UK Government Awards Contract Despite Contractor’s Bad Credit

The U.K.’s Crown Commercial Service (CCS) announced that Britain’s biggest construction company Balfour Beatty would be hired, even though it was among major construction firms that were recently punished for failing to pay suppliers on time, according to The Construction Index.

Balfour Beatty was suspended from the Prompt Payment Code in April 2019. The Prompt Payment Code was established in 2008, and thousands of firms are accredited.

The CCS construction framework runs for seven years, and is made up of 11 lots broken down into 38 sub-lots. This government-run construction agreement is the first for the entire public sector, and enables all organizations to find firms to construct schools, hospitals, prisons, housing and more. 

In November, when the government chose 128 companies to share in a roughly £30 billion ($39.2 billion USD), seven-year project, Balfour Beatty was not selected for 31 of the 38 sub-lots. Instead, Balfour Beatty was among 14 contractors chosen for lot five, a project worth over £80 million. Three more lots are still outstanding. The total number of contractors being used for a lot or sub-lot is now 136.

“From Sept. 1, 2019, any supplier who bids for a government contract above £5 million per annum will be expected to answer questions about their payment practices and performance,” said the then Cabinet Office Minister for Implementation Oliver Dowden in July. “If they are unable to demonstrate that they are paying 95 percent of invoices within 60 days, they may be excluded from the process.”

In April, the Cabinet Office started warning companies that rules taking effect in September would require firms bidding for annual contracts of more than £5 million to pay 95 percent of invoices within 60 days, with a goal of 30-day payment terms. The rules are part of an effort that seeks to curtail the late payments epidemic — where, as reported, as many as 50,000 small businesses (SMBs) shutter each year due to late payments. SMBs account for 86 percent of the workforce in the U.K.