Payment of Suppliers: Recovery and Transition from COVID-19: 1 July – 31 October 2020
On 9 June 2020, the Cabinet Office published Procurement Policy Note 04/20: Recovery and Transition from COVID-19 (“PPN 04/20”). PPN 04/20 updates the guidance contained in the previous PPN 02/20 (Supplier Relief due to COVID-19) but acknowledges that the supplier relief provisions in PPN 02/20 may still be appropriate for certain at-risk suppliers delivering critical services (including suppliers that have not sought relief previously). However, it makes clear that suppliers are not automatically entitled to payment or other relief.
For Central Government organisations, payments in advance of need to secure continuity of supply of critical services can be made up to 25% of the total value of the contract. For all suppliers, there is still an emphasis in PPN 04/20 for authorities to accelerate prompt payment practices including targeting high value invoices where a prime contractor is reliant on a supply chain, resolving disputed invoices urgently and encouraging suppliers to invoice on a more regular basis to ease cash flow.
In summary, the following actions should be taken by public authorities by 31 October 2020:
- Review contracts, including those where supplier relief is being provided, and where appropriate to maintain the delivery of critical services, continue or commence measures in line with PPN 02/20.
- Continue to pay suppliers as quickly as possible to maintain cash flow and protect jobs.
- Develop transition plans with suppliers, to exit from any relief as soon as reasonably possible.
- Work openly and pragmatically with suppliers during the transition to ensure that contracts are still sustainable and can deliver value for money over the medium to long term.
- Where contracts are no longer sustainable, look at termination options.
- If operational requirements have changed significantly, agree contract variations in line with regulation 72 of the PCR.
- Keep comprehensive records of all decisions, reasons for decisions, and actions taken.
