New project payment measures must protect SME contractors

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David Jazani, senior lecturer in building technology and construction management, University of Bedfordshire, has called for a government consultation to ensure SME contractors are at the forefront of a project bank account system

Following a proposal from MP Debbie Abrahams to incorporate a project bank account system to prevent another Carillion-like collapse, Jazani has urged for a government consultation to ensure SME contractors concerns are at the forefront of such a system.

Jazani commented: “The proposal from MP Debbie Abrahams for a secured contracts payment accounts to prevent a repeat of the Carillion crisis is a welcome, if overdue, move. However, it is imperative that the proposed system not only guarantees the payment, but also has the capacity to process this in a timely manner.

“The fundamental problem with Carillion and the subcontractors model was the delays in payments, which meant many SMEs could not function on 120-day terms. The ‘too big to go bust’ falsism certainly does not apply to SMEs. Being a few thousand pound overdrawn has major ramifications and often forces such businesses into liquidation due to the lack of cashflow – especially during these times of austerity, when access to credit and finance is problematic.

“The proposal needs to ensure that the system processes the payment within the contract terms as set out by the signed document. Should there be items of variation that are not agreed within the valuation, instead of refusing the whole valuation there should be then a process of deducting these to allow the majority of valuation to be processed in a timely matter.

“SME subcontractors should also be issued with clear claim forms with contract documents and have clear explanations provided how to complete these.

“A government consultation in conjunction with the Chartered Institute of Building (CIOB) is required to draft out a robust series of measures to ensure that SMEs, who are vital to the industry and whose livelihood depends on such a measure, are fully conversant with the rules and are able to implement these.”

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