Subcontractors are hoping that savings made by clients thanks to the requirement for payment within 30 days on all central government contracts will persuade private sector clients to follow suit.
Minister for business and enterprise Mark Prisk implemented a common assessment date for all tiers of the supply chain at the end of last year, requiring payment to filter down to tier 3 contractors within 30 days.
National Specialist Contractors Council chief executive Suzannah Nichol said the decision would ensure “hard-to-reach” private sector clients are made aware of the “overwhelming” advantages of the fair payment scheme.
“I don’t believe there’s a need to prove this is the most efficient way of doing things anymore,” said Ms Nichol.
“Constructing Excellence held demo projects proving substantial savings could be made through the implementation of a 30-day payment agreement.
“We know it works but the private sector has a very varied client base. Tesco, Sainsbury’s, Nestlé and your local factories are much harder to reach than central government.
“The step taken by Mark Prisk to implement the contractual requirement will make the case so overwhelming that when the private sector want to see how the government gets the best value, they are left in absolutely no doubt.”
Specialist Engineering Contractors Group chief executive Rudi Klein (pictured) said clients make savings of 2.5 per cent by introducing a 30-day payment scheme with project bank accounts and eliminating disputes and administrative problems.
“We would like to see the government encourage the private sector to follow suit,” said Mr Klein. “Once clients see the effects of the improved payment performance and cost savings brought about by the changes, the message should be clear.”
According to Office of Government Commerce guidelines, government departments must set an assessment date on all contracts, which ensues over a seven-day period.
The seventh day is known as the ‘due date’, 14 days from which tier one contractors must be paid.
Tier two contractors must receive payment within 19 days of the due date, while tier three contractors must be paid within 23 days.
At an NSCC event in November, Mr Prisk said the decision to implement 30-day payment periods in the public sector had come as a result of listening to the NSCC Fair Payment Campaign - an initiative that has now moved on to focus on the removal of retentions.