Open ECX’s thoughts on the further changes to The Prompt Payment Act

In response to the publishing of the Governments latest procurement policy requirement on payment, which reveals the welcomed development that public sector payment requirements will be tightened, it has now been announced that construction firms will have to pay 90% of their invoices within 60 days if they want to win public sector contracts over £5m. 



The requirement will be initiated in April 2022 and if companies do not adhere to this, they may be excluded from the procurement process. This is a significant change to the process that is currently in place, which states that companies who do not provide on-time payment can still bid for further business, as long as they ensure a plan of action is in place to rectify any previous failings. 



Introduced on 1st July 2021, but coming into effect from 1st April 2022, the requirement works to strengthen the position of small businesses and helps to alleviate the financial implications that arise as a result of large corporations failing to complete transactions on time. This will be a welcomed addition for supply chain SMEs organisations, as presently the 90% target is a 5% increase on the current metric of 85%. 



Following this, there are plans in the future to increase this percentage up to 95% in line with the Policy Procurement Notice (PPN 8/21).This provides greater security of payments for businesses within the construction space and helps provide greater reassurance for all employees, providing security for their incomes which should be a priority for all those in the built environment sector going forward. 



Open ECX’s innovative products are supporting businesses of all sizes with these upcoming changes –our award winning cloud-based solution, WebContractor, has already enabled other contractors and clients to stay on top of and process payments. Helping those in the construction industry meet the payment requirements of Government, WebContractor helps to ease the pressure on finance teams by digitising not only payment applications, but the entire process. 



WebContractor helps to create a solution for corporations by reducing the amount of worry they have surrounding remembering prompt payment, by creating a system which automatically reminds the parties about the respective payments that need processing. 



The changes to the Governments latest policy overview on Procurement reflects the idea of building upon the previous requirements to ‘increase the threshold bidders have to meet to demonstrate they have effective payment systems in place to ensure prompt payment’, which not only emphasises the significance of payment problems in unlocking the industry’s potential, but also highlights the increased importance of the role that WebContractor can play in supporting more of a wide variety of businesses. 



This is because Government’s requirement applies to a great number of organisations including all Central Government Departments, their Executive Agencies and Non-Departmental Public Bodies, meaning that the impact of using WebContractor to facilitate effective and secure payments can be felt by many different industries and sectors. It is therefore clear, given the focus of the Construction Playbook on digitising payment within the supply chain, that the government is ensuring greater scrutiny in payments and contracts within the construction industry, thus meaning that the construction sector as a whole is being taken more seriously. 



By implementing a digital-first system which notifies corporations on the need to process payment, WebContractor also helps to manage processing, calculation, reconciliation, approval, and audit aspects of the payment process.

This will help to provide much needed support for SMEs, both nationally and internationally as well as ensure employees within the industry have greater payment security. This is particularly important because it shows that the tide is turning towards greater security for payments and how the need to digitise your payments and contracting will help you stay ahead of all upcoming legislation as the focus on faster and more timely payments throughout the Construction supply-chain tightens.

Rob Driscoll (Chair of the Cabinet Office SME Payment Panel and Director of Legal & Business at ECA) commented:

“Innovative solutions like WebContractor will not only ensure improved compliance but improve transparency and accelerate change in the payment space. It is great to see industry adoption reaching critical mass in this area.”

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