§ Mr. Ancram
To ask the Secretary of State for the Environment if he will provide details of the pay-when-paid policy of the Property Services Agency and of its 269W purpose and origins; and if he will make a statement on the application to this policy of the Government's requiring Departments to pay their private contractors as quickly as possible.
§ Mr. Redwood
New payment arrangements are being implemented by the PSA building management businesses, where they are acting as agents for the Ministry of Defence for payment purposes under MOD property management contracts, such that subcontractors are paid no later than seven days following receipt of payment from the client, MOD. There is an existing obligation on the MOD to pay promptly and this together with the new payment arrangements being adopted by the PSAS will ensure that subcontractors should be paid within 30 days from validation.
The development of the appropriate systems and procedural changes is underway so that by 1 April 1993 the five BM businesses are operating on this new basis. As these arrangements are introduced, I am demanding better performance from PSA in reducing delays in payments to contractors by getting invoices to MOD more promptly.
These arrangements create a contractual commitment on the managing contractor to make payment to subcontractors whose invoices have been accepted for payment by MOD and should be distinguished from other forms of "pay-when-paid" for capital works contracts whereby main contractors may withhold payments to subcontractors. This latter practice is inconsistent with the Government's prompt payment policy.
While the building management businesses are still in Government ownership, and they retain the obligations of the Government's prompt payment policy in their own right, a safety net will be in place so that PSA can ensure prompt payment to its contractors even where MOD has not paid PSA.