All change for Network Rail contractors
news31st July 2018
Contractors who work for Network Rail must stop withholding retention money from their subcontractors and should pay them within 28 days.
Network Rail has introduced these new terms to its contracts before the upcoming five-year funding period begins (Control Period CP6, 2019-2024) - but better payment terms for subcontractors are just a small part of the reforms being implemented.
Network Rail aims to create a 'healthier environment for suppliers at all levels'. Soon payments to subcontractors will be agreed by the client and monitored more closely, thanks to the introduction of project bank accounts for major rail projects.
Network Rail introduced a best practise ‘Fair Payment Charter’ for its own supplier payments 7 years ago, but now wants subcontractors to reap the benefits too. It says it is the 'next natural step' to formalise the regime for CP6.
Stephen Blakey, Commercial Director of Network Rail, said: “The Fair Payment Charter was about recognising that cash flow is the ‘life blood’ for every supplier by committing to pay for goods and services in a fair, predictable and timely way.
"Harnessing the support we have already received from our major suppliers, we have simply taken the next natural step and formalised that approach for CP6. Culturally, it sends a huge signal as to the value we place on a sustainable supply chain and the way we want to do business.
“We recognise the challenges faced by smaller suppliers and are in a position to influence the way work on our railway is delivered and paid for. It is in our interest to have a sustainable supply chain at all levels – they are vital to the successful delivery of our projects and the safe operation of Britain’s railway.”
Network Rail will remove retentions - huge sums of money which are withheld from subcontractors until project completion - to put smaller suppliers in a stronger position financially. Being paid within 28 days of completing work will also strengthen its cash flow.
Written by Ian Johnson
