Guidance

PPN 021: Guidance on how to conduct a Payment Spot Check under a public sub-contract (HTML)

Updated 8 October 2025

Issued: April 2025 

Updated: October 2025

Introduction

1. This guidance supports Procurement Policy Note (PPN) 021 Payment spot checks in public sub-contracts. It sets out how in-scope organisations can conduct payment spot checks on their public supply chain to ensure suppliers comply with the payment requirements in the Procurement Act 2023.

Scope

2. This guidance applies to all central government departments, their executive agencies and non-departmental public bodies. Such bodies are referred to as ‘in-scope organisations’. 

3. An ‘in-scope contract’ is a public contract awarded under the Procurement Act 2023 where the tender notice or transparency notice (as applicable) was published on or after 1 October 2025, with one or more sub-contracts substantially for the purpose of performing (or contributing to the performance of) all or any part of that public contract, where the public contract is worth more than £5 million per annum (including VAT) and is awarded by an in-scope organisation. This does not include special regime contracts as defined in section 10(6) of the Procurement Act 2023 or contracts awarded by a school.

Overview

4. From 1 October 2025, in-scope organisations should include the example model terms in Annex A, or their own terms of equivalent meaning, within their in-scope contracts to enable payment spot checks. These terms could be after terms requiring payment within 30 days payment within 30 days in accordance with section 68(2) and terms requiring those 30-day payment terms to be included in any subsequent sub-contract that is wholly or substantially for the purposes of performing the public contract.

5. The model terms set out in Annex A are also included in the model contracts.

Commencing a payment spot check

6. In-scope organisations should carry out a payment spot check on in-scope contracts at least once every six months from the award date of a contract. Payment spot checks may be carried out more frequently, especially where a greater risk of non-compliance has been identified, such as the reasons outlined in paragraph 7.

7. In-scope organisations may choose to conduct additional payment spot checks on a specific contract or supplier for example, if there has been poor performance in a prior payment spot check, a specific issue has been raised with the contracting authority, or the authority has assessed there to be an increased risk of poor performance with a specific contract, supplier, or sector. A specific risk may include suppliers or sectors with long payment terms as standard, historic liquidity issues, or prior complaints with the contracting authority.

8. If a contracting authority has more than one in-scope contract with the same supplier it may instead conduct payment spot checks on either five or 25% of the supplier’s contracts with the authority, whichever is greater.

9. As set out in paragraph 3, payment spot checks should only be carried out on contracts with sub-contracts which are substantially for the purpose of performing (or contributing to the performance of) all or any part of a public contract awarded by a contracting authority.

10. In-scope organisations should notify the supplier if it wishes to undertake a payment spot check. This should include information on the process of a payment spot check, its purpose, and the evidence required from the supplier, shown in the checklist below. An example letter is available in Annex B. The contracting authority should allow the supplier to respond with the requested information and/or data within a maximum of 20 working days from receipt of notification.

Checklist for conducting a payment spot check

In-scope organisations conducting a spot check should request the following information from suppliers:	Check
A copy of the payment terms for the contract in question that show a  clear reference to 30-day payment terms, and a requirement for these to be passed down the supply chain in public sub-contracts.	☐
Details of procedures for resolving disputed invoices promptly and effectively.	☐
Evidence that procedures for resolving disputed invoices promptly and effectively were shared with all sub-contractors in the supply chain.	☐
Evidence of payments made (and time taken to pay) relating to the contract in question. This should be specified by the in-scope organisations but should cover at least the most recent 3 months’ payment performance.	☐

Conducting a payment spot check

11. A breakdown of the payment spot checks process can be found in Annex C.

12. The requirement to provide evidence of payment made within 30 days must be proportionate. Suppliers should be asked to provide a time-based range of invoice numbers relating to the public contract. The in-scope organisation should randomly select at least 10 for sampling, unless there are fewer than 10 invoices relating to the contract.

13. Evidence may include, but is not limited to, screenshots of finance systems, copies of invoices, verification from sub-contractors or other evidence the supplier considers suitable (for example bank statements). The supplier may decide which forms of evidence they supply (for example bank statements may be more suitable evidence for SMEs that do not have finance systems in place). If the evidence supplied is not sufficient, in-scope organisations should seek further evidence from the supplier.

