Procurement in a Nutshell – Taking account of a bidder’s approach to payment
10th December, 2020
The Government recognises that prompt, fair and effective payment is essential for all businesses. It has therefore issued an updated Procurement Policy Note (PPN 07/20) to set out how the approach taken to payment of subcontractors by a potential contractor can be taken into account in the procurement of major Government contracts.
This update to PPN 04/19 aims to ensure that large contractors comply with the Prompt Payment Code in paying their sub-contractors and also that they are able to demonstrate that they have effective systems for paying their suppliers and sub-contractors in accordance with the Code.
PPN 07/20 applies to procurements of goods and/or services and/or works, which are subject to the Public Contracts Regulations 2015 and where the individual value of the contract being tendered is greater than £5 million (excluding VAT)*.
Action
PPN 07/20 provides a number of questions which must be asked as part of the Standard Selection Questionnaire process. The additional questions facilitate assessment of a bidder’s payment systems. The contracting authority is entitled to exclude any bidder who is not able to demonstrate that they have appropriate payment systems.
The Standard Selection Questionnaire
The Standard Selection Questionnaire is a mandatory questionnaire to an EU standard which asks questions against exclusion grounds and selection criteria. It is separated into three parts, where part 1 covers basic information about the supplier, part 2 covers a self-declaration against the exclusion grounds, and part 3 covers the selection criteria on financial standing and technical capacity.
As part of this, the new questions introduced by PPN 07/20 ask about capability to maintain a healthy supply chain, including paying sub-contractors promptly and in accordance with agreed terms.
Prompt Payment Code
The Prompt Payment Code is administered and actively managed by the Chartered Institute of Credit Management on behalf of the Department for Business, Energy and Industrial Strategy. Signatories agree to pay suppliers on time, to be upfront about payment procedures and to work with their suppliers to encourage adoption of the Code throughout the supply chain. Although the Code is voluntary, the new PPN aims to ensure that failure of a company to commit to and comply with the spirit of the Code is used in the evaluation process when awarding public contracts.
PPN 07/20 will apply to all qualifying procurements advertised on or after 1 April 2021.
*Based on advertised contract value averaged over the life of the contract.
For further information on the new PPN, the Standard Selection Questionnaire or the Prompt Payment Code please do not hesitate to contact the Ward Hadaway Public Sector team.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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