Cabinet Office: In response to the COVID-19 outbreak
The Cabinet Office has issued two Procurement Policy Notes (PPN) providing guidance to all contracting authorities responding to the coronavirus pandemic. It requires action in relation to paying at risk suppliers to ensure that normal contract delivery can resume once the outbreak is over.
PPN 01/20 Responding to COVID-19
PPN 01/20 is an Information Note which advises all contracting authorities with urgent procurement needs to consider the following options in compliance with the Public Contracts Regulations 2015:
- Using the negotiated procedure without notice due to “extreme urgency” in accordance with regulation 32(2)(c);
- Using the negotiated procedure without notice due to absence of competition or protection of exclusive rights under regulation 32(2)(b);
- Calling off from an existing framework agreement or dynamic purchasing system;
- Using the accelerated timescales available under the open or restricted procedures; or
- Extending or modifying a contract during its term in accordance with regulation 72.
Contracting authorities will welcome this guidance as it provides details on the circumstances in which each option may be used. The guidance includes proposals for mitigating risk of challenge, such as providing sample text for inclusion in any contract notice when relying on the accelerated timescales for the open or restricted procedure. It also provides helpful detail about use of the negotiated procedure without notice, using framework agreements and dynamic purchasing systems set up by central purchasing bodies, and modifying existing contracts.
The guidance reminds contracting authorities to publish contract award notices and to keep proper audit trails of any decision to use one of the options noted above. It also provides that the options are not exhaustive and that there are other grounds in the Public Contracts Regulations, which may be applicable. For example, the light touch regime for certain health and social care related services.
PPN 02/20 Supplier Relief due to COVID-19
PPN 02/20 applies to all contracting authorities (save for devolved administrations) until 30th June 2020 and requires them to:
- Urgently review their existing contracts 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);
- Arrange the most appropriate payment measures to support supplier cash flow whether by way of forward ordering, payment in advance, interim payments, payments on order, or other; and
- Pay on the basis of previous invoices, where the contract involves payment by results.
In turn, suppliers need to agree to act on an open book basis and make cost data available to the contracting authority, as well as agreeing to continue to pay employees and sub-contractors.
The PPN envisages that contracting authorities will prepare a formal contract variation making it clear that the changes relate only to the COVID-19 situation and are limited in time. When making such a variation, contracting authorities will need to comply with the provisions of regulation 72 of the Public Contracts Regulations 2015 as detailed above in PPN 01/20. Legal advice should be sought before making such a variation as payment to at risk suppliers carries its own risks if the supplier becomes insolvent. Contracting authorities will therefore need to look at each contract on its own merits to determine which suppliers are at risk.
For further details about how to interpret the Information Note and Action Note please contact our team.