Results from the ECA's Freedom of Information request in September 2016 show that local authorities are still not meeting 2015 regulations.
- Over five in 10 councils (52 per cent) have not yet built in a contractual requirement for payment to flow thorough the supply chain within 30 days, as required by law. A further seven per cent say that they do not know if they do this.
- Over one in four councils (28 per cent) say they ‘have not and will not’ be building in a contractual requirement to ensure the supply chain is paid on time.
- Less than one in 10 councils (9 per cent) monitor and report on whether their supply chain is being paid within 30 days, in line with the law and the spirit of the law.
- Almost six in 10 councils (59 per cent) say they will not be monitoring whether supply chain payment takes place within 30 days. A further nine per cent say they do not know if they will.
There are been some improvement since 2015:
The number of councils building in supply chain contractual requirements for 30 day payment has risen (from 28 per cent to 40 per cent). A further 25 per cent said they planned to insert contractual requirements, though the provision has been in place for 18 months.
There was a year-on-year increase in the number of councils stating they would never build in contractual requirements for prompt payment (from 21 per cent to 28 per cent). This is in direct contravention to the law.
In October 2015, the ECA asked local councils across England (only) about how they are meeting key parts of the 'Public Contract Regulations 2015’, which came into force in February 2015. The Regulations require these bodies to contractually ensure prompt payment terms through their supply chain.
Late payment legislation allows contractors to charge local authorities interest for failing to pay on time. However, under the Public Contracts Regulations 2015, while there is a clear legal duty to ensure prompt payment, there are no apparent penalties for public sector bodies who fail to ensure payment through their supply chain.
Thousands of contractors are at risk of cashflow problems because many local authorities are not ensuring their supply chain is paid promptly, as required by the law, according to the ECA research.
The main findings of the ECA investigation were as follows:
- Less than 1 per cent of councils admit to payment terms of over 30 days and 6 in 10 (59%) say that they pay within 30 days.
- However, around 4 in 10 local authorities (38 per cent of respondents) say they 'don’t know' if they are meeting the legal requirements to pay contractors within 30 days.
- In addition, over 6 in 10 councils (62 per cent) do not monitor (or don’t know if they do) whether their main contractors pay sub-contractors promptly.
- Around 1 in 5 local councils (19 per cent) actually say they will be taking 'no steps to ensure within 30 days payment' along the tier 1 supply chain occurs within 30 days.
- Despite it being part of legislation, over 1 in 5 councils (21 per cent) do not plan to contractually oblige suppliers to pay those below them in the supply chain within 30 days.
The research also found that councils are wasting thousands of pounds in procurement costs by failing to meet the correct standards.
Some 27 per cent of local authorities across England had failed to use PAS 91 standards on pre-qualification questionnaires (PQQ).
(PAS 91 was launched in October 2010 as a standardised PQQ, aimed at bringing together the various question sets used between different buyers, intended to help SMEs.)
The results also revealed that while a quarter of councils had failed use the government mandated template, a further 18 per cent said they did not know if they did use them. Only 31 per cent—less than a third—said they used PAS 91.
However, many councils said they use another standard PQQ document produced by the Cabinet Office.
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