Driving change on fair payment: innovation through procurement
In her second blog, Victoria Brambini, managing director of Scape Procure, sets out how local authorities must provide stability and certainty for their supply chains through fair payment practices.
As well as setting ambitious payment terms, local authorities are becoming agents of industry change through innovative procurement methods that support Small-Medium sized Enterprises (SMEs).
E-invoicing has been successfully adopted by some local authorities to speed up payments. If this digital approach were to become a more accepted practice as part of councils’ digital transformation plans, it would help to deliver efficiencies for both client and supplier. As suggested by the European Commission, the adoption of e-invoicing by the public sector could also act as a catalyst for the wider economy, by encouraging the use of digital practices within the supply chain.
Project bank accounts are another way in which councils could support their supply chain. By placing funds into a single account from which subcontractors can draw down, clients can ensure all parts of the supply chain receive their payment much quicker. Project bank accounts do require a change in administrative procedure for clients, and although used by organisations such as Crossrail and Highways England, there remain some practical barriers to their use. However, they are a good example of where public sector organisations are seeking to drive fair payment best practice.
Abolition of cash retentions
However, introducing new methods are not the sole driver of change. The public sector and the industry must work together to end unfair practices. Cash retentions are an outdated yet lingering practice on many construction projects and should no longer need to be adopted; procuring contracts in a more responsible way that assures quality removes the need for withholding payment.
There is an ongoing public consultation on retentions, which is certainly a positive step in the right direction. However, because retentions impact the livelihoods of people all over the UK, the decision must be made quickly.
Paying people fairly and in good time is critical to the survival of small businesses and to the long-term future of our economy.
Victoria Brambini, managing director of Scape Procure
As the industry and the public sector reflects on the lessons learned from the collapse of Carillion, we must acknowledge the role that all contracted partners have in creating efficiencies and ensuring better outcomes for SMEs.
What has become clear is that the public sector, and in particular, local authorities, should not rely entirely on the private sector to ensure better management and support for supply chains.
By endeavouring to become fair payment champions, local authorities can empower local suppliers and drive substantive change.
Victoria Brambini will be speaking at the Construction News Summit in London, on 21 November, in a panel discussion on fair payment.
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