Transport Scotland award and payment of subcontractors: EIR release

Information requested

1. Are these companies vetted to ensure they have the funding?

2. Are they credit checked to ensure they are honourable businesses?

Response

As all of the information you have requested is ‘environmental information’ for the purposes of the Environmental Information (Scotland) Regulations 2004 (EIRs), we are required to deal with your request under those Regulations. We are applying the exemption at section 39(2) of the Freedom of Information (Scotland) Act 2002 (FOISA), so that we do not also have to deal with your request under FOISA.

This exemption is subject to the ‘public interest test’. Therefore, taking account of all the circumstances of this case, we have considered if the public interest in disclosing the information outweighs the public interest in applying the exemption. We have found that, on balance, the public interest lies in favour of upholding the exemption, because there is no public interest in dealing with the same request under two different regimes. This is essentially a technical point and has no material effect on the outcome of your request.

Prompt payment of suppliers has been a key element of the Scottish Government’s objectives since 2009 when the then First Minister announced during the Business in Parliament conference in June 2009 that a new clause would be introduced into Scottish Government contracts to require payment of valid contractor and sub-contractor invoices within 30 days throughout the supply chain of public contracts. The then First Minister commented that “the effect of late payment on small businesses, particularly in the current economic climate, is completely unacceptable and must be stopped. The Scottish Government is leading by example and I would encourage all other organisations to follow suit”.

Details of this new clause were contained in Scottish Procurement Policy Note (SPPN) SPPN/082009 “Payments of Invoices in Public Contract Supply Chains Within 30 Days”, which set out essential features to be included within contracting authorities contracts. This included:

• Valid invoices must be paid within 30 days of receipt, at all stages of the supply chain relating to the contract; and
• When a public body has paid an invoice submitted by the prime contractor which includes payment for work carried out by a sub-contractor, the prime contractor is obliged to pay the subcontractor’s valid invoice without deduction (once submitted).

A copy of SPPN/08 2009 is available from 0088877.pdf (webarchive.org.uk). Under regulation 6(1) (b) of the EIRs, we do not have to give you information which is already publicly available and easily accessible to you in another form or format.

Transport Scotland embeds within its current works contracts a prompt payment clause which sets out an obligation for the prime Contractor to pay their subcontractors within 30 days of receipt of a valid demand for payment. In addition, we require such clause to be replicated throughout the supply chain. This obligation is further highlighted within Transport Scotland’s procurement documents which require tenderers to submit a prompt payment certificate as part of their tender submission, which has the effect of drawing a tenderers attention to the importance of this obligation.

Measures which have also been introduced to ensure the prompt payment of subcontractors, have included the introduction of Project Bank Accounts (PBAs), which Transport Scotland has been at the forefront of their development, with them first being trialled by Transport Scotland on the A96 Inveramsay Bridge Improvement in 2015. However, it was not until October 2016 that PBAs became mandatory for contracts above a certain estimated value (currently more than or equal to £2,000,000 for building projects and £5,000,000 for civil engineering projects) and unfortunately the procurement of the M8 M73 M74 Motorway Improvements and the A737 Dalry Bypass predated this requirement. Transport Scotland has since introduced PBAs on 6 of its works contracts since that time.

SPPN 10/2016 provides details on the implementation of Project Bank Accounts in construction contracts, a copy of which is available from Implementation of project bank accounts in construction contracts: SPPN 10/2016 - gov.scot (www.gov.scot). Under regulation 6(1)(b) of the EIRs, we do not have to give you information which is already publicly available and easily accessible to you in another form or format.

PBAs ensure the proper allocation of monies under the contract and records when and how much is paid to subcontractors and the supply chain, enabling Transport Scotland to monitor payments. However even on contracts where PBAs are used,  subcontractors can opt out of using them, which is why we ensure embedding 30 day prompt payment clauses.

As a contracting authority, Transport Scotland procures Contractors under the Public Contracts (Scotland) Regulations 2015. These Regulations require that companies are vetted to ensure they have not been convicted of certain offences which would result in their exclusion from the procurement competition and that they have the required economic and financial capacity. In our procurements the economic and financial standing of companies is assessed by accountants at the start of a procurement competition and immediately prior to contract award. This is achieved by assessing predefined financial ratios and includes an assessment of a company’s debt by checking their ‘gearing ratio’. This process ensures that we enter into contracts with adequately financially robust Contractors.

Although Transport Scotland adopts the above measures to encourage the payment of subcontractors and the supply chain, the contract between the Contractor and the subcontractor or supplier is a private contractual relationship that we are not party to. As such, Transport Scotland has no jurisdiction to be involved in commercial discussion or disputes over the payment of invoices, or the determination of the validity of invoices. That contract and any related disputes is between the Contractor and the subcontractor and I am unable to provide comment in this regard.

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The Scottish Government is committed to publishing all information released in response to Freedom of Information requests. View all FOI responses at http://www.gov.scot/foi-responses.