National Specialist Contractors Council, NSCC, has warned specialist contractors about cost and payment issues associated with Carillion 120 days payment terms and its Early Payment Facility (EPF). The review warns contractor to be aware of potential costs and delayed payments that specialists could be exposed to.
Suzannah Nichol, NSCC chief executive ,said: “The way in which Carillion have told us they are operating their Early Payment Facility means that Specialist Contractors are being paid in 45 days at no cost to them. But let’s not kid ourselves; 45 days is only ‘early’ when your standard terms are 65 days.”
“NSCC believes, and has consistently stated through its Fair Payment Campaign, that 30-day payment terms are normal. We cannot see why Carillion has extended its payment terms to 120 days; it just complicates an already complicated payment mechanism! Contractual payment terms of 120 days are unacceptable both commercially and ethically.”
“It has taken us a while to understand Carillion’s Early Payment Facility and Supplier Incentive Scheme. We have met with Carillion representatives to discuss its objectives and they have clearly stated that their intention is to pay their supply chain early. We have also taken legal advice to interpret the various documents so that we can advise our members. It has taken a lot of effort and, if we have found it hard, I am not sure how a busy Specialist Contractor is supposed to understand it.”
NSCC’c research found that contracts which are subject to the Construction Act, the due date for payment is 112 days from the end of the month in which the invoice is issued or the date of the application for payment. This is arguably at odds with Carillion’s statement in the Supplier Incentive Scheme that it will endeavour to approve invoices within 30 days. As Carillion is not contractually obliged to approve an application for payment until 112 days later, specialist contractors may not be able to draw down under the EPF. It also prevents specialist contractors claiming interest on late payments until after 112 days have passed.
Under the Supplier Incentive Scheme Carillion has committed to reimbursing the bank charges paid by specialist contractors who reduce their payment terms under EPF. However, NSCC also found out that the scheme is not contractually documented and, if Carillion chose to withdraw it, the bank charges would have to be met by the specialist contractor.
NSCC also says that the EPF agreement terminates then a specialist contractor will be stuck with 120-day payment terms on existing contracts.
Last month, Carillion revealed it was expanding the system and said research showed that 89% of suppliers using the system felt it has had a positive effect on their ability to get paid promptly and flexibly. The firm said the figures showed critics were “absolutely wrong” about the scheme.
In the Carillion survey Peter Hall from The Horbury Group said: “Carillion’s new Early Payment Facility programme is a useful payment option and something we are more than happy to sign up to. It gives us a guarantee that we will be paid at a certain time, which means we can plan and forecast, but it also offers additional flexibility so that we can receive payment earlier if we want to. This is a particularly helpful facility to have.”
To see the NSCC investigation in full visit the NSCC website
