Public Accounts Committee calls for discussions between government and SMEs on reforming contracts to tackle delayed payments for public sector work
The Specialist Engineering Contractors (SEC) Group has welcomed calls from parliament’s Public Accounts Committee (PAC) for government to consult SMEs on how best to introduce project bank accounts and retentions reform in their contracts.
The proposed payment reforms, which are intended to tackle current industry concerns over delayed payments in the building services supply chain, are a key recommendation of the PAC’s findings from an investigation into public sector procurement after the collapse of Carillion.
The construction giant’s collapse in January has led to uncertainty across the construction industry concerning outstanding payments and the resulting impact on jobs.
The SEC Group has been among a number of industry bodies pushing for payment reform long before Carillion entered liquidation earlier this year. It has pushed for legislative reform to mandate cash retentions for building services contracts are held in third party deposit schemes with a number of key industry association working in building services over the last months.
Trevor Hursthouse, chairman of the SEC Group, said he welcomed the latest findings from the PAC, but was wary of whether government would now listen and take action on an ongoing issue for construction.
He said, “Over the years we have warned government of the financial fragility of its strategic suppliers and, as the committee acknowledged, these kind of warnings were ignored.”
“We have provided government with a comprehensive set of proposals that will support SMEs on government contracts and hopefully we can now have a productive dialogue with government as a result of this report.”
Mandating the use of project bank accounts for all public-sector work, enforcing payment within 30 days and implementing a yellow and red card system for suppliers with poor payment records are among the key issues SEC Group said it has been campaigning on. This is alongside playing a role in helping draft and build support for a bill introduced to parliament back in January that would ringfence any retentions payments on contracts.
PAC chair MP Meg Hillier said that the committee’s latest findings built on ongoing warnings of weaknesses in how the government contracts services. She cited Carillion’s collapse earlier this year as having “sharpened” the committee’s focus on how government manages over £100m worth of contracts with strategic suppliers.
Ms Hillier said the latest of its report looking at Carillion’s collapse backs a fresh approach on public sector contracts and payments that can look beyond prioritising cost reduction over other considerations.
She added, “There must be clearer specification of contracts, properly scoped, so that when any deal is signed there is an agreed understanding between government and supplier of what is being paid for, and over what timescale.”
“There are many areas in which the Cabinet Office can drive compliance across departments—not least turning its proposed ‘playbook’ of guidelines, rules and principles for contracting into a set of mandatory requirements.”