It is clear that the ongoing Coronavirus pandemic has caused significant temporary disruption for buyers, suppliers and other stakeholders within both public sector and private sector procurement. However, in the last few weeks the UK Government has released two new Procurement Policy Notes (PPNs), providing essential guidance for buyers and suppliers to ensure business continuity in procurement during this challenging time.
New directions in procurement policy are essential to provide relief for all sectors within the procurement process; particularly so for the construction industry, which is worth more than £110 billion and contributes 7% to overall annual UK GDP. Should construction activity decline in this period, there would be a huge impact on the UK economy, affecting people’s livelihoods and the ability to support the healthcare sector with life-saving equipment and resources (which the construction industry has been doing extensively – as discussed in this blog).
Tracker Intelligence always strives to support organisations to grow their business in procurement, and we will continue to do so with regular updates and reports on the evolving COVID-19 situation.
Government Procurement Policy Note (PPN) on Supplier Relief due to COVID-19
The Government has released two new editions of its Procurement Policy Notes to support organisations who are navigating the public or private sector procurement process during and after the COVID-19 pandemic. The documents give guidance for buyers and suppliers on temporary changes to the procurement regulations which are designed to help organisations across the supply chain work effectively, compliantly and responsively in this fast-changing environment.
Tracker will focus on the second document, ‘Supplier Relief due to COVID-19’, which sets out immediate actions buyers need to take in their current tendering process to support suppliers who are potentially at risk. This PPN has been issued because the financial challenges faced by some suppliers may have a detrimental impact on how the contracting authority’s project proceeds. If a supplier is struggling economically, they may not be able to meet their contractual obligations, and this will have a knock-on effect on business continuity for all parties involved.
Contracting authorities to review their contract portfolios
All buyers in procurement – central government departments, executive agencies, non-departmental public bodies, local authorities, NHS bodies and the wider public sector – need to urgently review both their current and prospective pipeline contracts, informing suppliers who are most at risk that they will continue to be paid as normal until at least the end of June. This is the case regardless of whether work has been temporarily suspended or not (for example, if the construction site has closed, your organisation will still be paid).
Contracting authorities need to establish appropriate payment measures
If they have not been implemented already, payment measures need to be implemented straight away to support supplier cash flow. This may include the following payment processes:
- Forward ordering
- Payment in advance or pre-payment
- Interim payments
- Payment on order (not receipt)
If the contract involves payment by results, payment should be on the basis of previous invoices, such as the average monthly payment over the previous three months.
Suppliers need to embrace transparency
In order to qualify for the appropriate revised payment measures, suppliers will need to be as transparent as possible in communicating their cost data to the contracting authority. It is strongly advised that suppliers agree to act on an open-book basis to achieve this. Suppliers are also required to continue to pay their employees and flow funding down to subcontractors as normal.
Pay suppliers immediately upon receipt
During this evolving situation, prompt payment to suppliers is more important than ever. Invoices submitted by suppliers should be paid by the contracting authority immediately upon receipt. This is in order to support cash flow across the supply chain, and by extension support people’s jobs across sectors and businesses.
Find out more information on Government PPNs
Our sister brand, the Procurement Advice and Support Service (PASS), has been reporting regularly on all updates from the UK and Scottish Governments as the COVID-19 pandemic progresses. PASS, alongside Tracker, will be here to help businesses build their resilience, agility and knowledge of procurement during this unprecedented time.
To find out more information about developments in the construction sector during the pandemic, and to receive further support, visit the PASS COVID-19 resources page.
In the meantime, read more about how sectors are working collaboratively as part of the national COVID-19 response.
Last updated on April 13th, 2020
Apr 02, 2020.