Guidance note on Procurement Policy Note 02/20 (“PPN 02/20”) in construction context

The purpose of this guidance note is to provide a very high level review of PPN 02/20 to assist authorities in identifying when it should apply and how they should deal with it in the context of construction. It is not intended to cover all aspects of PPN 02/20 and legal advice should be sought.

When does it apply?

Until 30 June 2020 (at which point it will be subject to review) PPN 02/20 applies to all contracting authorities (which includes local authorities) who are entering in to contracts for goods, services and works with at risk suppliers including contracts procured under:

1. Public Contracts Regulations 2015
2. Defence and Security Public Contracts Regulations 2011
3. Utilities Contracts Regulations 2016; and
4. Concession Contracts Regulations 2016.

Those suppliers who are considered at risk is quite wide and is likely to include anyone who is affected by the COVID-19 outbreak.

What is the aim?

The overarching aims of PPN 02/20 are to encourage authorities to work with suppliers and provide contractual relief where appropriate to ensure that:

1. suppliers do not suffer financial implications as a result of COVID-19 to try and protect jobs and help suppliers deal with the current crisis; and
2. when normal service resumes suppliers are in a position to do this.

It is not expected that authorities will no longer undertake the normal due diligence at the point of contracting and when administering payments to suppliers but it is expected that consideration of when this takes place may be impacted by the aims above.

What should you do?

Authorities should be reviewing all existing contracts relating to engineering, building and construction works to ensure that they are achieving the aims outlined above. In particular there are some suggestions of measures which could be implemented with suppliers to help achieve the aims:

1. accelerated payment of invoices – paying suppliers quickly is going to be essential for all those affected by COVID-19 and so changes to existing contracts should clarify that payments will be made quicker than usual but with the right for authorities to dispute these payments at a later date
2. certification of interim valuations for work not undertaken based on previous valuations – where completion of works is affected by COVID-19 in the short term authorities may maintain payments to suppliers regardless of progress whilst incorporating reconciliation provisions to determine how this will be recovered by the authorities and prevent any additional claims for money by the supplier as a result of COVID-19
3. amending existing payment mechanisms to make payment more regular – depending on existing payment terms it may be possible to amend these to increase the frequency of payment provided that clarification is provided on how these payments may be reconciled in the future
4. advance payments – where there is a value for money case for critical works advance payments may be appropriate but the authorities will need to understand what any advance payment is being used for and ensure contractual mechanisms are agreed to reconcile these payments and try to protect whatever goods/materials these payments relate to.

PPN 02/20 does not require the authority to provide all of the relief suggested above only those which are necessary, appropriate and ultimately most effective at achieving the aims – assessment should be made on a case-by-case basis.

Birketts LLP is able to provide detailed legal advice on amending existing agreements to ensure that the authority’s contractual documentation reflects the aims of PPN 02/20 and give guidance on what should be implemented on a case-by-case basis. Please get in touch with our Head of Public Sector Ruth Neave for any further information.