2020-03-24
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Coronavirus: available public money to help the construction industry

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Posted by Michael Hiscock on 24 March 2020

Michael Hiscock Partner - Head of Construction

The construction industry has a number of vocal supporters but, nonetheless, we must keep pushing government to do more. Liquidity and cashflow have never been more important.

The Retention Bill was a victim of the recent general elections, the identity of the Minister with construction in their portfolio has changed several times, and the Fair Payment Charter was guidance and best practice but not law. However, in this time of national emergency, the Cabinet Office has been considering how to use the power of the public purse to keep the industry moving forward. As a result, the first two Procurement Policy Notes in 2020 (“PPN”) have been issued which will hopefully allow money to move down through the supply chain.

PPN1/20 – place orders more quickly

The Note is designed to encourage all contracting authorities (central government, councils, ‘blue light’, schools, housing associations) to speed up the process and place orders to secure future projects. If you are a main contractor you can encourage your client contacts, whose projects fall above the current financial threshold, that options are available which still comply with procurement rules:

  • Direct awards due to extreme urgency caused by unforeseeable events and it is impossible to comply with the normal rules.
  • Direct awards due to absence of competition in a specialist technical area.
  • Increased use of pre-approved frameworks.
  • Accelerated procedures.
  • Extending the contract up to permitted financial maximum expenditure
  • Sharing resource between public authorities while still applying the value-for-money test in the circumstances

PPN2/20 – payment to supplier to ensure service continuity

If you are a contractor, or a subcontractor, mid-job, push up the line to make sure that payment is being processed. All contracting authorities should:

  • Inform suppliers that they will be paid as normal, even with service interruptions, up to the end of June.
  • Temporarily adjust payment mechanisms to use shorter interim payment periods, forward ordering, pre-payment and payment on order not delivery.
  • KPIs should be judged against three months or more
  • Interim invoices are paid and balanced later providing the contractor agrees to work on an open book basis.

Although these PPNS are guidance, they do indicate recommended best practice which allows the payer more flexibility and will allow the payee to exert some pressure.

About the author

Michael Hiscock

Partner - Head of Construction

Michael is a specialist in construction and engineering procurement, advising on a wide variety of works contracts.

Michael Hiscock

Michael is a specialist in construction and engineering procurement, advising on a wide variety of works contracts.

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