Can I ask for relief from KPIs or service credits under a contract with a public sector body if the Covid-19 outbreak means that I am having difficulty in performing it?
The Cabinet Office has published a useful Procurement Policy Note (“PPN”) on relief available to suppliers due to Covid-19 (available here). In brief, you should not be penalised by a public sector body, if, in the current circumstances, you are unable to comply (fully or partly) with your contractual obligations. Public sector bodies are expected to work with suppliers and, if appropriate, provide relief against current contractual terms. This is in order to maintain business and service continuity and avoid claims being accepted for other forms of contractual relief, such as the occurrence of a force majeure event.
The types of relief that may be available to suppliers to the public sector will depend on the existing contracts in place. Some contracts may have a payments by result mechanism, whereas others may be based on certain key performance indicators (KPIs) being met. Other contracts may not include any such mechanisms and therefore it will be a matter for discussion between suppliers and the public sector body.
The PPN provides that, rather than a supplier seeking to invoke a clause that would permit the supplier to suspend performance of its obligations (such as a force majeure clause), public sector bodies should first work with the supplier to amend or vary the contract. Any changes should be limited to the particular circumstances and considered on a case-by-case basis. Changes could include:
- Amending the contract requirements
- Varying timings of deliveries
- Relaxing KPIs or service levels
- Extending time for performance (e.g. revising a contract delivery plan), and/or
- Preventing the public sector from exercising any rights or remedies against the supplier for non-performance (e.g. liquidated damages or termination rights).
These should only be temporary variations and the contract should return to the original terms once the impact of the Covid-19 outbreak on the contract has ended. Discussions with the public sector body about any changes that are agreed should be documented, in a variation signed by both parties.
A public sector may also need to take account of regulation 72 of the Public Contract Regulations 2015, to ensure that any changes to a contract (even of a temporary nature) do not trigger a requirement to conduct a new tender process. Whilst this may be unlikely to be the case with temporary variations, suppliers should still bear this in mind when discussing any changes to a contract with a public sector body.
If you are a supplier to a public sector body and you are currently struggling to meet your contractual obligations, we recommend that you take legal advice as to whether it might be possible to take advantage of the flexible approach that the PPN requires public sector bodies to adopt – it could be that you can avoid service credits or other financial deductions, or the need to serve formal notices such as “force majeure” or other relief notices.
Related FAQs
There are two stages:
- Stage 1 – The provision of written information to the representatives.
- Stage 2 – Consultation on the proposed redundancies “with a view to reaching agreement” about certain matters
Stage 1: Provision of information
The first stage in the collective consultation process is to provide the representatives with written information including details of the proposed redundancies (often called a section 188 letter). This information must be given to the appropriate representatives and the time limit before dismissals can take effect does not start to run until they have received it. It is this information which ‘starts the clock’.
It is possible that there will be changes to the proposals during the consultation process: indeed that is part of the reason for the process. The employer’s obligation is not just to provide the appropriate representatives with the relevant information at the start of the process. It is under a continuing obligation to provide them with information in writing about any developments during the consultation process (although later changes do not ‘restart the clock’ before dismissals can take effect).
Stage 2: Consultation on the proposed redundancies “with a view to reaching agreement” about certain matters
The consultation process must include consultation “with a view to reaching agreement with the appropriate representatives” on ways of:
- Avoiding the dismissals
- Reducing the number of employees to be dismissed
- Mitigating the consequences of the dismissals
Employers should ensure that apprentices are paid at least the Apprenticeship Minimum Wage, National Living Wage or National Minimum Wage (AMW/NLW//NMW) as appropriate (and taking into account the new rates which will take effect from 1 April 2021) for training carried out where their wage received through the Coronavirus Job Retention Scheme does not cover this.
Some employers falling into the third group of organisations described above could understandably feel aggrieved that on the first reading of the guidance they are not able to furlough employees and rely on the Government scheme. Many publicly funded organisations that are not public sector employers, receive a package of public funding with little expectation on how that funding is used or applied, other than broadly for it to be used in providing the services it is contracted to deliver. Also, several publicly funded organisations have many different income streams and the element of funding that is received from the public purse can be only an element of their operating costs.
Unfortunately there is still no clear guidance on when employers falling into the third category identified above can use the scheme. The only reference in the guidance on this states that where organisations are not “primarily funded” from the public purse and whose staff cannot be redeployed to assist with the coronavirus response, the scheme might be appropriate to be used for some staff. This seems to suggest that where an employing organisation is not wholly or mainly funded by public funding and staff cannot be redeployed to work in areas in the effort to combat coronavirus, then it would be appropriate for the employer to access the scheme.
If considering applying for grants under the scheme a sensible approach would be to look at the combined total of your public funding and payments under the scheme and make sure it will not represent more than 100% of the level of total income you would have expected to receive during this period in a non-Covid scenario.
Local Authorities are expected to maintain support to suppliers and this should be considered:
There are four criteria which must be satisfied if an agreement is to be considered exempt:
- It must improve production or distribution, or promoting technical or economic progress – the guidance suggests that cooperation ensuring essential goods and services can be made available to the public, or an important sub-set of the public such as key workers, will satisfy this criterion.
- It must allow consumers a fair share of the resulting benefit – the guidance suggests this will be the case where the action prevents or reduces shortages.
- It must not impose on the undertakings concerned restrictions which are not indispensable to the attainment of the above benefits – the guidance suggests this will be the case where the cooperation is the only reasonable option due to the urgency of the crisis and where the cooperation is temporary in nature.
- It must not afford the undertakings concerned the possibility of eliminating competition – therefore the parties must endeavour to retain competition in respect of the products (in particular price competition).
Employers will be collecting and sharing health information. Health information is sensitive and higher data protection standards apply. Here are a few key pointers.
- Update privacy notices to cover the new collection and sharing of employees’ information and provide these to the workforce. Be transparent and fair.
- Identify the legal basis and condition for use of this information and put any required paperwork in place. The ICO guidance will help. For some conditions such as the employment condition, an Appropriate Policy Document (APD) will be required. The ICO has an APD template.
- Only use the information for the purpose of managing the workforce during the pandemic.
- Only collect or share information if it’s necessary – if it’s a targeted and proportionate way of achieving your purpose.
- Make sure any health information collected and shared is accurate – there may be serious consequences if it’s not.
- Work out how long the information must be kept for. Keep a record of that period and act on it at the appropriate time.
- Security is very important – there may be malicious actors trying to trick employers and employees. Make sure employees know how to identify a genuine NHS Test and Trace contact. Keep the information secure. Use the ICO’s data sharing checklists** and keep a record of the disclosures made and why. Control external disclosures – only certain authorised members of staff should make them.
- Make sure individuals can still exercise their data protection rights – that’s also very important. Keep data protection records up-to-date and ensure any exports of personal information outside the UK are compliant.
- Before introducing employer-led testing like taking temperatures, thermal imaging or other potentially intrusive tests, work out if a data protection impact assessment (DPIA) is required. It will be if the intended processing is ‘high risk’. If it is, then carry out a full DPIA. It will help address the issues systematically and mitigate risks.
- All this demonstrates ‘accountability’ – it shows affected individuals and the ICO that the employer is complying with data protection requirements.
If you need further help, please visit the ICO’s data protection and coronavirus information hub or ask our data protection team.
** Please note that this link is to the ICO’s existing checklists and data sharing code of practice. We will update the link to the ICO’s new checklists after they are published.