Cabinet Office
Learn about this policy
| Im a government supplier | Im a government buyer | Im a company in the private sector |
|---|---|---|
| I sell goods and services to government departments. | I buy goods and services from suppliers in the public sector | Im a company in the private sector |
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Prompt payment guidance for government buyers
The government aims to pay 90% of undisputed and valid invoices from small and medium-sized enterprises (SMEs) within 5 days. Additionally, 100% of all undisputed and valid invoices should be paid within 30 days.
Public sector buyers must incorporate 30-day payment terms in new public sector contracts. Additionally, they must ensure that this payment term is passed down their supply chain.
Government departments are required to report their payment performance annually on GOV.UK in line with these targets.
View government payment performance.
Prompt payment guidance for government suppliers
If you are a supplier who sells goods and services to government departments, its important to know about the Prompt Payment Guidance policy. From September 1, 2019, any supplier bidding for a central government contract above 5 million per year must demonstrate that they have effective payment systems.
In addition, suppliers must ensure that 95% of invoices in their supply chain are paid within 60 days.
Starting from April 1, 2024, all suppliers must also ensure that they pay their invoices within an average of at least 55 days.
How to demonstrate an effective payment system
To show that you have an effective payment system, suppliers must ensure that they can demonstrate that they:
- pay at least 95% of invoices within 60 days.
- pay their invoices within an average of at least 55 days
Large businesses are already required to publish their payment performance under the Reporting on Payment Practices and Performance Regulations 2017. You can submit these reports as part of your bid to demonstrate that you meet the required standard.
Procurement Policy Note 10/23 explains how to take account of a suppliers payment systems to demonstrate that it has a reliable supply chain.
Non-compliance with the policy
Suppliers must fulfil both criteria in at least one of the two previous six-month reporting periods, failing which they will meet the technical criteria at selection stage and be unable to bid for government contracts.
If suppliers fail to pay 95% of the invoices within 60 days, but still manage to pay 90% of invoices in this time, they are required to submit a detailed action plan outlining the steps to get back on track. If the supplier also pays invoices within an average of at least 55 days in one of the two previous six-month reporting periods, this will be considered to meet the criteria.
Actions for suppliers
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Ensure you are publishing payment reports if required.Check here to see if you need to publish a report.
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Understand how government departments will implement the policy starting 1 April 2024 by reading Procurement Policy Note 10/23
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Ensure you know what is expected of you when bidding for relevant government contracts.
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Ensure your company is ready to meet the new requirements.
Concerns about public procurement practices
The Public Procurement Review Service (PPRS) sits within the Cabinet Office and allows government suppliers and potential government suppliers to raise concerns anonymously about potentially poor public sector procurement practices.
If you have a concern youd like to raise about a procurement process or a problem with payment on a public contract, you can let them know by sending an email to publicprocurementreview@cabinetoffice.gov.uk, and they will investigate for you.
PPRS reports on the trends in the issues raised and recommends how to improve. They also publish monthly results from their investigations.
Also, suppliers may claim statutory interest where a public sector buyer hasnt paid an undisputed and valid invoice within 30 days (or any earlier payment date agreed in the contract). Interest is not paid automatically.
Find out more about the Late Payment of Commercial Debts (Interest) Act 1998.
Prompt payment guidance for private sector companies
Companies not selling goods or services to government can also help improve supplier relationships by meeting prompt payment standards.
The Prompt Payment Code is a voluntary code of practice for companies of any size.
It sets standards similar to those in public sector contracts when paying suppliers, with companies agreeing to:
Actions for private sector companies
- Pay suppliers on time and within agreed terms.
- Give clear guidance to suppliers on terms, dispute resolution and prompt notification of late payment.
- Support good practices throughout their supply chain by encouraging the adoption of the Prompt Payment Code.
Companies that do not meet the requirements of the Prompt Payment Code may face investigation and removal from the Code.
Implementing the Procurement Act
From October 2024, the Procurement Act will mandate that all public procurement contracts include a 30-day payment term, which is implied into contracts even if not explicitly written into them. This term will also extend to any subcontracts that are wholly or substantially meant to contribute to the performance of a public contract. This change will apply to the entire supply chain. Invoices will have to be paid within 30 days of receipt, not when they are validated.
Furthermore, contracting authorities will be required to publish Payments Compliance Notices every six months. The notices will detail the authoritys compliance with paying invoices within 30 days of receiving the invoice. This will align public sector payment reporting with the private sector.
Read more about how government is transforming public procurement.
The official transforming public procurement knowledge drops page helps to understand the extended measures for ensuring prompt payment and more.
Helpful links
Last updated 11 January 2024