Supplier relief in Public Procurement: What it means for you

We all know that COVID-19 has changed the world, but what does it mean for public sector procurement and their suppliers? The recent Cabinet Office Procurement Policy Note sets out a range of measures designed to protect supply chains, and ensure continuity for public sector contracts both during the current pandemic, and in the aftermath. At ProcureCo we have already witnessed much discussion from both suppliers and contractors as to the implications – positive and negative – of the note, and its impact on public sector procurement.

The guidance on Supplier Relief outlines the priority areas for action when amending public sector contracts in light of COVID-19, whilst still adhering to the Public Procurement Regulation of 2015. The principle behind the legislation remains that public sector procurement must give ‘the best mix of quality and effectiveness for the least outlay over a period of use of the goods or services’. However, with many suppliers facing unprecedented challenges, ensuring that suppliers and contractors are able to work collaboratively to protect those most at risk is vital.

The guidance sets out three main principles which underpin Supplier Relief at this time: effective communication, managing supplier cash flow, and operating with transparency. ProcureCo holds a unique position within public sector procurement, working closely with both suppliers and contractors. As such, we know how important it is to understand not just what immediate actions should be taken, but also the wider implications of these principles for efficient and effective working practices between suppliers and contracting authorities.

 

Improving Communication

All of the supplier relief measures set out in the procurement policy note revolve around effective communication between contractors and suppliers. Contractors are required to immediately identify and notify ‘at risk’ suppliers that no changes will be made to existing payments until at least the end of June.

We have witnessed some unease amongst suppliers recently that the definition of ‘at risk’ as decided by contractors is extremely subjective. Without effective two-way communication, certain suppliers may be prioritised over others. We understand these concerns, but seek to reassure suppliers that the regulation does in fact require public sector awarding bodies to honour payments for any contractual volume commitment made.

Provision is also made in the policy note to explore avenues like interim payments, or even advance repayments. For those contracts built on outcome related pay, which may have been significantly disrupted by the recent lockdown measures, the regulation allows for average payments, based on the previous three months. We know that for some suppliers, this state of affairs could actually be considered an improvement, with at least one of our supplier contacts commenting “We may well even be better off than we were before!”.

It’s at times like these that any extra measures suppliers and contractors can make to improve the communication channels will help. Even pre-COVID, we had already identified how important this was, with the ProcureCo platform (led by a steering group of procurement professionals) creating links between the public sector buyers and suppliers. The launch of the ProcureCo Suppliers Directory furthered this aim even more, providing a unique tool to increase communication at all tiers between suppliers and contractors.

We have already heard many anecdotal reports from suppliers that communication with their contracting body has actually improved as a result of COVID-19. Our ProcureCo partner housing associations and public sector bodies are also reporting making greater efforts to stay in close contact with suppliers, with the added benefit of contributing to their social value ethos.

 

Managing Supplier Cash Flow

There’s a fine balance to be struck between maintaining supplier cash flow – with the aim of ensuring continuity and protecting employment – and the risk of simply propping up failing businesses. Amongst our procurement team partners, ProcureCo are seeing first-hand how challenging this problem is to manage.

Suppliers should be reassured that many public sector organisations understand exactly how difficult the current uncertainty is to manage, and many have been going above and beyond to ensure that suppliers with contracted volume associated with their provision are still being paid on time. For example, at ProcureCo, we know of at least one Head of Procurement who has been working weekends to ensure payments are made on time.

The close ties ProcureCo has with both suppliers and contractors gives us a unique insight at this time as to how both parties can manage the challenges of cashflow. Our Online Summit on Wednesday 3rd June has been designed specifically to allow contractors and suppliers to connect, communicate and interact in real time to share knowledge and best practice to navigate the best way forward.

 

Operating with transparency

Underpinning the guidance on supplier relief during COVID-19 is the need for increased transparency between contractors and suppliers. Specifically, with regard to any relief payments made, suppliers must be prepared to share financial data to account for funds received, and demonstrate they have been used as directed.

This obviously requires a huge degree of trust from both parties, and again, we’re seeing that those who already have close communication links in place, either through the ProcureCo directory or other means are better able to leverage their working relationships to ensure an open dialogue.

 

How to proceed?

It is clear that the pandemic has accelerated the pace of change across many sectors worldwide. Many businesses are having to adapt to challenging new situations, manage uncertainty and find new and more effective ways of working. In public sector procurement, ensuring continued good practice between contracting authorities and suppliers one of our key strengths at ProcureCo. Our whole ethos centres on increasing connection, communication and collaboration – which is exactly what both suppliers and buyers need right now to weather this current storm and any anticipated storms in the horizon.

To find out more about how our range of resources could help with all of the areas we’ve outlined here – for both suppliers and contracting authorities – fill the form below to join our free Online Summit.

 

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    John Wallace

    Director of Procurement, Metropolitan Housing.

    John began his career as a laboratory assistant before becoming a qualified master brewer. Having spent 10 years in brewing production, John moved onto various procurement roles in the brewing industry prior to spending 2 years in the food sector working for one of the country’s leading chilled food producers. In 2006, he joined the NHS, being involved in the growth and development of two regional collaborative procurement organisations before moving to Housing and joining Anchor Hanover Trust in 2013. John is currently Procurement Director at Metropolitan Thames Valley Housing.

    Antony Silk

    Director of Procurement, Optivo.

    In a career spanning private practice, local authority, housing co-ops and registered providers, Antony brings over thirty years of experience in the housing sector delivering services focused on customer empowerment, compliance and safety.

    As Director of Procurement at Optivo, Antony is energised through creative solutions, the social value proposition and contracting through relationships.  As Board member of SEC, he is an avid supporter of developing future solutions and thinking for the sector.

    Open and accessible, Antony is keen to learn what others know and welcomes you contacting him.