Network Rail is leading a change in public sector procurement by banning cash retentions and insisting on 28 days payment terms as part of its new terms and conditions for all tier one contractors. Construction industry bodies have welcomed the decision to strengthen their supply chain payment procedures in the wake of the Carillion collapse. 

In a statement the Specialist Engineering Contractors’ (SEC) Group said it is encouraging to see Network Rail take the next steps in banning retentions and developing a closer and more collaborative relationship with their suppliers and sub-contractors. We hope that their monitoring process will ensure such policies are trickling down their sub-contractors in all tiers and implemented vigorously.

Professor Rudi Klein, SEC Group’s chief executive,  praised Network Rail’s decision: “It is great to see large and influential public sector clients like Network Rail supporting best practice. We hope that others will follow, as there is still widespread payment abuse for SMEs in the construction and infrastructure supply chain. It will be a great lost opportunity if we do not all learn from Carillion’s failings.

“We particularly welcome Network Rail’s new monitoring processes and we would like to see their stand on retentions followed throughout their supply chain. Public sector procurement has a key part to play in reforming this outdated practice. However, until everyone abolishes retentions, we need urgently now an intervention like the Aldous Bill, to ensure that if retentions are deducted, they are protected and SMEs do not lose their cash.”

Abolishing retentions will give greater protection and certainty of cash flow to supply chains. It will come into effect during the next funding period for Network Rail, which runs from 2019 to 2024 and will include around £48bn worth of projects.

The Electrical Constractors Association chief executive,  Steve Bratt, said: “I am delighted to see such a positive development in the fight against unfair payment practices. Network Rail’s decision should signal to the wider industry that true change can, and must, happen. We urge as many clients as possible to follow suit, and show support for immediate reform.

“The unprecedented support for the Aldous Bill from over half a million businesses and trade body members, as well as one in four MPs, is also telling of the need for change. Network Rail will hopefully be the first of many clients to take bold steps towards fairer business practices and start to show that lessons have been learned from Carillion.”