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Specialist contractors call on MPs to support payment reform in wake of Carillion collapse

Project Bank Accounts proposed for large projects to protect supply chain cash

The Specialist Engineering Contractors’ Group has called on MPs to redouble their efforts on introducing payment reform. The group, which notes that it represents the largest sector of UK construction by value, said that if all payments to the supply chain had been routed through a project bank account (PBA) “rather than through Carillion’s pockets”, firms would have received their monies – as large clients such as Highways England already do for their projects.

Carillion was revealed to have held a retentions pot of £800m in its last accounts.

In a briefing to members, SEC Group highlighted that Carillion was holding retention money even when the project didn’t require it – thus effectively using suppliers’ cash as its own working capital.

The Group said: “On contracts with the Defence Infrastructure Organisation (DIO) Carillion was taking retentions from its supply chain although the DIO was not asking Carillion for retentions.”

It said it is asking every Parliamentarian to:

1. Insist that the Government supports the Construction (Retention Deposit Schemes) Bill (“the Aldous Bill”) which had its First Reading on 9 January 2018;

2. Invite the Government to issue strong guidance to all public sector procurers to operate a yellow/red card system.

3. Invite the Government to legislate to require that PBAs are put in place for all construction works over £1 million [a similar law has already been implemented in Queensland, Australia);

PBAs are currently mandated for public projects over £4m in Scotland and since January for public projects over £2m in Northern Ireland and Wales (the latter since 1/1/2018). However, there is no mandate in England, only a ‘strong recommendation’, the Group notes.

SEC Group proposes that if lead contractors do not pay their supply chains within 30 days (as already required under the Public Contracts Regulations 2015),then they should be barred from bidding for public sector works for a period of at least two years (a rule that already appliers in Northern Ireland).

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