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Public Sector told to Keep Paying Construction Sector Suppliers

Written by: Keith Tully

Published: 23rd March 2020

Construction suppliers shake handsPublic sector operators who have hired construction sector contractors have been told to inform those companies that they will continue paying them even if their activities are suspended in the coming days and weeks.

The coronavirus outbreak means that construction projects across the country could soon stop if they haven’t already and the government wants to ensure that those businesses affected can continue to generate cashflows.

To that end, the Cabinet Office has sent out a new procurement policy note to public sector clients who have been told they should tell suppliers whose projects are at risk that they will still get paid as normal until at least the end of June.

Other advice was clarified in the communication, which suggests that the focus should be on safeguarding the cashflows of contractors, including by immediately paying invoices submitted by suppliers.

Forward ordering, payment in advance, pre-payment, interim payments and payment on order, are also policies that anyone with responsibilities for public sector procurement processes in the construction sector are now being told to seriously consider.

Where the terms of specific contracts stipulate that payments be made on the basis of particular outcomes, public sector clients are being told to make payments on the basis of previous invoices and the average amounts charged over a comparable three-month period.

Fundamentally, the government’s goal is to work towards keeping as many contractors and subcontractors in the construction sector as possible operational in the coming months so that supply chains can be maintained and jobs can be protected in the short and medium term.

“The current outbreak of COVID-19 is unprecedented and will have a significant impact on businesses of all sizes,” the Cabinet Office has said.

“Many suppliers to public bodies will struggle to meet their contractual obligations and this will put their financial viability, ability to retain staff and their supply chains at risk.

“Contracting authorities should act now to support suppliers at risk so they are better able to cope with the current crises and to resume normal service delivery and fulfil their contractual obligations when the outbreak is over.”

Keith Tully

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Keith Tully
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Keith has been involved in Business Rescue since 1992, during which time he’s worked for both independent and national firms. His specialties include company restructuring matters and negotiating with HMRC on his clients behalf.

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