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The government has lowered the required standard of payment performance for contractors working on public projects temporarily to give companies time to comply with its ambition for more stringent rules.
The move was welcomed by the Chartered Institute of Building (CIOB), which had lobbied for an interim change to the rules.
The Cabinet Office announced earlier this year that from September, companies would be prevented from bidding for public sector contracts unless they could show that they paid 95% of their invoices within a maximum of 60 days.
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However, it emerged that only four contractors were achieving the target, among them Willmott Dixon.
As a result, the CIOB’s policy team had proposed a time-limited interim measure, where firms are required to pay 75% of invoices within the specified time period for the next 12-18 months, before the higher target is subsequently introduced.
In an updated guidance note, the Cabinet Office has now lowered the requirement from 95% to 75% for a limited period.
Commenting on the decision, CIOB chief executive Caroline Gumble said: “We believe that the Cabinet Office have a 12-month interim period in mind and that only ‘undisputed’ invoices will be into account when assessing payment records.
“This is a move that we welcome and is an opportunity to put right the issues around payment practices that impact on cashflow, investment, productivity improvements and growth, moving to prompt and fair payments across the industry.”
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What about all the smaller-medium sized member companies that our specialist subcontractors to the larger and national contractors that are going wait a long ng time to be paid.
Remember the larger contractors mostly employ only management direct and site infrastructure, the actual work is done by the subcontract trades but they have to wait much longer to be paid yet who are critical to the main contractors performance who gets paid long before the ‘actual contractors, installers, fitters’.
Why should we always need to push, phone, nag the project surveyors and accounts office for what is rightly ours. We are the cogs in the wheel yet get the least consideration, credit and payment terms.
This really seems retrogressive. If only undisputed invoices are taken into account, then why can’t all payments be made within 60-days? Contractors should not be using subcontractors monies to bank role their cash flow issues (or more likely to simply earn interest on the money). That is what banks are for. All this practice does is increase the cost of subcontractors doing business, which in turn increases the cost of construction to the industry.
So the late payers which drive sub-contractors into bankruptcy, like Carillion and Pochin, , have gained yet another extension to continue their bad practices whilst the ones which have upped their acts like Willmot Dixon have gained nothing!
I cannot understand why my professional Institute, the CIOB, approves this back tracking. How much effort is required to bring a company’s payment out procedure to 60 days or less?
Your articles are so ambiguous -the Ciob welcomes the lowering of a standard? This doesn’t make sense.