COVID-19 public sector supplier relief – transitioning to the next phase

The Cabinet Office has issued further guidance, (PPN04/20 and PPN05/20) to public sector bodies (contracting authorities) supporting suppliers whose operations have been affected by the COVID-19 outbreak. The guidance ‘updates and builds on’ the provisions of the previous supplier relief guidance (PPN02/20), and is intended to enable transition to the next phase of the COVID-19 outbreak and response. It includes guidance on reviewing current arrangements, and determining next steps to enable organisations to put in place longer term, sustainable contracting arrangements in partnership with their suppliers.

PPN04/20 – Recovery and transition from COVID-19

The provisions in PPN04/20 apply from 01 July – 31 October 2020. The note repeats much of the information contained in the previous guidance on supplier relief, PPN02/20, but also includes expectations in terms of the need for contracting authorities to move forward and find ways to bring relief measures to a close as soon as possible and, in any event, before the end of October.

Key messages are also included which emphasise the discretionary nature of arrangements made and where they sit in terms of other forms of relief:

• The contracting authority has the final decision on whether it deems a supplier at risk and in need of relief.
• Supplier relief payments are not intended to be an economic response, or to supplement or duplicate government support measures.
• There is no automatic supplier entitlement to the relief measures falling within this guidance.  

The point is also made that in some instances, contracts which were commercially viable before the pandemic may no longer be so, such that open conversations need to be had with suppliers about termination or re-negotiation.

PPN05/20 confirms that the Outsourcing Playbook, guidance which dictates how central government departments should approach outsourcing but which is good practice across the wider public sector, has also been updated in line with the current situation.

Payment in advance of need

The standing order enabling certain payments in advance of need to be made without authorisation remains in place until the end of October 2020. However, contracting authorities are urged to review arrangements that have been made and consider whether these remain appropriate, in particular in the context of whether they are still required to maintain continuity in critical supply chains. Contracting authorities are also asked to consider whether any additional arrangements would now be appropriate.

Transparency

As with previous guidance, the need for contracting authorities to work collaboratively and transparently is emphasised. Suppliers must open their books to provide evidence of cash flowing through their business and supply chain, and must not expect to make profit on undelivered elements of the contract. The new guidance confirms that suppliers should expect contracting authorities to seek recovery of payments which have been used inappropriately.

The new guidance also confirms that suppliers should not receive both relief under this guidance, and relief under the Government’s Coronavirus Job Retention Scheme. That said it is expressly permitted for suppliers to claim labour costs under that scheme while also receiving partial payment from a contracting authority for non-labour related costs.

Transition planning

Contracting authorities are to work with suppliers to agree a transition plan to bring relief payments to an end as soon as possible and, in any event, before the end of October 2020. Key elements to agree include:

• The planned exit date, although this should be kept under review and take account of any change in situation, the example given being a local lockdown.
• When goods/services subject to advanced payment will be delivered.
• Payment reconciliation process.
• An assessment of the costs of implementing any new public health guidance in the context of the contract.
• An assessment of whether the contract is still ‘operationally relevant and viable’ in light of COVID-19. If it is not the transition plan should include proposals for variation or termination.

Responsible behaviour

Contracting authorities are urged to behave fairly in reviewing contracts affected by the COVID-19 outbreak. They are instructed to be reasonable and proportionate in their response to performance issues and contract enforcement, acting in a spirit of co-operation to achieve practical, just and equitable contractual outcomes, which take into account a range of factors including the protection of public health and the national interest.

The guidance also highlights that legal disputes are likely to prove destructive. Contracting authorities are urged to avoid these using other dispute resolution processes, including negotiation, mediation or ‘other fast track dispute resolution processes’ instead.

If we can be of any assistance in guiding you through this difficult and unprecedented period of uncertainty please contact us to discuss further.

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