The government has sent a letter to major contractors warning them to pay suppliers within 30 days or risk being frozen out from future contracts.
Officials from the Cabinet Office sent letters out to more than 10,000 businesses, including the government’s strategic suppliers, warning them about new rules on prompt payments.
Under the new rules, suppliers who bid for government contracts above £5m per annum, who cannot show they are paying 95% of invoices within 60 days, risk being prevented from securing government contracts. The new measures include an ambition to pay 90% of the government’s undisputed invoices from SMEs within five days and requiring strategic suppliers to advertise supply chain opportunities worth more than £5m on the government’s Contracts Finder website.
In the letter, minister for implementation Oliver Dowden said: “As one of our strategic suppliers, it is vital that you pay your subcontractors on time to ensure that the benefits of prompt payment flow through supply chains. Your payment data will reflect how you are performing against this.
“Any business you win under the Public Contracts Regulations (2015) will require payment terms of 30 days to be passed down the supply chain. As a signatory to the Prompt Payment Code, you have committed to paying your subcontractors on other contracts within a maximum of 60 days (this is met by paying 95% of invoices within this period) and to work towards 30 day payment terms as the norm.
“On 29 November, I announced a new policy which will require bidders (during the selection process) to answer a series of questions about their supply chain management and tracking systems. This will incorporate providing details about payment practices, processes and performance including the percentage of invoices paid within 60 days. Suppliers who are unable to demonstrate that they have systems in place that are effective and ensure a fair and responsible approach to payment of their supply chain may be excluded from bidding.”
The letter urged businesses to:
- Review their published data at the government’s payment check website
- Ensure that they are meeting the required standards (95% in 60 days)
- If improvement is required, to develop an action plan with timescales and milestones for making improvements and share this with a Crown Representative
