COVID-19 Public body payment terms

The Cabinet Office has recently published updated guidance to all public bodies about how they should pay and protect their suppliers, along with model contract variations, advice for contingent workers, and very useful FAQ, giving more detail of the bodies to which this applies.

This is partly to help organisations with their cashflow, but also to ensure that the suppliers are still in existence and able to resume normal contract delivery once things return to normal. This could be valuable information for many suppliers who are expecting to have cashflow issues in the coming months.

Where your company or charity transacts with a public body then that body has a duty to protect its suppliers during the coronavirus outbreak in the following ways:

• Inform suppliers who they believe are at risk that they will continue to be paid as normal (even if service delivery is disrupted or temporarily suspended) until at least the end of June. 
• Put in place the most appropriate payment measures to support supplier cash flow; this might include a range of approaches such as forward ordering, payment in advance/prepayment, interim payments and payment on order (not receipt).
• If the contract involves payment by results then payment should be on the basis of previous invoices, for example the average monthly payment over the previous three months.
• To qualify, suppliers should agree to act on an open book basis and make cost data available to the contracting authority during this period. They should continue to pay employees and flow down funding to their subcontractors. 
• Ensure invoices submitted by suppliers are paid immediately on receipt (reconciliation can take place in slower time) in order to maintain cash flow in the supply chain and protect jobs.

Full details of this guidance can be found here.