14. This evidence should not include personal data, only payment performance data relating to the contract in question.

15. If an in-scope organisation identifies that a supplier is not complying with the prompt payment rules, the in-scope organisation may decide to take the following actions:

a) inform the supplier that 30-day payments are implied into all contracts for the full or part performance of a public contract, that any term purporting to override that is invalid, and that their sub-contractors have the right to claim late payment interest where these terms are not adhered to

b) contact the sub-contractor directly and inform them that 30-day payments may be implied in their contract terms, even when not expressly included, that any term purporting to override that is invalid, and that they have the right to claim late payment interest where these terms are not adhered to. The in-scope organisation may also provide information on how the sub-contractor can take action, such as referring the contract to the Public Procurement Review Service

c) request that the supplier explain why the terms have not been adhered to and what action is being taken to remediate the issue

d) inform the supplier that they may be in breach of their contract

Publishing payment spot check outcomes

16. In-scope organisations should keep a record of any payment spot checks performed and may wish to create and send the supplier a summary report of the payment spot check covering the following information, specifically regarding the contract that was spot checked:

• confirmation the supplier expressly included 30-day payment terms in their sub-contracts at the time of the payment spot check
• confirmation the supplier had procedures in place for resolving disputed invoices promptly and effectively and evidence of this was shared with all sub-contractors on the contract in question at the time of the spot check
• number of invoices reviewed as part of the payment spot check
• % of invoices paid within agreed terms
• a reminder of statutory obligations

17. The in-scope organisation may wish to undertake a further payment spot check in the following months to ensure progress has been made if the in-scope organisation had any concerns regarding performance or adherence to the rules at the time of the payment spot check.

18. After a payment spot check has been conducted, the in-scope organisation should publish the outcome online within 3 months (the authority may wish to upload in bulk with other checks). 

19. Templates for individual and bulk payment spot checks publishing are available at PPN 021: Payment Spot Checks in Public Sub-Contracts. These should be published online until the Central Digital Platform can be used to upload the spot check outcomes.

Annex A: Example contractual terms

These terms are provided by way of example and should be used as a guide only. In-scope organisations should take their own legal advice on the use and suitability of the example terms below.

The definitions and references used below will need to be amended and adapted to fit within any relevant contract.

Example definitions

• Authority: [complete as appropriate]
• Contract: this contract between the Authority and the Supplier
• Effective Date: the date on which the Contract comes into effect
• Services: any and all of the services to be provided by the Supplier under this Contract
• Sub-contract: any contract or agreement (or proposed contract or agreement) between the Supplier (or a Sub-contractor) and any third party whereby that third party agrees to provide to the Supplier (or the Sub-contractor) all or any part of the Services or facilities or services which are material for the provision of the Services or any part thereof or necessary for the management, direction or control of the Services or any part thereof
• Sub-contractor: any person other than the Supplier who is a party to a Sub-contract and the servants or agents of that person
• Supplier: [complete as appropriate].

1. Supply chain payment period compliance

1.1. The Supplier must on demand provide the Authority with all co-operation, assistance, documentation and other information that the Authority may reasonably require to allow it to effectively investigate and assess the Supplier’s and/or any Sub-contractor’s compliance with their respective obligations to pay undisputed invoices within a specified time period.

1.2. For Sub-contracts in the Supplier’s supply chain which are entered into wholly or substantially for the purpose of performing or contributing to the performance of the whole or any part of this Contract:

i. after the Effective Date, the Supplier will ensure that they all contain provisions that, or

ii. on or before the Effective Date, the Supplier will take all reasonable endeavours to ensure that they all contain provisions that:

1.2.1. require the Sub-contractor on demand to provide the Authority with all co-operation, assistance, documentation and other information that the Authority may reasonably require to allow it to effectively investigate and assess compliance with the Sub-contractor’s obligations to pay undisputed invoices within a specified time period;

1.2.2. expressly provide the Authority with the right to enforce the provisions in clause [1.2.1] above directly by reference to the Contracts (Rights of Third Parties) Act 1999; and

1.2.3. require the Sub-contractor to include terms equivalent to those in this clause [1.2] in any contracts it enters into wholly or substantially for the purpose of performing or contributing to the performance of the whole or any part of this Contract, such that each Sub-contractor is obliged to include equivalent terms in any of its own relevant Sub-contracts. In these Sub-contracts’ clauses, references to the “Supplier” and “Sub-contractor” are to be replaced with references to the respective Sub-contractors who are parties to the relevant contract.

