Balfour Beatty, Costain and Interserve are among eight major construction companies that have been punished for failing to pay suppliers on time.
The firms have had their accreditation to the government’s Prompt Payment Code (PPC) removed or suspended, putting their ability to win government contracts at risk.
The PPC which was established in 2008 and thousands of firms are accredited.
The Chartered Institute of Credit Management (CICM), which is responsible for administering the code on behalf of the government, stripped John Sisk & Son of its PPC accreditation.
Meanwhile, six other firms had their accreditation suspended because of their late payment records. They were Balfour Beatty, Costain, Interserve Construction, Laing O’Rourke, Engie Services and Kellogg Brown & Root.
Under the terms of the PPC, accredited firms are required to pay 95% of all supplier invoices within 60 days of receiving them.
More broadly, 17 companies have had their PPC accreditation removed or suspended in the last three months for failing to meet the PPC’s standards, according to the CICM.
Businesses whose PPC accreditation is suspended must explain how they will comply with it within an agreed period before they are allowed to reclaim their accreditation. Their accreditation can only be reinstated if they demonstrate compliance. Failure to do so will result in them being stripped of their accreditation.
CICM chief executive Philip King said: “The Prompt Payment Code Compliance Board is disappointed with the actions of a minority who continue to treat their suppliers unfairly and has no satisfaction in having to name them publicly.
“As part of our work driving culture change to end late payments, we will continue to challenge signatories to the Code if the obligatory Payment Practice Reporting data suggests that their practices are not compliant with the Code.”
In a statement, the CICM added: “Companies are already taking action to improve, which is welcomed and supported by CICM. Interserve Construction, for example, has improved its performance based on an action plan agreed with the CICM, which has seen the business reduce the number of payments over 60 days by 10% over the second half of last year. The company is continuing to improve towards compliance over the next six months.”
From September this year, any supplier that bids for a government contract worth more than £5M per year must answer questions about their payment practices and performance. Those unable to demonstrate that they are paying their suppliers are paid in a timely manner could be excluded from bidding, the government has confirmed.
An Interserve spokesman said: “Payment terms and timing of payments to Interserve Construction’s valued supply chain partners remains an important area of focus and one which we take very seriously. That commitment is underscored by the fact that we dramatically improved the level of on-time payments from 17% to 51% throughout 2018.
“We remain committed to the principles underpinning the Prompt Payment Code and are working in partnership with CICM and our supply chain partners to continue to improve our performance. We have a strong and loyal supply chain who we work with collaboratively to deliver best in class service for our customers.”
A Balfour Beatty spokesperson added: “In an industry with complex supply chains, prompt payment is often reliant on resolution of disputes and alignment to agreed contractual processes. Our payment terms and payment days are in line with the wider construction industry.”
A Costain spokesperson said: “Costain was an early signatory to the Prompt Payment Code and we are taking action to ensure we comply. Since January this year we have moved all our suppliers onto payment terms of 45 days or less.
“We acknowledge that we have more work to do to ensure our suppliers are paid within 60 days and are committed to achieving this by the end of the year.”
A John Sisk & Son spokesman said: ”While we are disappointed with the decision we are working to address it as quickly as we can with all the relevant stakeholders to ensure we comply with the Code across all of our supply chain.
”We are committed paying all our suppliers to the agreed terms and will continue to work hard to achieve this.”
Small businesses minister Kelly Tolhurst said: “The Prompt Payment Code is a positive force for good and by naming transgressors we are supporting small businesses in the supply chain.
“We remain committed to supporting small businesses against poor payment practice and are delighted to see that the Prompt Payment Code Compliance Board has acted to expose those whose payment practices fall outside of their obligations to treat suppliers fairly.”
Carillion’s collapse put the issue of late payment in the spotlight last year. Following the construction giant’s collapse, trade bodies Build UK, the Civil Engineering Contractors Association and the Construction Products Association urged the government to abolish retentions. They claimed Carillion held an estimated £800M in retentions when it failed.
Research conducted by small business finance provider Liberis earlier this year revealed that small businesses are altogether still owed £14.9bn from goods and services they have provided.
New Civil Engineer has contacted all eight firms for comment.
Like what you’ve read? To receive New Civil Engineer’s daily and weekly newsletters click here.