Fair payment - expert guide

Payment is often a difficult issue in the construction industry. From 1 January 2008, clients in the public sector are being asked to adopt the Fair Payment Charter developed by the Office of Government Commerce (OGC).

The charter is designed to help ensure fair and transparent payment across construction projects. Its commitments are:

• Companies have the right to receive correct full payment as and when due. Deliberate late payment or unjustifiable withholding of payment is ethically not acceptable.
• "Fair Payment" will apply equally between the client and lead contractor and throughout the supply chain.
• The process will be transparent in order that members of the supply chain have certainty of how much and when they will be paid.
• Companies will consider, where appropriate, operating relevant contracts on an open book basis.
• The correct payment will represent the work properly carried out, or products supplied, in accordance with the contract. Any client arrangements for retention will be replicated on the same contract terms throughout the supply chain. Any withholding of payment due to defects or non-delivery will be proportionate and demonstrably justified in line with arrangements made at the time of contract.
• To ensure effective and equitable cash flow for all those involved, all contracts will provide for regular payments and have payment periods not exceeding 30 days.
• In order to avoid payment delays, the client and all supply chain members will agree payment procedures at the outset of their contracts. Payment will be through electronic BACS transfer and will apply throughout the supply chain.
• Monitoring and auditing and problem resolution procedures will be agreed between the parties.

Under the charter, companies can opt to be paid by BACS electronic transfer, and the National Specialist Contractors Council (NSCC) is advising all its members to do this as part of its Fair Payment Campaign.

BACS has several benefits - it saves time and money, is more secure, and helps improve cashflow as payments arrive as cleared funds.

To ensure prompt BACS payment, the NSCC advises:

• Include your bank sort code and account number with the message "Pay Me Direct" in bold on all your invoices;
• Before implementing payment by BACS, write to each of your clients to let them know you would like to be paid by BACS.

The NSCC has published a 10-point plan for being paid on time, a useful document on certainty of payment, achieving payment within 30 days and on retentions.