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Construction: Billing

Volume 498: debated on Monday 2 November 2009

To ask the Minister of State, Department for Business, Innovation and Skills what progress his Department has made since February 2009 in ensuring that payments to sub-contractors of tier one contractors on construction projects funded from the public purse are made within 10 days of receipt of invoice. (296254)

The Department is engaged in a range of activity to ensure (i) payment practices in the construction sector are improved, (ii) public sector contractors are paid on time and (iii) public sector contractors pay their own suppliers on time.

Poor payment practices in the construction industry give rise to substantial additional financing and transaction costs. More importantly certainty over how much and when payment is made builds trust between supply team members and underpins collaborative working to achieve value for money for clients. That is why Government are committed to a 'Fair Payment Charter' in construction contracts which applies equally between the client and lead contractor and throughout the supply chain. To ensure effective and equitable cash flow for all those involved, all contracts will provide for regular payments and have payment periods not exceeding30 days.

In October 2008 the Prime Minister committed all central Government Departments to pay invoices within ten days. We have made good progress and, as of September 2009, 19 out of every 20 invoices are being paid within ten days. Some £59 billion of payments were made within 10 days between June and September 2009.

The Government model contract includes a requirement for contractors to pay their own suppliers within 30 days and all Departments have recently been asked to (i) remind suppliers of their contractual obligations, (ii) undertake compliance checking and (iii) secure supplier support for the Prompt Payment Code.