Annex B: Payment spot checks example request letter

Subject: Payment Spot Checks Request - [Contract Name/Reference]

Dear [Supplier Name],

I am conducting a routine payment spot check in compliance with Procurement Policy Note (PPN) 021, which helps the public sector ensure its suppliers are complying with the terms of the Procurement Act 2023. 

To assist with this payment spot check, please provide the following information within 20 working days, in relation to [Contract Name/Reference]:

• A copy of payment terms for any sub-contracts.
• Details of procedures for resolving disputed invoices promptly and effectively.
• Evidence that procedures for resolving disputed invoices promptly and effectively were shared with all sub-contractors.
• Evidence of payments made (and time taken to pay) relating to this contract, such as copies of invoices or data exported from finance systems. 

You can find more information on the PPN and what evidence may be provided here: PPN 021 Payment spot checks in public sub contracts

This information helps us ensure our supply chain adheres to the payment requirements in the Procurement Act 2023, improves transparency, and encourages better payment performance in supply chains. Failure to respond or adhere to the Procurement Act 2023 requirements may result in further action, including scrutiny of your payment practices and potential contractual consequences.

Thank you for your cooperation and please let me know if you have any questions.

Kind regards,

[Name] 

Annex C: Payment spot checks process

Task

Before contract award

1. Include the relevant model terms in in-scope contracts

Requesting payment spot checks data

2. Write to the supplier explaining they have been selected for a payment spot check and request the required information is provided within 20 working days.

2b. If the evidence is insufficient, seek further evidence from the supplier.

Reviewing payment spot checks data

3. Check that there is a clear reference to 30-day payment terms and that these are being passed through the supply chain.

4. Check that there are effective procedures for resolving disputed invoices promptly and effectively.

5. Check that the procedures for resolving disputed invoices promptly and effectively are shared with sub-contractors in the supply chain.

6. Randomly select at least 10 invoices to sample payment performance.

Responding to the supplier

7. Create and send the supplier a summary report of the payment spot check.

8. If the supplier is not complying with the requirements of the Procurement Act 2023, take appropriate action.

8b. Review any further discussions with the supplier to determine if any further actions or more frequent payment spot checks are necessary.

Reporting payment spot checks outcomes

9. Complete the payment spot checks outcomes template and publish online.

Annex D: Frequently Asked Questions

Before contract award

1. Does this policy apply to framework agreements or dynamic markets?

For framework agreements where the tender notice or transparency notice (as applicable) was published on or after 1 October 2025 or dynamic markets established after 1 October 2025, framework agreement and dynamic market providers should ensure that appropriate contract terms can be included in any call-off contracts, where it is anticipated that the value of individual contracts awarded under the framework agreement or dynamic market will be above £5 million per year (including VAT).

The PPN does not require framework or dynamic market providers to carry out payment spot checks on the suppliers of their frameworks or dynamic markets. 

A in-scope organisation that awards a contract via a framework agreement or dynamic market should carry out payment spot checks as required.

2. Can in-scope organisations use different contractual terms to the ones provided?

In-scope organisations are encouraged to use the model contractual terms provided. However, in-scope organisations may choose to use different contract terms as long as they enable the in-scope organisation to carry out the payment spot check in accordance with the PPN. 

3. What if in-scope organisations already require contract terms that meet the requirements of Procurement Act 2023 in all sub-contracts, such as NEC3 model contracts?

Even where existing contractual terms meet the requirements of the Procurement Act 2023, carrying out payment spot checks ensures these terms are being passed on to sub-contractors, and allows in-scope organisations to check that payments are being made in accordance with the Procurement Act 2023. 

4. What in-scope organisations should be carrying out spot checks?

All central government departments, their executive agencies and non-departmental public bodies. Other public sector in-scope organisations may use this guidance to carry out payment spot checks to ensure that 30-day payment terms are being implemented throughout their supply chain in public sub-contracts.

