The Ombudsman has welcomed the Commonwealth move to ensure subcontracts on government projects are paid within 30 days.
“I commend the Department of Finance for listening to us, and other submission contributors, and changing the ‘Subcontractor’ clause in its Commonwealth standard payment terms to include payment terms of 30 days or less,” Australian Small Business and Family Enterprise Ombudsman Kate Carnell said.
“In addition to this, the same obligation is to be included in every secondary subcontract. This means the payment term of 30 days or less will be in every ‘Contractor’ and ‘Subcontractor’ contract the ‘Prime Contractor’ employs.
“Our Payment Times and Practices Inquiry recommended just that, and so did our submission in June to the Joint Select Committee on Government Procurement.
“Late payments affect a small business’ cash flow, affects business growth and, in worst case scenarios, can put a business out of operation.
“This clause will be part of the Commonwealth ClauseBank, which provides pre-drafted contract terms for use in existing contracts or in customised contracts.
“The clause also determines that only relevant obligations are included in subcontracts instead of all obligations from the main contract.
“The 30 days or less payment time, and inclusion of only relevant subcontractor obligations, is a significant step in the drive for fairness and balance in Commonwealth projects.
“We expect all Australian government departments and agencies to use this clause in contracts and give small businesses and contractors peace of mind, financially and mentally, when working with government.”