by Iain McIlwee | Apr 2, 2024 | Contractual and Legal, Transformation
A new stricter procurement regime is being introduced to support the Government’s 2019 Manifesto commitment to ‘..support start-ups and small businesses via government procurement, and commit to paying them on time…. <and> clamp down on late payment more broadly…’.
The Public Procurement Notice PPN 10/23 comes into force on the 1st April and demands historic payment performance is taken into account when awarding new Central Government contracts with a value in excess of £5 million per annum.
Contracting authorities must verify that the successful bidder meets the selection criterion prior to award of the contract or appointment to a framework agreement or dynamic purchasing system. The criterion is based on:
- Whether the bidder has paid its suppliers in accordance with the contractual terms that it applies to its supply chain; and
- Whether, overall, the bidder has paid its suppliers promptly by:
- paying at least 95% (at least 90% if an action plan is provided) of invoices within 60 days, which is considered an appropriate measure of overall payment promptness, and;
- meeting the average payment days threshold of at least 55 days for all invoices.
Reporting on this requirement will take into account a twelve month period and the bidder must demonstrate that they meet the required standard in at least one of the two previous six month periods – intercompany payments should not be included.
Where the bidder has reported payment data every six months in accordance with the Reporting on Payment Practices and Performance Regulations 2017, the two most recent reports can be submitted. If the bidder has recent data for the previous three or more months which has not yet been reported under the regulations, then this can also be submitted as a reporting period.
Where bidders are not required to publish their data in accordance with the regulations, they should still submit the previous twelve months’ worth of available data in two (six month) periods in line with the Department for Business and Trade Guidance to Reporting Payment Practices and Performance.
The criteria for applying the rules is summarised as:
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Bidder pays ≥95% of all supply chain invoices in 60 days and the bidders average payment days are also ≤55.
Both metrics are hit concurrently in at least one of the previous two six month reporting periods.
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Bidder meets the required standard. |
Pass |
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Bidder pays ≥90% < 95% of all supply chain invoices in 60 days and the bidder’s average payment days are also ≤55.
Both metrics are hit concurrently in at least one of the previous two six month reporting periods.
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Bidder demonstrates action plan that includes (as a minimum) the following:
1. Identification of the primary causes of failure to pay:
(a.) 95% of all supply chain invoices within 60 days; and
(b) (if relevant) all supply chain invoices within agreed terms.
2. Actions to address each of these causes.
3. Regular reporting on progress to the bidder’s audit committee (or equivalent).
4. Plan signed off by a director.
5. Plan published on its website. (This can be a shorter, summary plan) |
Pass |
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Bidder pays ≥90% < 95% of all supply chain invoices in 60 days and the bidder’s average payment days are also ≤55.
Both metrics are hit concurrently in at least one of the previous two six month reporting periods.
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No action plan or action plan does not include all of the above features. |
Fail |
| Bidder pays <90% of all supply chain invoices in 60 days in both of the previous six month reporting periods after removing intercompany payments (if relevant). |
Bidder’s payment performance falls substantially below the required standard. |
Fail |
| Bidder’s average payment days are >55 in both of the previous six month reporting periods after removing intercompany payments (if relevant). |
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Exemptions should only be considered:
- where the market for a contract of this type is distorted/narrowed/struggling to such a significant extent that delivery of public services is likely put at risk, or value for money is likely to be severely compromised;
- where there is a civil emergency.
FIS CEO Iain McIlwee commented:
“Whilst this another positive step, we are still talking about lengthy payment periods in an industry where up-front costs have increased substantially in recent years. It is also narrow in application, the requirement to comply with this notice only binds Central Government Departments, their Executive Agencies and Non Departmental Public Bodies where the contract value exceeds £5 million. It does not apply to NHS trusts, local or devolved authorities and there is also a fair bit of wiggle room provided in the exemptions. All this means in real terms the impact will limited for the vast majority of those working in the finishes and interiors sector. That said it is further recognition of the importance of an issue which remains a cancer at the core of construction and our hope is that as procuring authorities look to the new Regulatory Requirements and concerns about the resilience of the supply chain that they look to exceed the expectation set down in this PPN.
With increased Government support it is more important than ever that we call-out poor practice. If you have payment concerns FIS is able to take these foward anonymously both directly and working with the Small Business Commission (who has sanctions via the Prompt Payment Code). Through FIS you also have access to QS, Legal and specialist credit checking services that can help to expedite payment – nothing changes if we do or say nothing and we will always look to act in your best interests”.
