In a meeting on 17 November, APHC Chief Executive, Clive Dickin, met the Governments Business and Enterprise Secretary, Lord Mandelson. Discussions centred around Lord Mandelsons recent announcement regarding ensuring 10-day payments in public procurement, and also the Construction Act. Clive Dickin commented: "Lord Mandelsons statement that public sector bodies should pay within 10 days was most welcome.
However, this does not mean that first, second and third tier suppliers like some of our members get paid on time. In fact, the main contractor can be paid on time, then hold on to the monies instead of paying sub-contractors straight away. "During our meeting, I stressed the need for project banks accounts to ensure the whole supply chain benefited from early payment. We recommended that all public sector bodies demand that their first tier suppliers have 10-day payment periods in their supply chain contracts, and that project bank accounts are used as standard."
While Lord Mandelson was extremely open to these suggestions, he was not willing to make it mandatory for all public procurement. However, he does plan to invite all public procurement officers to make project bank accounts and 10-day payment periods standard practice from 2009. In fact, the Government has already made a commitment to improve payment security for SMEs on public sector construction projects. In the Office of Government Commerce Guide to best Fair Payment practices, public sector clients are recommended to set up ring-fenced project bank accounts. This recommendation was fully endorsed in the recent House of Commons Business and Enterprise Committee Report "˜Construction matters.
The use of project bank accounts provides a guarantee of cash flow for all parties. Other benefits include transparent management of cash flow, a reduction of financing charges across the supply chain, less opportunity for payment abuse and reduced impact of insolvency of a supply chain member. At present there are two high street commercial banks Barclays and Bank of Scotland that offer project bank account packages.
Added to this, Clive Dickin urged Lord Mandelson to accelerate the ending of the practice of operating retentions. No date has yet been set to invite all public sector construction procurers to commit to a date when they will end retentions and ensure that this is achieved throughout the supply chain.
Lord Mandelson also listened to concerns regarding the Construction Act, which is due to be announced in the Queens Speech in December. While the Government has certainly taken on board some of the concerns of groups representing sub-contractors and the building services sector, there remain causes for concern, largely relating to payment and adjudication clauses. However, Lord Mandelson made it clear that the current Bill was regarded by fellow ministers as the fairest balance between the interests of the many different parties who will be affected. Changes are unlikely.