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Fri April 03 2020

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Public clients rally to shore up supply chain

23 Mar The Cabinet Office has directed all public sector contracting authorities to keep paying their suppliers, especially any that are at risk.

Latest procurement policy note (PPN) from the Crown Commercial Service tells contracting authorities to tell suppliers who they believe are at risk that they will continue to be paid as normal until at least the end of June – even if work is disrupted or temporarily suspended.

To qualify, suppliers should agree to act on an open book basis and make cost data.

available to the contracting authority during this period for the sake of transparency. They should continue to pay employees and flow down funding to their subcontractors.

 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.

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Invoices submitted to any public sector client should be paid immediately on receipt the PPN says, to keep cash flowing through the supply chain. Any reconciliation required can take place later.

However, contractors looking to invoke force majeure are likely to have a battle on their hands. Public sector purchasers are advised that they are not bound to accept a supplier's claim for force majeure and can resist it. “An attempt by a supplier to invoke a force majeure clause without valid cause may mean that the supplier is in breach of contract,” the note says.

Action Note PPN 02/20, published on 20th March, makes clear we are living in extraordinary times, requiring extraordinary actions by government.

It says: “Central government organisations should note that Managing Public Money prohibits payment in advance of need in absence of Treasury consent as this is always novel contentious and repercussive. However, in the circumstances Treasury consent is granted for payments in advance of need where the Accounting Officer is satisfied that a value for money case is made by virtue of securing continuity of supply of critical services in the medium and long term. This consent is capped at 25% of the value of the contract and applies until the end of June 2020. HM Treasury will review in mid-June whether this consent needs to be extended for a further period. Consent for payment in advance of need in excess of this amount should be sought from HMT in the usual way.”

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