A diamond among the coal

The 48 pages of the Fair Payment Charter are largely made up of statements of the bleedin’ obvious worked up by some marketing wizard – but that project bank accounts idea is a real corker

“‘Integrated working’, ‘working in good faith’ – damn it, it even trots out ‘spirit of mutual trust and respect’. Try trotting all that out on a building site”

The Office of Government Commerce has just published 48 pages of “fair payment” practices for construction procurement. And before I even began to read it I fell victim to my pre-judgment streak. I heard myself go “hmfff”. Oh come on, we all have a pre-judgment streak. My dear old dad bought a Vauxhall Viva in 1964. Trouble! And since then I still can’t look at a Vauxhall badge without my pre-judgment streak screaming “trouble”! My hmfff this time was triggered by the words: “Office of Government”.

Let me explain. In 1964 a government office produced the Banwell Report on construction payment practices. Damn good noises in that report. Came to nowt. Me and my fellow streakers quite naturally squirm at all the government endeavours that have gone nowhere. But I will read these 48 pages anyway. Here goes.

Wow! Or as Bart Simpson would say “Eat my shorts”! The construction industry’s biggest customer is to begin “project bank accounts”. This isn’t just aspirations and bull. Barclays and Bank of Scotland have already got the paperwork in place. Here is the new money payment machine. The client at the top of the heap pays all the interim payment sums due on a, say, monthly certificate into a trust account. Then, all those who are in the supply chain and registered as part of the subcontractor or supplier receive their cash direct from the trust. So does the main contractor.

Notice that the published document explains that the cash in the project bank account is in trust. “The trust status of the account is essential in order to avoid potential problems if the contractor goes into receivership. The account, in effect, is held in trust on behalf of the whole of the supply chain, in a similar way to how a solicitor operates a client account. This prevents a receiver seizing the proceeds of the account.”

Do you recognise any of that idea? It was a Latham recommendation in July 1994. He recommended that mandatory trust funds for payment be established. For Latham the money was to go into the trusts at the front of each month and come out following the valuation at the end of the month. But it was not put into legislation alongside the payment and adjudication rules. So it fell away.

But now, 2008, the government is going to do all that in its own contracts. My hmfff has changed to Oooh! One thing, though, can the Office of Government Commerce kindly tell yours truly which projects are to implement the idea? And if the answer is none or none yet, well … we’re all watching you.

What else is in the fair payment pages? The “charter” that’s what. “The charter sets out the values and arrangements relating to payment practices consistent with integrated working.” Oh please, do stop using that sort of language. We don’t fall for it. It reads like a mission statement: “transparent payment practices”, “integrated working”, “working in good faith”, damn it, it even trots out “spirit of mutual trust and respect”. Try trotting all that out on a building site.

Then the commitments are trumpeted: “Companies have the right to receive correct full payment as and when due”. You might just have well shouted that Tuesday follows Monday. “Unjustifiable withholding of payment is unethical”, “fair payment will apply equally between client and lead contractor and throughout the supply chain”, “the correct payment will represent the work properly carried out in accordance with the contract” … and it goes on.

The truth is that nobody will pay the slightest attention to all this stuff. But if the charter said anyone who puts in an invoice claiming for work done that they know hasn’t been done, or if it said anyone who withholds money on grounds they know to be spurious, and if it said anyone who just sits on unpaid bills will all sent to work test-driving Vauxhalls – now that would be something. The Fair Payment Charter was written by some marketing wizard who doesn’t know one end of an arris from a half-round. So hmfff! But that project bank account is a very different. Ooooh!

Readers are invited to forward recent judgments for reporting in this column (with full acknowledgement) to: Tony Bingham, 3 Paper Buildings, Temple, London EC4Y 7EU. DX: 37164 Biggleswade

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