Government and industry agree construction charter to speed up payments

Construction Leadership Council, payment retention
Electronic payment is one of the commitments in a new payment charter for the construction industry.

Payment terms should be reduced to 45 days from June 2015 under the terms of a payment charter for the construction supply chain agreed by the Construction Leadership Council (CLC), the body set up to deliver the Government’s industrial strategy for construction. In the longer term, payment terms should fall to 30 days from January 2018.

Other commitments in the charter include not with-holding cash retentions, not delaying or with-holding payment and making payments electronically.

Nine companies represented on the CLC have agreed to sign up to the charter. They are Barratt Developments, Berkeley Group, British Land, Imtech UK, Kier, Laing O’Rourke, Skanska, Stanford Industrial Concrete Flooring and Stepnell.

The development of monitoring arrangements for the commitments made by signatories to the charter will be led by Philip King, CEO of the Institute of Credit Management.

Peter Hansford, the Government’s chief construction advisor, said, ‘The charter signifies the CLC’s commitment to small and medium-sized businesses and the important role they play in the construction industry. Through the council, the Government is working very closely with industry to give businesses of all sizes the confidence to invest — securing high-skilled jobs and a stronger economy for everyone.’

Kevin Louch, president of the National Specialist Contractors’ Council, said, ‘Many in the industry, and not just specialist contractors, want to see 30-day payment terms on all construction projects, but we recognise that it will take time for large businesses to adjust their business models over the next few years. Many clients already pay in 30 days, and we would like them to make public their commitment to new payment charter and give industry the confidence to pass that payment through the supply chain to those delivering their projects on site.’

The Specialist Engineering Contractors’ (SEC) Group wants the Government to make compliance with the charter a pre-qualifying requirement for all public-works contracts.

SEC Group’s chief executive Prof. Rudi Klein would like to see business secretary Dr Vince Cable contact the top-100 private-sector construction clients, inviting them to sign up — and to enforce — the payment charter along the supply chain.

He says, ‘SEC Group also believes that a “charter ombudsman” should be appointed to drive implementation and identify instances of non-compliance.’ He believes that one effective way of implementation would be the continued promotion of the use of project bank accounts across the public sector and utilities sectors.

‘Such measures are essential if the payment charter is not to become yet another wasted opportunity,’ say Prof. Klein.

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