Millions owed to MoD suppliers after IT problems

posted by Francis Churchill
27 February 2017

IT problems have left Ministry of Defence (MoD) suppliers waiting for what could be hundreds of millions of pounds in payments, it has been alleged. 

Technical problems with the department’s new online procurement system have left companies waiting almost three months for payment, and some firms have had to take out loans to pay wages and their own suppliers, the Sunday Times reported.

An MoD spokesman confirmed there have been late payments caused by the new system but said the numbers had been “blown up a little bit, it’s not as many as has been claimed”.

The Sunday Times said one firm was reported to be owed more than £5m.

The chair of industry body the Defence Industries Council, BEA Systems’ chief executive Ian King, has also written to the MoD calling for urgent action, the newspaper reported.

The problem is thought to stem from the department’s Contracting, Purchasing and Finance system (CP&F), introduced last December as part of a Cabinet Office initiative to get all government bodies conducting transactions electronically.

The end-to-end procurement system was also meant to be a more efficient way of interacting with suppliers, providing better contract visibility and management. But, delays have been caused by legitimacy checks on invoices, triggered where suppliers' information on the new system did not match up with the information on invoices, the MoD spokesman told SM.

He added that suppliers have been contacted with information on how to resolve any problems, and that special “tiger teams” had been created to manually resolve problems as soon as possible. SMEs could also apply for emergency payments.

“The MoD is striving to rectify any issues urgently through a series of focused activity to ensure swift transaction processing. We are engaging with suppliers and are confident that any delays will be resolved rapidly,” he said. 

“Since the new system was implemented in December 2016, the MoD has paid over £7bn to suppliers, with nearly half a million invoices processed, and we are dealing with the last few,” said the MOD in a statement.

SM has also been told none of the firms that complained about late payment to the Sunday Times had engaged with the Prompt Payment Code, of which the MoD is a signatory.

“Not a single business reported in the press at the weekend had sought redress through the code’s challenge process, despite its success in resolving issues in the past,” said a spokesman for the Chartered Institute of Credit Management (CICM), which administers the code. “To put across the idea that there is nothing to help SMEs would be incorrect,” he added.

As part of its commitment to the code, the MoD aims to pay 80% of suppliers within five days of receiving invoices. The CICM spokesman could not comment on whether there had been an increase in the number of complaints through the code since the MoD introduced the CP&F system.

A parliamentary review into procurement at the MoD is currently looking into whether the existing acquisition systems are offering value for money and what the implications of Brexit might be.

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