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Cabinet Office issues policy note on payment in procurement of major government contracts

The Cabinet Office has issued an updated procurement policy note on taking account of a bidder’s approach to payment in the procurement of major government contracts.

In PPN 08//21, which updates and replaces PPN 07/20 from April 2020, it said: “The Government understands the importance of prompt, fair and effective payment in all businesses. Being paid promptly for work done ensures businesses have a healthy cash flow.”

The key update to PPN 07/20 is the increase to the threshold bidders have to meet to demonstrate they have effective payment systems in place to ensure the reliability of their supply chains.

The PPN applies to all Central Government Departments, their Executive Agencies and Non Departmental Public Bodies.

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For the avoidance of doubt, the updated PPN does not apply to NHS trusts or to contracting authorities whose functions are devolved or mainly devolved functions of Scotland, Wales or Northern Ireland.

The Cabinet Office said: “In-Scope Organisations should take action to apply this PPN when procuring goods and/or services and/or works with an anticipated contract value above £5 million per annum (excluding VAT) which are subject to the Public Contracts Regulations 2015 save where, in exceptional circumstances, it would not be relevant or proportionate to do so.

“This PPN applies to framework agreements and dynamic purchasing systems only where it is anticipated that the individual value of any contract to be awarded under the framework agreement or dynamic purchasing system is greater than £5 million per annum (excluding VAT).”

In-Scope Organisations will be required to apply the provisions of the PPN in relevant procurements advertised on or after 1 April 2022. In-Scope Organisations should continue to apply PPN 07/20 to all relevant procurements before that date.

The Cabinet Office said that where this PPN applies, In-Scope Organisations must use the questions as sub-questions within section 6.2 of the standard selection questionnaire.

In relation to selection questions and guidance, it added: “The accompanying guidance explains how to include an assessment of a bidder’s payment systems to demonstrate it has a reliable supply chain and when it would be appropriate to exclude those bidders that cannot demonstrate they have effective systems in place. It also gives examples of exceptional circumstances where it might not be relevant or proportionate to apply this PPN.”

The Cabinet Office said that the PPN reflected a commitment in the Government’s 2017 Manifesto, in which it stated that it would “use our buying power to ensure that big contractors comply with the Prompt Payment Code both on government contracts and in their work with others”.

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