Scottish clients failing to enforce supply chain payment

Only a third of public sector contracting bodies in Scotland are meeting new public sector procurement rules to ensure prompt payment through the entire supply chain.

The new research has prompted the Specialist Engineering Contractors’ Group for Scotland to call on the Government to set up a new construction regulator role to ensure tier two and three subcontractors are being paid on time.

In April 2016, contracting authorities in Scotland with large annual procurement budgets became statutorily bound to declare in their procurement strategies how they intended to ensure 30-day payments along their supply chains.

Research conducted by SEC Group Scotland using the Freedom of Information Act revealed that 18 months into Scotland’s new payment regime,  just nine client bodies from a sample of 29 had sought to ensure 30-day payments throughout the supply chain.

Contracting authorities deemed to be compliant

• NHS Fife • Western Isles NHS Board6 • Edinburgh Napier University • University of Strathclyde • University of Edinburgh • NHS Borders • Scottish Fire and Rescue Service • Disclosure Scotland • University of Glasgow

It claims 45% or 13 public sector clients have failed to comply with Scottish Government rules on protecting payment periods, with the balance either introducing measures or operating under terms that did not look sufficient to support good payment practice for sub-sub contractors.

Specialist contractors north of the border plan to present the damning report to the Scottish Government, which is required under the new Procurement Reform (Scotland) Act to report annually on procurement activity.

Specialists’ recommedations to support Procurement Reform (Scotland) Act 2014

Scottish Government should appoint a “Construction Regulator” with powers to proactively challenge non-compliance.

Every contracting authority should have a compliance “hotline” to deal with complaints about non-compliance.

Scottish Government is invited to strengthen the statutory guidance by insisting project bank accounts are used by contracting authorities to comply with section 15 (5)(d) “unless there are compelling reasons not to do so”. Such reasons should be published on an authority’s website and, if necessary, capable of being challenged by a Construction Regulator.

In any event the statutory guidance should be re-visited to deal with some uncertainty surrounding the use of the phrase, “reasonably practicable”, in section 15 (5)(d). It should make absolutely clear that the measures listed at paragraph 2.7 in this Report should be adopted by all contracting authorities but the extent to which each of the measures are implemented should be related to factors such as contract duration and the number of firms engaged as part of the supply chain.

Scottish Government is invited to consider introducing a statutory obligation in all construction contracts that payments are discharged within 30 days from invoice or payment application.

The statutory guidance should also be amended so that it deals with the release of retention monies. It is suggested that contracting authorities ensure that in all their contracts, and in sub-contracts and sub-sub-contracts that: • the first half of retention monies are released on handover of the works; • the second half of the retention monies is released within 12 months of handover of the works.

from Construction Enquirer http://www.constructionenquirer.com/2017/09/05/scottish-clients-failing-to-enforce-supply-chain-payment/

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