A full copy of the PPN is available here
by Oscar Venus | Mar 15, 2024 | Contractual and Legal
Director of Building Safety for HSE, Philip White, has today written to the Building Control industry outlining new transitional arrangements for the registration of building control inspectors in England.
The Building Safety Regulator has listened to the concerns raised by the profession, including the potential impact on the construction industry if there are not enough inspectors registered to practice by the legal deadline.
It is crucial these concerns are balanced with the requirement for BSR to implement the Building Safety Act, 2022 and the need to raise standards in the profession; it is also important to remember that these changes were introduced in the wake of the Grenfell Tower tragedy.
A competence assessment extension period of 13 weeks will be introduced from 6 April to 6 July 2024 to enable those who meet specific criteria to continue to operate. This is not an opportunity to delay completing registration as an RBI and there will be no extension to these arrangements.
BSR has seen a positive response to the changes among the profession and it is encouraging to see a large number of people already engaging with the process. As of today (14 March) 3,261 professionals have started their applications to register.
In line with BSR’s enforcement policy statement and the principles of proportionate regulation, BSR will target its regulatory activity at those who present the greatest risk, particularly those who are not engaging with the new regulatory regime.
Open letter to Building Control professionals – March 24
Letter from the Director of Building Safety to industry:
Dear colleague,
As you will be aware, a number of concerns have been expressed by the building control profession about whether enough building control professionals will be registered as RBIs by 6 April.
I understand those concerns and have been working with colleagues in BSR and across government to consider what we can do to support the profession. To that end, the decision has been taken to implement a competence assessment extension period for those meeting set criteria.
Professionals who are not registered by 6 April will not benefit from the extension period and will not be able to continue to work on regulated building control activities.
Experienced building control professionals who are not trainees but have not yet completed a competence assessment will have the scope of their registration temporarily extended provided they meet the following criteria:
Temporary Class 1 Registration Extension Criteria:
- They are an existing building control professional;
- They are registered as a Class 1 RBI by 6 April 2024;
- They are enrolled in, and in the process of having their competency assessed through, one of the BSR approved competency assessment schemes by 6 April 2024. These are: cbuilde.com, www.thebscf.org, www.ttd-education.org; and
- A scheme provider has not told them that they have not passed their competency assessment for a second time
Those who meet the above criteria will be allowed a period of 13 weeks from 6 April 2024 to 6 July 2024 to complete their competency assessment and upgrade their registration to Class 2 or 3 (and 4, if applicable).
During this period, the scope of their registration will be temporarily extended, and they can continue to undertake building control work for the class of RBI for which they are undertaking a competency assessment.
Those who meet the criteria but do not successfully complete a competency assessment and upgrade their registration class by 6 July will not be able to continue to undertake regulated building control activities.
More detail on the transitional arrangements can be found here: https://www.hse.gov.uk/building-safety/building-control/codes-standards.htm
This must not be seen as an opportunity to delay – there will be no extension to these arrangements. From 6 July 2024 any professionals who have not completed a competency assessment and upgraded their registration class will only be able to undertake work under supervision.
We expect employers to support staff going through the assessment process by ensuring they have time to complete the assessment process and providing assistance and support to help them to succeed.
I encourage everyone who has not yet done so to register with BSR and enrol with one of the competency assessment schemes as soon as possible.
Philip White
Director of Building Safety, HSE
by Clair Mooney | Feb 21, 2024 | Contractual and Legal, Main News Feed
FIS Consultant Len Bunton shares his thoughts on why businesses should learn to say, No.
Len’s message is that businesses should not accept onerous contract clauses that increase risk, extended payment periods, or contra charges to name a few.
In this blog, Len has set down a list of things that businesses in thge sector should be saying no to.
Adopting some of the statements should help you to manage the commercial aspects of projects much more efficiently and profitably. In my experience there are plenty of good employers and contractors out there who will look after you and who have long-term building programmes, and who will value your input, and who will want you to help them build successful projects on cost, on time and to a high quality.
Be selective of who you work for, and find out which organisations have long-term building programmmes, with whom you can build a successful relationship.
Len Bunton, Bunton Consulting
These monthly Blogs are designed to help FIS Members avoid common traps and build on our focus on collective experience. They share ideas about improving the commercial management of your contracts. In other words, instilling best practice into the way FIS members run and manage their business. What I have endeavored to suggest is ways to ensure you get paid on time, and what you are due.
by Clair Mooney | Dec 19, 2023 | Contractual and Legal, Main News Feed
As we get to the end of 2023 there is no doubt it has been a tumultuous year for the industry in the United Kingdom. We have experienced some significant business failures which regrettably have left a mountain of debt due to a wide range of subcontractors across the industry. Fortunately, so far at any rate in Scotland, we appear to have avoided the impact of businesses stalling and going into administration and fingers crossed during 2024 that we do not experience any casualties.
