The Cabinet Office has released its second Procurement Policy Note (PPN) within the space of a week, this time with a focus on supplier relief due to COVID-19.
The PPN, which is applicable to all contracting authorities (including local authorities and registered providers of social housing), sets out guidance on payment of suppliers with the aim of ensuring service continuity during and after the COVID-19 pandemic. It is effective from 20 March 2020 to 30 June 2020.
The Cabinet Office advises contracting authorities to take the following key actions:
- Urgently reviewing contract portfolios and informing suppliers which are considered ‘at risk’ that they will continue to be paid as normal (even if there is service disruption) until at least the end of June.
- Where contracts involve payment by results, basing payments on past performance e.g. by taking an average of monthly payments over the previous three months.
- Adopting appropriate payment measures to support supplier cash flow, which may include forward ordering, payment in advance or pre-payment, interim payments and payment on order (rather than on receipt).
- Ensuring invoices, which have been submitted by suppliers, are paid immediately on receipt.
The PPN strongly emphasises that contracting authorities should work with and support suppliers by helping them maintain cash flow during this period of disruption whether this is through continuity of payments or, in some cases, through time-bound variations to supply contracts.
However, support from contracting authorities should not be given freely and, in order to benefit, suppliers must agree to operate on an open book basis. This necessitates the disclosure, if requested, of financial information to demonstrate that payments which are made to suppliers under contract have been used in the intended manner. For example, paying staff on time or allowing cash to flow through the supply chain. It is not intended that suppliers should profit from elements of work that are undelivered during this period and operating with integrity is essential to this. Any supplier who takes undue advantage opens themselves up to legal action and suppliers should be made aware of this.
The PPN also provides guidance on how to approach situations where suppliers are looking to rely on contractual or other legal forms of relief as well as at how contracting authorities can adjust their procedures to facilitate the prompt payment of supplier invoices. The full PPN can be read here, but if you do require further advice or clarification on any of the issues covered either in this note or the PPN, then our public procurement team is on hand to assist you.
