The construction acts were supposed to right a lot of the poor practice in the construction industry, particularly relating to getting paid on account. However, we all know stuff still goes on and pay when paid hasn’t gone away.
Starting from April 1st, 2024, suppliers providing goods and services to government departments are required to adhere to stricter payment regulations in order to be eligible for government contracts exceeding £5m. As per the recent Prompt Payment Guidance policy introduced by the government, all suppliers must ensure that their invoices are settled within an average period of 55 days, with the ultimate objective being to reduce this average to 30 days. Despite having endorsed the policy, Carillion, prior to its collapse, was notorious for delaying payments, leaving some suppliers waiting for up to 126 days before receiving their dues – that's more than 4 months. To put this delay into perspective, consider this scenario: if you work as a subcontractor in September 2024 and submit your invoice at the month's end, you won't receive payment until January 30th, 2025 – crazy! The issue of delayed payments is not exclusive to construction firms; consultants also face challenges with receiving timely or any payment at all.
When discussing ethics and ethical behavior, a point often raised is determining the appropriate time frame for consultants or suppliers to allow for invoice payments before deciding to withhold further services until payment is made. Typically, the concern is that being too insistent may lead to losing future business opportunities. This challenge is particularly pronounced when dealing with larger organizations.
In context of the above, it was positive to learn about a recent case involving a housing association that failed to make timely payments for two invoices totaling over £600,000. Consequently, the contractor issued a termination notice and ceased work, much to the client's annoyance. The case was escalated to adjudication and the Court of Appeal, which ruled in favour of the contractor, setting an important precedent. The counsel in this case stated that the contractor had various measures at their disposal to safeguard their cash flow, such as the ability to suspend work and claim statutory interest.
Duncan Cartlidge
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