Martin Burton (l) and Tony Davis (r) pictured at the hearing (image: Parliamentlive.tv)
Kier allegedly has a reputation as a poor payer among electrical contractors to the point where one firm refuses to work for them, MPs have heard.
The claim was made during a parliamentary hearing by the Business, Energy and Industrial Strategy Committee, which is examining the issue of small businesses and productivity.
Following a question from Labour MP Rachel Reeves, who chairs the committee, about which major contractors subcontractors would not work for because of problems with poor payment, Tony Davis, managing director of Essex-based AMD Electrical cited the example of Kier.
He said: “I won’t work for Kier at all because we talk a lot in the electrical industry and we have meetings in the Electrical Contractors Association (ECA) quite frequently and poor paying builders are quite often bandied around in the meeting. We stay away from players that have a reputation and Kier is one of them.”
It was recently revealed as part of a league table published by Build UK that Kier, along with Balfour Beatty and Vinci, takes an average of more than 50 days to pay invoices.
Kier and Balfour take an average of 54 days, while Vinci takes 52 days. Together with Murphy Group (66 days) and Engie (61 days), they are the five slowest payers among the Build UK members who have published details of their payment performance.
Davis said that even if a company offered standard payment terms, the time it actually took to pay could vary considerably. “It is not what is written on paper, it is what happens in practice and what happens in practice is the same excuses all the time: why they don’t want to pay you on 30 days, why they want stretch it out to 45 days. It could be something as basic as the wrong date on your invoice, or you valued it to a day, say the 28th of the month and they wanted it valued to the 30th of the month. These are the pathetic answers that we get back all the time,” he said.
Davis appeared in front of the committee alongside Paul Antino, managing director of NRT Building Services Group, Tim Hopkinson, director of ductwork contractor E Poppleton, and Martin Burton, contracts director at building services engineers Arnold James.
Earlier in the session, Burton appeared to defend Kier, commenting that it was “one of the more amenable contractors”.
But all four appeared to agree that in general, late payment was holding back productivity and investment in the sector.
Hopkinson said: “In essence it [late payment] stops our ability to grow. That means our inability to invest in apprenticeships and training, and technology. We as a supply chain and SMEs fall behind the main contractors that are leading the way in the use of technology – we are unable to keep pace and that is a fundamental problem of being down the food chain in the construction industry. And that affects the industry as a whole. It becomes less productive and is unable to continue to invest in infrastructure.”
Davis added that in his estimation, the problem of late payment was getting worse. He said: “I am at the stage in my business where I either stay where I am or I make the next step, the next step being employing more people and going for bigger contracts. I have a business partner and we have many discussions about whether we bother to invest in more apprentices and more employees because the situation in my opinion is getting worse from late payments.”
Meanwhile, Hopkinson called for legislation backed up by more effective regulation. He said: “Whether it is retentions or late payment or undervaluation, at the end of the the day it is working capital that the tier ones want and we need to run our businesses. We need government to legislate but not only to legislate but thereafter with someone like the Small Business Commissioner to police. Unless it is policed and enforced then it will continue to be a challenging industry where we struggle to invest in growth, apprenticeships and training.”
In response to the criticism from Davis, a Kier spokesperson said: “Our payment terms and timing of payments to our supply chain partners remains a very important area of focus for us and a responsibility we take very seriously. Kier uses an early payment process which ensures our supply chain can be paid at around 21 days with around 60% of transactions using this process. We believe that providing our suppliers with access to our early payment facility gives them the flexibility to manage their cashflows as they feel fit and to receive payment in advance of the contractual terms.”
Later in the same session, minister for small business Kelly Tolhurst promised that companies signed up to the Prompt Payment Code would be investigated if they did not stick to its terms.
“We will now investigate all complaints against signatories of the code and there will be regular reviews of signatories to the code,” she said.
Comments
Comments are closed.
When I worked for John Laing Construction in the 1970s, it was me, as Site QS, that stayed on payment certs the exact date to pay subcontractors. I always knew what the payment terms were because I had the signed subcontracts in a fireproof cabinet in my PK32.
Whatever date I stated (usually the latest date possible but always in accordance with the subcontract T&Cs), I and the whole of the Site Management team knew the dates subcontractors would be paid…and it was never, ever more than 30 days from receipt of invoice. To negate any of the pathetic smart-ass nonsense employed by numerous companies today to avoid paying on minor technicalities, we would firstly agree the value of work done with each subcontractor every month and issue the agreed valuation so the subcontractor would issue its invoice exactly as the agreed valuation. Any items in dispute that I would agree to pay would be subject to a separate invoice. Thus, the life blood of subcontractors was guaranteed.
