Quid pro quo public sector procurement to tackle late payment – it makes sense!

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The Government last week updated a list of public sector procurement projects worth a mind-boggling £70 billion throughout the course of the next five years.

We fully endorsed the Coalition’s plans when it first announced in the autumn their plan to encourage more SMEs to take part in the tender process for state contracts.

This process is, however, more than just an opportunity to drive growth across a wider section of the private sector. It is also a golden chance for Government to really tackle the perennial issue of late payment once and for all.

The Government is in charge of the purse strings, and also has absolute control over the tender process. It would, therefore, not be inconceivable for the Government to simply exclude firms that have payment terms of 30 days or longer.

This information could be gleaned, quite simply, in the PQQ (pre-qualification questionnaire), where firms are routinely asked about their position on equal opportunities or race discrimination. Why not add this in?

By being a beacon of best practice and only awarding contracts to firms which respect the supply chain by paying their dues promptly, the Government would be demonstrating huge support for small business.

Double, it would also send a clear message to big business that late payment is not acceptable – nor will it be tolerated by the government. This is an amazing opportunity to lead by example and set a standard for the private sector to follow.

Essentially, there is potential for massive impact for very little effort on behalf of Government, which quite frankly has much to do to demonstrate it has even a basic understanding of the needs of small business.

The news last week that the economy has stalled and is now back in the recession goes to show the private sector is not delivering this growth the Government was reckoning on. A small gesture could so much to help kick-start growth.

It’s a win-win situation too. Small firms would not have to worry about managing cash flow issues, instead of allowing them to concentrate on growing their businesses and driving forward.

And the Government will be able to demonstrate it has used its position of power to help small business for once by adopting a common sense approach.