Requesting payment spot checks data

5. If an in-scope organisation has many contracts with the same supplier, does it need to check each contract every six months?

When an in-scope organisation has more than one in-scope contract with the same supplier, it may choose to conduct spot checks on either five or 25% of the supplier’s contracts with the authority, whichever is greater, every six months. 

6. What if a supplier does not respond to an in-scope organisation within 20 working days?

An in-scope organisation may choose to take proportionate action in accordance with its own contract management processes and guidance. It may also wish to consider the actions set out in paragraph 15. 

Where a supplier continues to not respond, an in-scope organisation should still complete the payment spot checks outcome documents (answering either No or N/A where appropriate). It should provide details of any action taken and the lack of response in the relevant sections of the outcomes template.

Reviewing payment spot checks data

7. Why are only 10 invoices reviewed when large suppliers may have hundreds of invoices?

The PPN states that in-scope organisations should randomly select at least 10 invoices to review. If a supplier has more invoices than this, in-scope organisations are encouraged to review more invoices if they have the resources to do so. 

In-scope organisations may wish to consider reviewing 10% of available invoices beyond the 10 that meet the minimum requirement.

8. What is considered suitable evidence of 30 day payment terms?

In-scope organisations should check to ensure 30 day payment terms are included in sub-contracts with suppliers. 

Many in-scope organisations and suppliers use model contract terms that adhere to the Procurement Act 2023. This is considered suitable evidence of meeting the payment terms requirement. However, in-scope organisations should still require evidence of the contract terms, rather than rely on a supplier’s claims that 30 day payment terms are included. 

9. What is considered suitable evidence of having procedures in place for resolving disputed invoices promptly and effectively and sharing these with sub-contractors?

Existing legislation requires many businesses to report a narrative description of the business’s dispute resolution process, so these businesses should be familiar with providing this information. Further information can be found here: Duty to report: guidance to reporting on payment practices and performance

Where businesses are not required to report this information currently, it may be helpful to direct them towards this guidance to help them in providing details of their procedures for resolving disputed invoices.

10. What are prompt and effective procedures for resolving disputed invoices and how should these be shared with sub-contractors?

In-scope organisations should use their own judgement when deciding whether dispute resolution procedures are prompt, effective, and have been shared with sub-contractors. These procedures may vary between businesses and market sectors.

Responding to the supplier

11. What action should an in-scope organisation take if a supplier is not complying with the payment spot check or the terms of the Procurement Act 2023?

In-scope organisations will make their own decisions on what action to take if a supplier is not compliant as part of their routine supplier management processes. What is considered appropriate action will likely vary for many reasons, including but not limited to the in-scope organisation and supplier’s circumstances, market conditions, the severity and impact of non-compliance, and whether there is a history of non-compliance. 

In-scope organisations should ensure that any action taken is in accordance with their own policies and seek their own commercial or legal advice if required. 

12. Do in-scope organisations need to tell suppliers when the spot checks are complete?

The guidance encourages in-scope organisations to inform suppliers of the outcome and provide a copy of the information which will be published but this is not mandatory. 

Reporting spot checks outcomes

13. How should in-scope organisations report their payment spot checks outcomes?

In-scope organisations should publish the outcomes of their payment spot checks on gov.uk or via their own websites. Templates for individual and bulk uploads have been provided and in-scope organisations should determine which is most appropriate. 

14. Can in-scope organisations upload their spot checks outcomes in bulk?

Yes. Outcomes should be published within three months of the payment spot check. It may be easier for in-scope organisations to collate their results into one document and upload this on a quarterly basis rather than upload each result individually. 

15. What if a supplier does not want their information or outcomes published?

In-scope organisations should publish the outcomes of the payment spot check even if it may be perceived as a negative outcome by the supplier and/or the public. This is an important way of ensuring suppliers are held accountable and improves payment performance transparency.

If a supplier considers publishing the information to be a breach of confidentiality or publication is restricted under the terms of their contract, the in-scope organisation should seek their own legal advice before publishing. The payment spot checks outcomes will only be published in relation to public contracts meaning supplier information will already be publicly available, and we do not foresee any compelling reason for an in-scope organisation to not publish the outcomes of the payment spot checks.