Public sector contracts should encourage large suppliers to pay supply chain quicker

Public sector contracts should include clauses to ensure that larger businesses pay their suppliers more quickly, according to AAT (Association of Accounting Technicians). The organisation has released a new white paper which offers guidance on how businesses can be more responsible, and which also suggests that organisations need to avoid a ‘race to the bottom’ in procurement.

The white paper makes a suggestion that organisations in the public sector should specify in contracts that any business which wins a contract from them must commit to paying their supply chain quickly. This would be a way to help smaller businesses which often struggle with being paid late by their suppliers, which is a big problem for the UK’s small businesses (AAT has also previously recommended that the Prompt Payment Code should be made compulsory for all organisations with more than 250 staff, and its payment terms halved to 30 days, to help end the problem of late payments).

Another suggestion is that while there are now more attempts in the public sector to try and create social value, more consistency needs to be applied because it varies too much between government bodies, local authorities, and different regions.

The white paper also cautions that organisations should avoid a ‘race to the bottom’ by always choosing the cheapest bid for procurement, and that a goal should instead be to look at which bids offer the most value socially and as a whole, rather than just financially.

AAT’s white paper was created following a roundtable event where representatives from organisations including the Federation for Small Businesses, Organisation for Responsible Business, and Work for Good put forward their thoughts on how more of a responsible culture can be brought into business. This was in the wake of suggestions that confidence in UK business has fallen by 9% in the past year.

Adam Williamson, AAT Head of Professional Standards says: “AAT has committed to being a more responsible business, and through our actions such as gaining accreditation from the Living Wage Foundation, signing up to the Women in Finance Charter and the Prompt Payment Code, and becoming a member of Accounting for Sustainability we hope to lead by example. We aim to inspire others to do the same, and this white paper suggests some ways that this could be done.”

Other recommendations outlined in the white paper are that:

there needs to be an agreed measurement of social value in business, so that organisations can understand how projects can contribute to a wider good, rather than just financially.
there needs to be stronger protections for whistle-blowers, so that employees who see their organisations acting irresponsibly are not afraid to come forward.
there needs to be a recognition that tax in the system is good, and that it helps wider society.
there needs to be investment in people whose job it is to find social value in businesses.