Procurement Policy Note – COVID-19

Schools should continue to pay their suppliers as normal, even if their service delivery is disrupted or suspended by coronavirus, according to this Cabinet Office report.

The new guidance for public bodies sets out how organisations like schools, local authorities and academy trusts can continue to keep the supply chain moving and protect jobs outside their gates.

The DfE confirmed that schools will continue to get their normal budgets throughout the period of closure, and that they will be able to claim back money to cover additional costs. Contracting authorities in the public sector must act now to ensure suppliers at risk are in a position to resume normal contract delivery once the outbreak is over.

Schools and other bodies should urgently review their contract portfolio 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, the guidance states.

They should also put in place the most appropriate payment measures to support supplier cash flow. This might include approaches like forward ordering, payment in advance or prepayment, interim payments and payment on order (not receipt).

For contracts that involve payment by results, payment should be on the basis of previous invoices, for example the average monthly payment over the previous three months.

However, the government says that to qualify, suppliers should agree to act on an open book basis and make cost data available to the contracting authority during this period.

Schools should also ensure invoices from suppliers are paid immediately on receipt in order to maintain cash flow in the supply chain and protect jobs. The guidance states that reconciliation can take place in slower time.

Acknowledging the possibility of significant levels of staff absence, the guidance also recommends that schools ensure they have appropriate contingencies in place so there are enough staff with the delegated authority to pay invoices.

Action:

All contracting authorities should:

• Urgently review their contract portfolio 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; this might include a range of approaches such as forward ordering, payment in advance/pre-payment, interim payments and payment on order (not receipt).
• If the contract involves payment by results then payment should be on the basis of previous invoices, for example the average monthly payment over the previous three months.
• To qualify, suppliers should agree to act on an open book basis and make cost data available to the contracting authority during this period. They should continue to pay employees and flow down funding to their subcontractors.
• Ensure invoices submitted by suppliers are paid immediately on receipt (reconciliation can take place in slower time) in order to maintain cash flow in the supply chain and protect jobs.

Contracting authorities should act now to ensure payment is made as quickly as possible to their suppliers, including:

• Targeting high value invoices where a prime is reliant on a supply chain to deliver the contract.
• Resolving disputed invoices as a matter of urgency; consider paying immediately and reconciling at a later date in critical situations.
• Take a risk based approach as to whether 2-way matching is always needed (rather than adopt regular 3-way matching against receipt and Purchase Order)
• Encourage suppliers to invoice on a more regular basis to help cash flow (eg every week rather than monthly)

Link: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/874178/PPN_02_20_Supplier_Relief_due_to_Covid19.pdf