Prompt payment qualifying thresholds tightened for central procurement in England

It was announced this week that for most major procurements (£5m+) advertised by central government buyers in England there will be a tightening of the rules during the pre-qualification process relating to the timely payment of supply chains. 

Pre-qualification is, of course, the gateway to being able to bid. The changes will apply from 1 April 2022. From that date the payment information looked at is 2021/2022 and so the time to consider the change is now.

The rules only apply if there is a supply chain or sub-contractor element in a bid. That is almost always the case, in our experience.

Regular bidders

If as a bidder you have taken part in the procurement process under the current rules then there are three key take-aways:

• The automatic "pass" threshold remains whether all supply chain invoices are paid on agreed terms. This is measured over two 6 calendar month periods. If you cannot say "yes" to that, you still pass if 95% of invoices have been paid within 60 days. That percentage will not change.

• The next level "pass" threshold applies where you are not hitting the 95% target but can provide information on the causes for that and an action plan to improve. Currently you can pass on this basis with a payment history of 85% to 95% of invoices within 60 days. From 1 April 2022 that range will increase to 90% to 95%.

• The automatic "fail" threshold will therefore increase from 85% to 90%, again applying the 60 day rule.

New bidders

If as a bidder you are planning for a first opportunity since supply chain payment became a government focus then while the new rules are tighter than the old, it is worth a quick reminder of what you need to do.

• Pre-qualification is based around self-declaration. In other words you get to click yes or no to the questions. But the buyer is entitled to ask for verification and so you need systems and processes which allow that information to be collected and accessible. Clicking "yes" if untrue or if you don’t know could rule you out of that procurement, and any other future procurement opportunity if viewed as grave professional misconduct. Pages 6 and 7 of the guidance are clear on the information you will be asked for.

• Another pass/fail question is whether there are procedures for resolving disputed invoices "promptly and effectively". To be able to say "yes" this will bring forward the need for you as a bidder to obtain something more than a letter of intent or similar with the proposed consortium/supply chain partners at pre-qualification stage.

• If you miss the automatic "pass" threshold and so are in the territory of explaining the causes of that and providing an action plan to the contracting authority:
  • There must be regular reporting to your audit committee on progress against the plan.
  • The plan must be signed off at director level.
  • A summary of the plan (or the plan itself) must be published on your website.