Late paying contractors to be hit with public work ban

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late paying contractors face public work ban

Late paying contractors are to be prevented from procuring government contracts under new proposed legislation.

Companies bidding for government contracts worth over £5m must demonstrate they pay all invoices within 55 days, or face a public work ban

The potential public work ban was announced as part of the Autumn Statement, where chancellor Jeremy Hunt outlined the deadlines that would tighten over the next couple of years.

Coming into effect from April 2024, firms bidding for Government contracts over £5m will have to demonstrate they pay their invoices within an average of 55 days.

This will decrease to 45 days in April 2025, and 30 days in the following years.

Companies unable to demonstrate they are paying promptly will be excluded by the public work ban

Bidding firms must show that they have hit both thresholds concurrently in one of the previous two six-month periods or be excluded.

If a company fails to pay invoices within an average of 55 days, and aren’t paying 95% of all invoices within 60 days (or 90% with an action plan for improvement), they will be excluded from bidding for contracts.
This initiative is a major effort to prevent late paying contractors which blight the UK economy.

Public sector work invoices must be paid within 30 days, as well as small suppliers, per the Prompt Payment Code.

The move aims to bolster SME cashflow

Speaking previously on the challenges facing SME supply chain players, Hunt said: “One of the key challenges facing SMEs is the cashflow implications of late payments, which hold small businesses back from investing and innovating. The government will lead by example in introducing more stringent payment-time requirements for firms bidding for large government contracts.”

The new measures, further outlined in PPN 10/23, automatically applies to new advertised procurements in scope of the Public Contracts Regulations 2015 from 1 April 2024, with some exceptions.

The PPN emphasises that these rules do not apply to NHS Trusts and NHS Foundations Trusts. There is also an exemption for where the market for the contract is struggling to the extent that imposing the requirements of the PPN would not be proportionate or relevant.

From the implementation of the Procurement Act 2023 in October 2024, all new procurements will be in scope.

What can you do if you are faced with late paying contractors?

You should always try to agree on a payment plan with late paying contractors as soon as possible. However, if an agreement cannot be reached you could consider taking action via a professional debt collection agency or through the courts. Court action such as applying for a county court judgement (CCJ)

Alternatively, you may wish to refer the matter to an appropriate ombudsman or dispute resolution service. It is important to act quickly in order to protect your rights and ensure prompt payment of any monies owed.

It is also important for firms bidding for government contracts to clearly state their own payment terms and conditions in every contract they enter into, as this will help ensure that all parties understand what is expected from them and accept responsibility for fulfilling those obligations.  This can help reduce disputes and secure prompt payment.

It is important to remember that customer service should be a priority in any debt collection process. It should always be conducted with professionalism and courtesy, whilst staying within the bounds of the law.

This will help ensure both parties can come to an agreement that meets their needs without compromising on customer satisfaction. Remember that no matter how difficult a situation may seem, there are usually options available which can help resolve disputes and secure prompt payment.

Business late payment on the rise in 2023

Business late payment has shown a sharp rise in 2023 with the closure of thousands of businesses across the UK. Dealing with late paying contractors is likely to be an all too common scenario for many.

It provides a real eye opener and serves as a reminder that all parties involved in debt collection need to be aware of their rights and obligations. A clear understanding of the rules and regulations can help ensure that businesses receive payment for unpaid invoices on time.

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