Prompt Payments

Oral Answers to Questions – in the Northern Ireland Assembly at 2:15 pm on 17th February 2014.

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Photo of Alex Maskey Alex Maskey Sinn Féin 2:15 pm, 17th February 2014

3. asked the Minister of Finance and Personnel what measures his Department is taking to ensure prompt payments to subcontractors. (AQO 5544/11-15)

Photo of Simon Hamilton Simon Hamilton DUP

For all government contracts, CPD guidance includes a number of measures aimed at ensuring prompt payment to subcontractors.  They include payments by main contractors being made within 30 days; monthly reporting by main contractors on payments to subcontractors where the subcontract value exceeds 1% of the total contract or £10,000; payment issues being a standing agenda item for project meetings; random checking by project managers to ensure that subcontractors have received payments due; and the exclusion of contractors from tender opportunities for a year if they do not comply with contract conditions relating to prompt payment.  In addition, my Department has introduced project bank accounts in appropriate construction work contracts, which help to accelerate payment to subcontractors and protect payments in the event of the main contractor’s insolvency.  Payment is made simultaneously to the main contractor and its subcontractors, usually within five days of funds being deposited in the project bank account.

Photo of Alex Maskey Alex Maskey Sinn Féin

Will the Minister comment on the fact that many in the construction industry say that some of the difficulties that they find lie more in the period between the submission of invoices and the actual payment?  Will the Minister give me some insight into how that element of the process can be expedited to make sure that the targets are not flawed and are met?

Photo of Simon Hamilton Simon Hamilton DUP

I accept that, even though we have put in a significant raft of measures to respond in the way that we want to from a public policy perspective, as responsible contractors or responsible buyers, we want to make sure that they abide by the sort of standards that we put upon ourselves.  The Member will be familiar with the fact that we aim, as a Government, to pay all our invoices within 10 working days, not the 30 days that we have put on contractors, and obviously there needs to be a bit more time there because of the nature of the work.

I appreciate that sometimes there is a lapse between invoicing and payment.  However, we have issued guidance to Departments, including my own, that, where we are developing contracts, particularly those with a significant volume of subcontracting, a condition must be that it is paid within 30 days.

Occasionally, there will be circumstances where the invoice submitted is not accurate.  The main contractor might want to test that and make sure that everything that is being asked for is included and that our work has been done.  However, by and large, everything should be easily paid within 30 days.  As a Government, we endeavour to pay everything, and the project bank accounts will certainly help to ease out some of the problems, particularly with large construction projects.

Photo of Ian McCrea Ian McCrea DUP

The Minister will be aware that the Health Minister raised the need for a project bank account to be included for the building of the training college at Desertcreat.  Will he outline how important he thinks project bank accounts are to ensuring the quick payment of moneys to subcontractors?

Photo of Simon Hamilton Simon Hamilton DUP

They are an incredibly valuable innovation.  We are the first part of the United Kingdom to introduce project bank accounts, and I would not be surprised if other jurisdictions in the United Kingdom followed suit very quickly.

The Health Minister was right — I paid tribute to him at the time and would do so again — to ensure that a project bank account was included for the work at Desertcreat, which is in the Member's constituency, because of legitimate concerns that he had on the basis of previous experience in his sector about payment trickling down to subcontractors.

From January of last year, project bank accounts have been introduced into the contract conditions for government construction contracts let by my Department, where such contracts have an estimated value of £1 million and contain a significant subcontracting element.  CPD has now let two construction works contracts that include the use of a PBA:  the new regional office for the Rivers Agency in Omagh, at a cost of £1·13 million, and the refurbishment of the jobs and benefits office in Foyle at a cost of £1·04 million.  We have also prepared guidance for the application of project bank accounts in all construction contracts.  Its adoption as Northern Ireland public procurement policy will be considered by the procurement board to ensure that it is applied by all Departments in future.

Photo of Dominic Bradley Dominic Bradley Social Democratic and Labour Party

Go raibh míle maith agat, a Cheann Comhairle.  Gabhaim buíochas leis an Aire as ucht a fhreagra.

What monitoring process does the Minister have in place to ensure the effectiveness of the measures that he outlined earlier?  Are any statistics available?

Photo of Simon Hamilton Simon Hamilton DUP

I have no current figures, but I will attempt to furnish the Member with some data as quickly as possible.  In fact, I would be interested in seeing it myself.  As he will know, regular project meetings go on, particularly about big construction contracts, to measure and keep an awareness of various aspects of a contract.  We have now issued guidance intended for all Departments to ensure that, as well as talking about whether the contract is on course to be finished on time and any issues that have arisen over the course of a project, payment issues are included as a standard item on the agenda of project meetings.  That allows officials, whether from my Department, other Departments or arm's-length bodies, to bear down on contractors and ensure that they adhere to the very strict and firm conditions that we are setting for prompt payment.