The Cabinet Office has issued two Procurement Policy Notes ('PPNs') to support Contracting Authorities and their suppliers in mitigating the immediate impact of COVID-19. PPN 01/20 (Responding to COVID-19) provides guidance for Contracting Authorities on how to respond to the impact of COVID-19, and how contracts can be awarded in cases of extreme urgency. PPN 02/20 (Supplier relief due to COVID-19) focuses on payment of suppliers to ensure service continuity during and after COVID-19.
In this latest Insight, we have summarised the PPNs, examining the guidance and the consequences for the public sector.
Procurement policy note 1/20 - responding to COVID-19
The first of the PPNs provides guidance for Contracting Authorities on the available options for procuring goods works and services in an emergency, including of note, through the use of Regulation 32(2) of the Public Contracts Regulations 2015 ('PCR') which allows a direct award of a contract due to reasons of extreme urgency. Other options considered are:
- direct award due to extreme urgency;
- direct award due to absence of competition or protection of exclusive rights;
- call off from an existing framework agreement or dynamic purchasing system;
- call for competition using a standard procedure with accelerated timescales; and
- extending or modifying a contract during its term.
Direct award due to reasons of extreme urgency
For any Contracting Authority considering relying on Regulation 32(2)(c), they will need to evidence that:
- There are genuine reasons for extreme urgency;
- The events that have led to the need for extreme urgency were unforeseeable;
- It is impossible to comply with the usual timescales in the PCRs; and
- The situation is not attributable to the contracting authority.
Contracting Authorities should ensure they maintain records of their applicable justification and the steps taken to awarding a contract in accordance with the PCR. What is also clear from the guidance is that Contracting Authorities may only place reliance on Regulation 32(2)(c) for goods, works and services which are "absolutely necessary" in the circumstances, and it is equally important that Contracting Authorities still achieve value for money and use good commercial judgement.
Whether relying on Regulation 32(2)(c) or any of the other options referred to in PNN 01/20, Contracting Authorities should limit the duration and/or scope of the award or modification of contract and keep a written justification to evidence how it has considered and can satisfy each of the relevant conditions. Where applicable, the justification should demonstrate that the decision is related to the COVID-19 outbreak with reference to specific facts - the PPN provides the examples of staff redeployment or shortages.
Procurement policy note 2/20 - supplier relief due to COVID-19
In the second of the two PPNs issued, Contracting Authorities are advised to urgently review their contracts, and in particular payment provisions with a view to ensuring service continuity during and after the current COVID-19 outbreak. Contracting Authorities are also advised to ensure that suppliers who are at risk are in a position to resume normal contract delivery once the outbreak is over including by:
- Informing suppliers who they believe are at risk that they will continue to be paid as normal until at least the end of June;
- Putting in place payment measures to support supplier cash flow;
- Where a contract involves payment by results, payment should be on the basis of previous invoices;
- Suppliers should agree to act on an open book basis and make cost data available to the contracting authority during this period; and
- Ensuring invoices submitted by suppliers are paid immediately on receipt in order to maintain cash flow in the supply chain and protect jobs.
Contracting Authorities will need to work with their suppliers to ensure business continuity is preserved as far as possible.
In the event that a Supplier seeks contractual relief, Contracting Authorities are advised to work with Suppliers to amend or vary contracts instead. The guidance is clear that these will need to be considered on a case by case basis, but suggests that changes may include to contract requirements, delivery locations, frequency and timing of delivery, targets and performance indicators etc. Other relief that might be offered to Suppliers might include by way of a contract extension or waiver of the Contracting Authority's rights (e.g. to service credits or termination).
Gowling WLG has provided extensive guidance relating the impact of COVID-19 on contracts.
If you have any questions relating to the Cabinet Office guidance, or have any further questions, please do contact us.