When will you pay me?

Not least because the misery is always shared: every time a firm goes under, a shock wave of bad debt and permanently retained retentions travels down the whole supply chain. Only those with hearts of iron and noses of granite would shrug this off with the comment that “that’s business”. But how does one introduce safeguards without burdening the industry with administrative costs and laborious bureaucracy?

Two groups, commissioned by Gordon Brown and reporting to Sir Michael Latham, are currently reviewing the working of the Construction Act. The one dealing with adjudication has come up with a sensible maintenance plan. The payment group, however, has found it hard to strike a balance – it was meant to have produced its recommendations by the end of July. The problem is to decide how radical an overhaul of the act’s payment rules is needed. The main contractors think the act is fine as it is; the subcontractors’ ideal solution would be for payment to be guaranteed by a project trust fund, which would have protected them against the fate currently befalling Spectrum’s suppliers. But more realistically, they are pressing for the right to issue interim payment notices. Contractors and clients say that the idea that they should dance to the subcontractors’ tune is unacceptable – and besides, adjudication already gives the supply chain a swift remedy for late payment.

Of course, there is a political dimension to all of this. The Treasury has listened to the specialist lobby and set up a taskforce to look at retentions and payment for government projects. Specialists may take this to mean that they will have the ear and the sympathy of Whitehall with respect to changes to the Construction Act. And they may be right. But the Treasury has a deregulation agenda, too:

if there is no industry consensus on a solution – for example, with both sides agreeing to negotiate mandatory payment periods – the temptation will be to leave well alone, in which case the specialists could come away with nothing. Either way, time is running out.

Denise Chevin, editor