The government鈥檚 Payment Charter takes us a step closer to fixing the industry鈥檚 ills
The problem of achieving a 鈥渇air鈥� payment culture in the industry moved a tentative step closer to being addressed this week with the official launch of the government鈥檚 Payment Charter, which filled in some of the detail around the move trailed earlier this month.
One of the most promising signs was that three major private sector clients - British Land, Berkeley Group and Barratt Developments - have already signed an agreement that commits them to holding no retentions on their construction contracts from now on. The presence of such heavyweight names on the charter, alongside backing (in principle) from the public sector through the involvement of the Department for Business, Innovation and Skills (BIS), establishes a clear headwind in favour of abolishing the retentions practice that has been a source of financial distress to thousands of supply chain companies. It also sets a lead on the charter鈥檚 other key measures, including a move to 30-day payments by 2018.
Less positively, chief construction adviser Peter Hansford has acknowledged that monitoring mechanisms for the charter still need to be devised. With a lack of enforcement measures causing the failure of previous payment initiatives, this provides an immediate reality check to anyone hoping the charter will offer a quick fix to the industry鈥檚 payment ills.
The government could boost the chances of the scheme鈥檚 success by making signing the charter part of its pre-qualification process for main contractors on public sector projects
But the government could boost the chances of the scheme鈥檚 success by making signing the charter part of its pre-qualification process for main contractors on public sector projects. Those involved in drafting the agreement have said the expectation is that BIS will 鈥減lay a lead鈥� in pushing the deal out; such a move would be the most effective way of doing so.
This cannot realistically happen overnight: with some of the companies involved in putting the charter together themselves not yet in a position to commit to its terms, Hansford has rightly drawn attention to the need for businesses to transition to the arrangements.
The same would apply to public sector procurers. But a directive from government that signing the charter would be a requirement for working as a tier one contractor on government contracts from, say, 2015, would drive firms to start making the changes now that would enable them to join in a year鈥檚 time.
The need for time to adjust to any major change is a given, in the industry as much as anywhere else. But that transition period cannot be allowed to continue indefinitely or it starts to look suspiciously like failure. Just ask those following this week鈥檚 events at Old Trafford.
Sarah Richardson, 黑洞社区 editor
Look to the East
Increasing interest from Chinese investors in European projects has led to speculation that this will be followed by Chinese contractors seeking work. And despite fears about the wheels coming off the Chinese economy, the fact that Chinese funds have invested more than 拢13bn in EU infrastructure projects over the last four years shows that they offer an attractive solution to countries like the UK in a continuing era of constrained public spending.
Against this backdrop, this week鈥檚 announcement of an alliance between Atkins and the state owned China Communications Construction Company looks a shrewd move, and one that other UK firms will seek to emulate.
As Carillion showed with its relationship with Beijing Construction Engineering Group earlier this year, contractors are alive to the potential benefits of these partnerships as well.
The extra prize for consultants, of course, is that even if the reins do tighten on Chinese overseas spending, there is still a wealth of demand for their expertise in the East itself.
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