Encouraging SMEs into our supply chains

This month saw the Cabinet Office publish a suite of Policy Notes, Consultations and Legislation all aimed at supporting their wider agenda of making it easier for Small and Medium Sized Enterprises (SMEs) to do business with the public sector – either directly or through the supply chain. Whilst the PPN doesn’t apply directly to schools, academies or colleges, it still provides useful tips for anyone wanting to improve their engagement with SMEs.

PPN Action Note 01/18 "Supply Chain Visibility" introduces measures to require a contracting authorities main contractor to advertise any sub-contract opportunities under their contract on Contracts Finder and report on how much they spend on sub-contracting and how much is with SMEs. The PPN includes some standard contract clauses that could be tailored and adopted by schools, academies or colleges wishing to support SMEs in this way where it was relevant and proportionate to do so.

Open Consultation – Prompt Payment by Government Suppliers – the Cabinet Office are seeking views on whether it would be appropriate to exclude suppliers from major government procurements if they cannot demonstrate a fair, effective and responsible approach to payment in their supply chain management. Although it appears the proposals will only apply to central government contracts over £5million, the Cabinet Office are seeking responses from a wider audience including other public bodies and those involved in public sector procurement. Responses to the consultation can be submitted to CCS by e-mail or in writing to the addresses shown on the consultation page. The consultation closes at 11.45 am on 5 June 2018.

The consultation does also act as a useful reminder of the measures already in place to support responsible approaches to payment of suppliers, including those that apply to FE Colleges in England such as the requirement in The Public Contracts Regulations 2015 (PCR) Regulation 113 to pay undisputed invoices within 30 days and availability of reporting mechanisms through the Mystery Shopper Service and the Small Business Commissioner for suppliers to report poor payment practices.

The Reporting on Payment Practices and Performance Regulations 2017 (RPPPR) – came into force in April 2017 and applies to large companies registered in the UK that meet two of the three following thresholds;

• Annual turnover of at least £36 million;
• A balance sheet total of at least £18 million;
• At least 250 employees.

All companies falling within the above definition must report (every six months) on the following information from two different perspectives:

• Their standard payment terms;
• Their process for resolving disputes related to payment;
• Statistics on the average number of days taken to make payments in the reporting period;
• The percentage of payments made within the reporting period which were paid in 30 days or fewer, between 31 and 60 days, and in 61 days or longer;
• The percentage of payments due within the reporting period which were not paid within agreed terms.

Whilst the legislation doesn’t impact on procurement activity per se, it shows a commitment by the Cabinet Office to tackle the issues caused by late payment and should the consultation recommendations be implemented, may become more important to a contracting authority in terms of its ability to verify information provided during a procurement as to potential suppliers supply chain payment practices.

If you have any questions please contact Regional Procurement Advisor Jo Frost via email [email protected] or on 07990 763928.