Jenny Beresford-Jones examines a procurement policy note, effective from the beginning of April, on taking account of a bidder’s approach to payment in the procurement of major contracts.
PPN 07/20 comes into force in relation to procurements advertised on or after 1 April 2021. It applies:
- to all central government departments, executive agencies and NDPBs;
- and is recommended good practice for all public bodies;
- where a public contract is procured where the contract value is over £5 million per year excluding VAT; or
- where a framework agreement or DPS is procured, where it is anticipated that the individual value of any call-off contract will be over £5 million per year,
(unless it would not be relevant nor proportionate to apply it).
This PPN replaces PPN 04/19 in this policy area. The two main changes from the requirements of PPN 04/19 are:
- a higher standard bidders must reach to demonstrate they have effective payment systems
- clarification around how the PPN applies to framework agreements
If the PPN applies, you must incorporate the model questions into section 6.2 of the CCS SSQ. The aim of the questions is to assess whether bidder intends to use a supply chain to deliver the contract and, if so, whether it has proper payment systems in place. There are five questions.
Questions 1-4 are answered on a self-declaration (subject to later verification), and pass-fail basis.
Question 5 involves an assessment by the authority as to whether the bidder has met the required standard. This is demonstrated where the bidder has paid their supply chain within agreed terms and paid 95% of invoices within 60 days - in at least one of the two previous six month periods. If bidders are not able to demonstrate this they must be given the chance to explain and put forward an improvement plan which the Authority may assess and decide to pass (in accordance with a stated evaluation methodology).
The PPN notes that in relation to Framework Agreements, where the duration may extend to four years, authorities may consider a mechanism to suspend providers on the framework whose payment performance deteriorates.
There is a also a steer on circumstances where it will not be relevant or proportionate to apply this PPN, for example:
- where the market for a contract of this type is distorted/narrowed/struggling to such a significant extent that delivery of public services is likely put at risk, or value for money is likely to be severely compromised; or
- where there is a civil emergency.
Actions to take
Both authorities and bidders should read the PPN and the accompanying FAQs.
Authorities should consider whether they are within scope of this PPN, and, if not, whether they intend to apply it in any event, as best practice.
While we expect a new iteration of the CCS SSQ to be published shortly, in the interim period authorities will need to update their selection questionnaire templates to include these questions where relevant and proportionate.
Bidders should familiarize themselves with these new questions and consider how best to evidence compliance, as failure to do so could result in deselection. Where necessary, bidders should proactively and robustly put in place any necessary plans for remedial action as soon as possible, rather than wait until next completing an SSQ.