FIS had today responded to the Amendments to the Payment Practices and Performance Regulations consultaton calling for an overhaul that will better support SMEs in the sector.

The FIS response draws on recent research conducted by the University of Reading into procurement, contractual and payment practices in the sector.  It challenges headlines indicating that payment in construction was improving, on the basis of flawed data that fails to measure the value of invoices paid and is opened to being gamed.  As it stands companies only need to report on the percentage of invoices paid, but does not measure value.  Whilst the guidance does make clear that invoice in construction should mean application, this is not regulated and there is little to no enforcement of how companies are reporting.   This misleading dataset masks a cancer at the core of construction that is killing businesses and ruining lives.

In the response FIS makes it clear that whilst metrics on the average percentage of volume of payments made are useful but fail to give us a true picture of payment performance.  As it stands efficient payment of small invoices for e.g. business facilities or stationary could mask differing practices within the construction sector, typified by larger payments. The FIS also recommends that Duty to Report obligations should be incorporated into annual Audit requirements to ensure that there is third party scrutiny of auditing practices.

The FIS is also calling for a clampdown on retention practices.  FIS Research dentifies 33% of main contractors always secure retention, compared to 14% of specialists.  This concern here is that a significant proportion of retention that should cascade through the supply chain is actually realised as profit.  FIS continue to advocate for the ultimate abolition of retention, but in the interim, to ensure that retentions are protected, associated only with the work packages undertaken and AUTOMATICALLY RELEASED based on a defined date (rather than abstract event).  This should be Regulated and monitored to prevent nefarious practices.

In a seperate consulation the FIS has applauded the efforts of the Small Business Commissioner recommending that the Office is strengthened, responsibility in the construction sector is extended and that the office is given more resource and greater powers to support SMEs in the supply chain.

You can read the full FIS Payment and Retentions Submission 2023 here and response to the Small Business Commissioners Consultation here.

The consultation closes at 11:45pm tonight and FIS has also prepared a template response to encourage members to feed their views in here.