Wednesday, October 29, 2008

Pay loophole leaves subcontractors short of cash

Main contractors are flouting fair payment regulations by exploiting a loophole to delay handing over cash to subbies.

Big construction companies are using the dodge to give the appearance of complying with the Office of Government Commerce's (OGC) Fair Payment Charter while holding on to their money for as long as possible.

The charter requires contractors on public sector projects to ensure that the period between the date bills are due and the final payment date does not exceed 30 days.

But main contractors are getting around this by delaying subbies' applications for payment to push back the point at which a due date is set.

Firms are using any ruse to spin-out the payment process. Dodges include asking subbies to resubmit documents supporting their bills.


Pay loophole leaves subcontractors short of cash


Prof Rudi Klein, chief executive of the Specialist Engineering Contractors Group, said: "All the focus now is putting off the due date and that really is a concern at the moment.

"The 30-day expectation has been undermined because they are setting the due date later and later from the date at which you asked for your money. So the 30 days is frankly hollow."

Klein claimed that the main culprits were the smaller national main contractors, while the biggest names in the industry were largely playing by the rules.

An OGC spokesman said: "We would urge suppliers to refer any evidence of malpractice of the Fair Payment in construction initiative directly to the OGC, as without evidence it is difficult to follow up and rectify any alleged issues between firms.

"One mechanism available is OGC's Supplier Feedback Service, which suppliers can use to raise concerns about public procurement practice when attempts at resolving issues with a contracting authority have failed."

Lord Mandelson pledged to look into ending the practice of retentions during a debate on small businesses in the House of Lords last week.

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