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Payment of suppliers to ensure service continuity during and after the COVID-19 outbreak


The Cabinet Office have issued a Procurement Policy Note (PPN) setting out information and guidance for all public bodies concerning payment of their suppliers to assist with service continuity during and after the current Coronavirus outbreak. This guidance is applicable to all schools, academies and colleges in England (see CPC COVID-19 FAQs for clarification from the Cabinet Office on who this PPN applies too) and should be brought to the attention of all those within a commercial or finance role.

All schools, academies and colleges should, with immediate effect:

  • Urgently review their contract portfolio and advise business critical suppliers who they believe are at risk that they may continue to be paid as normal (even if service delivery is disrupted or temporarily suspended) until at least the end of June 2020. See the CPC COVID-19 FAQs for our advice on the implementation of this PPN. Any payments agreed would be subject to the signing of a variation agreement to the existing contract which would incorporate specific clauses for the period of the Covid-19 pandemic only.
  • As outlined in the point above, put in place the most appropriate payment measures to support supplier cash flow; this might include a range of approaches such as forward ordering, payment in advance/prepayment, interim payments and payment on order (not receipt).
  • If the contract involves payment by results then payment should be on the basis of previous invoices, for example the average monthly payment over the previous three months.
  • To qualify, suppliers should agree to act on an open book basis and make cost data available to the contracting authority during this period. They should continue to pay employees and flow down funding to their subcontractors. Ensure invoices submitted by suppliers are paid immediately on receipt (reconciliation can take place in slower time) in order to maintain cash flow in the supply chain and protect jobs.

The policy note states that where agreed, it is vital that contracting authorities pay suppliers as quickly as possible to maintain cash flow and protect jobs and to consider making advance payments to suppliers if necessary.

This could include, for example situations where:

  1. Services are cut short/reduced at short notice due to the impact of COVID-19 and non-payment could result in supply chains collapsing and/or significant financial implications for the supplier.
  2. It would be value for money and important to business continuity to continue to pay suppliers in the short term (regardless of whether you are able to reconcile at a later stage). This would ensure continuity of services when they can resume.

Although it does indicate that payments need not be made to suppliers where there is no contractual volume commitment to supply.

Suggested Actions:

  1. Keep in regular contact with your business critical suppliers and continue to discuss with them the impact of the coronavirus crisis on their business and your contract. (See the CPC COVID-19 FAQ to see what action CPC are taking to support suppliers and members during this crisis).
  2. If the supplier is deemed to be ‘at risk’ and payments are continued to be paid even though services are disrupted or temporarily suspended, ensure this is done on an ‘open book’ basis e.g. ask for evidence that staff have been paid the right amount and on time and that cash continues to flow through the supply chain as quickly as possible. 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.
  3. Document these discussions and record any temporary changes to the contract or payment processes utilising the variation to contract documentation and clauses as contained within the PPN support document here.
  4. Ensure payment of invoices is not delayed through staff absence or school/college closures – make sure appropriate contingencies are in place including sufficient numbers of staff with delegated authority to promptly receipt/authorise payments.
  5. Be clear where suppliers should send their invoices during the period of school / college closure, including the email address and the process required, make this clear on your website and issue a reminder to suppliers asking for invoices to be sent in electronically to avoid hard copies sitting in office buildings potentially unattended.

The policy note includes more information on force majeure clauses and contract frustration as well as more detailed information on the above and we would encourage all our members to read and digest this guidance.

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