Recovery and Transition from COVID-19: Public Contracts and Procurement Guidance Note 02/20

24 June 2020

Author: Kerry Teahan
Practice Area: Procurement Law

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Following the recent publication of the UK Cabinet Office guidance, Construction and Procurement Delivery (CPD) has now published its own Procurement Guidance Note (PGN) as an update for Northern Irish contracting authorities and suppliers on the management of contracts during the recovery and transition from the immediate impact of the COVID-19 outbreak.

This guidance follows on from CPD’s previous guidance on supplier relief (PGN 01/20). The newly published PGN acknowledges that the current COVID-19 pandemic is a long term issue and that as the Government moves into the next phase of its response to the COVID-19 outbreak, the supplier relief provisions set out in PGN 01/20 may still be appropriate. However, the guidance also recognises the need for contracting authorities and their suppliers to work in partnership, to plan an eventual exit from any relief and transition to a new, sustainable, operating model.

What is it?

The PGN recognises that the COVID-19 pandemic is not a short term crisis and that there is no easy or quick solution, however notes that the Government will need to ease economic support schemes as people begin to go back to work.

The PGN expressly recognises that it may still be appropriate to provide the contractual relief measures set out in PGN 01/20 to ensure continuity of supply for critical services, including a need for contracting authorities to consider suppliers of critical services who may not previously have requested relief but may require it going forward.

At the same time, the PGN also highlights the need for contracting authorities and suppliers to work together to plan for an eventual exit of any relief granted under PGN 01/20 and transition to a more sustainable operating model for both parties. This PGN encourages contracting authorities to plan for the period after the initial emergency caused by the pandemic and as a result, highlights that some of the measures put in place in the initial stages of the pandemic may not be appropriate for medium to long term sustainability.

Which bodies must implement the guidance?

The PGN recommends specific actions to be taken by certain contracting authorities. This includes all bodies subject to the Northern Ireland Public Procurement Policy and beyond that, serves as useful guidance for other public sector bodies. As with PGN 01/20, the PGN also sets out requirements for suppliers in receipt of, or wishing to claim, supplier relief due to the COVID-19 pandemic.

When does it take effect?

From 1 July 2020 until 31 October 2020.

Key actions for contracting authorities and suppliers:

The PGN highlights that:

  • All contracting authorities should review their contract portfolio (including in particular where they are already providing supplier relief) and, if appropriate to maintain delivery of critical services, continue or commence relief measures in line with PGN 01/20. The guidance provides guidance on accounting and record keeping steps to be taken when relief is made available as well as reiterating the approaches and guidance detailed within PGN 01/20 on the forms of relief that may be appropriate, stressing again for instance the continued need for swift and accelerated payment to maintain cash flow and protect jobs; the need for transparency around measures implemented; and importance of ensuring there is no duplicate relief under available Government schemes.
  • Both contracting authorities and suppliers should, in general, work together in partnership, openly and pragmatically, during the transition out of the initial COVID-19 emergency, to ensure contracts are still relevant and sustainable for both parties and will continue to deliver value for money over the medium to long term.
  • Equally, both parties should continue to work collaboratively to ensure there is transparency throughout this transition period. For suppliers in particular, this means continued application of the ‘open book’ approach and record keeping requirements set out in PGN 01/20
  • Contracting authorities and suppliers should work together to specifically develop transition plans to exit from any supplier relief granted under PGN 01/20, which plans should be ready for implementation as soon as possible and before the end of October 2020. This may include contract variations if requirements have changed. Specifically the parties need to look at whether the contract continues to be affected by the outbreak and when the contract can resume.
  • This transition plan should be agreed by both parties and include the following:
      • A planned exit date for when supplier relief will end. This should be kept under review to reflect the changing situation, for example any local restrictions being introduced.
      • In relation to advance payments, parties should agree if and when any outstanding goods/services are to be delivered.
      • The process for reconciling payments made against costs, as set out in the model interim payment terms accompanying PGN 01/20.
      • An assessment of any costs associated with implementing Public Health Agency NI advice specifically in relation to delivering the public contract; this needs to be considered by the authority on a case by case basis.
      • An assessment by both parties as to whether, as a result of COVID-19, the contract is still commercially operational, relevant and viable and if not, proposals for variation or termination.
  • If the parties agree that a contract is no longer operationally or commercially viable, then alternative options should be discussed, for example contract variation. Ultimately however, the guidance notes that it may be necessary for the parties to discuss contract termination.
  • Both contracting authorities and suppliers are expected to behave fairly in reviewing contracts where there has been a material impact from COVID-19, which includes a specific expectation that the parties resolve any emerging contractual issues responsibly to achieve practical, just and equitable outcomes having regard to the impact on the other party, the availability of financial resources, protection of public health and the national interest e.g. by using negotiation and mediation before any issues escalate into formal disputes.

Our experience to date is that the management of contracts and implementation of supplier relief is raising complex issues for both contracting authorities and suppliers alike. If you have any queries on the implementation of this updated guidance, please contact a member of the Procurement Team at Carson McDowell for further information.

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