Context:

At the Energy Chamber’s Local Content Forum in November 2023, the issue of late payments within the energy sector was identified as a major issue for contractors and sub-contractors in the sector.  Contractor representatives stated that delays in receiving payment had a significant impact on their cash flow and their costs, due to the frequent need to access expensive short-term lending and overdrafts.  Operator company representatives acknowledged that keeping the commitment to on time payment or improving payment processes throughout the supply chain (main contractors and subs) could represent a mechanism to help the finances of contractors with little no cost to the operator.  Both contractors and operators agreed that the reasons for late payments were varied and that the details are important and that further dialogue to identify specific actions were important.

In January 2024, representatives of operators and contractors meet to discuss this issue further and they identified the following specific themes and actions.  These are being shared with the wider industry for feedback and refinement before adoption as an agreed action plan.

Process : Contractor and Operator to ensure their procurement and payment process is clearly communicated and understood by stakeholders

  • Workshop/Forum/Contract Kick Off Meetings hosted by Operator to rollout the procurement cycle of the operator (Contractor to send appropriate person to attend workshops and kickoff meetings)

  • Invoicing process refreshers to occur at project kick off meeting

  • Entities to host an annual contractor forum to advise contractors of invoicing process.

  • Procurement to pay workflows to be issued as a general document with the issuance of all PO’s.

  • Entitles must cover SMEs and billed communications tailored to raising awareness and education.

  • Entities must perform Internal and external training annually and keep a record.

  • PO acceptance and communication management

Accountability: Single point of accountability (SPA)

  • Contractor focal point for project to be identified at point of engagement,

  • Operators to have a local AP or a single point of accountability to resolve issues based on the agreed process and defined timeline (e.g. 2 working days) where system help desks are unable resolve.

  • Contractors to also appoint a SPA.

  • General email to be set up by contractors to standardize invoicing and payment communication.

Sustainability: Invoice health

  • Metric - Proposed timeline for the submission of the invoices with the industry on the completion of the activity / service i.e. within 3 months (standard for both submission and acceptance).

  • Metric - Internal Invoice health check – No. of rejected invoices vs Invoices paid.

  • Purchase Order and Invoicing efficiency to allow for consolidation of invoices.

Sustainability: Payment performance management

  • Develop a criteria/requirement for primary contractors to share payment terms (at a min) with sub contractors.

  • Performance manage via KPIs at Performance review meetings

  • Protection of Payment Clause i.e. Primary contractors must demonstrate subcontractor is paid in full for previous cycle before Operator processes payment for current cycle.

  • KPI - Overdue payments for pre-defined timeframe (such as 60 days overdue or 90 days overdue)

  • KPI – On-time payments for all invoices to contractors

Industry Indicators to be established (industry standard to be set)
  '- PO cycle time
  '- Payment cycle time
  '- DPO (Day payment outstanding)

Sustainability:  Internal controls

  • Operators to have in place emergency process and communicate to Contractors and enforce internally throughout the supply chain
    Operators to reinforce throughout the supply chain that work should not be done without the appropriate authorization 

  • Metric - KPI - Confirmation order non-compliance
    Internal non-compliance KPIs for the entities CAM/ contract owners to be established (included in internal performance review). 

  • Operators agree to include payment/invoicing KPIs for the employees involved in the payment cycle
    Management of confirmation order
    Open PO management process

  • Non-compliance audits based on areas of risk to occur annually.

  • Operators to implement Contractor KPIs for on time submission of invoice and seek written periodic confirmation from Contractor that works done are invoiced

Sustainability: Ethics in Delivery

  • Operators to commit to treating confidentially payment issues raised by sub contractors

  • Energy Chamber to consider a forum/system for Contractors to raise these payment concerns confidentially

Forex:

Each Operator must have a defined criteria for payment in TT or US currency