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
If you are eligible you will get a taxable grant of 80% of the average profits from the following tax years (where applicable):
2016-2017
2017-2018
2018-2019
HMRC will add the total profit in each of the three tax years (if applicable). This will then determine the monthly payment, subject to the cap of £2500.
With the loss of face-to-face meetings in the current situation, video conferencing has taken centre stage. But how do you do that in a compliant way? Here are some of the main high-level data protection issues to consider when selecting and implementing a new third party provider’s video conferencing system.
- Make sure you do your due diligence on the security measures offered by the provider. Clearly you can’t visit them, so look at the information offered publicly by the provider and read good quality, reliable, third party sources and ask the provider questions directly. Also ask any other organisations you know that use the provider. Document all this.
- If personal information is being sent outside of the UK/European Economic Area, make sure that transfer complies with GDPR. If it’s a US provider, is it registered in the EU-US Privacy Shield list or does it offer a model clause contract (you’re likely to need the 2010 version)? Or is the service provided from a country whose data protection laws offer equivalent protection to those in Europe? Look at the support service as well as the hosting. Document this.
- Make sure you put a compliant processor agreement in place. The provider should offer one as part of the contract terms. Check it meets GDPR requirements.
- You’re likely to need to update your privacy notice, particularly if you’re going to record calls. Provide participants with a short message and link to the privacy notice in the meeting invite and on any registration page.
- Create or update other GDPR-mandated documentation – for example, depending on your use, you may need a legitimate interests assessment and to update your record of processing.
- Finally, configure and use the system in a secure and compliant way. Look at the settings/options carefully and think through the security and compliance implications of each. That could include deciding who in the meeting can share their screen; whether or not you use passwords for participants; whether or not to record, and if you’re going to record, where to store the recording. Document your decisions and the reasons for them.
The ICO has said it understands that resources, whether they are finances or people, might be diverted away from usual compliance work during the pandemic. However the last thing you need at the moment is to create a bigger problem than the one you are trying to solve. So do the best you can, ask for help from one of our specialists if you need it, and keep the whole thing under review.
On 16 April 2020, Ian Hulme, the ICO’s Director of Assurance, posted a blog for business owners, employers and managers about how to safely roll out the latest video conferencing technology.
On 21 April 2020, the NCSC published security guidance for organisations on choosing, configuring and deploying video conferencing services.
It is almost impossible to completely guard against the risks associated with contractor insolvency, but there are some steps which can assist in mitigating and managing the risks involved. To be in the best possible position, it is worth considering the following at the outset of any project:
- Check the contractor’s financial position – particularly the specific company which will enter into the building contract, as the employer’s rights will be against this company rather than the business as a whole
- Take legal advice to ensure that the building contract is properly drafted with appropriate provisions to deal with an insolvency event
- Consider requiring a performance bond and/or parent company guarantee (each serve slightly different purposes)
- Obtain collateral warranties from the consultants and sub-contractors involved, so that there are contractual rights against other parties if the contractor is no longer able to meet claims
- Consider requiring retention bonds, advance payment bonds or vesting certificates if necessary
- Project bank accounts and escrow accounts can also provide some further assurances for the parties involved
The Construction Leadership Council (with backing from the Government) has issued practical guidance and draft pro-forma documents to enable all parties involved in the construction supply chain to enter into collaborative and open dialogue about applications for extensions of time and additional payment and to minimise potential disputes. The guidance can we downloaded here
The draft letters and notices included in the guidance have been prepared on the basis of the standard JCT Design and Build 2016 and NEC 3/4 Engineering and Construction Contract (Option A) and parties will need to make sure that they are completed/adjusted to comply with their own specific contracts.
The Cabinet Office has also issued a general statement calling on parties to contracts adversely affected by C-19 to act responsibly and fairly and to support national efforts to protect jobs and the economy.
Details of your MHFAs should be posted somewhere that everyone can access easily – a specific area on an intranet or whatever alternative exists. Regular comms involving the MHFAs, webinar sessions, Q&A sessions and mental wellbeing drop in sessions are all ideas that may work well.