In New York, Late Payments Legislation Bows

Big city, bright lights, late payments? Legislation is taking shape in New York City’s council that would help change the contracting process, with an eye on improving timeliness of government payments to vendors.

Sites such as JD Supra have reported that the legislation, known as Intro 1067, would mandate the Procurement Policy Board to create a process that would spur city agencies to keep those vendors informed about late payments and the reasons behind them. Similarly, the Mayor’s Office of Contract Services (MOCS) would have to get reports on those same late payments. From that mayoral office, reports would be given every six months to both the Mayor and the City Council.

The legislation stems from reporting in the New York Post where, among documented instances of agencies paying late, the Department of Homeless Services has been late with 78 percent of its contract registrations and payments to vendors since 2013. In another instance, only 5 percent of those contracts were registered in a timely manner last year. The Post has estimated that 59 percent of all contracts have been paid late.

Among the stipulations of the new legislation, a maximum amount of time would be set for such contract registration. If that time is breached, interest accrues. The accrued interest would be charged to the budget of the agency that has been late in paying.

Thus far, no hearing has been scheduled for the legislation, media reports said.

Separately, north of New York in Montreal, a construction industry trade group said there have been fewer bids for city projects accumulating in the wake of late payments from the city. The city itself, according to the Montreal Gazette, is not taking steps similar to those seen in the province at large, where a payments schedule would be introduced.

That news comes as the provincial government announced that pilot program last month, which goes into effect in October. That project extends to the Ministry of Transport and the Société québécoise des infrastructures. That latter entity constructs buildings for government agencies. The pilot project sets 30-day limits for payments — and contractors must pay their subcontractors within five subsequent days. Disputes would go into mandatory arbitration, which in turn must be settled within 30 days to 45 days.

Might there be some good news in the late payments space? In Australia, there are reports that payment time are actually, maybe … improving. Consider the fact that, as estimated by data analytics company illion, the average time outstanding — as defined as being overdue — is now 11 days, down 25 percent year over year and down by about half from 2011, when the firm started tracking that data.

“A healthy cash flow is important to all companies, but even more so for small business, so an improvement in late payments across sectors and regions is a positive sign for the Australian economy,” said illion CEO Simon Bligh. As had been seen before, retail remains the sector with the slowest turnaround at more than 14 days. Other measured sectors, such as construction and finance, saw improvement.

Some macro concerns are at play, reported MyBusiness, where Stephen Kokoulas said that the late payment terms are improving as “a solid pace of economic growth, low interest rates and low wage costs are giving firms ample cash reserves to pay their accounts in a timely manner. In comparison, from 2011 to 2013 when the economy was weaker, and interest and wages growth were higher, late payment times were almost double the current time, averaging 21 days.”

Finally, to get a sense of how late payments can hit a sour note, St. Louis music festival, LouFest, which had been scheduled for this past weekend, was cancelled after vendors pulled out. They had said that LouFest organizers had not been paying on time. Some vendors told local sites that, in recent years, the event — where tens of thousands of concert-goers congregate — had been paid several months late.