25 May 2018

Hackitt Review weighs in on industry payment terms

In her final report on the regulatory framework surrounding building safety, Dame Judith Hackitt has stated that payment terms can drive poor behaviours.

Section 9.11 of the Independent Review of Building Regulations and Fire Safety, Building a Safer Future, 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.”

Speaking on behalf of the Specialist Engineering Contractors’ (SEC) Group, Professor Rudi Klein said that this was yet more confirmation of the damaging impact of payment abuse on industry performance. He added: “There cannot be any excuse now to delay much-needed action to improve payment security for SMEs in construction supply chains.”

SEC Group has been urging the Government to legislate to require the use of project bank accounts throughout public sector construction, thus enabling all project participants to be paid from the same pot; to improve the Public Contracts Regulations 2015 to have statutory 30 day payments; to introduce a yellow/red card system to ban poor payers from public procurement for three years; and to support a Private Member’s Bill now in the House of Commons that will protect retention monies.


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