Procurement: PPN 07/20 - Taking account of a bidder’s approach to payment in the procurement of major contracts

The Cabinet Office has published Procurement Policy Note PPN 07/20 “Taking account of a bidder’s approach to payment in the procurement of major contracts” (29 October 2020).

This PPN applies to the procurement by “In-Scope Organisations” - Central Government Departments, their Executive Agencies and Non Departmental Public Bodies - of goods, services and works contracts above £5 million per annum.

PPN 07/20 updates and replaces PPN 04/19, with effect from 1 April 2021. It deals with the inclusion of additional questions in the standard Selection Questions (or PAS 91 in the case of works contracts) used to assess a bidder’s payments systems to demonstrate it has a reliable supply chain.

Two supporting documents are published with PPN 07/20:

• Guidance, with Annex A setting out the Selection Questions
• Frequently Asked Questions.

The Guidance explains that the key update from PPN 04/19 is the increase to the threshold bidders have to meet to demonstrate they have effective payments systems in place. Under PPN 04/19, the measure of “overall payment promptness” is payment of 95% of invoices within 60 days, with a “Fail” when the bidder does not pay 75% of all supply chains invoices in 60 days in one of two previous six month reporting periods. Under the new PPN 07/20, that “Fail” threshold increases to 85%.

The new Guidance also further clarifies the handling of call-off contracts from framework agreements. Bidders are required to confirm whether they intend to use a supply chain to deliver any call off under a framework agreement. The Guidance covers the situation where a bidder initially says that is does not intend to use a supply chain, but that position subsequently changes. The Guidance advises that, where such a change is permissible, the bidder is asked to complete the supply chain payment selection questions and provide relevant payment data. The authority should then carry out the assessment of the responses in the usual way. The Guidance notes that if bidders provide false or misleading information, they may face sanctions, including the possibility of exclusion, rescission of contract, damages and criminal prosecution.

You can access the PPN and supporting documents from the PPN website.

Our article which outlines PPN 04/19, will continue to apply until 31 March 2021.