I was most fortunate to meet Sir Maurice Laing on a couple of occasions. He said the first time I met him, “I know we are one of the largest construction companies in the UK, but understand this, we need the subcontractors more than they need us. Might, in this case, is not right and does not have the upper hand”.
The likes of the Kiers and BBs of this world take heed!
When will they stop claiming that contractors can get paid early via payment schemes these are just an arrangement between the bank and the big boys and allow for them to take a % of the value from the SME when all they want is there invoice paid , also allowing them to say yeh we pay on time when In reality they force SME to settle for a reduced invoice , I’m sure if the SME wanted to use a invoice transfer / clearance service they could shop about and get it at a lower % than offered . What happened to the 30 day promise to SME
Keir, make the point of paying sub-contractors within 21 days if they use Keir,s early payment facility. What a load of tosh! I worked for the biggest Utility Company in the North West, and they used this approach. What it actually means is: If you reduce your invoice by 10% or 20% thereby giving the main contractor money back from your usually very tight profit margin.
Scandalous, just pay on time and DO NOT ASK FOR MONEY BACK.
Small sub-contractors usually feel obliged to comply with this situation in the hope of getting future work. Would these big companies accept this option if they were on a government contract and had to wait for their payment. I think not.
Hit them where it hurts most – suspend them from government contracts wherever possible – let them feel the pinch
I am sorry but having endured both sides of this situation, I can say that only prompt payments indicate a solvent employer. One miss, well ok, two misses, extreme caution, three misses, off down the road, get out while you can and stay in front. Listen to their weasel words and you are lost.
Why the surprise about bad payers, sub-contractors have been dealing with Main Contractor late payment practices for decades. This is not even an issue that has been hidden as report after report and survey after survey has highlighted the detrimental effect it has on the industry. Take a few recent reports:
Farmer Review of the UK Construction Labour Model reported unjust payment practices:
• “…The multiple and tiered sub-contracting interfaces within the industry and between industry and its clients has generated a further non-value add process whereby some businesses higher up the supply chain will use other businesses’ money lower down to temporarily support and enhance their own cash flow.” Furthermore, the surveys suggest that prompt payment is affected by contractual disagreements and that the majority of firms do not always receive the payment that they have billed for.
Construction News survey; ‘Late Payment: The state of the construction Industry’ concluded that respondents to the survey indicated that 25% of payments are not made on time with 40% of respondents stating that their payment terms exceeded 40 days. In addition, only 55% of respondents from tier one contractors indicated that they pay in accordance with their contractual terms, with 25% of Main Contractors and 20% of subcontractors’ respondents indicating that contractual disagreements affect prompt payment.
BIBBY Financial Services Subcontracting Growth report highlighted; “27% of respondents saying that late payment is the biggest threat to their business over the next 12 months…with, on average, subcontractors waiting 42 days for payment from main contractors”, and only “29% of firms indicating they ‘always’ get paid the full amount they bill contractors for”.
Unfortunately, sub-contractors generally do not help themselves and make it far easier for Main Contractors not to pay by not correctly administering the contracts that they have signed up to. BIBBY Financial Services Subcontracting Growth report suggests that 19% of subcontractors do not thoroughly check contracts before they sign them and 38% state that construction contracts are too complex to understand.
Main Contractors who encourage late payment practices are a disgrace and should be avoided. However, sub-contractors should also stop making it too easy for Main Contractors to get away with with bad payment practices. They should train their staff on contractual issues as the best way to win and to avoid a dispute is to completely understand contractual positions, understand contract law, and to understand contract processes and procedures. In short, sub-contractors should book on to contractual training courses that will instil contractual knowledge and the confidence to interrogate contracts and administer them correctly.
Gerald Kelly – General Manager
Confederation of Construction Specialists
It is an absolute travesty, that the big contractors try to get away with cashflow balancing at the expense of those that can make the company great. It just seems really stupid, to me. Maybe I am missing something, and the bosses know what they are doing..
I came into construction as an apprentice wall and floor tiler in the mid eighties working for a reasonable sized company where the boss through making very shrewd choices was able to retire in his early 50’s.
I am now a managing partner in my own SME where we constantly have to listen to all the late payment excuses. Recently caught up with the old boss who’s still going strong in retirement and chatted about the whole construction situation today especially payments, he found it unbelievable. He said that in his day everything worked smoothly with 30day payment terms. He got paid, then his labour, then the suppliers month after month no problem. So what has happened? Who changed this simple system and why? This system worked really well, simple and effective nothing untoward, and with very little technology. Why did we try to fix something that was never broken? Answers please from Main Contractors in plain English, no complex
jargon!!!