The government has admitted that authorities could potentially be forced to cancel contracts as all parts of the economy try to cope with the aftermath of the coronavirus crisis. This is evident from the most recent guidelines on public procurement.
In the previous guidance, authorities were told to continue paying “at risk” contractors if projects were halted by the coronavirus lockdown.
The cabinet office issued guidelines in early April calling on public sector customers to help businesses cope with the coronavirus crisis.
It states: “The contracting authority should continue to pay suppliers who are at risk due to covid-19 until at least the end of June 2020 on a continuity and retention basis.”
The government said this needs to be done to ensure supplier cash flow and maintain cash flow in the supply chain.
Now, however, it has admitted that it may be time to end contracts.
The latest guidance states: “The parties may need to discuss the termination of the contract. If a contracting authority considers a contract no longer relevant or feasible, they should work with the supplier to resolve the termination on the basis of the existing contractual one Continue corrective action.
“Inadequate expectations of risk and cost transfer are likely to increase the likelihood of contract failure and can lead to suppliers leaving the market and weakening competition.”
In addition, all contracting authorities should review their contract portfolio, including the cases in which they provide contractual facilities based on covid-19 and, if necessary, continue measures to maintain the supply of critical services or take measures according to the previous guidelines.
The authorities should work in partnership with their suppliers and develop transition plans in order to get away from any relief as soon as possible. This should include agreeing to contract changes when operational requirements have changed significantly.
However, it was recommended that companies continue to pay suppliers as soon as possible after receiving invoices or according to pre-agreed milestone dates in order to maintain cash flow and protect jobs.
The new guidelines run until the end of October.