Contractors’ group calls for government action on procurement following MPs’ report

The Specialist Engineering Contractors’ (SEC) Group has called for government action to address late payment in the construction sector, following the publication of a House of Commons Public Accounts Committee report on the procurement of strategic suppliers by government.

The report follows an inquiry carried out by the committee in the wake of the Carillion collapse and the SEC Group, which represents the largest sector by value in UK construction, gave written evidence to the committee.  The final report reflects many issues raised in SEC Group’s submission regarding protection for SMEs, especially those acting as sub-contractors in the supply chain.

Recommendation 12 in the report demands urgent action from government on improving payment security, as follows:

“There is no excuse for small and medium supplier businesses not being paid on time.  We recommend that the government considers a project bank account approach and reviews the impact on small businesses.  We expect the government’s proposals for supporting SMEs to include measures to address:

(i) Delays in payment.

(ii) Retention payments.

(iii) Preferred supplier discounts.

(iv) Increasing the use of Project Bank Accounts.

(v) Reducing the barriers to direct bidding to government.

(vi) Supporting consortia bidding.

“We recommend that the government consult with SMEs on the most appropriate way to incorporate these measures in contracts.”

SEC Group’s chairman, Trevor Hursthouse, said that he was delighted with the committee’s report but queried how many more reports and recommendations were needed before the government got the message.

“Over the years we have warned government of the financial fragility of its strategic suppliers and, as the committee acknowledged, these kind of warnings were ignored,” said Hursthouse. “We have provided government with a comprehensive set of proposals that will support SMEs on government contracts and hopefully we can now have a productive dialogue with government as a result of this report,” he said.

SEC Group has been campaigning for:

• The mandating of project bank accounts on public sector work so that everybody is paid from the same “pot”
• Ring-fencing of cash retentions
• Statutory mandating of 30-day payments on all public sector work
• A yellow/red card system to exclude from public sector work those suppliers having a poor payment record
• Public sector clients to make direct payments to sub-contractors where they are unable to obtain credit insurance as cover in the event of the insolvency of tier 1 suppliers.