Fair payment In construction

The Government Construction Strategy 2025 set out a blueprint of how to create a modern, effective and sustainable construction industry. It’s aim was – through initiatives, policy and legislation – to ensure that:

“Construction in 2025 is no longer characterised, as it once was, by late delivery, cost overruns, commercial friction, late payment, accidents, unfavourable workplaces, a workforce unrepresentative of society or as an industry slow to embrace change.”

One of the 10 key commitments was that industry and government together would “Create conditions for construction supply chains to thrive by addressing access to finance and payment practices.” One of the strategy’s first tasks was to launch the Fair Payment Charter (April 2014) to reduce payment terms in construction to 30 days in the next 5 years and get rid of retentions.

Behaviour not mechanisms

Many of the disputes on construction projects arise due to misunderstanding and misapplication of the payment mechanisms in existing contracts. So, one of the core changes required is not mechanical or procedural but behavioural. The Charter recommends that the project team adopts “a transparent, honest, and collaborative approach when resolving differences and disputes.

The charter should have gone further and stated that the project team would adopt this approach when making applications for payment, issuing notices, and using the payment processes. Construction News echoed this in their article on the strategy stating “payment will only be improved…if companies collaborate more closely to pay more fairly.”

We have legislation intended to improve cashflow (the Construction Acts 1996 and 2009). We don’t need more processes, charters, good intentions and government interferences. We need to apply the existing processes fairly. If the supply chain is going to use the existing payment processes fairly, it needs to be able to read and understand them. We need to make it simpler, not add new layers of complexity.

What should you do?

Why not create a simple, clear payment process, written in plain language that can be adopted throughout the supply chain that is easy to use and administer?

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