The results of the recent CICV Payment and Cash Flow Survey made grim reading, but the responses really were not surprising as many of us who advise contractors and subcontractors, felt that recently reflected what the supply chain was experiencing across Scotland this being a general slowdown in payment periods, and a reduction in the amounts that the supply chain were due. Anecdotally, some clients say that they are currently experiencing a downturn in work opportunities, coupled with a tightening of margins and there are now definite concerns emerging regarding pipeline of work in 2024.
I have set out some positives with the hope that we will see some of these issues been delivered to see a general improvement in the construction industry in Scotland. In 2024 the process of educating the industry on the Best Practice Guide which sets out some of quite simple recommendations to contractors and subcontractors to improve the way in which they manage the commercial aspects of the construction projects. Getting contractors to buy into this is especially important and in embedding these recommendations into their businesses, and already there are several pilot workshops been planned and the feedback will hopefully be positive that lessons are being learned from the solid advice that has been provided. In addition, several contractors are seeking to have internal workshops to bring their commercial and contract management teams up to speed on the SBCC Forms of Contract.
The Quality Initiative is also a great idea and I know that CICV will be supporting this and again this initiative needs to be brought in at site level to ensure that less and less projects have issues concerning non-compliant workmanship which inevitably results in the costs associated with rework and contra charges, from the contractor and the clients. It really is up to everyone reading this article who runs a construction business, to make sure that their focus is on quality, and to end the criticisms experienced by the industry because of non-compliant workmanship and defects.
There is no doubt that there is a surge towards more collaboration in the industry and as to what form that takes remains to be seen, but it strikes me from sitting on the fence that the industry does want to collaborate more closely with the employers, contractors, and the supply chain to improve performance on construction projects. This is going to be a never-ending and a long term process and needs energy and dedication to drive these changes through.
Much work is happening behind-the-scenes on the Construction Accord and in my personal opinion it is essential that the Scottish Government and the construction organisations work very closely together to achieve the objectives of the Accord, and there is no doubt that this is going to take a number of years to come to fruition, but the positive side of this is that discussions are underway and some very positive ideas and objectives are emerging.
Again, on a positive note the Conflict Avoidance Process and the Conflict Avoidance Pledge are gaining traction and we are now seeing a number of major projects having CAP incorporated into the building and engineering projects from the outset. In addition, the level of approaches to the RICS are increasing, to have 1/3 party brought in to try to resolve issues at the initial stages and avoid issues escalating into expensive and time-consuming disputes. The Conflict Avoidance Coalition will come forward in 2024 with a new structure which will focus on promotion and growth, and developing guidelines and processes, and a major conference will be held in 2025 which hopefully will attract major clients users of the construction industry and consultants, contractors, and subcontractors.
I have also been encouraged by the work of the Finishes and Interiors Sector who have appointed experienced individuals to provide Contract Reviews to FIS members. This means that when a tender enquiry comes in a tenderer can have the conditions of contract reviewed to identify any high risk clauses that might require financial recognition but hopefully the parties can negotiate out some of the unacceptable risk transfer amendments and thus start the project with a balanced and fair set of conditions of contract. It is beyond my comprehension why public and private sector clients continue to have pages of amendments to the Standard Forms and the industry needs to stand up to this type of conduct.
One question I was asked recently was – are attitudes changing and so the answer to that is yes. In my own work with a number of clients I have noted that they are walking away from employers who are only interested in lowest price, they are walking away from employers who as I say produce ridiculous amendments to the Standard Forms and there are walking away from both public and private sector clients who are either late payers, or who continually reduce the amounts due to contractors and the supply chain. I find that approach to be refreshing and hopefully it will spread throughout the industry.
So, let us take a positive view moving into 2024 and let us hope that the industry can take on some of the many recommendations coming forward, to make the industry in the United Kingdom a positive and profitable sector to be in.
Read all of Len’s blogs and get more information about all the Business and Legal Support available through the FIS here.
by Oscar Venus | Dec 14, 2023 | Contractual and Legal, Insurance
With cashflow continuing to be a thorny issue across the industry, it’s never been more important to ensure your payment preparations are in good health. Here, our expert elf delivers a dozen festive financial pointers to help prepare your business balance sheet for the New Year and beyond…
Unfortunately we’re still seeing significant contractor and sub-contractor business failures across the UK, resulting in a trail of devastation for the supply chain.
I’ve recently dealt with payment and cashflow issues for a number of SMEs and the level of difficulties currently being experienced is extraordinary.
