COVID-19 and procurement – recovery and transition

It is recognised that COVID-19 is not a short-term crisis and as restrictions are slowly being eased, the focus is moving towards recovery. Earlier this week the government issued PPN 04/20 which sets out guidance for public bodies on payment of suppliers to ensure service continuity. It builds upon the supplier relief provisions set out in PPN 02/20 and aims to support at risk suppliers resuming delivery of critical services.

From 1 July until 31 October 2020 all contracting authorities should:

review their contract portfolio and continue or introduce measures in accordance with PPN 02/20 in order to maintain supply of critical services (see our previous blog post);
collaborate with suppliers to develop transition plans to withdraw from any contractual relief as soon as practicable, agreeing contract variations if appropriate;
be open and pragmatic during the transition to ensure contracts are sustainable and deliver value for money over the medium to long term; and
continue to pay suppliers as quickly as possible to protect jobs and maintain cash flow.

The PPN sets out ways contracting authorities can support suppliers they deem to be at risk as a result of COVID-19 to maintain service continuity, including:

proactively considering and making payments in advance of need; and
providing relief on KPIs and service credits.

Note for central government organisations

Managing public money prohibits payment in advance of need without Treasury consent. However, where the accounting officer is satisfied that a value for money case is made by securing continuity of supply of critical services in the medium and long-term, Treasury consent is granted (capped at 25% of the total value of the contract) until the end of October 2020. If the payment in advance of need is in excess of this figure, Treasury consent should be sought in the usual way.

If a contract is no longer viable or relevant, contracting authorities may need to work with the supplier to terminate the contract based on the existing contractual remedies.

These actions do not negate the risk of a supplier becoming insolvent. Contracting authorities will need to manage these risks and keep a comprehensive audit trail of all decisions, rationale and actions taken in order to be transparent and demonstrate value for money.

Outsourcing Playbook update

The government has also issued PPN 05/20 with immediate effect which updates the Outsourcing Playbook along with new or updated Guidance Notes including:

Delivery model assessments: to determine whether to deliver a service, or part of a service, in-house, procure from the market or adopt a hybrid solution;
Should cost modelling: when and why departments should produce them and key considerations around developing and/or procuring them;
Testing and piloting: to be considered as part of a wider strategic model assessment (‘Make or Buy’ decision), overall commercial strategy and business case;
Risk allocation and pricing approaches: seeks to provide key information about risk allocation – why it is important, what should be considered and how risk might be allocated;
Competitive dialogue and competitive procedure with negotiation: a collection of best practice to be used in applying these procedures;
Bid evaluation: a collection of best practice;
Assessing and monitoring the economic and financial standing (EFS) of bidders and suppliers: guidance on how to assess, monitor and mitigate any financial risks identified; and
Financial viability risk assessment tool 2.0