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Non-compliance with late payment legislation
Published:  06 September, 2017

'More must be done' to improve supply chain payments in the Scottish public sector, according to research by the Specialist Engineering Contractors’ (SEC) Group Scotland.

On 18 April, 2016, contracting authorities in Scotland with large annual procurement budgets became statutorily bound to declare, in their procurement strategies, how they intended to ensure 30-day payments along their supply chains.

The SEC Group Scotland has now surveyed contracting authorities (other than local authorities) to establish the extent of compliance with this requirement. The key findings were as follows:

  • 45% of authorities were not considered to be compliant
  • On the evidence provided it wasn’t absolutely clear whether 14% of authorities were compliant
  • 10% of authorities were taking steps to comply
  • 31% of authorities were considered to be compliant.

The primary reasons for non-compliance, according to SEC Group Scotland, were:

  • Lack of evidence demonstrating that 30-day payments were required in tier 2 and tier 3 contracts (covering sub-contracts and sub-sub-contracts)
  • No indication of measures such as performance monitoring to ensure compliance along the supply chain
  • Failure to accurately reflect the requirement in the legislation – [section 15 (5)(d), Procurement Reform (Scotland) Act 2014] – that the 30 days commences from the presentation of an invoice or similar claim.

Commenting on the findings, Eddie Myles, SEC Group Scotland’s chairman, said that it was still early days, but contracting authorities required clearer guidance on what they needed to do to ensure compliance.

He added: "Anecdotal evidence from SMEs in our sector suggests that little has changed. The easiest way to ensure compliance in many cases is to use project bank accounts as suggested in the statutory guidance accompanying the legislation."

SEC Group has incorporated the survey results in a report to the Cabinet Secretary for Finance and the Constitution and the Minister for Business, Innovation and Energy. The report has a number of recommendations, including the appointment of a Construction Regulator to oversee compliance and promote best practice in public sector procurement.