The standard required of suppliers' paying the supply chain has been raised.

On 21 October 2021 the Cabinet Office published a new Procurement Policy Note (PPN) 08/21. It replaces PPN 07/20 which set out how Central Government Departments, their Executive Agencies and Non Departmental Public Bodies must take into account the prompt payment of the supply chain when procuring contracts under the Public Contracts Regulations 2015 worth over £5million per annum.

PPN 08/21 provides the same guidance and example selection questionnaire templates, and still requires as standard that suppliers achieve >95% prompt payment of invoices ('prompt' meaning within 60 days) within at least one of the previous two six-month reporting periods. However, PPN 08/21 has increased the threshold for passing the requirement where prompt payment of invoices falls below 95% but the supplier has an action plan for dealing with the issue. Previously this flexibility was given to suppliers which had achieved only 85% prompt payment. Now this is 90%.  It represents an increase in the baseline standard which is deemed acceptable for central government suppliers on major contracts and is in line with prompt payment regulation and the government's commitment to increasing the health of supply chains.

There is also some further information on how this works when supply chain financing is used.

In addition, a new FAQ helps in understanding what constitutes "the supply chain": References to supply chain means suppliers or sub-contractors of any tier that execute any works, supply any products or provide any services that are used wholly or substantially for the purpose of performing (or contributing to the performance of) the whole or any part of the contract.

The increase from 85% to 90% is effective from 1 April 2022, so suppliers have time to make sure the payment statistics they will be submitting will reach the new standard.

For further information on the PPN or on prompt payment reporting requirements generally, please contact one of our team who would be happy to help.