PPN 04/20: Recovery and transition from COVID-1917/06/20
A new Procurement Policy Note issued by the Cabinet Office provides further guidance on working in partnership with suppliers during the COVID-19 crisis, to support suppliers at risk to be able to resume delivery of contracts. It also looks forward to transition planning in order to exit from relief in the period July to October. We highlight the key messages below.
Building on previous guidance
PPN 04/20, published by the Cabinet Office on 9 June 2020, updates and builds upon PPN 02/20, signalling a move to transition planning outside of the COVID-19 crisis. A copy of our article discussing PPN 02/20 can be found here.
PPN 04/20 takes effect on 1 July to 31 October 2020 and applies to all contracting authorities, including registered providers of social housing. It looks beyond the initial crisis to encourage longer term solutions to be discussed “openly and pragmatically” with contractors.
PPN 04/20 reiterates and builds upon the guidance referred to under 02/20 that:
- ‘At risk’ suppliers should still be dealt with in accordance with PPN 02/20 if the relief is still required.
- Payment options and relief from contractual requirements should be explored, such as relaxation of KPIs and service credits.
- Comprehensive records should be retained on all decisions made to ensure transparency throughout the current period and to protect against future scrutiny.
- Suppliers in receipt of public funds should continue to operate on an ‘open book’ basis.
- There shall be no duplication of relief claimed by suppliers under government schemes, and no profit made on elements of a contract that are undelivered during the current period.
- Payment of supplier invoices shall be made as quickly as possible to maintain cash flow, including appropriate contingencies in place to allow other staff members to authorise and pay invoices promptly.
The guidance makes it clear that this is not an automatic right to advance payment or contractual relief. Contracting authorities will need to assess the risks involved in offering any such relief, for example, the risk of a supplier still becoming insolvent despite advance payments being made.
Transition measures and moving forward
Under the guidance, contracting authorities are also now encouraged to establish a transition plan with suppliers to be implemented as soon as possible and before the end of October 2020, focussing on:
- A process for reconciling payments against costs (if relevant).
- Confirmation of when outstanding goods or services are to be delivered under contracts where advanced payments have been made under the previous PPN 02/20.
- A planned exit date to transition from any relief currently being provided to suppliers as soon as is reasonably possible.
- An assessment as to whether a contract is still commercially viable. If a contract is no longer operationally relevant and commercially viable, then reviewing options such a proposal for a variation, or termination using the contractual remedies available.
What to take away
Contracting authorities should begin or continue reviewing their contractual portfolio to ensure that their current contractual arrangements still remain relevant and viable, and if not, consider negotiating a variation to the terms of their contracts with each supplier, or utilising any contractual termination provisions.
How can Capsticks help?
At Capsticks we strive to ensure our clients are “one step ahead” in delivering their ambitions to ensure value for money and the best possible service. We offer an experienced and responsive team of specialist procurement lawyers who are on hand to review your procurement options and/or procurement compliance.
If you have any queries around what is discussed in this article, and the impact on your organisation, please contact Katrina Day or Lee Clarke to find out more about how Capsticks can help.