Public sector organisations are exposed to Russian suppliers in the energy market © Frederic Scheidemann/Getty Images
Public sector organisations are exposed to Russian suppliers in the energy market © Frederic Scheidemann/Getty Images

Public sector: review and terminate contracts with Russian suppliers

Will Green is news editor of Supply Management
28 March 2022

UK public sector organisations are being told to “urgently review” and seek to terminate contracts with Russian and Belarusian suppliers.

In a Procurement Policy Note (PPN) the Cabinet Office said central government departments, executive agencies and non-departmental public bodies should identify contracts with links to the two countries and end them where it is legally possible and financially feasible.

Steve Barclay, chancellor of the Duchy of Lancaster said: “Public money should not fund Putin’s war machine. We are asking hospitals, councils and other organisations across the public sector to urgently look at all the ways they can go further to sever their commercial ties to Russia.

“The government will continue to work closely with these organisations, ensuring they are able to take the necessary steps as quickly as possible, including taking legal routes where necessary.”

The PPN said contract termination should only be considered if:

• Suitable, commercially-acceptable termination provisions are contained in the contract;

• The criticality of the contract has been assessed, along with the availability and affordability of alternative suppliers, and;

• Financial and other implications of termination have been assessed and mitigated.

The PPN said this work should be documented and any recommendations “approved by the appropriate senior commercial or procurement leader in their organisation”.

The PPN said public sector exposure to Russian and Belarusian suppliers was “primarily limited to the energy markets” and organisations “must seek advice from an energy expert and/or a relevant public sector buying organisation before taking action to terminate an existing energy supply contract to ensure an alternative source of supply is available and affordable”.

The PPN said terminating contracts would increase costs.

“There are likely to be some additional costs associated with terminating a contract particularly where there is a need to secure an alternative supply, for example increased costs of commodities, market engagement and tendering costs as well as legal support,” said the PPN. 

“You should ensure these have been quantified up-front, and that there are funds approved and available to support your course of action.”

However, the PPN warned contracting authorities subject to the Local Government Act are prohibited from taking into account “non-commercial considerations” – including the country of origin of supplies – in procurement decisions. “The Department for Levelling Up, Housing and Communities is considering an amendment through secondary legislation to address the issue,” said the PPN.

☛ Want to stay up to date with the news? Sign up to our daily bulletin.

LATEST
JOBS
Enfield (Locality), London (Greater)
£27,430 - £34,809 per annum plus excellent benefits
Lee Valley Regional Park Authority
Winsford, Cheshire
£29,793 to £36,369
Cheshire Constabulary
SEARCH JOBS
CIPS Knowledge
Find out more with CIPS Knowledge:
  • best practice insights
  • guidance
  • tools and templates
GO TO CIPS KNOWLEDGE