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The 30 Day Payment Deadline For Public Sector Works

Filed under: Uncategorized — emitaliablog
Posted on June 29, 2010 @ 1:46 pm
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When the latest budget was unveiled by Mr Darling in late March, the majority of the country was browsing at its impact it would have on our jobs, on our taxations, our education and health programs and our own personal spending habits. There was one particular step launched as part of the 2010 budget which many of us will not have seen however. This article aims to uncover some of the facts of this new initiative.

The announcement is in respect to fair payment within the public sector industry, with specific focus on contractors and subsequent sub-contractors. The new ruling declares that from March 25th 2010, any service provider working for a division in the public segment will have a contractual responsibility to pay their sub-contractors inside of 30 days. The scope of this particular initiative will only cover new deals.

It is worth noting that the 30 day clause does not apply to payments from the governmental departments to 1st tier contractors, but to those first tier contractors making prompt payments to lower tier contractors that they are hiring themselves. Nevertheless, all central government departments now have to pay 80% of any undisputed invoices for goods or services inside of 5 days. This is a gauge of their commitment to a fairer payment program.

Why It’s Being Done

This step has been made as part of an effort to improve the timeliness of payments coming from public segment jobs up and down the supply chain. Public segment work has a great reputation for the prompt payment of accounts at the top levels of sub-contracted work, however this gain has not at all times been felt by sub-contractors which are two or three levels of separation away from the initial payment.

When viewed as part of the larger picture, this particular payment move is being utilised to try to help the numbers of small and medium sized businesses (SMEs) that trade in this country. As we feel the end of the most recent recession, many companies both large and small have felt the strain. Merely surviving until now in the present economic situation has been an achievement for most. The government is now seeking to ensure that it can assist as many of these companies as possible.

To help these companies control their cash flow more effectively, suppliers to the public sector are being paid more quickly than has ever before been the case. 19 out of 20 bills to central government sections from main contractors are being settled within 10 days.

A public sector enterprise looking into any kind of office fit out have to currently adapt deals for any companies they will use.

Who It Affects

The new ruling will affect any contractors and sub-contractors all through the supply chain on projects for any government departments, government agencies and NDPBs (non-departmental public bodies). It is designed to support the sub-contractors further down the chain rather than providing rewards only to the primary contractors at the higer levels.

Who It Doesn’t Affect

The 30 day payment program is only relevant to contractors in the supply sequence for public sector projects and isn’t part of general business law. It therefore doesn’t impact any contractors within the private market. Because the measure does not need to be placed on to active agreements, several of the projects for the 2012 Olympic Games won’t be forced to adopt the program. The usage of the program by existing construction contracts on a voluntary basis is currently being encouraged however.

What It Means For Business

What this step ought to signify for small firms that are involved with public industry works is an increase in the pace with which they receive payment for their performance. Whilst some payment policies have been known to include scope with regard to certain “bending” of the rules, this fresh scheme does seem to be far more rigid in terms of delivering on its potential. At least it appears that way so far.

It does of course mean that public sector agreements can no more be received by primary contractors that don’t agree to the 30 day payment clause. Even more than this, the swiftness of payments all the way down the supply chain could become a variable when deciding which contractors will be selected. The authorities are positively encouraging their main contractors to pay 2nd and 3rd tier companies before the 30 day deadline is up, which can see contractors using speed of payments as one part of their plans.

The fresh payment measures do not have to be put on to any existing contracts which the governmental departments in question currently have. This fact may help to lessen the period of time put in on adjusting these contracts and keep the paperwork necessary to a bare minimum, and it should allow the new system to come into practice much more easily.

Selecting the right Midland fit out contractors to work within your workplace fit out is definitely an incredibly critical choice.

This new commitments to quicker payments throughout the supply string is a related measure to other plans and acts that are being implemented in order to encourage a fairer working atmosphere up and down the supply chain.

Fair Payment Charter

The Fair Payment Charter is one part of a larger guide developed by the Office for Government Commerce (OGC) designed to encourage the very best “fair payment” practices for companies operating within the world of public segment works. The terms set down by this charter came into force from the 1st January 2008 targeted at all contracts in the public segment. Although it is focused at the public segment, these recommendations can be employed by businesses in the private sector as well.

This charter is by no means a legally binding record, and it doesn’t supersede any terms laid out in specific workers’ deals. It’s simply a record which sets out a range of commitments that are hoped to be adopted all through the market. A few of the primary points in the charter are the swiftness and correctness of payments to be made, that the payment procedure should be clear up and down the supply chain and also that all points in the supply chain should work together to ensure appropriate cash flows at many levels.

Prompt Payment Code

The Prompt Payment Code is another move that is tailored towards helping small and medium size businesses, particularly in terms of cash flow. It has been developed by the Government, with support from the Institute of Credit Management (ICM) and encourages the adoption of best payment tactics and transparency for any kind of agency which adopts it. It sits along with existing fair payment strategies.

Again, this code is not a legally binding document and doesn’t override any stipulations of working contracts between businesses and individuals. It’s a guideline for businesses that sets out a standard collection of fair payment policies developed to help all affiliates working within the public segment. As well as timely and fair payments, it also sets out recommendations for the challenge of invoices and any complaints raised by vendors.

Firms that sign up to the code have to undertake an application procedure which determines if they have suitable procedures in place to conform with the guidelines set out in the code. After they have passed all these checks they can then display the PPC logo on their own company brochures and web site as an indicator of their dedication to operating inside of a fair payment environment. This provides a good opinion of the company, which may be crucial in the course of tough economic periods.

The 30 day settlement system will only apply to office refurbs at companies operating in the public sector and doesn’t stretch to private businesses.

Implementation Of The Code

The specific wording that should be followed by organisations operating in the public segment may be taken from the Model Terms and Conditions of Contract for Goods and Services, as released by the OGC. The particular section that ought to be adopted within the industry is :”Where the Contractor enters into a sub-contract with a supplier or contractor for the purpose of performing its obligations under the Contract, it shall ensure that a provision is included in such a sub-contract which requires payment to be made of all sums due by the Contractor to the sub-contractor within a specified period not exceeding 30 days from the receipt of a valid invoice.”

The OGC wants firms to adopt the contract models that it has produced as a system of best practice. This does not necessarily mean that they must be adopted word for word in every circumstance, since every company is different and works under a distinctive collection of conditions. By making public segment firms adopt just the prompt payment condition set out over an industry wide system can easily be unveiled with out compromising the flexibility to set down department specific terms and conditions.

Political Impact

As with any program introduced by Government there is a certain amount of political maneuvering that happens. Whilst all sides of the political spectrum can certainly agree that there is a crucial need for fair payment within the public segment, there are still a number of additional actions that can be undertaken that could be employed by all parties to promote their own campaigns. This becomes even more apparent during an election year.

David Cameron and the Tory party have recently come forth with a promise to tackle unfair pay within the public segment. The plan will put into action a broad sweep of pay cuts across the senior employees in the public sector by associating the pay levels of the senior personnel to the lowest paid workers in their business. A fair pay review would happen with the prime objective of creating a 20-fold pay scale, so a senior worker could not earn more than 20 times what the lowest paid staff member does.

While Cameron recognises that there is already a commitment to pay transparency, fairness and speed, he also says that “it is time to go further.” The party head says that by tackling the problem of fair pay within the public segment is an indication of how his party has become the most progressive party in the Uk and should go some way to dispel the conventional prejudices linked with the Conservative party.

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