Procurement: Central government contracts - new requirements for prime suppliers

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Procurement: Central government contracts - new requirements for prime suppliers

Published 12 April 2018

On 10 April 2018 the Crown Commercial Service announced changes to Central Government procurement policy to increase supply chain visibility and assist suppliers, including SMEs in bidding for work in Central Government supply chains (Procurement Policy Note 01/18).

What’s the requirement?

From 1 May 2018 all Central Government Departments, Executive Agencies and NDPBs must update their terms and conditions for procurements valued above £5 million per annum to include clauses requiring the successful prime supplier to:

  1. Advertise subcontract opportunities valued above £25,000 on Contracts Finder.
  2. Report how much it spends on subcontracting in the delivery of the prime contract.
  3. Report how much it spends directly with SMEs or VCSE (Voluntary, Community or Social Enterprise) organisations in the delivery of the prime contract.

Useful to know

  • The requirement only impacts central government procurements (including Executive Agencies and NDPBs).
  • It applies to procurements started on or after 1 May 2018 (Contract Notice dated 1 May 2018 or later).
  • The £5 million per annum calculation must be based on the advertised total contract value, averaged over the life of the contract regardless of whether each year of the contract attracts a value of more than £5 million (e.g a contract with a total value of £21 million divided by 4 year term would be in-scope even if the value in the first year was less than £5 million).
  • The CCS has issued standard clauses for use by Contracting Authorities. See Annex A of PPN 01/18 here.
  • Contract conditions must be relevant and proportionate to the subject matter of the contract and this should be assessed by the contracting authority on a case by case basis. The PPN acknowledges that there may be times where the conditions are not relevant and proportionate, for example where there are issues of national security.
  • The requirement only applies to subcontracts arranged after the award of the prime contract. It does not apply to subcontracts arranged prior to contract award (i.e as part of the tender process).
  • The £25,000 threshold may be increased to £100,000 on a procurement if the authority believes that £25,000 is overly burdensome to a supplier.
  • There are no rules to dictate how the advertised subcontract procurement is to be conducted but suppliers must give potential subcontractors a reasonable amount of time to respond to the advert.
  • Once the subcontract is awarded, the supplier should update the Contracts Finder notice within 90 days with the details of the successful subcontractor.
  • Suppliers must monitor and report to the contracting authority the number, type and value of subcontract opportunities advertised and awarded during the contract term.
  • Suppliers must also monitor and report to the contracting authority their direct spend with SMEs/ VCSEs in the supply chain relating to the prime contract including (i) the value subcontracted generally; (ii) the value subcontracted to SMEs/ VCSEs.The PPN refers to a reporting template at Annex C but it does not appear in this version of the PPN.

Authors

Alison Walton

Alison Walton

Newcastle

+44 (0)191 404 4129

Victoria Fletcher

Victoria Fletcher

London - Walbrook

+44 (0)20 7894 6658

Hannah Chapelhow

Hannah Chapelhow

Newcastle

+44 (0)191 404 4121

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