Businesses bidding for public contracts must prove they pay their suppliers on time
The government is proposing to amend the Procurement Act to require contracting authorities to exclude late payers from bidding for major contracts.
Under plans set out in an open consultation published on Thursday by the Cabinet Office, suppliers would be required to demonstrate that they pay invoices within an average of 60 days in order to bid on public contracts worth more than 拢5m per year.
If they do not exclude suppliers who fail this test they will have to 鈥減rovide an explanation鈥�.
According to the document, SMEs are on average owed 拢22,000 a year, with late payment leading to 50,000 business closures per year.
Current government policy requires central government departments to ensure their suppliers demonstrate that they pay their supply chain on time as a condition of bidding for major contracts.
The Procurement Act 2023 also implies 30-day payment terms into future contracts and subcontracts when they are part of the public sector supply chain.
The new proposals would shift the burden of proof onto the supplier and, unlike the terms implied by the Act, would take account of every invoice a business has paid, whether or not it forms part of a public supply chain.
The proposals set out in the consultation build on changes introduced in the Act and will support the implementation of the government鈥檚 National Procurement Policy Statement.
The UK spends 拢385bn on goods, works and services annually and the government wants to use this leverage to improve outcomes for businesses.
鈥淭hese reforms aim to go further to strengthen the UK鈥檚 economic resilience and support British businesses,鈥� said Georgia Gould, parliamentary secretary for the Cabinet Office:
鈥淏y strategically leveraging our annual public procurement spend, we can protect our supply chains, open up new opportunities for local small businesses and social enterprises, create good local jobs, and deliver greater value for taxpayers.
鈥淭hrough these reforms, public procurement will truly be in the service of the people 鈥� empowering British businesses, supporting social enterprise, safeguarding our national interests, and tackling today鈥檚 challenges while building a prosperous and fair future for all.鈥�
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