Public sector expected to save £750m by adopting fair payment guide, which came into force yesterday

Central government construction clients must follow the Office of Government Commerce (OGC) Fair Payment guide and charter from the new year.

The guide sets out good practice and recommends that project bank accounts are used.

The charter commits clients, lead contractors and supply chains to greater transparency, with no unfair withholding of retentions, more efficient payment procedures that don't exceed 30 days.

The government estimates the public sector could save up to £750m by adopting the guidelines.

The OGC and the Public Sector Construction Client’s Forum (PSCCF) will monitor the progress of implementing the charter and the value gains over the next two years.

The guide, launched in September, was devised by the PSCCF Fair Payment Working Group, which was set up to confront payment problems highlighted in the Latham and Egan reviews.

The National Specialist Contractors Council is backing the charter with a campaign which calls for certainty of payment, 30-day payment periods, and removal of retentions.

Rudi Klein, chief executive of the Specialist Engineering Contractors Group, said he had written to members asking them to flag up contracts that do not follow the new principles.