Following representations from construction body the Specialist Engineering Contractors’ (SEC) Group, a revised statutory guidance has now been issued to clarify the start point of 30-day payment clauses within construction supply chain contracts.
The 2015 Public Contracts Regulations placed a statutory duty on UK government departments/agencies and public bodies in England to insert 30-day payment clauses into supply chain contracts.
However, the original statutory guidance issued under the regulations did not specify a trigger point in construction contracts for the commencement of the 30 days.
Under the new guidance, it is clear that on public works contracts, Tier 1, 2 and 3 contractors must be paid within 30 days of the issue of a payment notice.
SEC Group chief executive, Professor Rudi Klein, explained that subcontractors (and sub-subcontractors) should now expect to be paid, at the latest, within 30 days following expiry of the five-day period (after the payment due date) allowed for issuing statutory payment notices.
He said: “This clarification will benefit thousands of construction supply chain firms working on public sector jobs. The statutory guidance also advises public bodies to use project bank accounts to ensure that supply chain firms are paid within the 30 days.”
SEC Group has already referred complaints to the government’s complaints service, the Mystery Shopper Scheme, regarding failure by some public bodies to ensure that 30-day payments are being made along the supply chain.
I note that this is ‘Statutory Guidance’ and nothing else. We have experience of the NHS taking 8 months to pay us on a JCTMW contract and other Local Authorities changing contract terms to monthly. So the question is why introduce ‘Guidance’ when the Construction Act doesn’t work and JCT contracts have never been re-written to reflect changes since 1963. The clause numbers change but the practices go on. Retention’s should be replaced as they are ancient. MC’s or Tier 1 contractors as they are now called (?) just pass things on. Until there is a unity on revision of contracts – with a lead by Subs and MC’s rather than the RICS who dominate JCT we’ll still be seeing this for years to come.
Whilst the days of the Local Authority-specific JCT form of contract are long gone, both JCT and NEC publish public sector amendments which implement Fair Payment, 30-day payment limits, Freedom of information Act, transparency, etc. The real issue is not the contract terms anyway, but the fact that surveyors and project managers within client organisations (1) often lack sufficient delegated authorities, and (2) cannot exercise professional commercial judgement for matters within their delegated limits.
Where costs fall within their limits, professionals should be able to exercise judgement – requiring a degree of evidence suited to the value of the change; instead, fearing audit, they feel they must demonstrably verify every detail. Quite apart from the time cost and misdirection of effort, the monetary cost of this detailed administrative effort outweighs the value of a minor change.
Where costs fall outside their delegated authority the PM or QS cannot make decisions to formally agree increases in cost, and may be forbidden from even paying on account sums. Instead they must navigate a plethora of internal governance before being able to certify payment for work which was often instructed and completed months before.
The contract can require that the undisputed part of the application must be paid within 30 days, but no-one wants to sign a witholding notice (then) or pay less notice (now) that gives a reason for deduction as, “awaiting outcome of internal governance chain/ pending approval by commercial directorate/ no time to assess this month, sorry.”