As an update, we recommend you look at the two procurement policies the UK government published between 18 March and 20 March 2020.
1. PPN 01/20 (Responding to COVID-19)
Procurement Policy Note 01/20: Responding to COVID-19
2. PPN 02/20 (Supplier relief due to COVID-19)
Procurement Policy Note 02/20: supplier relief due to coronavirus (COVID-19)
In summary, here’s an overview of what these policies mean.
1. PPN 01/20 (Responding to COVID-19)
This PPN (in place with immediate effect) is grounded on regulation 32(2)(c) under the Public Contract Regulations giving authorities the ability to commission work with extreme urgency given the threat posed by COVID-19.
This means that authorities can:
- Direct award due to extreme urgency (regulation 32(2)(c)
- Direct award due to absence of competition or protection of exclusive rights
- Call off from an existing framework agreement or dynamic purchasing system
- Call for competition using a standard procedure with accelerated timescales
- Extend or modify a contract during its term.
The policy outlines the above can be undertaken so long as the following motivations are met:
- There are genuine reasons for extreme urgency (public health risks, loss of existing provision, etc)
- The events that have led to the need for extreme urgency were unforeseeable
- It is impossible to comply with the usual timescales in the PCRs (there is no time to run an accelerated procurement under the open or restricted procedures or competitive procedures with negotiation, and there is no time to place a call-off contract under an existing commercial agreement such as a framework or dynamic purchasing system
- The situation is not attributable to the contracting authority (You have not done anything to cause or contribute to the need for extreme urgency).
The policy advises authorities to make formal assessments to justify invoking the above and that, wherever possible, authorities continue to make a sound commercial judgement(s).
It’s worth shining a spotlight on the “accelerated timescales due to urgency”, under which authorities are “free to set… timescales as long as they are reasonable and proportionate”. This means that you should prepare for significantly shorter timelines on submissions. It is critical, now more than ever, to take a proactive stance in managing your pipeline and assessing capacity. Wherever possible, you should be communicating with buyers to understand their approach to upcoming, or due-to-be-released, contractual opportunities.
2. PPN 02/20 (Supplier relief due to COVID-19)
This PPN (in place with immediate effect until 30 June 2020) sets out “information and guidance for public bodies on payment of their suppliers to ensure service continuity during and after the current coronavirus, COVID-19, outbreak”.
The notice urges authorities to:
- Review and inform suppliers who they believe are at risk that they will continue to be paid as normal (even if service delivery is disrupted or temporarily suspended) until at least the end of June.
- Put in place the most appropriate payment measures to support supplier cash flow
- If the contract involves payment by results, then payment should be based on previous invoices
- Suppliers should agree to act on an open-book basis and make cost data available to the contracting authority during this period, continuing to pay employees and flow down funding to subcontractors.
- Ensure invoices submitted by suppliers are paid immediately on receipt (reconciliation can take place at a slower time) to maintain cash flow in the supply chain and protect jobs.
The notice advises suppliers to “identify in their invoices which elements of the invoiced amount relates to services they are continuing to supply (i.e. business as usual) and which amounts are attributable to the impact of COVID-19”.
It is again worth shining a spotlight on force majeure, a contractual term, which essentially allows either (or both) parties to terminate the contract, be excused from performance, and/or be entitled to performance suspense. Crucially, “authorities are not bound to accept a supplier’s force majeure and can resist it” and should seek legal support if required.
In the coming weeks, you should work with your buyers and/or suppliers, to identify fair and appropriate relief given the implications of COVID-19. Re-evaluations of KPIs, payment, and/or SLAs, should all be undertaken to ensure alignment of expectations and fair, continued payment.
If you need any more advice on what these PPNs mean, or how they may impact you, please feel free to contact us to chat further!
We hope everyone is keeping well and safe during these times.
Contracts Advance team.
April 2020