UK government should consider automatic interest if no improvement on late payment – Lord Young

11 February 2015

Automatic interest on late payments, a review of contract sizes, and expanding the Contract Finder website, could all be considered at as part of future reforms to public sector procurement, according to a report.

The Report on Small Firms 2010-2015 by the prime minister’s enterprise advisor Lord Young, includes an outline of the government’s measures this Parliament to give smaller businesses better access to public sector contracts, and how it is trying to cut red tape in the procurement process.

The changes included a legal requirement for public bodies and their supply chains to pay invoices within 30 days. But the government should consider automatic payment of interest if its changes fail to improve late payments to suppliers, according to the report.

Young said he expected the government “to keep a close eye” on payment performance of undisputed invoices across the public sector.

“If the reforms do not deliver demonstrable progress in the timeliness of supplier payment, I would propose that government goes further and considers automatic payment of interest on late payment,” the report says.

Young added that he would like Contract Finder, which lists all public sector tenders over £10,000, to be expanded to allow prime contractors to advertise supply chain opportunities on the site so that small suppliers could get work on schemes such as HS2, the strategic road network and Crossrail.

Contracts Finder should also be able to provide small firms with data on the procurement market, and more work could be done to determine how it could be integrated with Mystery Shopper - the scheme that allows suppliers to raise concerns about public procurement - to get feedback on procurement authorities and prime contractors.

“Ultimately, I would like to see Contracts Finder spun out of government through mutualisation, as I see this as a significant opportunity for this portal to reach its full potential,” said Young in the report.

The report also says although the Small Business Research Initiative was in place to connect public sector challenges with innovative ideas from industry, the government should go “much further” with pre-procurement engagement so commissioners and buyers have better understanding of what small firms can offer.

Young also proposed a full review of contract sizes in any future small business procurement programme, to investigate the optimal circumstances for procuring on a large scale versus purchasing through smaller procurements.

The report says: “Contract size continues to be a key determinant of whether small suppliers win procurement contracts, and this leaves them up against bulk buying and aggregated procurement, which aim to generate cost savings but often at the expense of the innovation and greater value that small firms can offer.”

The government is opening up a quarter of a trillion pound public sector procurement market to small firms.

As part of plants to cut red tape in tendering for public sector contracts, it is abolishing pre-qualification questionnaires (PQQs) for all low value contracts and introducing a simplified, standard questionnaire for all other contracts. Public sector contracts will be advertised on a new Contracts Finder portal.

In the report Young says that government will monitor the implementation and impact of these procurement reforms closely, and make further changes in needed.

He added: “In particular, I do not want to see the superfluous questions, once contained in PQQs, to resurface in Invitation to Tender documents.”

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