Light at the end of the tunnel?
Despite the reading of the Retention Bill being delayed again, there are some encouraging noises coming from Westminster. And elsewhere, there’s plenty of other important activity that could finally signal a significant step on the journey to safeguarding payments
So, the retention saga continues – but at least the news looks positive. Richard Harrington, the Construction Minister at Westminster, has recently confirmed that he will legislate to deal with retentions abuse. But before we get too excited, he wants to seek a workable solution and any legislation is unlikely much before 2022.
In the meantime, the second reading of the Retention (Deposit Schemes) Bill introduced by Peter Aldous MP has been put off yet again, this time to 25 January. Keeping this Bill in play is intended to maintain pressure on the Business Department at Westminster to address the issue.
SEC Group has been working with various players in the financial services sector to develop a simple and cost-effective way of safeguarding retention monies. This will use the latest digital technologies to set up an IT platform that will process all cash retentions and ensure that they are safeguarded. Accessing such platform will be no different from banking online.
In Scotland, we’ll need to bring more pressure on the Scottish Government to address the inequality of distribution of risk with regard to the loss of retention monies through upstream insolvencies.
On public sector projects, Tier 1 contractors are never at risk of losing their retentions because public bodies do not go bust. This protection is not accorded to the supply chain because Tier 1 contractors DO go bust. Kilmarnock MP Alan Brown has now written to Derek Mackay, Cabinet Secretary for Finance, to ask that he bring in one simple measure in regard to public sector works contracts. At pre-qualification stage, Tier 1 contractors should be asked to provide a bank guarantee to sub-contractors that will ensure retention monies are released in the event of the insolvency of the Tier 1 contractor.
The other option would be for public bodies to make direct payments to sub-contractors in the event that the Tier 1 contractor fails to discharge outstanding payments, including retentions.
Survey on public sector payments
SEC Group Scotland will shortly be carrying out a survey on payment practices in the public sector.
The aim is to find out whether contractors and sub-contractors are being paid promptly and within less than 30 days. SELECT firms are asked to respond to this survey, which will come round via Survey Monkey.
Project Bank Accounts (PBAs)
Pressure is now being exerted on the Scottish Government to lower the threshold for PBAs. These enable main contractors and sub-contractors to be paid from the same “pot” simultaneously, without monies having to cascade through different levels of contracting.
The current threshold is £4.1 million for building works – this should be reduced to £2 million. Any SELECT member who has been paid through a PBA is invited to inform SELECT of the experience, whether it was positive or negative. Payment legal tip When making applications for payment always ensure that:
The application states the amount you consider to be due
You should show on the application how the amount was calculated
The application contains any other information and has the supporting documentation as required by the contract
The application is in the format (if any) required by the contract and has been sent to the correct address, whether email and/or postal.
A valid application is absolutely necessary if the amount applied for is to become the amount that has to be paid by the final date for payment. This will occur if your paying party has failed to issue an initial payment notice – if it is required by the contract to do so – and/or a pay less notice.
If you’re experiencing payment abuse ensure you inform SELECT. It’s vitally important that we maintain a record of any abuse you have suffered and the type of abuse which can be used when lobbying government.
My congratulations go to Alan Wilson, SELECT acting Managing Director, on his recent appointment as Deputy Chairman of the Scottish Building Contracts Committee (SBCC). He succeeds to this post because he is held in very high regard by the industry. In his role, Alan will be able to ensure that the voice of SELECT and SEC Group Scotland is heard throughout the industry in Scotland. Well done Alan.
Find out more about the work of Rudi and the SEC Group at secgroup.org.uk