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By way of PGN 01/20, the Executive has implemented measures, with effect from 25th March 2020, to ensure that Departments pay their suppliers as quickly as possible, in order to maintain cash flow and protect jobs. This article gives guidance to the private sector who are party to public sector contracts.
The first thing to note is that the measures apply to those bodies subject to Northern Ireland Public Procurement Policy. The PGN is also meant to form guidance for other public sector bodies. The private sector should therefore check whether or not the public sector bodies which they are in contract with are subject to the Northern Ireland Public Procurement Policy. Even if the public body is not subject to the Northern Ireland Public Procurement Policy, it may still decide, at its sole discretion or as part of its own policies and procedures, to apply this PGN.
The ethos of the PGN is to protect the supply and support at risk suppliers. The measures set out therein, both collectively and individually, endeavour to cushion the blow of the current outbreak of COVID-19 on suppliers. It goes as far as suggesting payments, in some circumstances, may still be made to at risk suppliers even if goods and services are paused. The PGN also suggests that allowances should be made in some circumstances in respect of KPIs.
Risks in respect of payments being made to suppliers by the public sector will be managed on a case by case basis. The public sector may therefore seek vesting certificates, guarantees or other protections and as such legal advice on such documentation should be sought before such agreements are entered.
On no less than five occasions, the PGN explicitly requires public sector bodies to seek legal advices before taking action. Therefore, if you are dealing with a public sector body in anticipation of the PGN being applied, you may consider if you need to engage legal advice so that there is equality of arms in any negotiations.
The PGN requires all public bodies to, amongst other things, “urgently review their contract portfolio and 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”. You may therefore wish to make contact with the relevant contracting authorities to open discussions in this regard. The private sector should note however that to qualify, they must act on an open book basis and ensure payment to subcontractors. You should also note that profits will not be accounted for in this exercise.
It should be noted that in order to protect the public purse that the PGN states that “Payments should not be made to suppliers where there is no contractual volume commitment to supply, and contracting authorities should carefully consider the extent of payments to be made to suppliers who are underperforming and subject to an existing improvement plan.” This therefore means that the protections will not be available to all suppliers and public bodies will review on a case by case basis.
There is a possibility for some public sector organisations to redeploy private sector contractors and so you may want to explore this option with the relevant authority.
The PGN also covers Force Majeure and Frustration but given the legal nature of these concepts, legal advice should be sought.
Public sector organisations are encouraged to pay invoices as quickly as possible. The PGN sets out a number of measures that should be considered such as ensuring sufficient resources are available, delegate authority, overlooking minor administrative issues on invoices and reissuing payment processes to contractors to ensure that they are clear as to the payment authorisation process, Contractors should therefore contact the contracting authority if they have any queries in terms of the invoicing and payment process as soon as possible.
If you want to read the guidance in full click here. Our team can assist in reviewing contracts and advising further should you require.
This article has been produced for general information purposes and further advice should be sought from a professional advisor. Please contact our Procurement team at Cleaver Fulton Rankin for further advice or information.