Why Network Rail is playing fair

Network Rail buys an awful lot of building work … something in the order of £4bn worth a year. The number of bridges, viaducts and tunnels alone comes to 40,000! Big customer. Big clout. I bet it is ever so tempting at this level to lord it over, domineer, even bully the contractors, the suppliers. And yet, what’s this? I am looking at a document headed “Network Rail fair payment charter”. It’s dated 11 November 2011. It is signed by pretty well all of the great and good thick-skinned, hard-headed chiefs of contractors in this end of our business; signed, too, by Network Rail’s chief stoker.

This fair payment charter is signed by pretty well all of the great and good thick-skinned, hard-headed chiefs of contractors in this end of our business

It’s true. Thirty-three commanders-in-chief have penned their moniker to a pact. Something called the Commercial Directors’ Forum has been established “to promote, support and influence commercial policy in the rail industry by encouraging collaborative working amongst Commercial Directors throughout the supply chain”. In other words, Network Rail is going to pay on the nail and its contractors are not going to nail their subcontractors, nor beat up their subsubcontractors, nor the bloke that makes the thing that drills the hole that holds the spring that drives the rod that turns the knob that works the thingumabob.

This Fair Payment Charter is signed by folk such as Balfour Beatty, Amey, Atkins, Skanska, Carillion, Bam Nuttall and Costain (more names in a moment, I promise). They declare, nay swear, that companies throughout the supply chain have the right to “fair payment” - that is “to receive prompt, predictable and correct payment when due”, and the right to “standard terms and associated administrative practices of payment such that they could reasonably be considered as fair”.

More names … Hochtief, Thales, Arup declare: “Deliberate deferral, late payment or unjustifiable withholding of payment is ethically unacceptable”, and “Fair Payment will apply equally between the client and lead contractor and throughout the supply chain”.

The light has dawned. There is only one real firm foothold for damned good service … it is to pay up and pay up quickly

More names … May Gurney, Jacobs, Siemens announce that “correct payment should reflect the works properly carried out and products and services duly supplied, including acknowledged additives, all being in accordance with the contract”, and that “any withholding of payment due to defects, non delivery or the absence of proof, will be proportionate and demonstrably justified”.

More names … Vinci, Volker Fitzpatrick, Laing O’Rourke say: “Client arrangements for retention will be replicated via matching terms throughout the supply chain where practical” - or, by the way, Network Rail is going to stop retention all together.

The concordat goes on to promise that:

• Main contracts will have payment periods not exceeding 21 days from valuation date
• Subcontractors’ and suppliers’ payment will not be dependent on the pay date of a main contract
• Subcontracts will have payment periods not exceeding 28 days from the same valuation date
• Authors of subcontracts will be invited to include similarly short payment periods where appropriate
• To minimise payment delays, the client and all supply-chain members will agree payment procedures at the outset of their contracts

More names … Galliford Try, Delta Rail, Scott Wilson, J Murphy, Osborne, Tata, Spencer, Invensys, Colas Rail, Babcock - they all promise, and so does Network Rail, to “introduce standard terms as necessary to support the aspired payment regime”.

And you, if you are a cynic, might say these chaps have been bullied into this by this lord and master with a lot of work to get through. Tosh! These people know which side the bread is buttered. They know that what they have signed up to is precisely what the government is beginning to insist on for public contracts. The worst payers in the business once, these government departments, but the light has dawned. There is only one real firm foothold for damned good service … it is to pay up and pay up quickly.

Oh, and one other thing: I have worked out that these 33 signatories are sharing in £4bn worth of work. All in return for everyone paying everyone on time. Easy, isn’t it?

Tony Bingham is a barrister and arbitrator at 3 Paper Buildings, Temple