Bombardier rapped over small business late payments
13 Feb 2020
Canadian multinational manufacturer Bombardier has been heavily criticised by the small business commissioner over late payments to suppliers made by its UK operation, and is to review its payment practices
13 Feb 2020
The investigation into Bombardier began after the small business commissioner’s office received a complaint from Alistair Hugo Catering and Events, a small business which had four outstanding payments totalling £5,600 for catering services and had failed to resolve these despite numerous attempts over a six-month period.
The amounts invoiced were not disputed and no complaints were made about the service provided. However, while the small business had payment terms for each invoice to be paid 15 days from the end, Bombardier Transportation UK Ltd understood payment terms to be 60 days.
The commissioner found that notwithstanding the confusion in payment terms, payments were made significantly late. Even based on 60-day payment terms, the oldest invoice submitted was paid 223 days late.
The subsequent investigation found Bombardier Transportation UK Ltd did not provide evidence showing purchase order numbers were provided for the invoices in question or that terms and conditions were conveyed at the time orders were placed.
The company could not internally identify if relevant purchase order numbers existed, new purchase orders were required or how to ensure these issues were resolved and payments made.
Bombardier Transportation UK Ltd accepted the delay in payment was a result of being unable to reconcile invoices against relevant purchase orders, citing that their procurement governance process required purchase orders to be raised internally prior to any orders being placed with external suppliers.
The Canadian manufacturer provided evidence of this process being followed for an unrelated order placed with the complainant.
However, Alistair Hugo Catering and Events provided two unrelated separate orders placed by Bombardier Transportation UK Ltd, one had a purchase order number and the second did not.
The small business commissioner said this revealed the company did not continually follow their own procurement governance process, as in this instance it could not provide an audit trail for the relevant purchase order numbers raised for the outstanding invoices, or evidence they were ever provided.
Payment was made by Bombardier Transportation UK Ltd finance circumventing their usual payment system.
Philip King, small business commissioner, said: ‘Bombardier Transportation UK Ltd claim to have robust procurement and payment systems in place, but those systems proved to be ineffective on this occasion.
‘Bombardier Transportation UK Ltd mandatory payment practice reporting indicates that paymentthey pay 61% of their suppliers outside of payment term, with an average time of 116 days to settle an invoice.
‘This data highlights Bombardier need to take accountability and make significant changes to their internal processes to ensure their small business supply chain is paid on time.
‘Bombardier have agreed to review their payment practices and will report back to me within 60 days.’
A spokesperson from Bombardier said: ‘We agree that in this case our usually robust internal systems have not worked as they should, but we believe that the events in question were unusual.
‘Bombardier takes its obligations towards its suppliers very seriously and we are committed to continually improving our payment practices.
‘We will carefully review our purchase order and invoice processes in the light of the Commissioner’s recommendations and take all necessary steps to ensure this case remains a one-off.’
Bombardier, which is based in Montreal, has more than 68,000 employees in 28 countries.
Last year the company hit the headlines when it announced plans to pull out of Belfast, where it had a factory making commercial aircraft wing parts which employed 3,800 people and was the largest hi-tech manufacturer in Northern Ireland.
The business was subsequently sold to US firm Spirit AeroSystems in a deal worth nearly £1bn.