Prompt Payment Code - Construction on London O2 Arena

Several construction companies were suspended or removed from the UK’s Prompt Payment Code signatory list earlier this year. The list includes some big names in the industry. So, what did they do to be suspended or removed from this list? And what are the consequences for not following the code? Let’s find out.

What is the UK Prompt Payment Code?

The UK Prompt Payment Code is a code of payment that companies pledge to support. Becoming a signatory code is required to work on government contracts. By signing up, companies are signifying their commitment to paying 95% of their invoices within 60 days and striving to make 30 days the norm.

The Prompt Payment Code is a public-private partnership between the Department for Business, Energy, and Industrial Strategy (BEIS) and the Chartered Institute of Credit Management (CICM). CICM appoints members to the Compliance Board, which administers the code and responds to complaints.

Required to qualify government contracts

Signing up is technically voluntary, though bidding on a government contract requires being a signatory to the code. Once approved, companies are allowed to use the PPC logo on  their website demonstrating they have signed the code. As of this writing, 467 construction companies have received approval under the code.

Enforcing the Prompt Payment Code

While the code itself has no enforcement behind it other than the suspension of bidding rights, the government is requiring signers to submit records that show their payment terms to suppliers. The Compliance Board reviews their records. Companies that do not meet the 95% in 60 days criteria are suspended or removed from the list.

The names of the suspended and removed companies are publicly released, so there is some stigma associated with not complying. Also, these companies are not allowed to bid on government contracts while their status is suspended. After suspension, a company can submit a plan to improve their payment terms and be reinstated. Those who do not submit a plan are removed from the list permanently.

Suspended contractors

Several late-paying construction companies have had their signatories suspended due to late payments, including Balfour Beatty, Costain, Interserve Construction and Laing O’Rourke. These companies did not meet the requirement to pay 95% of their invoices within 60 days.

Balfour Beatty, a London-based contractor, has also run into payment problems in the US. Levelset’s Contractor Profile for Balfour Beatty lists them as a high payment risk, showing 271 payment disputes or slow payment incidents on projects in the past year.

Balfour Beatty was suspended from the UK Prompt Payment Code because they paid only half of their invoices within the term limits and averaged 50 days to pay subs and suppliers. Another suspended contractor, John Sisk & Son, was removed from the list altogether. They paid 59% of invoices within the terms and averaged 57 days to pay.

Other construction-related companies that have recently been suspended or removed include Stantec, Engie Services, Kellogg Brown & Root, Persimmon Homes, Alun Griffiths, Galliford Try, Ferrovial Agroman (UK), Severfield, and Screwfix.

UPDATE: UK Reinstates Contractors to Prompt Payment Code

How is the UK Prompt Payment Code different from prompt payment requirements in the US?

In the US, Prompt Payment may refer to the  federal Prompt Payment Act, or the state laws that set payment deadlines for construction projects. The federal Act applies only to federal projects, requiring the government to pay prime contractors within 14 days of receipt of an invoice. Subcontractors/suppliers must receive payment within seven days after that, with the next tier of subs/suppliers’ invoices due seven days after that. If a contractor or supplier is not paid within that time frame, they can file a prompt payment claim against the level above them.

Voluntary vs. required by law

In both the US and the UK, meeting prompt payment requirements is mandatory on government projects. However, the UK code also has a voluntary aspect that transcends federal construction jobs. Once a company becomes a signatory to the code, it applies to all a company’s transactions – not just those to subs and suppliers on a government project. They can be kicked out of the Prompt Payment Code for a complaint on a non-government construction job.

Payment deadlines are shorter in the US

Under the UK code, contractors have 60 days to make payment (though they strive for 30). The timeframe for payment is much shorter in the US Act, potentially only 21-35 days, depending on what tier a subcontractor or supplier is working on.

Prompt payment in US states

Most US states also have their own Prompt Payment statutes. The requirements of these laws vary widely. Some states apply prompt payment laws to both private and public construction projects. Others with prompt payment legislation only set deadlines for public projects.

In Texas, for example, the owner on a private job has 35 days to pay the general contractor. Once the GC receives payment, they have 7 days to pay their subs & suppliers. The owner on a public job has 31 days to pay the prime, with the same trickle-down deadlines as private projects.

Claims & complaints

If a contractor or supplier has a complaint about the amount of time it is taking to get paid, in the UK they can register a complaint with the Compliance Board that manages the code signatories.

The US doesn’t have a system for calling out contractors for slow payments. Instead, individual parties must use the civil court system for adjudication of prompt payment claims.

How can US companies deal with slow paying contractors?

US contractors and suppliers have a number of options for dealing with slow payments, depending on the type of project they are working on.

Communicate with contractors & owners

The best option is to communicate openly with the payment tier above. Start by sending a preliminary notice to your customer, the prime contractor, and the project owner. Preliminary notices let everyone know you are on the job and will be looking for payment. In some states, sending preliminary notice is also a crucial step to preserve your lien rights, required as a prerequisite to filing a lien in several states.

When payments are delayed, send invoice reminders. Call your customer and find out what’s going on. If there is no resolution there, go up the chain until you get an answer.

Protect your payment rights

On a public project where the GC has filed performance and payment bonds, you can file a claim against their bond and secure payment that way. Liens generally can’t be filed on government projects, so a bond claim is the next best thing. It will force the GC to pay you in order to release the bond. On federal projects, a bond claim is also called a Miller Act claim.

If you are working on private job, you can follow up your preliminary notice with a notice of intent to lien, and then file a mechanics lien on the property if you still don’t receive payment. Be sure to watch your timelines, since you only have so long to file a lien and each state has a different deadline.

Do research, and share your payment experiences

Curious about how well a company pays its subs and suppliers? Find out before the job starts by visiting Levelset’s Contractor Payment Profiles. You can see what others have experienced and share your own payment experiences. Whether good or bad, reviews create more transparency in the construction industry. Sharing your experience can help other subs and suppliers make better decisions on their own projects.

UK Prompt Payment Code is a step in the right direction

The actions taken by the UK show that they are serious about prompt payments in the construction industry. Although there aren’t currently legal consequences for delaying payment, having your company’s name on a list of slow payers should spur some to act. Ultimately, the Prompt Payment Act is a good step for everyone working on construction projects in the UK.

Was this article helpful?
You voted . Change your answer.