FIEC statement on plans to combat late payments in construction

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FIEC, the trade association representing building and civil engineering companies in Europe, has spoken out about EU plans to combat late payments in construction.

The statement comes ahead of a vote on the matter in the European Parliament’s Committee on Internal Market and Consumer Protection (IMCO).

FIEC says it is “crucial to ensure a careful balance between creating a level playing field in the EU and better protecting construction companies by providing clear payment terms, while at the same time ensuring that “contractual freedom” in commercial transactions is respected.

“The two co-legislators are currently examining the file. Both are divided on some aspects of the Commission’s proposal. In the EU Council, many Member States appear to be highly critical of the proposal as a whole.

“One provision reportedly causing disagreement is the 30-day payment period applicable to all businesses, which FIEC believes should be maintained when the debtor is a public authority.”

FIEC’s key messages

Ahead of the vote, FIEC urged the IMCO Committee to take note of its reservations against the introduction of the following provisions:

• Differentiated treatment depending on the size of companies

The draft report includes a number of amendments that would differentiate payment periods according to the size of the company.

FIEC warns that such an approach could make commercial relations more complex and affect SMEs’ access to public contracts, if contracting authorities are able to pay large companies over a longer period than SMEs.

• Payments to construction companies only after payments to subcontractors in public procurement?

Under the proposal, construction companies will face more red tape, unjustified discrimination and further delays in public procurement payments, if the main contractor will be required to verify the preceding payment of its subcontractors, before being allowed to claim payment from contracting authorities.

The goal is to ensure that payments in public works contracts are passed down the supply chain. But FIEC warns that this obligation threatens the financial liquidity of sound construction companies, risks creating legal uncertainty and additional administrative, financial and time burdens for both the contractor and the contracting authority.

Moreover, this obligation does not provide a solution for a strict mechanism to ensure that public authorities actually pay on time.

• Enforcement authorities, complaints and confidentiality

The proposal also requires Member States to designate national authorities responsible for enforcing the Regulation.

But it does not explicitly require them – once designated – to take action against public sector clients who fail to pay companies on time.

There are also concerns in the construction sector that setting up a parallel system to the courts would create confusion and bureaucracy.

FIEC considers that it should be left to Member States to decide what system to use, as long as it is consistent and applies the same way for public and private contracting authorities.

• Reporting obligations

Lastly, FIEC also rejects the introduction of annual reporting obligations only on companies’ payment practices as this would only increase the administrative burden for all parties involved.