16 April 2018

A new consultation seeks views on whether it would be appropriate to exclude companies with poor payment records from bidding for major government contracts.

Launched by the Crown Commercial Service (CCS), the consultation invites views from suppliers to government departments, their representatives, public bodies and those involved in public procurement on whether firms should be prevented from bidding for such work if they cannot demonstrate a fair, effective and responsible approach to payment in their supply chain management.

The consultation follows the announcement last week by Cabinet Office Minister Oliver Dowden that a range of measures is being considered to encourage small firms to apply for government contracts (see “Government gets tough on public contracts”).

Two options have been identified by the Government under which an assessment of whether a bidder demonstrates a fair, effective and responsible approach to payment might be appropriate under the Public Contract Regulations 2015 (PCRs).

Given that both options could potentially introduce additional burdens on contracting authorities and bidders, the CCS wishes to gather views on their risks and benefits.

Under the first, a contracting authority would ask a bidder to provide evidence of its payment systems, including standard payment terms and details of its performance on paying invoices. Based on the evidence, the authority would decide whether to exclude a firm from proceeding to the next stage of the procurement process.

Option 2 would allow authorities to exclude bidders with a record of poor payment from the procurement process on grounds of “grave professional misconduct”, for example because of knowingly delaying the raising of purchase orders or disputing invoices unnecessarily or failure to pay valid claims for interest or compensation under late payment legislation.

It is proposed that only contracts worth over £5 million per year would be subject to the new rules.

Further details, including the full text of the proposals, are available at https://bit.ly/2HrKNmQ. The deadline for responses is 5 June 2018.