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The government has lowered the required standard of payment performance for contractors working on public projects temporarily to give companies time to comply with its ambition for more stringent rules.
The move was welcomed by the Chartered Institute of Building (CIOB), which had lobbied for an interim change to the rules.
The Cabinet Office announced earlier this year that from September, companies would be prevented from bidding for public sector contracts unless they could show that they paid 95% of their invoices within a maximum of 60 days.
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However, it emerged that only four contractors were achieving the target, among them Willmott Dixon.
As a result, the CIOB’s policy team had proposed a time-limited interim measure, where firms are required to pay 75% of invoices within the specified time period for the next 12-18 months, before the higher target is subsequently introduced.
In an updated guidance note, the Cabinet Office has now lowered the requirement from 95% to 75% for a limited period.
Commenting on the decision, CIOB chief executive Caroline Gumble said: “We believe that the Cabinet Office have a 12-month interim period in mind and that only ‘undisputed’ invoices will be into account when assessing payment records.
“This is a move that we welcome and is an opportunity to put right the issues around payment practices that impact on cashflow, investment, productivity improvements and growth, moving to prompt and fair payments across the industry.”
