ECA drives government reform on prompt payment

ECA has long been an advocate of addressing unfairness in payment. It disadvantages all, but disproportionately impacts SMEs.  

Earlier in 2021, we worked closely with the Government to strengthen the Prompt Payment Code. Signatories to the Code should now pay contractors within 30 days. We also supported Lord Agnew in crafting tighter public sector requirements within the Cabinet Office. This means, from 1 April 2022 suppliers must prove they pay 90% of invoices within 60 days to qualify for public sector contracts.

New legislation will have proposals for more transparency on evidence-based decision making

At the same time, ECA worked with the Cabinet Office to draft proposals for a Green Paper. This shapes UK procurement post-Brexit and heralds further important changes in the payment landscape.

Government Consultation

Government recently published the results of its Consultation on the Green Paper, Transforming Public Procurement.  The responses make for a long read, but this blog summarises the key findings about public sector pay performance. 

ECA leads the SME Advisory Panel Group on Payment and drafted the following proposals for the Consultation on the Green Paper. Respondents were asked if they agreed with the statements below:

• businesses in public sector supply chains should have direct access to contracting authorities to escalate payment delays? 
• there should be a specific right for public bodies to look at the payment performance of any supplier in a public sector contract supply chain? 
• private and public sector payment reporting requirements should be aligned and published in one place? 

What did people say?

Once the Bill has passed through Parliament, ECA will supply detailed guidance on the changes 

Seventy-nine per cent of 332 responses supported the proposals. Overall, they were in favour of proposals to increase transparency of payment issues in the supply chain. They also wanted to shine a light on public sector payment performance. 

There was support for a specific right of investigation into supply chain payment performance. Respondents felt this had been lacking, given the statutory duty of public sector authorities to ensure payment at tier 1, 2 and 3 within 30 days. 

This would increase the confidence of SMEs bidding for work in Government supply chains. It may even see a return to naming/nomination forms of contract where clients can withhold monies due to tier 1, to ensure payment to tier 2. It would allow clients to safeguard project delivery and supply chains.

The most common concern raised about escalating payment delays to contracting authorities, was the privacy clause in contracts. Sub-contracts often have confidentiality clauses prohibiting sub-contractors liaising with parties outside the contract. If you escalate concerns to the end-client, you place yourself in breach of confidentiality.

Similarly, concerns were raised about contracting authorities investigating payment delays. While people supported the principle, there were queries over how often the right would be exercised in practice. 

Government Response 

The Government will introduce the proposals into legislation, as described in the Green Paper. It is a credit to ECA’s involvement and leadership that guidance on escalating payment issues and using whistle-blowing channels will form part of the Bill.

The new legislation will have proposals for more transparency on evidence-based decision making, and greater clarity on payment performance. The aim is to resolve payment delays quickly and avoid disputes between suppliers. Once the Bill becomes an Act, secondary legislation will be introduced in to implement specific parts of the new regime. 

Once the Bill has passed through Parliament, ECA will supply detailed guidance on the changes. We want to thank all our Members for sharing their experiences and helping to influence change in the payment landscape. The response to the Consultation shows how ECA amplifies the collective voice of Members and benefits the wider industry.