Payment of govt subcontractors to be expedited

Small businesses engaged as subcontractors on government projects will be paid more quickly  from July under measures being introduced in the upcoming NSW budget.

Damien Tudehope

Under the changes, large businesses who contract with NSW government agencies for goods and services contracts valued at more than $7.5 million will have to pay small business subcontractors within 20 business days.

It follows a pilot earlier this year.

Finance and small business manager Damien Tudehope says the Small Business Shorter Payment Terms Policy was being introduced to better support small businesses that work on government contracts.

“Cashflow can be a major issue for small businesses and the new policy will support the important role small businesses play in the NSW economy,” he said in a statement.

“There is a growing focus on the payment performance of large businesses to small businesses and it is vital the NSW government leads the way, in particular as the small business sector continues to recover from the impacts of COVID-19.”

The new policy builds on existing Faster Payment Terms Policy, which cut payment times for small businesses directly engaged by the state government from 20 days to five days in 2020.

It also complements the federal government’s Payment Times Reporting Scheme which requires large businesses with a total annual income of more than $100 million to publicly report on their payment terms and practices to their small business suppliers.

“This is about ensuring small businesses are paid quickly, making it easier for them to pay staff and bills without the stress of not knowing when the next cheque will come in,” Mr Tudehope said.

The 2021-22 NSW Budget, to be handed down today, will also include changes to the Small and Medium Enterprise (SME) and Regional Procurement Policy which was introduced in 2019 to increase opportunities for SMEs and regional businesses to supply goods and services to the state government.

Changes introduced under the refreshed policy will include:

  • increasing the general exemption of $50,000 for small businesses to $150,000 for SMEs and regional businesses, meaning they can be directly engaged by agencies for goods or services up to that value, even where there is a whole-of-government contract in place
  • requiring agencies to first consider SMEs for procurements up to $3 million, where direct engagement is permitted
  • increasing the value that government places on suppliers which deliver economic, ethical, environmental and social outcomes through a contract
  • requiring suppliers tendering for contracts valued at more than $3 million to submit a contractually binding SME and local participation plan.

“We want to continually improve small business participation in our supply chain,” Mr Tudehope said.

More information is available here.

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