New Contractual Obligations For Public Sector Workers
When the latest budget was released by Alistair Darling in late March, the majority of the nation was looking at its effect it would take on our jobs, on our taxations, our education and health programs and our own individual spending habits. There was one particular step launched as part of the 2010 budget which many of us will not have seen though. This article seeks to shed light on a few of the details of this fresh initiative.
The announcement is in respect to fair payment within the public sector field, with specific focus on contractors and subsequent sub-contractors. The new ruling states that from March 25th 2010, any contractor working for a division in the public segment will have a legal responsibility to pay their own sub-contractors inside of 30 days.
It is certainly worth noting that the 30 day clause does not apply to payments by the governmental branches to 1st tier contractors, but to those 1st tier contractors making prompt payments to lower level contractors that they are appointing themselves. Nevertheless, all central government units now must pay 80 percent of any unchallenged invoices for goods or services inside of 5 days.
Why It’s Being Done
This step has been taken as part of an attempt to improve the timeliness of payments arising from public sector work up and down the supply chain. Public sector work has a good reputation for the speedy payment of accounts at the top levels of sub-contracted work, but this benefit has not always been felt by sub-contractors which are two or three levels of separation away from the initial payment.
If viewed as part of the larger picture, this particular payment initiative is being utilised to try to help the numbers of small as well as medium sized businesses (SMEs) that trade in this country. As we feel the tailing off of the most recent recession, many companies both large and small have experienced the strain. Merely making it through until now in the present economic circumstances has been an achievement for many. The government is now looking to ensure that it can assist as many of these companies as possible.
To help these businesses manage their cash flow more effectively, suppliers to the public sector are being paid faster than has ever before been the case. 19 out of 20 bills to central government departments from primary contractors are being paid within 10 days. The government is now looking to distribute this benefit across the sub-contracting supply chain.
There are ramifications for all public sector projects, even an office fit out for any government agency should follow these measures.
Who It Affects
The fresh ruling will affect any contractors as well as sub-contractors all through the supply chain on projects for any government departments, government agencies along with NDPBs (non-departmental public bodies). It is designed to aid the sub-contractors further down the chain rather than offering benefits only to the primary contractors at the higer levels. The 30 day payment condition is solely applicable to any new agreements for projects and does not have to be used retrospectively.
Who It Doesn’t Affect
This 30 day payment program is only relevant to contractors in the supply chain for public sector projects and is not part of common business regulation. It therefore does not impact any companies within the private sector. Since the measure doesn’t need to be placed on to active agreements, many of the works for the 2012 Olympic Games won’t be forced to adopt the program. The adoption of the system by existing construction contracts on a voluntary basis is actually currently being invited however.
What It Means For Business
What this step should mean with regard to small firms that are involved with public segment projects is an increase in the speed with which they receive payment for their work. While some payment procedures have been recognised to contain scope with regard to certain “bending” of the rules, this fresh plan does appear to be much more rigorous in terms of delivering on its possibilities. At least it looks that way so far.
It does of course mean that public sector agreements can no more be won by primary contractors that don’t agree to the 30 day payment clause. Further than this, the swiftness of payments all the way down the supply chain could become a variable when deciding which contractors will be chosen. The government are positively encouraging their main building contractors to pay 2nd and 3rd tier firms before the 30 day deadline is up, which might see contractors making use of speed of payments as part of their own proposals.
The fresh payment measures do not need 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 the contracts and keep the paperwork needed to a minimum, and it should allow the new program to come into practice much much more smoothly. Departments are being asked to really encourage their main contractors to adopt the 30 day payment program on a voluntary basis where ever feasible.
There’s one specific company that specialize in fit outs which are actually gladly taking these payment steps aboard.
This fresh commitment to faster payments all through the supply string is a sister measure to some other policies and acts that are being implemented in order to promote 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 best “fair payment” procedures for companies operating in the realm of public segment works. The terms set out by the charter came into force from the 1st January 2008 directed at all contracts in the public sector. Although it is focused at the public sector, all these guidelines can be used by businesses in the private industry as well.
This charter is by no means a legally binding document, and it doesn’t supersede any terms laid out by specific workers’ deals. It is simply a document which lays out a range of responsibilities that are hoped to be adopted throughout the industry. A few of the principal factors in the charter are the swiftness and correctness of payments that are made, that the payment procedure ought to be clear up and down the supply string and also that all parties within the supply chain need to work jointly to help appropriate cash flows at all levels. In many ways this charter set the footings for the new 30 day payment plan.
Prompt Payment Code
The Prompt Payment Code is one more move that is geared towards assisting small and medium size companies, particularly in terms of cash flow. It has been produced by the Government, with support from the Institute of Credit Management (ICM) and promotes the usage of best payment tactics and openness for any kind of agency which adopts it. It sits along with existing fair payment schemes.
Again, this particular code is not a lawfully binding document and does not override any stipulations of operating contracts between companies and individuals. It’s a guide for organisations that lays out a standard set of fair payment procedures designed to help all affiliates operating inside the public segment.
Companies that sign up to the code must undergo an application process which determines if they have appropriate procedures in place to comply with the recommendations set out in the code. After they have passed these tests they can then show the PPC logo on their very own business brochures and web site as an indicator of their commitment to operating within a fair payment environment.
Firms around this country perform refurbs each and every day which usually hire several contractors with unique expertise.
Implementation Of The Code
The exact wording that should be adopted by companies operating in the public segment can be taken from the Model Terms and Conditions of Contract for Goods and Services, as released by the OGC. The specific clause that should be followed within the market is the following:”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 would like firms to adopt the contract models that it has developed as a program of best practice. This does not always imply that they have to be adopted word for word in every circumstance, given that every organisation is different and operates under a distinctive collection of circumstances.
Political Impact
As with any kind of program introduced by Government there is a particular amount of political maneuvering that goes on. Although all sides of the political spectrum can agree that there’s a vital need for fair payment within the public segment, there are still a number of additional actions that may be taken that can be used by all parties to promote their own campaigns. This becomes even more apparent in an election year.
David Cameron and the Tory party have recently created a pledge to tackle unfair pay in the public sector. The scheme will implement a broad sweep of pay cuts across the senior workers within the public segment by associating the pay grades of the senior personnel to the lowest paid staff within their company.
Whilst Cameron acknowledges that there is already a commitment to pay transparency, fairness and timeliness, he also states that “it is time to go further.” The party head says that by tackling the issue of fair pay within the public segment is a sign of just how his party has grown to be the most modern party in the Uk and should go some way to dispel the traditional prejudices associated with the Conservative party.
This entry was posted on Tuesday, April 27th, 2010 at 4:12 am and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.