Local authorities urged to do more to protect supply chain SMEs

Alan Wilson

THE Specialist Engineering Contractors’ (SEC) Group Scotland has urged construction procurers in local authorities to protect retention monies belonging to SMEs in their supply chains. 

The group also wants Scottish councils to be more proactive in checking that firms are being paid and barring poor payers from bidding for council works contracts.

The move follows a survey of local authorities which highlighted the use of cash retentions in council contracts.  SEC Group said the research, based on data gathered through the Freedom of Information Act, also revealed a lack of monitoring by councils of payment performance along the supply chain.

The survey found that almost 94% of Scots councils deduct a 5% cash retention, while 32% use cash retentions to bolster their working capital or fund other activities. 55% stated that cash retentions were held in a ring-fenced account.

Other findings included that 87% of councils either don’t insist that main contractors release retention monies on time or they do not check that they are doing so.

Scottish Business Minister Jamie Hepburn MSP said, “The Scottish Government recognise the negative impact that poor supply chain payment practices have on the construction industry. We believe in fair and transparent working practices and a culture that supports prompt payment is essential to secure investment and jobs. Our Economic Action Plan sets out our intention to step up our engagement with the construction sector to support its plans to develop and grow a more sustainable, productive and innovative industry. Having listened to the construction industry’s concerns, a public consultation on the use of retentions in construction contracts will take place this year.

“In addition, the Scottish Government’s project bank account policy means more subcontractors will benefit from prompt and protected payments in Scottish Government contracts. We welcome SEC Group Scotland’s continuing support for project bank accounts and strongly encourage other public bodies to implement them into their construction projects.”

SEC Group Scotland national executive officer Alan Wilson added, “We recently witnessed the collapse of long-established building services company McGill & Co. with the loss of 374 jobs in the Dundee area.  The administrators blamed this on payment disputes and delays. We cannot afford to continue to lose firms of this calibre. We have written to the Scottish Government to make them aware of this report and made a number of recommendations.”

Fiona Hodgson, CEO of the Scottish & Northern Ireland Plumbing Employers’ Federation commented, “Our member firms keep reminding us of the payment abuse they suffer, day in and day out. They believe that public bodies have a responsibility to ensure that all suppliers are paid on time and in the right amount.”