27/03/2020
Relief for Public Sector Suppliers

CPD have issued a new Procurement Guidance Note (PGN 01/20) to all bodies subject to NI Public Procurement Policy with effect from 25th March 2020 setting out how contracting authorities in Northern Ireland may amend payment provisions in contracts or consider other contractual relief in order to assist at-risk contractors to combat the impact of COVID-19.

This relief is intended to ensure that normal service delivery can be resumed once the outbreak is over by ensuring that contractors can retain staff, maintain supply chains and continue to be financially viable.

Urgent Payment

Contracting authorities must pay all contractors as a matter of urgency as soon as invoices are received, even where services are reduced or paused, however contractors should not expect to make a profit on any undelivered contractual obligations. Payment of relief should override performance, force majeure, frustration and business continuity
contract clauses

Additional Options

The following options are to be used at the discretion of contracting authorities who may choose to adopt a combination of the options based on the individual circumstances of each contract:

  • Consider making advance payments or forward ordering;
  • Pay contractors on a continuity and retention basis;
  • Where a contract provides payment by results, the contracting authority may make payment on the basis of previous invoices;
  • If a contractor cannot fulfil their contract, the contracting authority may re-deploy workers to other areas where possible;
  • Grant relief against certain contractual obligations, for example KPIs or service credits;
  • Consider variations to contracts, for example it may be reasonable to vary contract requirements, delivery locations, frequency and timing of delivery, targets or performance indicators; and
  • Maximise flexibility in accordance with the contract by granting an extension of time for performance or a agreeing to a
  • waiver by the contracting authority to exercise certain rights under the contract, for example claiming damages.

Each contracting authority is encouraged to review their portfolio of contractors and to assess the appropriate course of action for each contractor according to need on a case-by-case basis and to reassure the identified at-risk contractors that payment will continue until at least June 2020.

Model Interim Terms

In order to facilitate the release of payments to contractors, Model Interim Payment Terms for public contracts for the delivery of goods and services are provided at Annex A of the PGN. It is important to note that these model terms are not appropriate for works contracts, as those are generally more complex and will require bespoke drafting (and a more detailed review of the interaction with other contract provisions).

Conditions for Relief

In order to qualify for relief, contractors must be transparent, operate on an open book basis, and allow for their records to be freely available for review by the contracting authority. There is also a need for contracting authorities to check that employees and sub-contractors are being paid appropriately.

There is also a need for contracting authorities to check that employees and sub-contractors are being paid appropriately.

When submitting invoices, contractors should identify which aspects of the contract are not being delivered specifically due to the impact of the COVID-19 outbreak.
Contracting authorities should not be providing relief where contractors were not meeting contractual obligations prior to the outbreak of COVID-19.

Should a contractor be found to be taking undue advantage, or failing in their duty to act transparently and with integrity, any payments made by way of relief will be recovered by the contracting authority.

Continuing Duties of Contracting Authorities

This guidance does not release contracting authorities from fulfilling their duty to perform due diligence and to ensure that value for money is being achieved. Contracting authorities should review the precise terms of their existing contracts (and performance to date) take risk factors into account and record all decisions that are made, with specific legal advice sought where required.

Contracting authorities should review the precise terms of their existing contracts (and performance to date) take risk factors into account and record all decisions that are made, with specific Clegal advice sought where required.

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