Public sector ‘holding back £120m’ from small contractors

Specialist Engineering Contractors Group ScotlandPublic bodies in Scotland stand accused of withholding £120 million from small construction contractors, according to a new report.

Published by the Specialist Engineering Contractors (SEC) Group Scotland, the report said most councils and universities still operate retention clauses in their contracts, a practice criticised in large firms and often used to boost their own working cashflow.

SEC Scotland chairman Eddie Myles said: “This is scandalous given that the bulk of retention monies are ultimately provided by small firms which continue to have major difficulties in accessing finance.”

The research also shows that, while many public bodies pay their primary contractors within 30 days, little effort is made to ensure that secondary or sub-contractors get the same treatment. Some 72 per cent of public bodies make no attempt to monitor supply chain payment – nor do 64 per cent of universities.

Meanwhile, small contractors who want a slice of Scotland’s £4 billion public works programme also have to spend up to two weeks a year filling out forms as attempts to standardise pre-qualification questionnaires have failed.

Newell McGuiness, managing director of SEC member SELECT, said: “This information makes very depressing reading.

“It suggests that while organisations which depend on money from the public purse would appear on the surface to be backing moves against late payment, the reality is somewhat different.

“The Scottish Government has wholeheartedly endorsed industry’s appeals to help small firms by the simple expedient of prompt payment.

“It now needs to enforce that across the bodies for whose funding it is responsible.”

A Scottish Government spokeswoman said it was “committed to ensuring that procurement guidelines on pay are adhered to and that companies are paid on time, because we understand how important this is to the financial future of smaller firms.”

She added: “The Scottish Government has been co-ordinating trials of Project Bank Accounts (PBAs), which are ring-fenced accounts that payments can be made directly and simultaneously by a client to contractors and sub-contractors, improving cash flow through the supply chain.

“Our focus on prompt supply chain payment will continue, and we will work closely with our delivery partners in other pilot projects to build positively on what we have learned through our experience.

“We are absolutely committed to ensuring every pound spent on infrastructure investment goes as far as possible to support businesses and jobs, building greater resilience into the broader Scottish economy.”

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