Network Rail contractors will have to pay subcontractors within 28 days, under new rules imposed for control period 6 (CP6).
Tier One contractors will also have to remove the use of retentions on payments, as part of the Network Rail contract shakeup.
The rail operator said the new terms would help protect smaller suppliers across the industry.
The changes are designed to overhaul the way larger contractors do business with the supply chain and create a “healthier environment for suppliers at all levels”.
The rail operator implemented a best practice ‘Fair Payment Charter’ in 2011 and described the decision to formalise the new contract terms as ’“the next natural step’’ and something their major contractors supported.
Removing retentions, which withhold large sums of money from sub-contractors until project completion will place smaller suppliers in a stronger financial position, according to Network Rail.
Network Rail commercial director Stephen Blakey said: “The Fair Payment Charter was about recognising that cash flow is the ‘life blood’ for every supplier by committing to pay for goods and services in a fair, predictable and timely way.
“Harnessing the support we have already received from our major suppliers, we have simply taken the next natural step and formalised that approach for CP6. Culturally, it sends a huge signal as to the value we place on a sustainable supply chain and the way we want to do business.
“We recognise the challenges faced by smaller suppliers and are in a position to influence the way work on our railway is delivered and paid for. It is in our interest to have a sustainable supply chain at all levels – they are vital to the successful delivery of our projects and the safe operation of Britain’s railway.”
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