Nine out of ten councils breach payment rules

Image: Dreamstime.com

Nearly nine in ten local authorities (89%) are not monitoring whether or not their supply chain is getting paid within 30 days for construction work.

That’s according to data obtained by the Electrical Contractors Association (ECA) and the Building Engineering Services Association (BESA).

A Freedom of Information (FoI) request revealed almost half (49%) of local authorities do not have, or don’t know whether they have, a built-in contractual requirement for 30-day payment.

Almost one in five (18%) of councils also said they have no intention of building in contractual requirements for 30-day payment.

The data, released six months after the collapse of contractor Carillion, showed that many councils are not meeting their legal requirements, ECA and BESA said.

They highlighted that under the Public Contracts Regulations 2015, 30-day payment down the supply chain is mandatory and that public bodies should take steps to ensure this takes place. The FoI data therefore shows that many councils are not meeting their legal requirements.

Alexi Ozioro, public affairs and policy manager at the BESA, said: "There has been much talk of the payment culture change needed in the industry, and public bodies need to lead by example. The industrial strategy calls for a fairer payment system, the Chancellor has highlighted the need to tackle late payments and a Crown Commercial Services consultation even poses excluding bad payers from public contracts. We applaud the Government for engaging with the poor payment debate, but it is about time action matched words."

Rob Driscoll, deputy director of business and policy at ECA, added: "Non-compliance by the public sector with the Public Contracts Regulations is unacceptable. This is especially significant given the cautionary tale of the collapse of Carillion – one of the key strategic suppliers to government – which ultimately had a wider impact on SMEs. If Government purports to support fairer payment practices, these findings show that there is work to be done. ECA and BESA will continue to work with industry and Government to deliver a fairer payments system in construction."

Carillion, a strategic supplier to government, went into compulsory liquidation on 15 January 2018. It was later revealed Carillion owed suppliers tens of millions of pounds in unpaid fees and cash retentions. ECA and BESA are calling for Whitehall to take steps to enforce the Public Contracts Regulations.

Both trade bodies are also supporting the progress of a parliamentary bill, launched by Peter Aldous MP, which calls for cash retentions to be held in trust.