Information on measures introduced by the government to tackle late and unfair payment practices in both public and private sectors.
Prompt Payment in Government Contracting
Government announced in November 2018 that from 1 September 2019, any organisation that bids for a central government contract in excess of £5 million a year will need to demonstrate it has effective payment systems in place to ensure a reliable supply chain.
As a part of this, government has set a standard of 95% of all supply chain invoices to be paid within 60 days for organisations who want to do business with government. Suppliers who do not comply with this standard could be prevented from winning government contracts.
What is expected of suppliers?
From 1 September 2019, organisations bidding for government contracts in excess of £5 million a year may be required to provide:
- confirmation that you have systems in place to ensure that organisations in your supply chain are paid on time, including that you have procedures for resolving disputed invoices promptly and effectively; and
- details about your payment performance, including the percentage of invoices paid within 60 days.
If you are not meeting the required standard, in order to proceed, you will be required to provide an action plan which sets out the reasons why and the steps your organisation is taking to get back on track.
Large businesses are already required to publish their payment performance under the Reporting on Payment Practices and Performance Regulations 2017. You can submit these reports as part of your bid to demonstrate that you are meeting the required standard.
Procurement Policy Note 04/19 explains to departments how to take account of a supplier’s payment systems to demonstrate that it has a reliable supply chain.
Actions suppliers should take now
- Ensure your organisation is publishing payment reports where required. Check here to see if you need to publish a report.
- Read PPN 04/19 to understand how departments will be implementing the changes from 1 September and what is expected of you when bidding for relevant government contracts.
Government Prompt Payment Policy
The government commitment is to pay 90% of undisputed and valid invoices from SMEs within 5 days and 100% of all undisputed and valid invoices to be paid within 30 days. Government departments are required to report their performance against these payment targets on a quarterly basis on GOV.UK.
Read the guidance for central government departments on prompt payment policy and the publication of payment statistics in PPN 03/16.
Through the Public Contract Regulations 2015, public sector buyers must include 30-day payment terms in new public sector contracts; and require that this payment term be passed down the supply chain. Public sector buyers must also publish annual reports on their payment performance.
Suppliers can claim statutory interest where a public sector buyer hasn’t paid an undisputed and valid invoice within 30 days (or any earlier payment date agreed in the contract). Interest is not paid automatically.
Find out more about the Late Payment of Commercial Debts (Interest) Act 1998.
If your business is owed money on a public sector contract
The Cabinet Office runs the government’s Public Procurement Review Service which enables suppliers to report poor procurement practice, including instances of late or unfair payment, in public sector contracts. Following its investigations, recommendations are made and findings published on GOV.UK.
Use the service by completing the public procurement review service case request form. The team will investigate your case. PPRS has unblocked over £7.5 million in late payments since 2015.