Guidance

PPN 018: Taking account of a supplier’s approach to payment in the procurement of major contracts (HTML)

Published 3 December 2024

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This publication is available at https://www.gov.uk/government/publications/ppn-018-how-to-take-account-of-a-suppliers-approach-to-payment-in-the-procurement-of-major-contracts/b78b8279-3129-4195-85ba-230eed146601

Issue

1. The government understands the importance of prompt, fair and effective payment in all businesses. Being paid promptly for work done ensures businesses have a healthy cash flow. This Procurement Policy Note (PPN) sets out how payment approaches can be taken into account in the procurement of major government contracts.

2. This PPN replaces PPN 015 from 1 October 2025.

Dissemination and scope

3. This PPN applies to all central government departments, their executive agencies and non-departmental public bodies. These are referred to as ‘in-scope organisations’.

4. Please circulate this PPN within your organisation, particularly to those with a commercial, procurement and/or contract management role. It may also be relevant to those in finance, operational and sustainability roles.

5. Other public sector contracting authorities may wish to apply the approach set out in this PPN.

6. For the avoidance of doubt, this PPN does not apply to NHS trusts or to contracting authorities whose functions are devolved or mainly devolved functions of Scotland, Wales or Northern Ireland.

7. In-scope organisations should take action to apply this PPN when awarding public contracts[footnote 1] for goods and/or services and/or works, other than special regime contracts,[footnote 2] with an expected contract value above £5 million per year[footnote 3] (including VAT) under the Procurement Act 2023 except where, in exceptional circumstances, it would not be relevant or proportionate to do so having regard to the nature, cost and complexity of the contract.

8. This PPN applies to framework agreements and dynamic markets where it is estimated that the value of any individual contract to be awarded under the framework agreement or dynamic market is greater than £5 million per year (including VAT).

Timing

9. In-scope contracting authorities must apply the provisions of this PPN in relevant procurements advertised[footnote 4] on or after 1 October 2025. In-scope contracting authorities should continue to apply PPN 015 to all relevant procurements before this date.

Action

10. Where this PPN applies, in-scope contracting authorities must use the questions in the Procurement Specific Questionnaire (PSQ). The questions require a supplier to demonstrate it is paying at least 95% of invoices within 60 days (90% with an action plan), and also paying all its invoices within an average of 45 days.

Assessment questions and guidance

11. The accompanying guidance explains how to assess (with specific questions) a supplier’s payment systems to demonstrate it has a reliable supply chain and when it would be appropriate to exclude suppliers that cannot demonstrate effective systems are in place. It also gives examples of exceptional circumstances where it might not be relevant or proportionate to apply this PPN, and explains the process for an exemption request.

Background

12. The Government has committed to tackling late payments as part of its Plan for Small Businesses. This PPN will help to unlock £20 billion in unpaid invoices and ensure small businesses are supported more widely by encouraging better cash flow, enabling them to more easily invest in their own growth.

13. This PPN replaces a series of previously issued PPNs including PPN 015 (PPN 10/23 under the PCR 2015) and PPN 08/21. The key update is a reduction in the average payment days threshold suppliers have to meet to demonstrate they have effective payment systems in place to ensure the reliability of their supply chains.

14. PPN 015 replaces PPN 10/23 and is in effect between 24 February 2025 and 30 September 2025.

Contact

15. Enquiries about this PPN should be directed to the Crown Commercial Service Helpdesk (telephone 0345 410 2222, email info@crowncommercial.gov.uk).

  1. See Section 3 of the Procurement Act 2023 ↩

  2. See section 10(6) of the Procurement Act 2023 ↩

  3. Based on advertised contract value averaged over the life of the contract, e.g. a contract with a four year term with a total contract value of £21 million would be in scope, even if the value in the first year was under £5 million. The term length of a contract will include any extension options, if applicable. ↩

  4. Advertisement includes the publication of a Planned Procurement Notice or Preliminary Market Engagement Notice. ↩

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