Fair Payment For Public Sector Sub-Contractors
When the newest budget was unveiled by Alistair Darling in March, the vast majority of the nation was looking at the impact it would have on our work, on our taxes, our schooling and health programs and our own individual spending habits. There was one particular step launched as part of the 2010 budget that many of us will not have observed however. This write-up aims to uncover some of the details of this new initiative.
The announcement is in regard to fair payment within the public sector field, with particular focus on contractors and subsequent sub-contractors. The new judgment says that from March 25th 2010, any contractor working for a department in the public segment will have a legal responsibility to pay their own sub-contractors inside of 30 days.
It is certainly worth noting that the 30 day clause doesn’t apply to payments from the governmental branches to first tier contractors, but to the first tier contractors making punctual payments to lower level contractors that they are employing on their own. However, all central government units now must pay 80% of any unchallenged invoices for goods or services inside of 5 days.
Why It’s Being Done
This step has been made as one element of an effort to improve the timeliness of payments arising from public segment jobs up and down the supply chain. Public segment work has a great reputation for the speedy payment of bills at the higher levels of sub-contracted work, but this benefit has not at all times been felt by sub-contractors which are two or three levels of separation from the initial payment. The addition of a 30 day payment clause ought to help to distribute this benefit to all sub-contractors working on public sector jobs.
If viewed as part of the larger picture, this particular payment initiative is being used to try and help the numbers of small and medium sized businesses (SMEs) that operate in this country. As we feel the tailing off of the most recent recession, many businesses both large and small have suffered the strain. Just making it through until now in the current financial circumstances has been an accomplishment for many. The government is now looking to ensure that it can support as many of these enterprises as possible.
To help these companies control their income flow more efficiently, suppliers to the public sector are being paid faster than has previously been the case. 19 out of 20 invoices to central government departments from primary contractors are being paid inside of 10 days. The government is now looking to spread this benefit across the sub-contracting supply cycle.
With so many unique companies working jointly on nearly every office fit out money flow frequently becomes a complex process.
Who It Affects
This new ruling will impact any contractors as well as sub-contractors through the supply chain on works for all government departments, government agencies along with NDPBs (non-departmental public bodies). It is designed to help the sub-contractors further down the chain rather than offering rewards only to the primary contractors at the top levels.
Who It Doesn’t Affect
The 30 day payment program is only relevant to personnel in the supply sequence for public sector projects and is not part of standard business regulation. It therefore doesn’t affect any companies in the private sector. Since the measure does not need to be applied to active contracts, several of the projects for the 2012 Olympic Games won’t be obligated to adopt the program. The usage of the system by present construction contracts on a voluntary basis is currently being invited however.
What It Means For Business
What this should mean with regard to small firms that are involved with public industry works is an improvement in the speed with which they will receive payment for their work. Whilst some payment procedures have been recognised to include scope for certain “bending” of the guidelines, this fresh plan does seem to be far more rigorous in terms of delivering on its possibilities.
It does of course mean that public segment agreements can no more be received by main contractors who don’t agree to the 30 day payment terms. Further than this, the speed of payments down the supply chain could become a factor while deciding which contractors will be chosen. The government are actively encouraging their main contractors to pay 2nd and third tier firms before the 30 day deadline is up, which can see contractors making use of speed of payments as part of their plans.
The new payment measures do not have to be put on to any existing contracts that the governmental bodies in question currently have. This fact will help to lessen the amount of time spent on adjusting these contracts and keep the paperwork required to a bare minimum, and it ought to enable the new system to come into practice much much more smoothly.
Choosing the appropriate Leicester fit out contractors to operate within your workplace fit out has always been an extremely critical decision.
The fresh commitments to faster payments throughout the supply string is a sister measure to other policies and acts that are being executed in order to encourage a fairer working environment up and down the supply chain.
Fair Payment Charter
The Fair Payment Charter forms one part of a bigger instruction developed by the Office for Government Commerce (OGC) designed to encourage the best “fair payment” procedures for companies operating within the world of public segment projects. The terms set out by this charter came into force from the 1st January 2008 targeted at all contracts in the public sector.
This charter is by no means a lawfully binding document, and it does not supersede any of the terms laid out in particular workers’ contracts. It’s simply a record which sets out a range of responsibilities that are hoped to be adopted throughout the industry. A few of the major points in the charter are the timeliness and correctness of payments that are made, that the payment process should be transparent up and down the supply string and also that all parties within the supply chain should work jointly to ensure appropriate cash flows at many levels.
Prompt Payment Code
The Prompt Payment Code is yet another initiative that is geared towards assisting small and medium size firms, especially in terms of cash flow. It has been developed by the Government, together with support from the Institute of Credit Management (ICM) and promotes the adoption of best payment tactics and openness for any kind of agency which adopts it. It sits alongside existing fair payment schemes.
Again, this particular code is not a lawfully binding document and doesn’t override any stipulations of operating agreements between companies and individuals. It is a guide for organisations that sets out a standard collection of fair payment policies designed to assist all affiliates working inside the public sector.
Companies that sign up to the code must undertake an application process that determines if they have suitable procedures in place to conform with the guidelines set out in the code. After they have passed all these tests they can then show the PPC logo on their very own company brochures and web site as an indicator of their dedication to operating within a fair payment environment.
The terms will have an impact on numerous companies performing refurbishments upon workplaces built for organisations working within the public sector.
Implementation Of The Code
The exact wording that should be adopted by firms working in the public segment may be taken from the Model Terms and Conditions of Contract for Goods and Services, as released by the OGC. “Where the Contractor enters into a sub-contract with a supplier or contractor for the purpose of performing its obligations under the Contract, it shall ensure that a provision is included in such a sub-contract which requires payment to be made of all sums due by the Contractor to the sub-contractor within a specified period not exceeding 30 days from the receipt of a valid invoice.”
The OGC would like companies to follow the contract models that it has produced as a program of best practice. This doesn’t necessarily mean that they must be adopted word for word in every circumstance, given that every company is different and works under a distinctive set of circumstances.
Political Impact
As with any program introduced by Government there is a certain amount of political maneuvering that happens. Although all sides of the political spectrum can agree that there is a vital requirement for fair payment in the public segment, there are still a number of further steps that can be undertaken that could be employed by all parties to promote their own campaigns. This becomes even more apparent during an election year.
David Cameron and the Tory party have recently come out with a promise to tackle unfair pay in the public segment. Their plan will implement a broad sweep of pay cuts across the senior workers within the public segment by associating the pay grades of the chief staff to the lowest paid individuals within their business.
While Cameron recognises that there’s currently a commitment to pay transparency, fairness and speed, he also says that “it is time to go further.” The party leader claims that by dealing with the issue of fair pay within the public segment is an indication of just how his party has become the most progressive party in the Uk and should go some way to dismiss the traditional prejudices associated with the Conservative party. He furthermore makes use of the steps to release an attack on the Labour party, claiming that they are a government beyond their sell-by date.
This entry was posted on Saturday, June 26th, 2010 at 3:56 am and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.