News

Payment Bill receives industry-wide support

13 March 2018

(Mike Gimelfarb/Wikipedia)

More than 60 trade bodies have come together to support the Aldous Bill in the wake of Carillion.

The Bill, spearheaded by Peter Aldous MP, aims to reform damaging payment practices and abuse in the construction industry.

A total of 64 construction and maintenance trade bodies are now backing the Bill, which proposes that cash retentions owed to the supply chain be held in trust.

It is the largest industry coalition ever formed on the issue of late and unfair payment, amid growing support and industry appetite for reform. There is also growing political support from MPs and Lords.

Support for the BIll comes from a broad cross section of the supply chain, including electrical, plumbing, heating, interiors, housebuilding, roofing, scaffolding and demolition. Major trade bodies in support include the Federation of Master Builders and the Federation of Small Businesses.

Aldous said: “This coalition of support shows the urgent need for reform and unity of industry following Carillion. Support covers so much of the industry that we now have a golden opportunity to change construction for the better.

“I hope government gets behind industry and this Bill. We need action to protect SMEs before more millions are lost, and this Bill is about ensuring people’s money is safe so businesses can grow and invest in their future.”

Awareness of the Bill and support for Aldous are being coordinated by the Building Engineering Services Association (BESA) and electrotechnical and engineering services body ECA.

The Bill seeks to ensure payment retentions are protected in special ring-fenced deposit schemes, to minimise damage to the supply chain in the event of insolvencies.

ECA director of Business Paul Reeve said: “Quite simply, the time for major change to retentions is now. Putting retentions in trust would help to protect the supply chain from future upstream insolvency, and it would reduce the amount held in retentions when buyers see that they can no longer use suppliers’ cash to support their own business model.”

Alexi Ozioro, public affairs & policy manager at BESA, said: “Levels of support for the Bill are very encouraging, and this is a real opportunity for government to show it can respond to urgent developments and legislate on more than just Brexit.

“It will take months, maybe years to feel the full effect of Carillion, and what this Bill will do is make sure thousands of people can enjoy a more secure future.”

The second reading of the Bill is 27 April.

Comments

As a Construction Director I agree. Everyone needs more protection, but let’s not stop here. Why not review the entire payment process for all parties and make it fairer for all, for main contractors, subcontractors and consultants.

Why do we have a system that allows clients to fund their projects through others?

Paul Fitzpatrick, 13 March 2018

This bill, whilst welcome in improving the situation, does not address the root cause, which is the imposition of cash retentions in the first place.

Also retentions are ultimately a cost to the client in that the cost of money is reflected in the contractor’s overhead

Our industry, I believe, is alone in having retentions imposed upon it. Can you imagine holding 10% when you buy a new house or car ?

Also the article was silent on who determines whether or not the retention should be released? As we all know our business is riddled with excuses to hold money back from subs for reasons some of which are spurious some of which are genuine. The difference between spurious and genuine is, like beauty, “in the eye of the beholder”.

No the answer is to establish the use of retention bonds in UK practice. Apart from guaranteeing all the things that retention guarantees it would also, because of the investigation of the bond company or bank into the financial viability of the subcon, help to weed out those subs who did not have the financial capacity to fund their work.

John Porter
FCIOB

John Porter, 13 March 2018

Although I welcome the reforms in retention I don't understand why no one is looking at the 120-day payment terms that Carillion were imposing on their subcontractors. The loss from having not being paid for up to 150 days of work would have been much more than the retention.

Payment terms need further reform and the UK should adopt a system similar to the Security of Payments legislation in Australia which gives maximum payment terms of 15 days for head contracts and 30 days for subcontracts. This ensures that the main contractor is in positive cash flow while providing reasonable terms to the subcontractors.

Adam Arnold, 15 March 2018

Having read an article in CM by Colin Harding, I am like him in thinking Old School.
Retention percentage is held by the contractor’s QS off all subcontract payments although the LO subbies are not happy. In turn, the client reduces payment to main contractor by the same retention percentage. In my experience, retention money has to be claimed by the subcontractor rather than be paid automatically in a lot of cases.
There is an argument for withholding retention in that getting snagging done is more likely to be less problematic when retention is held. Therefore, I cannot imagine the retention scenario changing.

sean morgan, 15 March 2018

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