The first action delivered under the Industrial Strategy: Construction 2025 is the new Construction Supply Chain Payment Charter, which sets out the industry’s ambition for 30 day payment terms and no retention by 2025.
The major step forward is on private sector projects with a commitment to payment terms of 60 days from April 2014, 45 days from June 2015 and 30 days from January 2018. The existing public sector commitment of 30 days is embedded within the charter and will apply to all central government and wider public sector projects in line with the Late Payment of Commercial Debts Regulations 2013.
The ambition to eliminate retentions is in recognition of just how vital cash flow through the supply chain is. The charter requires that cash retention is either not withheld at all or that any arrangements for retention with the supply chain are no more stringent than those implemented by the client in the Tier 1 contract.
The charter also sets out clear commitments in respect of ‘pay less’ notices, contract variations, electronic payments and supply chain finance schemes, all of which are integral to payment practices in the industry.
David Frise, chief executive of AIS FPDC, said: “Poor payment is the scourge of the industry and our members waste far too much time chasing money that is properly owed to them.
“AIS FPDC supports the NSCC campaign for fair payment and the new payment charter which will see payment in 30 days and the end of retentions. The payment charter has its flaws, most notably in the length of time it is going to take effect but it signals the right direction of travel.
“We recognise that Tier 1 contractors need to change their business models to accommodate the charter and for the good of the industry they need to get on with it quickly.”
