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Getting paid on public sector projects and the mystery shopper scheme

The government has been making every effort to crack down on poor payment practices on public sector works. In the Construction Strategy published in May 2011 the government set a target for introducing project bank accounts. By 2014 £4bn worth of government works will be paid through project bank accounts, writes Professor Rudi Klein.

This means that government departments and agencies procuring construction works will make payments directly to a bank account (protected by a trust) and payments to the supply chain will come directly from the bank account – without going through the pockets of those higher up the supply chain. This, then, cuts out the usual incidence of payment abuse such as ever-lengthening payment times and spurious reasons for non-payment. Project bank accounts are now under consideration by the Welsh and Northern Ireland
governments as well as a number of local authorities.

In addition there exist government limits on the time taken to make payments. On public sector works tier 1 contractors should be paid within 14 days of the due date under the main contract; tier 2 contractors should be paid within 19 days of the main contract due date and tier 3 contractors should be paid within 23 days of the maincontract due date.

There are, of course, numerous reports of payment periods being prolonged and payments not being made on time on public sector jobs. To deal with complaints about poor payment practices (and, indeed, any other complaints relating to bad practice) the government has set up the Mystery Shopper Scheme. This can be accessed via the Cabinet Office website, www.cabinetoffice.gov.uk. It enables you to make a complaint about poor practice directly to the government. The scheme covers the bulk of the public sector – prisons, schools, hospitals, roads, defence installations, police, etc – and is particularly aimed at SMEs and any problems that may arise within supply chain contracts.

One of the difficulties which most firms have when making official complaints is ensuring anonymity to preserve their commercial position. This can be done by using FPDC to submit complaints. If FPDC does this, then the better option would be to gather in similar complaints from other trade association members relating to the same project or works so that it becomes more difficult to identify a particular complainant.

What will the government do once complaints are received? With regard to central government works, the government will issue instructions to the procurer or lead contractor to remedy the matter. If the complaint is in regard to non-central government works such as local authority works, the government will work with the respective authority to bring about a remedy.

Other matters that could be dealt with under the scheme could, for example, relate to poor tendering practices. Imposition of unwarranted discounts, retrospective rebates, dutch-auctioning, pre-qualification problems would all qualify as suitable material for the Mystery Shopper Scheme.

The Cabinet Office – the part of government which operates the Mystery Shopper Scheme – regularly publishes throughout the year the complaints received and the actions taken. Again these can be downloaded from the Cabinet Office website. In one of the more recent reports it was revealed that the Ministry of Defence had promised to change its procedures to ensure that problems of late payment to a subcontractor would not re-occur. There was another example of a complaint in respect of Devon & Cornwall Police. The prequalification questionnaire required a minimum turnover threshold of £33,000,000! The force was required to drop this requirement in future procurements.

How does one complain? There is a proforma available on the website which needs to be filled in and forwarded to the Cabinet Office. With regard to complaints about payment, the Specialist Engineering Contractors’ Group has compliance forms which can be filled in and
forwarded to the scheme. These compliance forms can be downloaded from SEC Group’s website at www.secgroup.org.uk

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