NETWORK RAIL SHOWS LEADERSHIP ON PAYMENT
N
etwork Rail has set a great example on fair payment, which others should now follow, according to BESA. The Association applauded Network Rail’s decision to ban retentions and adopt project bank accounts as part of its new five-year investment programme. Large contractors who work with the railway operator will also be obliged to pay their own supply chains within 28 days under new terms of engagement. BESA’s public affairs and policy manager Alexi Ozioro said Network Rail had shown “exemplary leadership and foresight”. “This demonstrates not only that reform can happen, but can happen very
quickly. If a major client like Network Rail can do it, so can everyone.” BESA and the ECA have been instrumental in shaping and promoting the
‘Aldous Bill’, which is due to have a second reading in the House of Commons in October. This seeks to ensure all retentions payments are held in trust to protect sub-contractors from upstream insolvencies. This has become a particularly urgent issue in the wake of the collapse of Carillion in January. Debbie Petford, BESA’s head of legal affairs said that Network Rail’s Tier
1 contractors would now be contractually forbidden from withholding retention payments. “Hopefully this will trickle down the supply chain,” she said. “We will wait eagerly to see if this happens, but Network Rail is setting a great example to the wider industry.”
Certainty
This decision to afford greater protection and certainty of cash flow to supply chains will come into effect during the next funding period for Network Rail, which runs from 2019 to 2024 and will include around £48bn worth of projects.
The wider adoption of project bank accounts will give further
reassurance that sub-contractor payment will be protected from potential abuse by large contractors, according to BESA, and Network Rail’s chief executive Richard Beresford explained there was sound business logic behind the decision. “Certainty of payment creates a truly healthy supply chain,” he said. “Network Rail has answered the question on how quickly a major supplier can change its payment policy. Culturally, this sends a huge signal as to the value we place on a sustainable supply chain and the way we want to do business. “We recognise the challenges faced by smaller suppliers and are in a position to influence the way work on our railway is delivered and paid for,” he added. ECA chief executive Steve Bratt said he hoped Network Rail would be the
first of many clients to “take bold steps towards fairer business practices” as this would show that lessons had been learned from Carillion. “Network Rail’s decision should signal to the wider industry that true change can, and must, happen,” he added. “We urge as many clients as possible to follow suit, and show support for immediate reform.”
www.theBESA.com
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