Kier is hatching a plan to charge subcontractors 1.5% of their package turnovers to become closer strategic partners.

The controversial new plan forms part of its new Working as One initiative. This has been designed to overhaul and promote better supply chain relationships across the group.

Kier says it is revamping its supply chain approach to encourage greater collaboration and alignment with subcontractors.

But some subcontractors claim it is the latest twist in a developing pay to get paid culture as main contractors seek to strengthen balance sheets as clients shy away from large upfront payments on jobs.

Kier has called meetings with large groups of subcontractors at its London office to explain the new banded structure before the system is piloted in the south east.

Subcontractors were told to keep the plan under wraps although the Enquirer has been told the new deal for highest ranked strategic subcontractors will involve the new 1.5% ‘management fee’ alongside the promise of more repeat work.

A subcontractor said: “We saw this sort of thing with Carillion – main contractor discounts, rebates. Now we are being asked for 1.5% just to work with them.

“The danger is what Kier is doing becomes contagious and other main contractors sit up and say we need to do this.”

Over 14,000 suppliers and contractors ranging from Tier 1 to micro SMEs work with Kier, with subcontractors alone accounting for £2.4bn of spending each year.

Under the new arrangement, subcontractors and suppliers will be split into four relationship bands. The lowest is a new entrant level where the onus is on communicating expected standards.

Firms at the “approved” level will be pre-qualified to Kier standards, be involved in training and upskilling with tender opportunities highlighted across the group.

Preferred contractors will have proven track records on projects and use the Kier Early Payment System, which allows payment days to be reduced to 21 days for a fee.

While the system is a voluntary one, it has grown steadily in use and ran at an average debt level of £196m in last six months of last year.

Firms moving to the highest strategic band will be expected to come into greater alignment.

Kier hopes this will involve greater innovation sharing, early work pipeline discussions and agreed standards terms and conditions.

A Kier spokesperson said “We are continuously developing new ways of working with our supply chain.  Following feedback from our supply chain partners, we are investing in smarter solutions on a collaborative, voluntary basis.

“Working with larger strategic subcontractors, we are looking to reduce overall project delivery costs within our buildings businesses. This early project engagement with our subcontractors offers them preferred trading terms and the opportunity to develop project improvements.

“We anticipate this will improve the overall value of project delivery for our clients.”

Source: Construction Enquirer