A major industry report has placed the brunt of blame for delayed payments in the North Sea upon Tier 1 contractor companies.
Offshore Energies UK’s (OEUK) latest business outlook report has assessed the landscape for delayed payments, saying around a third are not made on time within their 30 day terms.
Tier 1 contractors have been named as the main culprits, with OEUK saying they “generally had a significantly higher number of late payments, despite having longer payment terms”.
Delayed payments can have major impacts on smaller firms down the supply chain in terms of their cash flow and general financial health.
OEUK has not named which of these contracting firms are to blame. Tier 1s are large firms delivering integrated project solutions such as Aker Solutions, Baker Hughes, Halliburton, Petrofac, SLB, Subsea 7, TechnipFMC and Wood.
Data is available from the regulator on operators – those at the top of the chain like Shell, BP, TotalEnergies or Harbour Energy – who miss payments, but such information is not made publicly available for the next rung, between Tier 1 contractors and their subcontractors in the supply chain.
The NSTA said in January that a quarter of operator payments are being made late.
The issue was addressed on Monday during a Westminster forum by Malcolm Wilson of supplier management firm Achilles Information.
He said: “30-day payment should be normal, but a survey carried out last year found that less than half of the payments were actually made on time.
“This has a particularly hard effect on SME’s that come lower down the food chain and won’t be paid until the operator pays the Tier 1 main contractor.”
Earlier this month OEUK CEO David Whitehouse said the industry must pay its bills on time to support the supply chain.
High cost of tendering
The business outlook report also pointed to negative supplier sentiment “rigid tender processes that are too restrictive”.
That reflects comments from Mr Wilson of Achilles said at the Westminster Forum.
He said: “The cost of tendering duplication of effort has been a long standing complaint from suppliers that are tired of providing generic information in tender responses time and time again.
“I’ve heard stories about tendering costing a company, say £50,000 and time in terms of time and effort that they spend on tendering.
“So it adds massive costs to the tendering process both for suppliers and buyers and some necessary because there are online shared registration audit systems that exist to reduce this duplication of effort, but they’re not always adopted due to poor buyer behavior.”
OEUK intends to publish best practice guidelines on this later in the year.
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