While local authorities will be expected to follow the DfE’s model agreement, the actual payment terms and timings will be subject to the particular terms of the contract with a particular provider. Any remedy a provider may have for late payments and any consequential losses will depend on these terms.
Regarding interest, the Late Payment of Commercial Debts Interest Act 1998 implies liability for interest in business-to-business contracts amounting to 8 per cent above the Bank of England base rate and an additional fixed sum dependent on the amount of the debt. The payment is deemed late the day after an agreed date for payment or, where there is no agreed payment date, 30 days after either the customer gets the invoice or the delivery of goods or provision of the service (for public authorities). In practice, public authorities normally try to exclude this Act in their contracts – but these must provide for an alternative ‘substantial contractual remedy’ to late payment.
Joining forces may be the best way for providers to challenge their local authorities if councils are acting in a way which frustrates the provision of sufficient childcare due to a pattern of sustained late payment to the end that providers are unable to provide free places. This may also mean the local authority is in breach of its statutory duty to secure sufficient childcare in accordance with the Childcare Act. The remedies available are probably best suited for a co-ordinated action.
Providers should not be disheartened, however, as local authorities must have regard to the statutory guidance and model agreement to ensure the provisions of the contract are fair and reasonable. Providers should ensure payment terms are clear and provide for prompt monthly payments such as BACS transfer by a stipulated day of the month in arrears or advance. There should be an expedited dispute resolution process, provision for interest at a fixed rate on any late payments, and provision for the local authority to pay the provider’s reasonable legal costs for recovering any sums due under the contract.
