Subcontractors: Payments

Oral Answers to Questions — Finance and Personnel – in the Northern Ireland Assembly at 2:00 pm on 20th April 2015.

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Photo of Edwin Poots Edwin Poots DUP 2:00 pm, 20th April 2015

4. Mr Poots asked the Minister of Finance and Personnel what measures can be taken to ensure payments to subcontractors are made in accordance with his Department's guidelines. (AQO 7949/11-15)

Photo of Simon Hamilton Simon Hamilton DUP

It is important that the benefits of prompt payment are shared throughout the supply chain, and this is reflected in the guidelines that my Department has set. As the problem has been felt most acutely in the construction industry, centres of procurement expertise are required to monitor the implementation of fair payment requirements in government construction contracts.

The information is reported quarterly to CPD and discussed at each meeting of the Construction Industry Forum for Northern Ireland.

The monitoring regime involves dip sampling to ensure that prompt payment is happening in practice. In 2014, a sample of 15% of payments was validated, with only one irregularity found. That has since been resolved by the relevant centre of procurement expertise. For supplies and services contracts, CPD has implemented standard terms and conditions requiring subcontractors to be paid within 30 days. When issues of non-compliance are highlighted to CPD in projects that it manages, they are pursued with the contractor so as to facilitate early resolution.

Photo of Edwin Poots Edwin Poots DUP 2:15 pm, 20th April 2015

Can the Minister give us an assurance that, where companies are highlighted that are not adhering to the principles that he has outlined, thorough investigation will take place to identify the veracity of the complaints and, if they are found to be right, actions taken thereon? Many small companies fear raising the issue because they believe that they will lose out on contracts. It is incumbent on us to defend the subcontractors and ensure that they are paid promptly.

Photo of Simon Hamilton Simon Hamilton DUP

I thank the Member for his supplementary question. The measures that I and, more so, my predecessor have introduced in that regard have come as a result of concerns expressed to us by small businesses — contractors in supply chains, particularly in the construction sector. Measures have been introduced over the last number of years to deal with the issue, which has been highlighted, I suppose, in the very high-profile collapse of some local construction firms. In January 2013, we introduced the ability to have project bank accounts for projects of over £1 million with a significant amount of subcontracting going on. Ten pilots have been chosen for that, and feedback so far has been positive. Indeed, we may well look to extend it away from construction and into supply contracts too.

Perhaps more relevant to the Member's question is that a procurement guidance notice was issued in January 2012. It has now been backed up by regulations introduced this year that monitor the performance of main contractors in a range of ways, including on their payment to subcontractors, and a certificate of unsatisfactory performance can, in appropriate circumstances, be issued. Indeed, main contractors who are found to be failing to pass on the prompt payment that government is doing — government is very good at paying; some 91% of our invoices in DFP are paid within 10 days — can be struck off public contracts for 12 months. Now, there has been no single case of that so far, but, as I revealed in the first answer to the question, one of the samples taken last year showed that there were some issues. That was dealt with between my Department and that main contractor.

My Department relies on companies coming forward. I accept the point that the Member makes about the fear that some people have, but, if subcontractors are even prepared to go through Members or other elected representatives to bring that to my attention, I assure the Member and the House that those issues will be dealt with with the appropriate seriousness.

Photo of Robin Newton Robin Newton DUP

I remind the Minister of the two-minute rule.

Photo of Alex Maskey Alex Maskey Sinn Féin

Go raibh maith agat, a Phríomh-LeasCheann Comhairle. Can the Minister advise the House whether there are any protections or measures in place to ensure that local businesses can avail themselves of all subcontracting opportunities?

Photo of Simon Hamilton Simon Hamilton DUP

There are no particular measures or statutory provisions in place to ensure that. What is found in most cases is that those main contractors, even if they are not locally based, bring on a large number of locally based subcontractors, particularly in construction, to do their work and assist them in the provision of whatever capital project it may be. Again, like our prompt payment, we have a good record of letting contracts of all types, whether construction or supplies contracts, to suppliers in Northern Ireland. We have a record that sometimes does not get through. Sometimes you would think, even listening to debates in the House, that local suppliers are not getting to deliver government contracts, but that is not the case. I think that the latest figures show that over 70% of contracts go to local firms. Indeed, about two thirds go to local SMEs, so we have a good record in Northern Ireland not just on prompt payment to contractors but on getting local suppliers. We do that without having to manipulate. As the Member will be aware, procurement is highly governed by the European Union and you have to be very careful about what you do at local level so that you do not breach European law. Within the laws that are there, we have a very good record in this part of the world of ensuring that local suppliers get work.

Photo of Dominic Bradley Dominic Bradley Social Democratic and Labour Party

Go raibh míle maith agat, a LeasCheann Comhairle. Gabhaim buíochas leis an Aire as ucht a fhreagra. I thank the Minister for his answer. In relation to small construction companies accessing government contracts, especially small to medium-sized road contracts, I am hearing that there is a catch-22 situation in that, in some cases, if you are not already on the list, you cannot be considered for the list. Is the Minister aware of this situation, and, if so, is there anything that can be done about it?

Photo of Simon Hamilton Simon Hamilton DUP

I was just checking the precise figure that I gave to Mr Maskey in my previous response. In 2013-14, 75% of government contracts were awarded to Northern Ireland firms. That £2·6 billion, more or less, is being spent every year in Northern Ireland on centrally-let government public contracts, of which 75% are going to Northern Ireland firms. I am sure that we would all like to see that being higher, but it is a record that compares favourably with other jurisdictions in the British Isles.

I have not been made aware of the particular issue that the Member raises. I suppose that, in some ways, I would not expect to be; road contracts are obviously taken forward as the responsibility of the Minister for Regional Development. Roads ServiceTransport NI, as it is now called — has a centre of procurement expertise of its own. I would expect that perhaps Minister Kennedy would have a better appreciation of that problem. I encourage the Member to draw any concerns he has from his locality to the attention of the Minister for Regional Development or, if not, I am happy to pass them on to Minister Kennedy.