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Payment terms can drive poor behaviours, says Dame Judith Hackitt

30 May 2018

Further emphasis on the need for prompt payment within the supply chain has been highlighted by the Specialist Engineering Contractors Group (SEC) within the recent Dame Judith Hackitt report.

Building a Safer Future - Independent Review of Building Regulations and Fire Safety, written by Dame Judith, has been well received by a number of industry bodies and contractors.

Late payment is also one of the issues highlighted in the wake of the Carillion collapse, which has seen a number of companies in the company's former supply chain go out of business.

SEC Group has focused on paragraph 9.11 within the report, which states:

“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.”

Chief executive officer Rudi Klein said that this was yet more confirmation of the damaging impact that payment abuse was having on industry performance.

"There cannot be any excuse now to delay much-needed action to improve payment security for SMEs in construction supply chains," he said.

In addition to public sector projects using project bank accounts to ensure prompt payment for all concerned, amendment of the Public Contracts Regulations 2015 should be made to ensure 30-day payment terms, said SEC.

Retention monies should additionally be placed in a protected scheme and the Small Business Commissioner should be given the power to fine large companies for poor treatment of their supply chains, the SEC advised.

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