Taking account of bidder’s payment approach in government procurement

To reflect the Government’s commitment to the prompt, fair and effective payment in all businesses, the Cabinet Office has published how payment approaches can be taken account of in the procurement of major Government contracts in Procurement Policy Notice 07/20.

This PPN updates and replaces PPN 04/19 – coming into effect from 1 April 2021 – and applies to the procurement of goods, services and works contracts above £5 million per annum by Government Departments, Executive Agencies and Non-Departmental Public Bodies.

The key update to PPN 04/19 is the increase to the threshold that bidders must meet to demonstrate they have effective payment systems in place to ensure the reliability of their supply chains. Under PPN 04/19,  the overall promptness of payment is measured by the bidder paying suppliers promptly, with payment of 95% of invoices in with 60 days and a Fail if the bidder doesn’t pay 75% of all supply chain invoices within 60 days in at least one of two previous six-month reporting periods. Under PPN 07/20, the Fail threshold is 85%.

The guidance supporting the PPN also clarifies how the call-off contracts from Framework Agreements will be handled.

You can access PPN 07/20, its supporting documents and answers to Frequently Asked Questions here.