Public sector buyers should continue to pay suppliers as normal to protect the health of supply chains during the coronavirus outbreak.
In a Procurement Policy Note (PPN), the Cabinet Office said many suppliers to public bodies are likely to struggle to meet contractual obligations, putting their “financial viability, ability to retain staff and supply chains at risk”.
“Contracting authorities should act now to support suppliers at risk so they are better able to cope with the current crises and to resume normal service delivery and fulfil their contractual obligations when the outbreak is over,” the note said.
Contracting authorities, including central government departments, local authories and NHS bodies, should urgently review contract portfolios and inform at-risk suppliers they will be paid as normal, “even if service delivery is disrupted or temporarily suspended” until at least 30 June 2020.
Authorities should also put appropriate payment measures in place to support supplier cash flow which could include forward ordering, payment in advance, interim payments and payment on order.
“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,” it said.
Invoices submitted by suppliers should be paid immediately on receipt in order to maintain cash flow in the supply chain and protect jobs.
In turn, suppliers should agree to act on an “open-book basis”, making cost data available to contracting authorities, and continue to pay employees and flow down funding to subcontractors.
The PPN also outlined additional contingency measures contracting authorities should consider throughout the pandemic:
1. Ensure sufficient numbers of staff with delegated authority are able to promptly receipt and authorise an amount due for payment as significant levels of staff absence are possible.
2. Receipt for goods promptly and monitor flow down to ensure payment is cascading down the supply chain.
3. Verify an invoice, undertake neccessary checks and resolve any issues as a matter of urgency. Do not send invoices back for minor administrative errors and risk causing delay in payment. Reconcile minor discrepancies at a later date.
4. Use procurement/payment cards where possible to ensure businesses are paid as quickly as possible. Consider increasing the upper limit of spend, open up categories and ensure an appropriate number of staff have the authority to use.
5. Be clear where suppliers should send their invoice, including email addresses and the process required. Issue a reminder to all suppliers to help them best prepare and ask for invoices to be sent in electronically to avoid hard copies sitting in unattended office buildings.
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