After 40 years in the industry I don’t think I’ve ever seen so much chaos and it’s desperately sad to see so many businesses going into administration and good people being made redundant.
It’s essential that FIS Members minimise risk in 2024, so with apologies to the classic tune <<The 12 Days of Christmas>>, I’ve wrapped up a dozen of my own top payment tips to ensure you don’t lose sleep over payments and can enjoy a silent night…
1. Use Mr (or Mrs) Clause – use an experienced professional to analyse any contracts you’re bidding for and highlight any high-risk clauses. This will allow you to discuss the issue in advance and request that the clauses are removed or mitigated. There’s no use doing this after your tender has been accepted!
2. Make a list and check it twice – ensure you have a payment schedule in your contract, setting out the dates when you’ll make an application for payment, what you need to provide, the due and final dates for payment and when a pay less notice will be issued. Stick religiously to these dates – your commercial manager should have them in their calendar.
3. Stay another day – beware your payment schedule running out. If a job runs past the last date in the schedule, make sure it’s extended until you reach practical completion.
4. Talk turkey – payment applications are often rejected or reduced because you haven’t provided the relevant information. Too much detail is better than not enough, so ensure your commercial manager follows up each application with a call to the contractor to establish they have everything they need. There’s nothing worse than getting to the end of the month, only to find your application has been shredded!
5. Follow the star – make sure you do what the contract says about submitting notices. So if it says they must be sent by email and registered post, do that. If it says they have to go to individuals and an organisation, do that instead.
6. Wrap it up – a sub-contractor told me recently that if his money isn’t received by the final date for payment, he issues a notice to suspend the performance of his obligations on site the next day. You’re perfectly entitled to do this and I find it’s a good wake-up call to both contractors and employers.
7. Do you hear what I hear? – you’ll often get an early indicator if there are trading difficulties, so keep your eyes and ears open. If the contractor or employer isn’t paying on time or reducing payments, share intelligence and compare notes with other sub-contractors.
8. Avoid a ding-dong – if you’re delayed, tell the contractor or employer why ASAP and give early notification of an extension of time. Some clients say they don’t want to ruffle feathers, but your priority is your <<OWN>> business. A standard contract allows extensions of time and payment of loss and expense, so take advantage.
9. Head for quality street – quality is still a major issue in the industry, with clients being charged for failing to rectify defective workmanship, remove rubbish and comply with health and safety regulations. The Construction Quality Improvement Collaborative is a major step forward – it’s worth signing up at www.cqic.org.uk to demonstrate your credentials and commitment to doing things right.
10. Jingle all the way – I recently issued a notice of adjudication to a defaulting party who quickly paid up. The Low Value Dispute Adjudication offers a fixed fee for an adjudicator to run such a dispute so you should take advantage – find out more at www.rics.org
11. Goodwill to all men – SELECT is among the many bodies to sign up to the Conflict Avoidance Process (CAP), which you can use as an early intervention to prevent issues escalating and allow you to keep working (and earning). Check it out at www.rics.org/capledge
12. Stuff those turkeys – finally, if you’re working with an organisation that’s repeatedly giving you the runaround, have the courage to tell them their goose is cooked and give them the boot.
In addition to these pointers, please read the CICV’s Best Practice Guide – available to download for free from www.cicvforum.co.uk – to improve your commercial management.
There’s no doubt we’re in for another tough 12 months across the industry but those firms that prepare properly will manage to weather the snowstorms to come.
by Clair Mooney | Nov 9, 2023 | Contractual and Legal, Main News Feed
FIS Consultant Len Bunton shares his concerns about the payment and cash flow issues in the construction industry in the UK.
“Everybody who reads this will be acutely aware of difficulties in the current marketplace, and what I would like to do is to share some recent experiences and to highlight some recommendations to allow businesses to find a way through an exceedingly difficult period.
“What we have experienced recently as a number of significant failures of contractors and subcontractors in the UK, and there is no doubt that these failures result in a trail of devastation for the supply chain who have been involved. What members need to do is to minimise risk. I have recently been involved with a number of FIS members in dealing with payment and cash flow issues, and the level of difficulties that are being experienced is extraordinary and after 40 years in this industry I do not think I have seen so many issues arriving on so many projects.
Here, Len provides some suggestions and recommendations for you to take on board.
These monthly Blogs are designed to help FIS Members avoid common traps and build on our focus on collective experience. They share ideas about improving the commercial management of your contracts. In other words, instilling best practice into the way FIS members run and manage their business. What I have endeavored to suggest is ways to ensure you get paid on time, and what you are due.
