The Government’s Cabinet office has put forward proposals to blacklist main contractors who pay their suppliers and sub-contractors late.
The plan, if implemented, would see rogue contractors being penalised by enforcing a three-year ban on them bidding for public works contracts.
The Government has suggested that an appropriate benchmark for ‘adequate payment performance’ would equate to settling 95 per cent of all undisputed invoices within 60 days, over two consecutive six-month periods.
The consultation document has been welcomed by the Specialist Engineering Contractors’ (SEC) Group which represents the interests of a number of specialist contractors across the UK.
Rudi Klein, SEC Group’s CEO, said: “If such a system had already been in place, Carillion would have been excluded from Government contracts.
“We have been urging the Government to introduce a yellow/red card system for a long time. The yellow card is a warning to improve payment performance and the red card excludes a continuing poor performer from bidding for government contracts for a period of two to three years.”
Adam Davis, a Partner with Palmers who heads the Construction Law team, said: “Outstanding payments outside the original invoicing terms, are the scourge of the construction and engineering sectors.
“Although the Government proposals are welcome, contractors who are experiencing problems with late payments should remember that adjudication is often a highly effective way of overcoming the impasse.
“The Housing Grants, Construction and Regeneration Act 1996 provides a “pay now, argue later” mechanism that offers the option of fast payment via adjudication. With adjudication typically a 28-day process, this can be a very useful method of obtaining payment where the contractor has not issued a pay less notice.
“Although legal costs relating to adjudication are not recoverable, Palmers offers fixed fee adjudications for all debts under its fixed fee scheme.”
More details of our Fixed Fee Adjudication Scheme are available here.
For help and advice on all aspects of commercial debt, including late payments or contract re-negotiations, please contact us.