Date: 23rd Mar 2020 By: Pat Condon length: 15 minutes Tags: Procurement Regulations People
This document contains a series of FAQs for CPC members and suppliers in consideration of the utilisation of CPC frameworks throughout the coming weeks whilst we navigate the COVID-19 crisis. The FAQs will be updated to reflect new issues as they arise together with updates to current FAQs as necessary.
For the latest information on how CPC are operating while we navigate the COVID-19 crisis see the CPL Group Coronavirus (COVID-19) update.
Additionally we have decided to immediately close the current application window for grant funding applications until the current global COVID-19 crisis has been resolved. For details please see the Group funding update.
CPC, in conjunction with other educational consortia, has been working with suppliers and has produced a risk based summary spreadsheet by framework with our current understanding of the risks in the supply chain and pertinent risk rating. This document can be viewed here.
The levels of supply chain risk may not be as critical to CPC members given institution closures from Friday March 20th
Should you require further details on a specific CPC framework supplier, please review the supplier web pages on the CPC website or contact the appropriate CPC contract manager for support.
All CPC framework suppliers are actively monitored for changes in their financial rating via Creditsafe. Any change in the financial rating of a supplier is notified to the CPC Contract Manager to investigate. In addition, for key contracts, the relevant Contract Manager will be working closely with approved suppliers especially when closures to educational establishments occur to enable them to monitor supplier’s current financial positions. Whilst this is prudent, it cannot offer any guarantee as to the ongoing liquidity of any supplier on any of our frameworks. CPC members can contribute to the liquidity of all suppliers by wherever possible ensuring that all valid and correct invoices are fully paid within agreed timescales which normally do not exceed 30 days from date of invoice.
Cabinet Office have issued a Procurement Policy Note PPN 02/20: Supplier relief due to COVID-19 to provide more information in support of supplier finances and payments which can be found here
CPC are fully aware of potential issues in consideration of cleaning consumables and PPE and are liaising with suppliers in consideration of stock positions and then posting updates as we become aware of items coming back into stock from suppliers in our dedicated PPE blog article. We are also notifying members weekly of supplier stock positions on all key PPE via the CPC Communicator and our social media channels:
A series of FAQs has been developed by Cabinet Office on Procurement Policy Note 02/20 and is available here for review. An additional PPN entitled Recovery and Transition from Covid 19 in support of PPN 02/20 has been issued here and this amends our advice to that now given below:
Where the CPC Call Off Contract has been utilised without amendment, the following clauses are Key.
2. Basis of contract
2.1 The Order constitutes an offer by the Institution to purchase Services in accordance with the Contract.
2.2 The Contract shall comprise any Order, any Order Amendments, these Conditions and the Specification(s). In the event of any conflict between the provisions they shall be read in the following order of precedence:
(a) Any Order Amendments (each Order Amendments having precedence over any earlier Order Amendments)
(b) The Order
(c) The Specification(s)
(d) The Conditions
2.3 The Order shall be deemed to be accepted on the earlier of:
(a) the Supplier issuing a written acceptance of the Order; or
(b) the Supplier doing any act consistent with fulfilling the Order, at which point the Contract shall come into existence.
2.4 All of these Conditions shall apply to the supply of Services.
This clause lays out the order of legal importance of the documentation issued and executed under the Call Off Contract. As is evidenced above, the specification will determine how the services will be carried out and how payment may be made. Should there be no explicit provision within the specification that contemplate service suspension, then other clauses within the Call Off Contract should be considered which are as follows.
13 Variation & Substitution
13.1 Either party shall have the right on giving reasonable notice to the other party to issue an Order Amendment adding to, deleting or modifying the requirements. If the Order Amendment will cause an increase in costs to the Supplier or a change to the Price, or Delivery Date then the Supplier shall notify the Institution of any changes to the Delivery Date, costs arising from the change and or any new price which shall be at the same level of cost and profitability as the original Price. The party requesting the order amendment must allow the other party at least ten (10) working days to consider any additional costs, new prices or Delivery Date. The Order Amendment shall take effect when, but only when the parties agree to such order amendment in writing. Subject to other provisions of the Contract, if the parties fail to agree the Order Amendment within the time stipulated then performance of the Agreement shall continue as though the Order Amendment had not been issued.
It is always the position in law that the parties to a contract may vary its terms by agreement. This clause merely sets out a process for doing so. The suspension of services by either the member or the supplier could be agreed as a variation of contract and the terms of service and payment renegotiated for a defined period with run on timescales incorporated within the variation to take account of the uncertainty of the current position in relation to COVID-19.
