New late payment legislation may prevent large companies from bidding for lucrative public sector contracts, it has been revealed.
The rules, which form part of the enhanced Prompt Payment Code, will require 95 per cent of supply chain invoices to be paid within 60 days before a business can win a taxpayer-funded contract.
Likewise, organisations who bid for public-sector contracts in excess of £5 million will be required to demonstrate it has effective payment systems and show how suppliers will be paid on time.
Those who fail to comply with the new rules will no longer be eligible to apply for contracts.
The new rules, which came into force on 01 September, come after criticism that Government was not doing enough to protect small suppliers and contractors from late payments. The latest statistics suggest that up to 50,000 small businesses close their doors every year as a direct result of poor payment practices.
Welcoming the move, the Federation of Small Businesses (FSB) said the rules will prevent big businesses from “hoarding taxpayers’ money” off the back of smaller suppliers.
“We welcome the new administration taking ownership of the late payment crisis with this crucial step, sending a message that late payments will not be tolerated within Government contracts,” said National Chairman Mike Cherry.
He added: “Measures to open up public procurement will give taxpayers and our public services access to the innovation and value small firms bring, as well as helping our economy. This is a challenge, and there is, of course, more work to do, but today’s announcement is an important step.”
More information about the Prompt Payment Code – which sets the standards for payment practices and best practice – can be found here.
For help and advice with late payments, please get in touch with our expert team.