Network Rail cuts payment time to help supply chain

Network Rail’s investment projects arm has reduced the time it takes to pay contractors and suppliers to 21 days, down from 56 days.

The new regime was implemented on 1 October 2011 and applies to Network Rail’s standard payment terms for investment projects works contracts.

The standard time for payments under these contracts had been 56 days – typically allowing 14 days to certify a payment, then 42 days for the payment to be made.

The new standard assumes payments will be made in seven days from the point of certification, which compares favourably with long-standing industry model forms proposing payment times of 28 days and less.

David McLoughlin, finance and commercial director, Network Rail investment projects, said: “We want to improve the way we pay our contractors and suppliers and this revision to our payment terms will significantly shorten the time taken for Network Rail to complete payment. Suppliers and contractors of all sizes will now have much greater certainty over cash flows.

“This initiative aligns closely with a number of government initiatives relating to fair pay and reflects ambitions for closer and more collaborative working between Network Rail and strategic partners.”

The new payment terms will be effective for all new contracts from 1 October 2011 and are not intended to impact existing contracts, where opportunities continue for contractors to choose to be paid earlier via the use of Network Rail’s reverse factoring facility, which guarantees prompt payment.

Network Rail’s main contractors are being asked to help disseminate news of the new arrangements through the supply chain. A new fair payment charter will be adopted by Network Rail later this year which will be communicated to the wider industry.

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