Public contractors win 30-day payment clause

The smallest IT suppliers on the biggest government technology contracts must have their invoices paid within 30 days, under new laws that took effect yesterday.

In fact, everyone in the supply chain of such contracts must comply with the 30-day payment term from 24.02.15, whether they are a primary contractor, a supplier or a sub-contractor.

So from that date, contracting authorities are required to insert provisions in all public contracts to ensure the prompt payment of “undisputed” invoices permeates the supply chain.

“Public contracts must…contain a condition requiring contractors to include similar provisions in their contracts, and so on down the supply chain,” added the government.

“Additionally, each contracting authority must publish statistics showing the proportion of invoices paid in accordance with these obligations”.

Those stats must include the total amount of any liability to pay interest which arose during the year; and the total amount of interest actually paid in discharge of any such liability.

Enshrining transparency and prompt payment are part of package of new reforms to simplify the procurement process for SMEs supplying, or looking to supply, the public sector.

Unveiled by the Cabinet Office, the package includes the removal of Pre-Qualification Questionnaires (PQQs) on low value contracts, and new transparency rules for Contracts Finder.

Contractor body IPSE welcomes the package, which the government says should “increase” its spending on SMEs – currently standing at 26% of its budget, equating to £11.4bn.  

“Any action to make it easier for the smallest businesses to gain government contracts should be welcomed,” reflected IPSE’s Andy Chamberlain.

“Late payment is a major issue for micro-business owners…who rely on regular income to keep their business afloat, but chasing payment puts future contracts in jeopardy.” 

So while he hinted contractors would embrace the 30-day clause, and the removal of PQQs, he suggested more could be done if helping the smallest suppliers was really the goal.

“A small business conciliation service…would allow self-employed professionals to receive payment without the need for lengthy court action,” Chamberlain said. “The problem [of late payment] won't disappear until tough action is taken to change the whole culture of pay by big business.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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