27 April 2020 | Comment | Article by Emily Powell
The government has published a procurement policy note (PPN) relating to procurement cards and their usage in light of COVID-19. We take a look at the practical and financial implications of the note and how Hugh James can offer guidance to affected organisations.
What are procurement cards and what is the purpose of this PPN?
Procurement cards allow authorities to pay suppliers instantly for goods and services and are considered the most efficient way for organisations to make payments for these items.
The PPN published by the government this month supports the instructions set out in a previous PPN (February 2020) asking contracting authorities to pay suppliers as quickly as possible to maintain cash flow and protect jobs during the COVID-19 outbreak. It is one of a number of measures the government is advocating to minimise the disruption to businesses during the global pandemic.
The PPN applies to ‘in-scope organisations’ which are listed as Central Government Departments, their Executive Agencies and Non Departmental Public Bodies. However other public sector contracting authorities are also being encouraged to apply it.
Increasing use of procurement cards
Increasing the use of procurement cards will enable the payment of suppliers to be more agile, whilst still retaining controls. Whilst the Public Contract Regulations 2015 already require the public sector to pay suppliers within 30 days from the date of a valid and undisputed invoice, in light of COVID-19 and its effect on the economy, it is now vital for contracting authorities to accelerate their payment practice and pay all suppliers as quickly as possible to maintain cash flow and protect jobs. In scope organisations should therefore take steps to ensure procurement cards are used more widely.
The PPN provides Accounting Officers and Finance Directors within in scope organisations the authority and flexibility to increase their organisation's transaction and monthly limits as follows:
- individual transaction limit of procurement cards should be raised to £20,000 for key card holders
- monthly limit on cards should be raised to £100,000 for key card holders
In both cases, higher limits can be agreed on an individual basis.
The above measure is in addition to steps the Ministry of Justice has already taken action on the use of procurement cards in response to Covid19. These include:
- opening up the merchant category groups across all cards;
- arranging for a small number of cards to be held by a central team to be used to support cost centres where no local cardholders are available; and
- issuing communications to cost centre owners that procurement cards may also be used if the need is so pressing that purchasers do not have time to raise a requisition.
What does this mean in reality?
By increasing the use of procurement cards and implementing the provisions set out in the PPN, the result will be to ensure payment is made to suppliers as swiftly as possible during Covid19 which will, in turn, minimise the impact on suppliers and businesses.
Hugh James has a dedicated procurement and state aid team which can provide advice and guidance on implementing this and other PPNs.
For more information or advice surrounding the possible issues faced by public bodies during this time, please get in touch with our procurement and state aid team. The team has supported clients of all sizes from local authorities and central government to utilities, higher education and housing associations.