Legal opinion: is PPN a lifeline for operators?

Coronavirus (COVID-19) – Cabinet Office has issued guidance to the public sector on managing supplier arrangements in these challenging times. A welcome relief for the PSV sector, asks our legal eagle?

It is a difficult time for PSV operators, with the government’s ‘Coronavirus’ advice and guidance changing on a daily, even hourly, basis. PSV operators are, understandably, worried about the implications of Covid-19 on their commercial contracts, and naturally are seeking clarity on their contractual rights under essential business and supply contracts.

Ciara Campfield, Partner, Stone King LLP

There may be some welcome relief available to the PSV sector. At the end of March, the Cabinet Office published guidance (“PPN”) aimed at contracting authorities (essentially public authorities), which urges them to treat their suppliers with fairness to ensure stability during these challenging times, and to respond to service disruption supportively. All contracting authorities are urged as follows:

  • Urgently to 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.
  • 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.

The PPN may be a potential lifeline for PSV operators. We expect many operators will be looking carefully at their contracts with public sector bodies in light of this PPN, followed up by discussions to take into account some of these mitigation measures, and in a way that supports fairness and continuity for all. Unilateral reversion by a public authority is unlikely to be beneficial, and disruptive to all.

The PPN is also remarkably progressive. Here, we have the government talking about “collaboration” and “transparency”, which presents a possible opportunity for the PSV sector to take control of the concept the government is reaching for by educating the public sector; firstly, on the realities of service cost and, secondly, on the real meaning of integrated Social Value.

If you have any queries, please contact Ciara Campfield on [email protected] or 01225 324 479.

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