- Cabinet Office PPN - Updated guidance on payment of suppliers at risk and variation of contracts
By Joanna Frost
12th Jun 2020
The Cabinet Office have issued a new Procurement Policy Note (PPN) that updates and builds on previous policy notes in relation to payment of at risk suppliers. It’s applicable to all contracting authorities including the wider public sector and applies between 1 July and 31 October 2020.
This is a summary of what the policy notes are advising contracting authorities to do:
- Review their contracts and if appropriate to maintain delivery of critical services, continue or commence measures in line with its previous Policy Note about paying suppliers who are at risk even if they are unable to deliver the goods or services due to the impact of COVID-19. The PPN is clear that the contracting authority has the final decision on whether it deems a supplier at risk and the form of any relief. Suppliers to the public sector are not automatically entitled to payment or other relief under this PPN. Comprehensive records should be kept of all decisions behind key decisions and actions taken to support transparency and future scrutiny of value for money.
Where contracts are primarily revenue generating and payment relief is not available within existing budgets, for example concession contracts (a catering contract could fall under this definition), contracting authorities should work with these suppliers to identify commercial solutions that are specific and appropriate to the contract.
Suppliers must not be in receipt of multiple, duplicative relief under PPN 02/20, PPN 04/20 and under the Coronavirus Job Retention Scheme (CJRS). This means, if suppliers are in receipt of payments, supplies should have ensured that all of the parts of the workforce identified to deliver the contract were not furloughed during this period under CJRS. It is permissible for a supplier to receive partial payments for non-labour related costs and claim labour costs under the CJRS.
- Work in partnership with their suppliers and develop transition plans to exit from any relief as soon as reasonably possible and before the end of October 2020. This should include agreeing contract variations if operational requirements have changed significantly. The PPN points out that in some cases, it is possible that the basic commercial assumptions that underpinned the viability of the original contract can no longer be maintained and that you and your suppliers will need to work in partnership, openly and pragmatically, during this transition to ensure that contracts are still sustainable and deliver value for money over the medium to long term.
The PPN does recognise that it may be necessary in some cases for contracts to be terminated if the contracting authority views a contract as no longer relevant or viable. In these cases you should work with the supplier to pursue termination based on your contracts existing contractual remedies.
- Continue to pay suppliers as quickly as possible, on receipt of invoices or in accordance with pre-agreed milestones dates, to maintain cash flow and protect jobs.
The full PPN can be found on the Cabinet Office Procurement Policy Note website alongside previous PPNs and FAQs on payment of suppliers. CPC FAQs on the Cabinet Office PPNs concerning payment of suppliers is also available.