27 Force majeure
27.1 Neither party shall be liable to the other for any delay or failure in performing its obligations under the Contract to the extent that such delay or failure is caused by an event or circumstance that is beyond the reasonable control of that party, and which by its nature could not have been foreseen by such party or, if it could have been foreseen, was unavoidable, provided that the Supplier shall use all reasonable endeavours to remedy any such events or circumstances and resume performance under the Contract. If any events or circumstances prevent the Supplier from carrying out its obligations under the Contract for a continuous period of more than 30 Business Days, the Institution may terminate this Contract immediately by giving written notice to the Supplier.
This is a clause of last resort for either party to rely upon as after 30 days of no service provision, the member or supplier could terminate the contract with immediate effect. If this position was adopted, then the member could not simply pick up with the supplier where they left off after the crisis is over as the contract would have been formally terminated. The member would need to undertake a new procurement exercise from scratch. There could also be a case that as the contract cannot be performed that it can be terminated due to the legal doctrine of “Frustration” where a contract can be set aside where an unforeseen event renders the performance of the contract impossible. If this was relied upon, the same consequence as Force Majeure, i.e. the member would be required to undertake a new procurement exercise for the services would be then outcome.
Considering the question of what sums would be due on suspension of the service by either party, the supplier would be due payments as agreed in the specification at the point of service suspension. However, as the Call Off Contract does not explicitly grant rights of suspension of service to either party (unless expressly given for in the specification) there is a risk to the member in suspending the services that they may be in breach of contract, although a pragmatist may argue that you cannot provide a service if a building is closed.
It will probably be best practice to invoke clause 13 and agree a variation of contract between the member and the supplier that can work for both parties. Ultimately, the UK is operating under extreme conditions and the best advice that CPC can offer is to work together to reach a mutually agreeable solution. As always, the CPC Contract Manager is available should you wish to discuss.
Cabinet Office have issued a Procurement Policy Note PPN 02/20: Supplier relief due to COVID-19 to provide more information and detail which can be found here.
CPC has taken legal advice for members in consideration of the contents of the PPN 02/20 as this is now detailed.
CPC has received a response from Cabinet Office which states that both PPN 01/20 and PPN 02/20 are designed to capture ALL Contracting Authorities.
The definition within the Public Contracts Regulations 2015 of Contracting Authority relevant to the education sector is that of “bodies governed by public law” as;
“bodies governed by public law” means bodies that have all of the following characteristics:—
(a)they are established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character; (b)they have legal personality; and
(c)they have any of the following characteristics:—
(i)they are financed, for the most part, by the State, regional or local authorities, or by other bodies governed by public law;
(ii)they are subject to management supervision by those authorities or bodies; or
(iii)they have an administrative, managerial or supervisory board, more than half of whose members are appointed by the State, regional or local authorities, or by other bodies governed by public law;
Universities, Further Education Colleges, Schools, Academies and Academy Trusts where the majority of income (over 51%) is derived from public grants will be ascribed the status of a Contracting Authority.
A series of FAQs has been developed by Cabinet Office on Procurement Policy Note 02/20 and is available here for review.
In consideration of PPN 02/20, CPC has discussed this with our legal team and the following is our advice for our members.
The PPN Is NOT an instruction from Government that Contracting Authorities should begin to pay all suppliers for all goods and services through to June 2020 automatically in advance. The PPN is advising Contracting Authorities to take a pragmatic risk based approach to their contracts and suppliers and where appropriate and business critical, look at payment methodologies which may include those as detailed within the PPN. Any decision as to whether to make changes to contractual payments is for you as the Contracting Authority to make, for example, if you are satisfied that the risk of doing that and the supplier defaulting is lesser than the risk of not doing it and the supplier going into administration.
In support of Contracting Authorities making changes to contracts to facilitate payments outside of their current contractual protocols, a series of model clauses pertaining to Covid-19 has been developed by Cabinet Office and these are available here. As stated in this guidance, where you seek to amend a contract by variation, you should firstly seek legal advice from your own legal team. Due to the complexities and vagaries of contracts, CPC is unable to offer practical legal advice where members elect to invoke a contract variation as a consequence of Covid-19.
We will be issuing further guidance as necessary and will continue to update this FAQ page which can be accessed via the Covid-19 link on all CPC web pages.
Procurement Policy Note 02/20: Contingent Workers Impacted by COVID-19 is available here.
The purpose of the Guidance notes for Payments to Suppliers for Contingent Workers is to provide measures that contracting authorities can use to implement with Contingent Workers who have been affected by COVID-19.
The contents of the guidance note apply to all Central Government Departments, their Executive Agencies and Non Departmental Public Bodies. Cabinet Office encourages other public sector contracting authorities to apply the approach set out in this guidance note.
On Thursday April 2nd 2020, CPC contacted our members asking them to forward specific questions pertaining to PPN 02/20 that they may have.
This morning, we have received responses from Cabinet Office addressing those member questions and should you wish to view the questions and responses that have been responded to so far, then please click here.
