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Contractors attack MOD payment rules

PRIME CONTRACTING, the new Ministry of Defence construction procurement model, came under attack this week from contractors.

Alan Crane, chairman of construction best practice body Movement for Innovation, said contractors would refuse to work for Defence Estates, the MoD's property wing, unless it scrapped clauses dealing with payment and risk.

DE demands that lead or prime contractors pay their suppliers and subcontractors in full at set points through a project's delivery cycle. Only then will they be eligible for payment by DE. Prime contractors must also shoulder responsibility for a proportion of risk at the project's outset (NCE 9 March).

'DE is asking main contractors to fund their projects for them, and that's simply not fair, ' said Crane.

The Construction Confederation is also unhappy about DE's prime contracts. Model terms and conditions are 'vague' and open to interpretation, said CC legal director Claire Edwards.

CC members are worried that payment clauses could be open to abuse. DE will be able to hold back payment to the prime contractor not only if it fails to pay the supply chain but for other, minor, breaches of contract as well, said Edwards.

But according to Specialist Engineering Contractors Group chief executive Rudi Klein, many contractors are worried that they do not have the cash needed to assume a lead role in prime contracting and are worried about losing out on work.

'The majority of contractors are not cash rich enough to win prime contracts. They can see the work going to big construction management specialists if prime contracting goes ahead and are digging in to fight it all the way, ' Klein said.

DE has no plans to alter payment and risk allocation clauses.

DE's contracts have been designed to stamp out abuse of subcontractors, such as late payment or under payment, said commercial director Ted Pearson. The first prime contracts are to be let later this year.

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