NSCC Publishes Information on Carillion Early Payment Facility
Following Carillion’s decision to increase its maximum payment terms to suppliers to 120 days as part of its Early Payment Facility (EPF), NSCC has published detailed information for Specialist Contractors setting out the potential issues that they should be aware of when signing up to the scheme.
Earlier this year, NSCC released a statement on extended payment terms condemning them as ‘grossly unfair’ to the supply chain in accordance with the Late Payment of Commercial Debts Regulations 2013. Since then, NSCC has met with Carillion which has confirmed that its suppliers are engaged on 120-day payment terms under the EPF. However, the arrangements that Carillion has put in place with various banks mean that suppliers can receive payment earlier than 120 days by applying to the appropriate bank after their invoice has been approved by Carillion. The bank will then pay suppliers directly minus a charge which is set out on a sliding scale depending on how early they wish to be paid. At present, Carillion has committed to reimbursing bank charges paid by suppliers for accessing their money in accordance with their existing payment terms under its Supplier Incentive Scheme.
Carillion has stated that its intention is to pay suppliers earlier under the EPF than they would have been previously on Carillion’s standard payment terms of 65 days. Carillion has told NSCC that it is reimbursing all bank charges paid by suppliers who reduce their actual payment terms to 45 days although this is not contractually documented anywhere. Whilst this is potentially encouraging, Specialist Contractors should understand that they are extending the payment terms in their contract to 120 days and there are a number of potential pitfalls that they should be aware of when signing up to the EPF. These include the fact that the Supplier Incentive Scheme could be withdrawn at any time, termination of the EPF Agreement does not affect the underlying sub-contract terms, and there is no contractual obligation on Carillion to approve an application for payment until the due date which is 112 days from the date of the application.
Specialist Contractors are advised to check the terms of all the agreements they are asked to sign in relation to the EPF, which will include the EPF Agreement, a Deed of Amendment to their existing contracts, and an agreement with the bank, to make sure they are happy with them. For further information regarding the issues in relation to the EPF, please view the NSCC information sheet.