In addition to providing responses to the direct questions asked, the Cabinet Office in conjunction with the Department for Education have also released an additional set of FAQs pertaining to the recent PPNs which can be viewed here. The Department for Education has issued the following guidance in support of state funded schools, academies and trusts here which focuses on;
Additional guidance has been received from the DfE that focuses on Further and Higher education providers and can be found here and focuses on;
Cabinet Office has released a Procurement Policy Note PPN 01/20: Responding to COVID 19 covering this issue with appropriate guidance. This can be found here.
The advice has been collated by our specialist partner, Risk2Value and will provide an update in this regard.
We are also asking additional questions of insurers and will add these to this series of FAQs as we receive their responses
As far as we are aware there has been no relaxation of the need for statutory inspections of plant and engineering equipment, so inspections should be carried out as normal where required. Zurich’s website presently states the following:
With people across the UK now being asked to stay at home wherever possible, we made the decision to pause inspections for one day (24 March) while we sought clarification from our trade association SAFed, the HSE and BEIS on the definition of essential services and how best to support the UK government in its strategy to beat coronavirus.
It is now agreed, across our industry, that we should resume an inspection service focused on essential services only. Following a definition by HSE and talks with our fellow members of SAFed, we have defined these essential services to be facilities that are crucial for the treatment/research of the virus and the general infrastructure of the country.
CPC will continue to update our Covid -19 FAQs as needed during this crisis
Following the latest government guidance that all educational institutions should close for the majority of students in response to the COVID-19 pandemic, we have been working with the CPC Utilities Supplies & Services framework supplier, Utilities Procurement Group, to understand the potential impact of building closures and partial closures on our members’ energy supply contracts. As member’s will be aware, contracted rates are often based on certain level of energy consumption by a customer over a given period. Due to the closure or partial closure of members’ facilities, historic & contracted levels of energy consumption are unlikely to be achieved and we have therefore been seeking clarity from the different energy suppliers that currently supply our member’s via the framework to understand the potential impacts on customers. Please find a summary below of the positions of the suppliers:-
All contracts placed historically, of less than 10 GWh = 10,000,000 kWh usage per annum, which covers all CPC contracts placed to date, are on +/- 100% Volume Tolerances, which effectively means there are no volume tolerances in place. Haven are an electric supplier only.
Haven have said going forward they will apply +/-20% Volume Tolerances to new contracts.
SSE have no Volume Tolerances for Electricity, and for Gas they have a wide volume tolerance of +/-30% (70/130), however they have never applied this historically in practice, and the 6 x coldest months of the year have already passed, accounting for the majority of annual gas usage, so there should be no issues from a period of closure over the warmer months of the year.
Unfortunately, for some larger Electric contracts with Orsted they contain a +/-20% annual (80/120) Volume Tolerance, and Orsted have stated:
“To confirm, if no volume reconciliation is stated, then it won’t apply (many of the very small contracts would not have Volume reconciliation), where it is stated, it will apply, i.e. 80/120 annual.
Worth noting where it is annual, you won’t know any outcome until after the 12 month period, which may also help mitigate if the volume issue is for a couple of months only, i.e. annually you may still be within tolerance.”
Npower’s Electric and Gas contracts terms and conditions, do not specify a volume tolerance, and they have stated they will aim to balance where possible, customers whose demand will reduce with those where it will increase.
Dukefield Energy Limited (formerly UPG) have also advised, "To assist members going forward for any new imminent start date contracts from April 2020, we can help with volume forecasting, whereby we estimate a maximum of 5 x affected months (Apr-Aug 20), and a maximum reduction of 80% of electric consumption for these months. We can assist by creating a year one volume forecast to reflect this, alongside a year two forecast at normal consumption levels. We do not anticipate any contracts starting from October 2020 to be affected at this time."
It is also prudent to let energy suppliers know if your consumption is going to change significantly, with an estimation of for how long (we estimate 5 months, April to August) , which will help them to adjust the volumes that they need to purchase at any given time. Dukefield Energy Limited can assist you in this respect.
There has been a significant collapse in consideration of Crude Oil prices, in relation to Coronavirus and reduced economic activity. As a result, energy prices have now reached a 4 year market low point.
Now is without doubt an optimal time to renew future energy contracts, and to also consider longer term contract durations.
Also if any member has overlooked April 2020 renewals under the current circumstances, Dukefield Energy Limited can assist with securing contracts as well as quoting 3 to 4 years into the future.
Should this be of interest, please get in touch with Dukefield Energy Limited on 03453 020041 / [email protected] to discuss this further.
For our framework supplier, Dukefield Energy Limited and their energy suppliers it is business as usual, in terms of continued support to CPC Members.
Companies will no doubt need assurance about the implications on Liability Insurance when their employees return to work after the current Covid-19 lockdown is lifted. Please see the guidance provided from CPC partners Risk2Value (R2V).