UK Law change encourages prompt invoice payments within the construction sector

Posted 17 August 2011 | | 0 Comments

Changes to the Housing Grants, Construction and Regeneration Act 1996 (HGCR) from the 1st October this year will result in several changes that construction contractor procurement and finance staff must act upon; some of the key changes include:

• Construction contracts need no longer be in writing thus even oral contracts can now use the Act;

• The main contractor can no longer make payments to sub-contractors conditional on his own payment by the end customer;

• Once money is due, the payer has five days to issue a payment notice with the final amount owed. If they do not, the supplier can issue default notice for the amount it believes is owed. If the payer believes the default notice claims too much money, it has seven days to issue a ‘pay less notice’. Failure to issue this notice within a week will result in it being forced to pay whatever amount the supplier claimed in its default notice.

This last point is key as until now, there has been no penalty for those who delayed payment.

by M Roper | 17 August 2011

Posted 17 August 2011 | | 0 Comments

Changes to the Housing Grants, Construction and Regeneration Act 1996 (HGCR) from the 1st October this year will result in several changes that Housing Association procurement and finance staff must act upon; some of the key changes include:

• Construction contracts need no longer be in writing thus even oral contracts can now use the Act;

• The main contractor can no longer make payments to sub-contractors conditional on his own payment by the end customer;

• Once money is due, the payer has five days to issue a payment notice with the final amount owed. If they do not, the supplier can issue default notice for the amount it believes is owed. If the payer believes the default notice claims too much money, it has seven days to issue a ‘pay less notice’. Failure to issue this notice within a week will result in it being forced to pay whatever amount the supplier claimed in its default notice.

This last point is key as until now, there has been no penalty for those who delayed payment.

by M Rop | 17 August 2011

Poor Contract Management Practices put Councils at risk

Posted 15 July 2011 | | 0 Comments

The latest phone hacking scandal and allegation of police bribery surrounding the News of the World has come at the very time that Parliament has passed anti-Bribery legislation. And of course the politicians at Westminster have themselves been in the spotlight over the expenses scandal. Given how outraged the British people are over these institutional crimes, it makes it even more critical that Local Councils ensure that their own procurement practices are squeaky clean in relation to supplier relationships.

Yet a recent internal audit report at a London Borough has uncovered significant weaknesses in contract performance, including the lack of formal contract for a significant security services arrangement, and the lack of procurement process prior to the firm’s appointment. This is particularly concerning when one considers that the value of this supply exceeded the EU Procurement rules for establishing an annual contract.

And in another recent news piece, several London Boroughs have just announced that they will be jointly adding a clause in future supply contracts to seek suppliers to clarify their contingency plans, in part to ensure that services aren’t disrupted by the Olympic Games next year (e.g. what will suppliers do to minimise disruption to supply caused by traffic congestion). Which begs the question why haven’t contingency plans been standard across council contracts until now? Why has it taken the Olympic Games to force such clauses, which should be considered standard practice?

Don’t get us wrong, we’ve seen very good procurement practices in Councils, so we’re not here to bash the procurement staff genuinely seeking to drive better value for money in our times of austerity. Those councils making their best procurement staff redundant are potentially killing off the only opportunity they have to make significant inroads into their costs, assuming that those staff are adhering to best practice.

But if your Council has some concerns about how robust its procurement processes are, particularly in relation to contract management, then time may not be on your side and now is not the time for bad press about dodgy practices. So why not consider developing an external partnership with an experienced procurement consultancy firm to mitigate these risks? One that can offer purchasing audits, procurement training and even procurement outsourcing. The Buying Support Agency is one such firm – we’ve been working successfully with public funded bodies in the procurement space since 2002 and we recommend that you talk to us before drawing up a shortlist when tendering for such support services.

by M Roper | 15 July 2011

Middle East Crisis - its impact on Procurement

Posted 23 February 2011 | | 1 Comments

The current political crisis taking place across North Africa and the Middle East has taken everyone by surprise, not least western governments who have looked flat footed when reacting to the breaking news. I believe that these events, like those in 1989 in Eastern Europe, will have far reaching consequences for Procurement and supply chains across the World, particularly in relation to the risks associated with political upheaval and regime change.

The seemingly unstoppable force of globalisation have encouraged buyers to become increasingly global in their sourcing strategies, to take advantage of lower labour costs in emerging markets. But with this change comes additional risk and the events in the Middle East demonstrate that political risk must be a key factor when buyers assess the strength of global supply chains. As we have seen, major supply lines can suddenly be halted and if buyers here in the UK haven't prepared a contingency plan (assuming this is feasible) then the results can be catastrophic.

We have to face up to the fact that many of the world's most economically dynamic countries and regions are not necessarily politically stable, and there are significant supply chain risks that need to be considered. There are also ethical considerations - the UK's defence industry has been selling ammunition and riot equipment to many of these autocratic countries in Africa and are now seeing this equipment being used against the innocent people caught up in the street fighting.

I sense that the world is becoming more politically stressed - the events in Libya, Egypt and Tunisia will have far reaching consequences not just for other autocratic regimes but also for seemingly stable democracies, as the people reassess the relationship they have with their governments. If buyers are not currently taking such political risks into account when making sourcing decisions, they really must wake up and take a reality check now without delay.

That doesn't mean that political change necessarily will result in more challenging supply chains (indeed one could argue that enabling democracies within strong legal frameworks will result in increased economic opportunity for all, and the positive development of supply chains), but even if the change is for the good, there will inevitably be uncertainty and risks preceeding this (democracies can take decades to stabilise from a standing start). Never has the phrase "Caveat emptor" (let the buyer beware) been so apt.

by M Roper | 23 February 2011

Outlook for 2011

Posted 4 January 2011 | | 0 Comments

Happy New Year from the team at the Buying Support Agency! As 2011 begins, the outlook for the UK economy stills looks uncertain, with all eyes on how the public sector austerity measures will affect GDP growth. Whilst we don't expect a double dip recession, all organisations in both public and private sectors will continue to focus on efficiency improvements and cost savings - and we're here to help support this process as procurement support specialists. So whether you're seeking to reduce overhead costs, outsource certain elements of your purchasing function or to train your buyers, then please get in touch.

by M Roper | 4 January 2011