Ombudsman examining payment terms for subcontractors

The Australian Small Business and Family Enterprise Ombudsman is looking at the payment terms and conditions for subcontractors working on government projects following a recent inquiry into payment times.The Australian Small Business and Family Enterprise Ombudsman is looking at the payment terms and conditions for subcontractors working on government projects following a recent inquiry into payment times.

According to Ombudsman Kate Carnell, small business subcontractors are vulnerable to delayed payments, which can have an adverse impact on their livelihoods and the broader economy.

“Most government departments pay their invoices within 30 days, but when a prime contractor is appointed to manage a project there are regularly delayed payments further down the chain,” Ms. Carnell said.

“Government agencies and prime contractors should ensure that payment terms and conditions throughout the supply chain are no worse than those in the head contract.”

Ms. Carnell has written to seven government departments seeking information about their procurement and payment policies, following her inquiry into payment times, which recommended the government pay invoices within 15 days.

“It’s not good enough to leave responsibility with a head contractor and overlook small businesses who do much of the work,” adding that cashflow is vital to small business success.

“Cashflow is king. A lack of cashflow is the leading cause of business insolvency and this underscores the importance of prompt payments.”

The initial inquiry recommended:

  • The Australian Government require its head contractors to adopt the payment times and practices of the procurement policy through the supply chain
  • The Australian Government extend its payment policies to all agencies and entities
  • The Australian Government publish its payment times and policies, and for all its agencies and entities, with performance against best practice benchmarks
  • The Australian Government procure from businesses that have supply-chain payment times and practices equal to or better than its practices
  • All levels of government adopt the same prompt-payment policies
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