In addition to the wide ranging changes to the procurement process that are set out in the “Transforming Public Procurement” green paper, the UK Government has also proposed a number of measures to promote effective contract management, throughout the life of a project to ensure that the contract can flex to meet new demands and opportunities while ensuring the supply chain is treated fairly.

The government has identified prompt payment as a key issue, especially in the current uncertain economic context. This can be a significant issue for many businesses, but particularly small businesses within public sector supply chains. Long payment terms and late payments can make it difficult to manage cash flow and could threaten the survival of important parts of the supply chain that contracting authorities rely on. For most public contracts, the PCR already requires contracting authorities to pay invoices within 30 days and to require this payment term to be passed down the supply chain. However, there can be issues with maintaining visibility and enforcing this requirement. The UK Government is therefore suggesting going further by legislating to allow any business to take up payment delays in the supply chain directly with the contracting authority and to allow an authority the right to investigate payment performance at any tier in its supply chain. There are also plans to align public and private sector reporting requirements to allow greater scrutiny.

Another key issue for managing public contracts is how contracting authorities address changing circumstances with contract amendments. Currently, the PCR, UCR and CCR all allow amendments to be made to public contracts without triggering a new procurement where specific criteria are met. Going forward, the UK Governments proposal is to make the requirements clearer by having one provision governing contract amendments for all types of public contracts which will be based on regulation 72 of the PCR. The new provision will be substantially similar to the old regulation 72 but with some reordering and minor changes to make it clearer and with an additional right for contracting authorities to make amendments where there is a crisis or emergency. In addition, the UK Government is proposing that all contract amendments will require the publishing of a notice and then a 10 day standstill period to allow the amendment to be challenged. Amendments will only be exempt from this requirement where they have a small effect on the term or value of the contract and no effect on the scope.

Additional changes that the UK Government propose to make are the imposition of mandatory profit rates on extension periods used to cover contract award suspensions to reduce costs and the introduction of a data driven feedback mechanism to encourage continuous improvement from suppliers.

To the extent that these proposals will improve transparency, cash flow through supply chains and promote efficient contract management we expect that they will be received positively. However, it will be interesting to hear industry views, particularly on the new notice and standstill requirements.