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Supplier payment practices to be a factor in UK public contracts eligibility


Businesses hoping to win major government and public sector contracts in future will have to prove that they pay sub-contractors promptly, under new plans outlined by the UK government.

The proposals are designed to help smaller businesses win work from government departments and public sector bodies, according to a statement from the Cabinet Office.

"Efficient mechanisms to ensure that suppliers comply with contractual obligations as to payment of their subcontractors are important for the overall delivery of major contracts," the Crown Commercial Service (CCS) said in its consultation paper (11-page / 177KB PDF). "As such, it is appropriate to consider a supplier’s evidence that it demonstrates a fair, effective and responsible approach to payment in its supply chain management."

According to the CCS, the requirement would apply to procurements for public contracts in England where the annual value of the contract is greater than £5 million.

"Contracts of this size are more likely to involve a supply chain," the CCS said. "Assessing contracts by their value (rather than, for example, size of the supplier) should support a consistent application of the policy across different suppliers."

The benchmark for "payment performance" that the CCS has proposed is "paying 95% of undisputed invoices within 60 days, over two consecutive six month periods".

The proposed measures build on existing requirements under the voluntary Prompt Payment Code, which many major government suppliers are signed up to already, and a payment reporting scheme that many large businesses and limited liability partnerships are already subject to. They have been framed in the context of powers contained in the Public Contracts Regulations 2015.

The CCS has also outlined plans to enable sub-contractors to raise concerns about suppliers' payment practices direct to the contracting authorities.

The consultation is open until 5 June.

Emma Jones, the government’s crown representative for small business, said: "Securing a government contract is a great way for small firms to bring in a steady income stream that can really help their business to grow. These measures demonstrate the government’s clear commitment to small business, ensuring they can easily find and access new opportunities to supply to government."

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