04 October 2007
The government has signed the OGC's Fair Payment Charter, committing public sector clients, and their main contractors and supply chain members, to a series of principles for future construction projects.
The principles, also set out in the OGC's Guide to Best Fair Payment Practices
, include greater transparency, no unfair withholding of payments and payment periods not exceeding 30 days.
The OGC and the Department for Business, Enterprise and Regulatory Reform signed the charter on behalf of the government, together with representatives from the construction industry. The OGC predicts widespread adoption of these principles could save the public sector up to £750 million each year by cutting financing and risk elements from project costs.
John Ioannou, the OGC's head of market and suppliers - construction, told SM
the construction industry has experienced more problems with payment than other sectors because it is so fragmented. It has about seven interfaces between a client and a final supplier.
He added: "Some of the problems are down to lack of trust in the supply chain but I'm sure some of it is down to abuse, with some members of the chain holding on to funds for as long as they can."
He said the commitment by each signatory body to monitor their own sector for implementation should improve the situation.
Central government construction clients are expected to adopt the principles by 1 January 2008. OGC and industry bodies will monitor progress over the following two years.