Getting paid by your government client
Congratulations, you’ve landed a new contract a public sector institution (PSI). This may have not been your first time being awarded a contract from a PSI, so you feel confident that you will manage this contract successfully and get paid on time. You deliver the the service to specification and contract terms of reference. You have reasonable expectation that you will receive payment on time, as outlined in your contract. This however turns out not to be the case. What are your options to getting what you earned?
Firstly you need to understand that the South African government has as its policy intention the aim of both growing the economy and redistributing the countries wealth through its own procurement processes. This implies supporting SMMEs to become involved in the delivery of public sector programmes. This applies equally whether your service is a high end strategy for government or a catering facility.
After much failure and criticism about the way the public sector operates, government being led by the Presidency and National Treasury are driving forward performance improvement approaches in the public sector to do away with issues like late payment and weak contract management. There is a clear understanding by the leadership in government that there are many within the public service who don’t do their jobs as required and thereby slow down the overall process of transformation in the country. These people hide behind the power of their institution. The leadership in government have started cleaning house and putting into place systems to allow you to complain better so that they can improve the functioning of the public sector. Recently, the Presidency has signed Performance Agreements with Ministers. The plan is for all the accounting heads of government agencies to be tied into this Performance Agreement process. The intention behind these agreements is to link the political structure together with the delivery structure. However government is still notorious for being a poor payer and hamstringing small business, especially small black business, by paying late or not following their own procurement procedures on supply chain management.
Small companies have to think carefully about their options to recoup what is owed to them. They have to think carefully because the legal route is expensive and long drawn out and in the meantime you are burning up your cash reserves.
So what can you do in addition to following the remedies in your contract? In most cases your contract would specify an arbitration clause which should be followed first. We’d like to suggest a combination of tactics that are not mutually exclusive from each other. The tactics we suggest are intended to place pressure on an institution to quickly resolves and prioritise your issues, otherwise you might end up being a low priority.
You need to make sure that your payment is being held back for reasons other than non performance. The approach we are spelling out only works for issues where non payment is linked to a SCM violation by your public sector client. You as the owner of your business needs to determine whether you need a soft strategy to get your funds out from your non paying client – and this is typically favoured where your cash flow is not being eminently threatened by the non payment, or a hard strategy where you are weeks or even days (in the case of SMMEs) away from cash flow woes.
Other contract related matters such as contesting of results require more specific specialist intervention i.e. get a good contract lawyer. Contact us and we can recommend a few if you need referrals.
1. Do a situational analysis: Important questions and steps before you decide on a course of action:
- Examine your contract to see if the terms and conditions are clearly outlined and that you have met these obligations.
- Where deviations or changes to the contact have taken place, do you have approval of these confirmed in writing by the client. If no, a client could contest that these were required and not pay for the changes or resulting contract deviations.
- Have you invoiced according to the specifications? You need to make sure you invoiced using the correct procedure spelt out by your client. you also need to make sure you have provided them with all your substantiation documents – e,g, some contracts require an auditors sign-off on the invoicing.
- Before taking any action you need to formally approach your client about the delayed payment. You need to ask in writing of your contract manager where your payment is. If you get no response we suggest contacting their finance department directly to enquire about your payment. All too often what has taken place is that your late payment is as a result of someone not pushing through the payment on time. If this your problem, a friendly reminded of payment should get your funds through to you. Simple.
The simple route is always the best route, relations are important and you always want to keep them going. However if you can’t access your contract manager or get assistance from the finance department you are left with limited options and cash burning out, in this instance consider the following further steps.
2. Go to the head of the organisation: Once you have confirmed that you have both a payment and communications problem with the client go to the institution’s head. Don’t wait, the institution’s head is the accounting officer and is responsible for dealing with late payments. Please remember that late payment for a PSI is an issue the Auditor General’s office will want to know about. It is in the interest of the agency’s head not to have the AG asking questions about simple SCM issues.
Write a calm letter to the head of the institution explaining in detail the problem and your attempts to resolve the issue, and appeal for their assistance. We also suggest that you copy the letter to your contract manager. You should notify the contract manager so that the contract manager can feel some pressure from your approach to the institution’s head.
If appealing to the agencies head does not resolve your issue. You have a few more options available to you.
3. Going to the reporting National Department: Your next level of complaint is to go directly to the reporting department. For exampl, if your client is a Sectoral Education Training Authority (SETA) their reporitng department is the National Department of Higher Education and Training, and if your client is a municipality, their reporting department of is the Department of Cooperative Governance and Traditional Affairs (COGTA). You can find out who the reportng department is for your client by vising your client”s website and looking at their annual report.
Once you’ve identified who the reporting department is, you need to know who to speak to within the department. You either contact the Chief Director under whom the agency reports or if this is not clear complain directly to the Director Generals office of that department.
In your letter, stipulate your facts in detail, as in the case with the head of the agency previously, but this time include the facts around your request to the head of the agency failing to provide you with resolution. As in the previous action copy the head of the agency and your contract manager on the communication with the national department.
By now you should be getting a response from your client. They wont want you to be causing waves, impacting on their performance agreements by showing them to be inefficient.
If however you still do not get resolution you now need to escalate the matter to the highest structure you can, outside of the courts, and this is the relevant Minister’s Offices and the Portfolio Committee in Parliament.
4. The Presidency, The Minister and Parliament: It sounds daunting – the idea of sending anything to the President, a Minister or to Parliament. Remember they are accountable to you, they actually do want to hear from you because ultimately you are the end user of what they deliver and you can vote them out.
Parliamentarians also like to find issues to hold government agencies accountable. They can be a great leverage point.
You need to copy your letters to the head of the agency, the Chief Director and Director General, to the President, the Ministers Office and to a member of the Parliamentary Portfolio Committee that holds oversight over the agency you are struggling wit, notifying them that:
- The agency is in breach of SCM rules,
- They have not paid you for services you have rendered. If they have used your work without paying for it – there could also be copywrite violations
- The damage being caused to your business and
- The interest being accrued by the agency in question on the outstanding payment, which is a wastage of public funds.
You can email the Presidents Office on: president@po.gov.za or try the Presidential hot line on 17737. You can find the contact details for the Minister’s Office on the relevant national department’s website – we suggest calling the Ministry and asking for the Minister’s PA’s email address and you can find the details for the relevant Portfolio Committee at Parliament by visiting www.parliament.gov.za and searching for “committees”.
If your payment difficulty is truly down to incompetence or inefficiency or even just spite on the part of your client, but you have stuck to the terms of the contract, this process should see you exert enough pressure on the agency to see you paid on time.
This article was published in Your Business Magazine
Getting Paid by Government_DecJan 2011_Your Business Magazine
