New public sector guidance raises payment bar for bidders

3 November 2021

The UK government has issued new guidance for public sector buyers around taking account of a bidder’s approach to payment.

In a Procurement Policy Note (PPN) the Cabinet Office said the threshold bidders have to meet to demonstrate effective payment systems, to ensure the reliability of their supply chains, has been raised.

For contracts above £5m, contracting authorities are required to make an assessment of a bidder’s responses to questions, designed to determine if they have an effective and reliable supply chain management system in place.

The PPN said buyers must examine whether a bidder has paid suppliers in accordance with the contractual terms it applies to its supply chain and whether it had paid 95% of invoices within 60 days.

Previous guidance from 2020 allowed a bidder to “pass” if it had paid 85-95% of all its invoices within 60 days in at least one of the previous two reporting periods and it had an action plan to achieve the required standard in the future.

The revised rules – which apply from April 2022 – state that in this case the bidder must have paid 90-95% of all its invoices within 60 days in at least one of the previous two reporting periods, while having an action plan to achieve the required standard.

However, buyers can also make an exception for firms that are new entrants to the market.

Bidders that have been trading for less than 12 months “should not be disadvantaged” when it comes to this threshold, the latest PPN states.

But new entrants still have to confirm they have systems in place to pay those in their supply chain promptly and effectively.

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