Companies bidding for government contracts worth over £5m must demonstrate they pay all invoices within 55 days, or face a public work ban
The potential public work ban was announced as part of the Autumn Statement, where chancellor Jeremy Hunt outlined the deadlines that would tighten over the next couple of years.
Coming into effect from April 2024, firms bidding for Government contracts over £5m will have to demonstrate they pay their invoices within an average of 55 days.
This will decrease to 45 days in April 2025, and 30 days in the following years.
Companies unable to demonstrate they are paying promptly will be excluded by the public work ban
Bidding firms must show that they have hit both thresholds concurrently in one of the previous two six-month periods or be excluded.
If a company fails to pay invoices within an average of 55 days, and aren’t paying 95% of all invoices within 60 days (or 90% with an action plan for improvement), they will be excluded from bidding for contracts.
Public sector work invoices must be paid within 30 days, as well as small suppliers, per the Prompt Payment Code.
The move aims to bolster SME cashflow
Speaking previously on the challenges facing SME supply chain players, Hunt said: “One of the key challenges facing SMEs is the cashflow implications of late payments, which hold small businesses back from investing and innovating. […] The government will lead by example in introducing more stringent payment-time requirements for firms bidding for large government contracts.”
The new measures, further outlined in PPN 10/23, automatically applies to new advertised procurements in scope of the Public Contracts Regulations 2015 from 1 April 2024, with some exceptions.
The PPN emphasises that these rules do not apply to NHS Trusts and NHS Foundations Trusts. There is also an exemption for where the market for the contract is struggling to the extent that imposing the requirements of the PPN would not be proportionate or relevant.
From the implementation of the Procurement Act 2023 in October 2024, all new procurements will be in scope.
