黑洞社区

Those with long memories in this industry might well be tempted to skip over the news just as they would be inclined to do if a new report popped up, promising another set of reforms. It鈥檚 fair to say, most with any experience of the way construction works have been here before.

But the scale of the letter-writing campaign says that, possibly, the government is getting an idea of just what a problem subcontractors, suppliers and smaller firms in construction face getting paid. Carillion has chivvied them into action, no doubt, and for that reason alone Dowden鈥檚 letter is better late than never.

Will a firm be given a warning that it faces being barred if it doesn鈥檛 buck up its ideas? Further still, will it be put in special measures until it improves? What would that actually entail? Nobody really knows 

黑洞社区 has heard many horror stories of how firms get out of paying suppliers when they鈥檙e supposed to 鈥� from changing the address on where to send the invoice to problems with internal systems along the lines of 鈥渟orry, the IT system is playing up so the payment run鈥檚 been put back a month鈥�. And on it goes.

One insider told this magazine recently of the goings-on at a well-known contractor. Staff, he said, were having to answer phone calls and reel off a new list of excuses.

While it鈥檚 difficult to prove that this is actually happening 鈥� short of listening in to these conversations 鈥� it鈥檚 not too difficult to imagine either. That鈥檚 almost as damning as the excuses being trotted out.

Dowden, or certainly officials at the Cabinet Office, have realised that this can鈥檛 go on. In his letter, he tells firms he鈥檒l be keeping tabs on them thanks to the payment data they are now required to publish every six months.

He tells firms that those who cannot prove they pay their supply chain within 60 days are at risk of being barred from government contracts. 鈥淪uppliers who are unable to demonstrate that they have systems in place that are effective and ensure a fair and responsible approach to payment of their supply chain may be excluded from bidding,鈥� he writes. 鈥淢any of you are due to publish your next report by the end of July and I expect to see you meeting the required standards and making improvements if necessary.鈥�

And he adds that he鈥檚 not planning to go away on this one, warning: 鈥淢y officials will keep me updated on your progress.鈥�

But what happens if that progress is not very good? What then? For many, the carrot approach only works with a stick. The question is how heavy a stick to wield?

The acid test will come when a firm flunks the new required standards and is found to be hopelessly not up to scratch on paying its suppliers in a 鈥渇air and responsible鈥� manner.

Some will want a statement, a sign that the government is really serious about getting to grips with one of the longstanding scourges of the industry. And for them that means barring a firm from winning work and making that news public. Will a firm be given a warning that it faces being barred if it doesn鈥檛 buck up its ideas? Further still, will it be put in special measures until it improves? What would that actually entail? Nobody one really knows and as ever the devil is in the detail.

In his letter, Dowden tells recipients that as signatories to 鈥渢he Prompt Payment Code, you have committed to paying your subcontractors on other contracts within a maximum of 60 days (this is met by paying 95% of invoices within this period) and to work towards 30-day payment terms as the norm鈥�.

We thought we鈥檇 take a look at just how many top 10 firms were meeting the 95% in 60 days target. The answer is none. 

Most people probably won鈥檛 be too surprised at the news, given that contractors still operate on wafer-thin margins and the industry鈥檚 biggest contractor, Balfour Beatty, talks about margins in excess of 2% as some sort of a triumph.

And here lies the rub. While the payment record of this industry is poor, the margins firms are expected to accept encourage this sort of behaviour. There is talk of ring-fencing margins on government projects at, for example, 5% and, the theory goes, payment malpractice would be cut out at a stroke.

There is a huge amount of structural change required in construction 鈥� and fair payment, margins and attracting a more diverse workforce are right at the top of the industry鈥檚 collective in-tray.

But simply blaming margins for everything is not good enough 鈥� and nor should it mean the government doesn鈥檛 at least attempt to do something about poor payment practice. After all, that is what a government is supposed to do: lead.

Let鈥檚 hope it does exactly that on this issue, so that Dowden鈥檚 letter doesn鈥檛 become another 鈥渂een here before鈥� moment.

Dave Rogers, deputy editor, 黑洞社区