The government has recently published new PPN 10/23 which updates and replaces PPN 08/21 from 1 April 2024.
The purpose of the PPN is to set out how authorities can take in to account suppliers’ supply chain payment approaches within the context of a procurement. The underlying policy aim is to ensure prompt payment of all suppliers down the supply chain and ultimately to support small and medium sized entities.
Scope
The PPN, as previously, applies to all central government contracts that are regulated by the PCR 2015 and valued at over £5 million. While NHS Trusts and NHS Foundations Trusts are both now categorised as “central government authorities”, the PPN makes it clear that it does not apply to them.
The PPN will of course only be relevant where the tenderer is proposing to use a supply chain to deliver the requirement.
The guidance, as previously, contains an exemption where the market for the contract is struggling such that to impose the requirements of the PPN would not be proportionate or relevant.
Requirements
The guidance includes draft wording at Annex A for use in selection questionnaires, aimed at assessing how long suppliers take to pay their own supply chain. There are certain thresholds which suppliers need to meet in order to show that they have the necessary payment systems in place to deliver prompt payment.
Updates to old PPN 08/21
There are two key updates in this new iteration of the guidance, as follows.
First, under the older PPN, the benchmark thresholds were based only on the percentage of invoices that a suppliers had paid within 60 days. Following the new PPN 10/23, there is a second benchmark, which uses “payment days” to assess the extent to which a bidder has paid all its invoices in an average of 55 days of less.
Secondly, the process by which an authority may seek exemption from applying the PPN is clarified. This must now be done the Commercial Policy Team in Cabinet Office with an evidence-based rationale for the exemption request, and proposing an alternative measure. Only the Minister can grant the exemption.
Looking ahead to the Procurement Act 2023
The PPN notes that it will need to be updated to reflect the prompt payment requirements that are set out in the Procurement Act 2023 (expected to come into force in October 2024).
Section 68 of the Act requires all authorities to pay undisputed invoices within 30 days of the date the invoice is received/the payment fell due. This obligation is then automatically passed down the supply chain to suppliers who have subcontracted some or all of the requirement, by virtue of section 73.
Section 69 requires all authorities to publish to the central platform (which we expect will be Find A Tender in expanded form) a Payments Compliance Notice, documenting how far the obligation at section 68 has been met.
Actions to take
Authorities will need to update their standard selection questionnaires to reflect the new benchmarks from 1 April 2024 and to make sure that the new version of the SQ question is being used from that date.