Pay your suppliers within 30 days of invoice or risk being named and shamed by your own statistics! This is the underlying capability of Regulation 113(7) of the Public Contracts Regulations 2015.
Regulation 113(2) requires contracting authorities and their subcontractors to include provisions in their procured contracts for (and to perform) payment of valid invoices within 30 (calendar) days.
Regulation 113(7) goes further by requiring them to publish their own statistics in respect of these payments and effectively obligates contracting authorities to:
- Closely and accurately self-regulate and monitor their performance of paying "on time"; and
- Confess on a public stage if they have performed poorly.
Conversely, publication should reward those who have performed well by giving suppliers confidence in their performance.
When do we need to publish our statistics?
A contracting authority must publish its statistics at the start of its financial year to include:
- How many invoices (expressed as a percentage) have been paid within 30 days for the preceding financial year;
- The total amount of any interest liability which accrued as a result of not paying invoices within the 30 day period over the preceding financial year; and
- The total amount of interest actually paid in the preceding financial year (whether or not it accrued in the same financial year).
Statistics must be published and made freely available on the internet and remain available online until the next publication(i.e. until the end of the next financial year at least). This means poor statistics could haunt a contracting authority all year around.
In addition, the Crown Commercial Service has issued Procurement Policy Note 03/16 ("PPN") on the matter which advises, as a matter of good practice, that contracting authorities make historical statistics permanently available online "for comparison purposes".
What happens if a contracting authority fails to publish its statistics?
It follows that to satisfy a relevant invoice within 30 days from the date on which the invoice is validated results in a contracting authority falling foul of Regulation 113 and statutory and/or contractual interest becoming payable. However, any failure to comply with Regulation 113 shall not affect the validity of a public contract that has been entered into (Regulation 114(1)). It is therefore unclear what (if any) sanctions will be imposed where a contracting authority fails to comply with the publication requirements set out in Regulation 113(7). The PPN states that a mystery shopper service will undertake spot checks to ensure compliance, but it is not clear what sanctions or penalties for failure to comply may be handed down.
In any event, contracting authorities are advised to publish their results as soon as they are able, raise any queries in relation to received invoices in a timely manner and ultimately pay all undisputed invoices on time.
This article was written by Katharine Rutherford and Lee Ward.