Have you come across PPN 08/21 and the changes in public procurement relating to prompt payment? In November 2018, the Government announced that from 1st September 2019, any organisation that bids for central government contracts over £5 million per annum will need to demonstrate they have effective payment systems in place to ensure a reliable supply chain.
In October 2021, the Government updated and replaced Procurement Policy Note (PPN) 07/20, effective from 1st April 2022, with PPN 08/21; the key update being the increase to the threshold that bidders have to meet to demonstrate an effective payment system.
What Tenders Dos PPN 08/21 Apply To?
As with 07/20, PPN 08/21 applies to any Central Government Contracts, including any framework agreements or Dynamic Purchasing Systems (DPS), where the guaranteed value is greater than £5 Million (Excluding VAT) per annum. This does not apply to any NHS Trust contracts.
What does the PPN Amendment Mean?
Bidders will be required to prove that they have paid 95% of all invoices to their supply chain within 60 days. They will need to submit reports proving this over a 12-month period, broken down into 2 x 6-month periods, with the Tender. If you haven’t paid all invoices within the agreed terms, you must explain why in order to pass the question.
If you do not meet the required 95% in at least one reporting period, you can still pass the question if:
- After removing intercompany payments from the calculations, you pay 95% of all invoices within 60 days in at least one reporting period
- You have paid 90%-95% of all invoices within 60 days in at least one of the previous two reporting periods
- You are a new company that has been trading for less than 12 months
Within Annex A of the guidance for PPN 08/21, there is an example of the Selection Criteria Questions you should expect to find within tenders. The documents or systems you will need to have in place include:
- Standard payment terms for your supply chain
- Procedures for handling disputed invoices
- Details of any payments of interest for late payments you have paid in the past twelve months
- A copy of your standard payment terms used with sub-contractors
Need Prompt Payment Support?
Whilst this PPN only applies to larger contracts, having the documents mentioned set up and ready to go can help prepare you for what to expect if you’re planning on bidding on contracts of that size in the future.
If you’d like some advice on how to improve your processes and performance, get in touch with us today. We’re more than happy to work with you on updating procedures and payment plans as your company prepares to be bid ready for when PPN 08/21 comes into effect!