New procurement guidance in response to covid-19: Implications for charities

Charities delivering public services are facing extremely serious challenges due to covid-19. From drastic changes in the volume and nature of demand, to having to adapt or even suspend their services. NCVO and others have urged the government to ensure charities delivering public services have the support and flexibility they need.

So, it was a relief for charities when last week the government issued guidance to encourage all contracting authorities to support suppliers.

New procurement guidance 

The guidance asks that contracting authorities take the following steps: 

  • Inform suppliers who they believe are at risk that they’ll be paid as normal (even if service delivery is disrupted or temporarily suspended) until at least the end of June. This could include services cut short or reduced because of the impact of covid-19, and non-payment could result in supply chains collapsing and/or significant financial implications for the supplier. Authorities can also decide to continue to pay suppliers if it’d be value for money and important for continuity.
  • Put in place payment measures to support supplier cash flow. Authorities can continue to pay at usual contractual rates. They could consider other options such as payment against revised/extended milestones or timescales, interim payments, forward ordering, payment on order or payment in advance/prepayment. They should also ensure invoices submitted by suppliers are paid immediately on receipt.
  • If the contract involves payment by results (PBR) then payment should be on the basis of previous invoices. For example, authorities can pay the average monthly payment over the previous three months.
  • Contracting authorities should re-deploy the capacity of those suppliers to other areas of need or provide relief against terms like KPI’s, before considering claims to suspend performance.

For this to apply to suppliers, they need to agree to act on an open book basis and make cost data available to the authority during this period. Suppliers should also continue to pay employees and flow down funding to their subcontractors. The guidance warns against offering relief to suppliers who were underperforming before the coronavirus outbreak.

Guidance has also been issued to help authorities understand how they can obtain goods, services and works with extreme urgency under current regulations. This includes extending or modifying contracts or making a direct award. There are ways contracting authorities can acquire additional delivery of supplies from an existing supplier. These aren’t covered in this guidance and have their own specific requirements.

What are the issues? 

 This guidance is welcome, but there are some issues that still need to be resolved:  

  • Will authorities have the capacity to implement open book accounting if they haven’t before and will they understand charity accounts? There’s also a concern that it could be harder for organisations to recover costs that aren’t as direct as staff costs, that are often recovered through the margins of a contract and towards the end.
  • Often PBR contracts require a lot of investment in the beginning, with costs recovered over time. There’s also a concern that paying a three month average for a PBR contract could be a challenge for organisations that are new to delivering a service. Here there could be a provision to pay anticipated or projected income.
  • The guidance says the contract should return to its original terms as soon as the impact of the covid-19 outbreak on the relevant contract is over. For organisations needing to adapt drastically or suspend, there should to be grace period to reopen or shift back to previous ways of working.
  • Organisations that are adapting to meet higher or different need will incur extra costs, and we want to ensure that those costs are covered by contracting authorities.
  • We want to ensure that these provisions can be applied to contracts and subcontracts of all sizes. It could also be helpful to see more flexibility in reporting and monitoring.
  • We’ll also need contract managers to monitor and ensure that prime providers pay and support subcontracted organisations. Authorities should ensure that subcontracted organisations are permitted and supported to speak directly to them.

This guidance comes into immediate effect but isn’t binding. Many authorities are already supporting organisations well, but we know this isn’t the experience of charities across the board.

The positive impact of this guidance will depend on uptake from contracting authorities. A strong steer is needed from the Cabinet Office, as well as bodies like LGA and NHS England and Improvement, to ensure this guidance is put into practice.

This guidance is applicable to all contracting authorities in England, including: 

  • central governments  
  • departments 
  • executive agencies 
  • non-departmental public bodies 
  • local authorities 
  • NHS bodies and the wider public sector.  

Organisations operating in other parts of the UK will need to consider separate guidance, which we think will be issued shortly.

Beyond procurement, further clarity is needed to support organisations that deliver services through grants from contracting authorities, or through personal budgets and direct payments. Many London Boroughs have signed up to the funders pledge coordinated by London Funders. We think other authorities should follow suit.

We also think this crisis will throw new light on where mechanisms like competitive procurement, contracting and PBR are appropriate. Some authorities may wish to consider the flexibility that can be afforded through grant-making.

We’ll raise the concerns outlined above with government officials as well as bodies like the LGA to ensure this guidance is implemented and benefits charities. It’s important that charities delivering services read this guidance to understand the detail and use it when negotiating with contracting authorities. It’s also important for us to hear from you whether your authorities are adopting this guidance, and the impact on your organisation.

Please get in touch by emailing rebecca.young@ncvo.org.uk 

 

 

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Rebecca Young Rebecca Young is a senior policy officer at NCVO, working primarily on public services and volunteering policy. Before joining NCVO, Rebecca led on mental health, housing and disability policy at the National Union of Students.

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