Mo Olatuja considers the implications COVID-19 has had on public contracts and the plans to provide supplier relief.
Public Procurement Notes (02/20) from the Cabinet Office in March 2020 stated that contracting authorities must act quickly and take immediate steps to pay all suppliers to support their survival over the coming months, even where the supply of goods and services are stopped. The intention was to protect suppliers and stop supply chains collapsing so that recovery at the end of the crisis would be swift.
At the same time, suppliers being supported must be completely transparent about their costs with the contracting authority and not seek to make a profit, as they would have done if the goods and services had been delivered in normal times. They must also not claim support under other schemes aimed at addressing the same problem, such as the Salary Job Retention Scheme.
What does this mean?
There are a number of significant questions posed for both sides by this simple direction. For example, is the price that should be paid the same as the original contract or should it just be the costs that the supplier discloses?
Contracting authorities themselves are asked to fully consider and document the risks of paying at-risk suppliers for goods and services that aren’t being supplied. Yet at the same time are being asked to delegate authority down their organisation to avoid undue ‘red-tape’ in payment.
How does a company invoice for unprovided services and how does a contracting authority reconcile and validate those invoices against unsupplied goods and services?
Recovery and Transition from COVID-19
The Cabinet Office then issued Public Procurement Note (PPN) 04/20: “Recovery and Transition from COVID-19”, which was effective from 01 July. This guidance updates and builds on Procurement Policy Note 02/20 – Supplier Relief due to COVID-19 (PPN 02/20) published on 20 March 2020.
The key takeaway messages are:
- Supplier reliefs may still be relevant going forwards but were not intended to be an economic response to the pandemic nor intended to supplement or duplicate the wider support measures made available by the Government to UK businesses; and
- as we all move towards economic recovery, contracting authorities should also now start to plan with their suppliers how to exit any contractual relief and “transition to a new, sustainable, operating model taking into account strategic and re-prioritisation of needs.”