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Procurement Policy Note 04/20 – Recovery and Transition from COVID-19

12 June

The Cabinet office has released Procurement Policy Note (PPN) 04/20 which updates and builds on the provisions contained in PPN 02/20: Supplier relief due to COVID-19. PPN 04/20 sets out information and guidance for local authorities on the payment of their suppliers to ensure service continuity during the current COVID-19 outbreak.

PPN 04/20 states that local authorities should review their contract portfolio and work in partnership with suppliers to develop a transition plan to exit from any relief currently being provided due to COVID-19, as soon as possible. This would include agreeing to vary contracts where operational requirements have changed significantly. Local authorities should continue to pay their suppliers as quickly as possible on receipt of invoices to maintain cash flow and protect jobs.

The Procurement Policy Note outlines that the Government is now moving into the next phase of the response to COVID-19 and, even in this second phase, the supplier relief provisions set out in PPN 02/20 may still be appropriate and can continue to be provided to “at risk” suppliers. However local authorities and suppliers now need to work together to plan an eventual exit from any relief and transition to a new, sustainable, operating model and this may include discussing termination of the contract if it is no longer relevant or viable. Any termination would be under the terms of the existing contract.

Suppliers to the public sector are not automatically entitled to payment under the Procurement Policy Note as this relief is intended to allow contracting authorities to consider supplier cash flows and payment scheduling to support the continuity and retention of critical contracts. When considering the case for providing supplier relief, authorities should take account of the other sources of government support that are available. PPN 04/20 now clarifies that suppliers are entitled to receive partial payments for non-labour related costs and claim labour costs through the Coronavirus Job Retention Scheme (CJRS).

Where relief is currently being provided under the contract, local authorities are required to work with the supplier to agree a transition plan to be implemented as soon as possible and before the end of October 2020. The transition plan should include a planned date for relief to end, a process for reconciling payments made against costs, an assessment of any costs associated with implementing Public Health England guidance, i.e. social distancing, in relation to delivering the contract and an assessments of whether the contract is still operationally viable and relevant and, if not, proposals for variation or termination of the contract.

PPN 04/20 asks local authorities to act responsibly and fairly in relation to the performance and enforcement of contracts impacted by the COVID-19 pandemic. In particular, local authorities and their suppliers are strongly encouraged to seek to resolve any emerging contractual issues responsibly before they escalate into formal intractable disputes, for example through negotiation, mediation or other alternative or fast-track dispute resolution processes.

In practice therefore:

·       For the moment payments will largely continue as they have to-date.

·       There is much greater clarity over the position where furlough payments and PPN Supplier Relief payments co-exist

·       Public Sector departments (for many of you, Local Government) will be entering a dialogue with operators/suppliers to discuss the department’s future requirements as we move towards the end of October to allow both parties to exit the Supplier Relief system with an understanding of what the requirements of each will be after then end of October and to allow the supplier / operator to plan and adjust driver and vehicle resource accordingly.

·       It is very important to engage with this as early as possible and to be realistic but also firm as to what you can be expecting to provide by way of a service to the Public Sector provision you are involved in after the Supplier Relief ends.

Some contracts will be similar to pre-COVID levels others will have changed substantially.

If you would like help with this process, please contact Libby Pritchard either by phone 01254 828300 or email libby.pritchard@backhouses.co.uk

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