Councils told to pay contractors even if sites stopped by coronavirus delays

The note states that all contracting authorities should:

• Urgently review their contract portfolio and inform suppliers which they believe are at risk that they will continue to be paid as normal (even if service delivery is disrupted or temporarily suspended) until at least the end of June.
• Put in place the most appropriate payment measures to support supplier cash flow; this might include a range of approaches such as forward ordering, payment in advance/prepayment, interim payments and payment on order (not receipt).
• If the contract involves payment by results then payment should be on the basis of previous invoices, for example the average monthly payment over the previous three months.
• To qualify, suppliers should agree to act on an open book basis and make cost data available to the contracting authority during this period. They should continue to pay employees and flow down funding to their subcontractors.
• Ensure invoices submitted by suppliers are paid immediately on receipt (reconciliation can take place).

In the policy note, the Cabinet Office said that the outbreak of coronavirus is “unprecedented” and will have a significant impact on businesses of all sizes.

It added: “It is vital that contracting authorities pay all suppliers as quickly as possible to maintain cash flow and protect jobs.

“Contracting authorities can consider making advance payments to suppliers if necessary.”

The order comes after the Federation of Master Builders warned last week that coronavirus could cause widespread insolvencies and job losses within the construction sector.

The coronavirus disruption comes as many contractors are already struggling as a result of operating on small margins and being hit by late payments from clients and retentions.