A Client’s Guide to Fixing Late Payment of Subcontractors under NEC4

Clients, Stop Trusting and Start Verifying

Late payment is a disease that has plagued the UK construction industry for decades. It causes small businesses to fail, puts immense stress on families, and weakens the entire foundation of our sector. For too long, the problem has been treated as an unavoidable part of the industry culture. But since February of this year that is no longer acceptable.

A major shift is underway. The new Procurement Act 2023, which is now in effect, places a legal duty on public sector clients to be more transparent and accountable. This, combined with powerful but often overlooked clauses within the popular NEC4 contracts, gives clients the tools they need to finally solve the late payment crisis. The era of relying on trust alone is over; it’s time for clients to verify that their supply chains are being paid, or risk being named and shamed for losing them.

V A business owner reviews invoices and paperwork, highlighting the financial strain faced by small and medium-sized enterprises due to £26 billion in owed payments.

The Power You Already Have in Your Contract

Many clients using NEC4 contracts (specifically the 'open-book' options C, D, and E) already have a powerful mechanism to enforce fair payment. The contract is very clear: a main contractor can only claim for the costs of subcontractors it has actually paid, not just costs that are due to be paid in the future.

The named contract Project Manager is responsible for checking this. Before certifying the main contractor's monthly payment, they are obliged to obtain proof that the subcontractors have been paid. If the main contractor cannot provide this proof, the Project Manager should not include those costs in the payment certificate.

This creates a simple and powerful incentive. If the main contractor wants to get paid by the client, they must first pay their suppliers. This directly links the cash flow of the main contractor to the fair treatment of its supply chain, moving the system from one of hope to one of commercial reality.

Your Responsibility Just Became a Legal Duty

The client is ultimately responsible for ensuring the Project Manager applies the contract correctly and fairly. The new Procurement Act 2023 makes this responsibility a legal requirement for public sector clients.

The Act demands a new level of transparency. Public bodies must now publish regular notices about their payment performance and the performance of their main suppliers on major projects. To do this accurately and confidently, they need hard evidence that money is flowing correctly all the way down the supply chain.

Simply instructing their Project Manager to enforce the 'paid' rule in the NEC4 contract assure it with Coria’s Digital Cost Assurance, combining it with Saible’s software, is the most effective way to gather this evidence. It’s not about taking sides; it’s about correctly applying the terms of the contract everyone signed up to. This protects the client from overpaying, ensures subcontractors are treated fairly, and helps the client meet their new legal obligations.

Bridging the Gap with Technology

In the past, the idea of checking every single subcontractor invoice on a major project was impossible. It relied on manual spot-checks and a great deal of trust. This is where modern technology changes the game.

Digital Cost Assurance is a new category of software that automates this process. It can check 100% of project costs against the contract rules in near real-time. Instead of drowning in paperwork, the Project Manager gets a clear, data-driven report showing which payments are compliant and flagging any that are not.

This technology gives the Project Manager the verifiable proof they need to apply the contract properly. It provides the client with a complete, unchangeable audit trail of every penny spent, which is exactly what the Procurement Act’s transparency rules require. By automating the checks, it speeds up the entire payment cycle, reduces disputes, and ensures everyone gets paid faster.

A Call to Action for All Clients

The fight against subcontractor late payment has reached a turning point. We already have the contractual tools in the NEC4 ECC contract and a new legal imperative from the Procurement Act 2023. What’s needed now is for clients to take a proactive role.

By instructing Project Managers to enforce the existing contract terms and using modern digital tools to make it possible, clients can protect the extended project supply ecosystems, reduce project risks, and deliver better value for the public. This is no longer just a matter of good practice or corporate responsibility; it is a commercial and legal necessity for a fairer and more efficient construction industry.

www.coria.ai - Digital Cost Assurance

www.saible.co.uk - Digital Parallel Payment Accounts (DiPPAs)