The Department of Finance has moved to change the “Subcontractor” clause in its Commonwealth standard payment terms to include payment terms of 30 days or less, prompting a commendation from the Australian Small Business and Family Enterprise Ombudsman (ASBFEO).
In addition, the same obligation is set 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, as recommended by the ASBFEO’s Payment Times and Practices Inquiry which was submitted to the Joint Select Committee on Government Procurement last June.
“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,” said Carnell. “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.”
Carnell said that late payments affect a small business’ cashflow, impacts on business growth and, in worst case scenarios, can put a business out of operation. She hopes the new directive will provide some assurance to small businesses transacting with the government.
“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,” Carnell said.
