Subcontractors to be paid directly
The headline in Building Magazine this week was all about the retailer John Lewis considering direct payment for sub contractors. It is perhaps unsurprising that John Lewis are pioneering this approach considering their history of procurement via management contracting utilising framework sub-contractors. The potential for construction contracts to allow for sub contractors to be paid directly, if main contractors are not paying them quickly enough, is a potentially useful way to speed up payments under building contracts.
This news is perhaps something to do with another recently topical subject of debate, which was concern over the state of cash flow amongst the UK’s major contractors. There has been a pattern of deteriorating cash positions amongst some major contractors over the last 12 months. The reason has, in part, been because the major contractors are being pressurised by public sector clients to pay their sub contractors on a far quicker basis.
Our experience with the major regional contractors has not been one that has been of too much reported concern over the last few years. The regional and local contractors are all too often very aware to ‘help’ their sub contractors and prompt payment, or payment as quickly as they are able to make it, seems to be a priority.
The news though from John Lewis may be a very interesting development. The move would potentially make John Lewis with Waitrose one of the first private sector companies to set out and demand such a requirement.
The confidence this could give to sub contractors and in turn their keenness to bid competitively knowing they can be paid by a ‘solid’ end user procuring the building and not only by the main contractor could see some real benefits.
Demanding a supply chain that gives better guarantees of prompt payment can only be a good thing for the construction industry and something the Building team at Harris Lamb will be keeping a close eye on.
For information on how the Harris Lamb Project & Building Team can help with your construction contact one of the team at Harris Lamb on 0121 455 9455 or email email@example.com