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SEC Group: Hackitt review intensifies pressure for construction payment reform

Professor Rudi Klein has welcomed conclusions in post-Grenfell review of construction standards that links poor payment practices with bad behaviour in the construction supply chain

The Specialist Engineering Contractors’ (SEC) Group has welcomed conclusions within the Independent Review of Building Regulations and Fire Safety that has linked delayed payments in the construction supply chain with wider bad behaviours around standards compliance.

SEC Group head Professor Rudi Klein has argued that specific conclusions within the report on the impact of delayed payment should provide further impetus in efforts to push government to introduce legislation over issues such as cash retentions.

The association cited paragraph 9.11 of the findings, which said that, “Payment terms within contracts (for example, retentions) can drive poor behaviours, by putting financial strain into the supply chain.”

“For example, non-payment of invoices and consequent cash flow issues can cause subcontractors to substitute materials purely on price rather than value for money or suitability for purpose.”

Professor Klein said that final report of the review, which was overseen by Dame Judith Hackitt and demands a number of legislative overhauls to reduce the complexity of the existing regulatory framework for construction, demonstrated that there was no excuse to avoid payment reforms.

The SEC Group has now reiterated calls for an improvement to the Public Contracts Regulations 2015 to ensure statutory 30-day payments, while also urging full government support for a bill introduced earlier to parliament earlier this year to ring fence cash retentions.

The proposed legislation that was devised by a number of industry bodies and MP Peter Aldous seeks to make it mandatory for accredited third-party deposit schemes to be used to hold retentions on construction projects.

Other proposals backed by the SEC Group include ensuring project bank accounts are used on all public-sector contracts and that a red and yellow card system be adopted in public procurement to penalise organisations with a poor payment record.

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