The UK construction industry has been plagued by late payments in recent years, and it’s an issue that we’ve covered in depth in the past on the Integrity Software blog. While the situation looked to be improving recently, new research shows that the public sector remain guilty of late payments. A freedom of information request by the Specialist Engineering Contractors’ (SEC) Group found that 38% of public sector clients breached late payment legislation and did not pay up in 30 days.
Additionally, the group found that only a quarter of public sector bodies had a system in place to track the speed of payments. Nine in ten public sector clients used a cash retention system to withhold payment, supposedly for security reasons, but no doubt also to improve the capital available to them in the short-term. Only 14% of public sector clients made use of PAS 91 pre-qualification questionnaires, which are designed to save suppliers time when looking to gain public sector work.
SEC Group have assembled a six-point plan to ensure fairer payment throughout the construction supply chain:
- All public sector payments should be made within 30 days of the end of the month when the work was carried out.
- Organisations failing to pay their supply chain within 30 days should be excluded from bidding for further public sector contracts for a year.
- Cash retentions should be required to be placed in trust, in a segregated account.
- Targets should be set to introduce project bank accounts throughout the public sector, to ensure the supply chain is guaranteed payment.
- Pre-qualification processes should be standardised throughout the public sector.
- The office of Public Procurement Ombudsman should be created to keep track of payment timeliness.
Struggling with late payments? Construction accounting software lets you keep a close eye on your revenue and outgoings, and even lets you manage retentions and see how they affect your cashflow.