Guidance

PPN 021: Guidance on how to conduct a Payment Spot Check under a public sub-contract (HTML)

Published 24 April 2025

Introduction

1. This guidance supports Procurement Policy Note (PPN) 021 Payment spot checks in public sub-contracts. It sets out how in-scope organisations can conduct spot checks within their public supply chain to ensure suppliers comply with the payment requirements in the Procurement Act 2023.

2. From 1 October 2025, in-scope organisations should include the model terms in Annex A within their in-scope contracts to enable spot checks. This should follow on from terms requiring payment within 30 days and terms requiring those 30-day payment terms to be included in any subsequent sub-contract that is wholly or substantially for the purposes of performing the public contract.

3. The model terms set out in Annex A are also included in the model contracts.

Checklist for Conducting a Spot Check

Contracting authorities conducting a spot check should request the following information from suppliers:	Check
A copy of the payment terms for the contract in question that show a  clear reference to 30-day payment terms, and a requirement for these to be passed down within the supply chain in public sub-contracts.
Details of procedures for resolving disputed invoices promptly and effectively.
Evidence that procedures for resolving disputed invoices promptly and effectively was shared with all sub-contractors in the supply chain.
Evidence of payments made (and time taken to pay) relating to the contract in question. This should be specified by the in-scope organisations but should cover at least the most recent 3 months’ worth of payment performance. (Further details in paragraph 10)

Guidance for Conducting a Spot Check

4. In-scope organisations should carry out a spot check on in-scope contracts at least once every six months from the award date of a contract. Spot checks may be carried out more frequently, especially where a greater risk of non-compliance has been identified, such as the reasons outlined in paragraph 6.

5. An in-scope contract is one with sub-contracts substantially for the purpose of performing (or contributing to the performance of) all or any part of a public contract worth more than £5 million per annum (including VAT), awarded by in-scope organisations.

6. In-scope organisations may conduct spot checks on a specific contract or supplier if there has been poor performance in a prior spot check, a specific issue has been raised with the contracting authority, or the authority has assessed there to be an increased risk of poor performance with a specific contract, supplier, or sector. A specific risk may include suppliers or sectors with long payment terms as standard, historical liquidity issues, or prior complaints with the authority.

7. In-scope organisations must only spot check contracts that are substantially for the purpose of performing (or contributing to the performance of) all or any part of a public contract awarded by a contracting authority.

8. In-scope organisations must notify the supplier if it wishes to undertake a spot check. The in-scope organisations must allow the supplier to respond with the requested information and/or data within 20 working days from receipt of notification. In-scope organisations must notify the supplier using a spot check request, providing information on the process of a spot check, its purpose, and the evidence required from the supplier. The information contracting authorities are permitted to request from suppliers is set out in the checklist above.

9. The requirement to provide evidence of payment within 30 days of receiving an invoice must be proportionate. Suppliers should be asked to provide a time-based range of invoice numbers relating to the public contract. The contracting authority should randomly select at least 10 for sampling, unless there are fewer than 10 invoices relating to the contract.

10. Evidence may include, but is not limited to, screenshots of finance systems, copies of invoices, verification from sub-contractors or other evidence the supplier considers suitable (for example bank statements). The supplier may decide which forms of evidence they supply (for example bank statements may be more suitable evidence for SMEs that do not have finance systems in place). If the evidence supplied is not sufficient, contracting authorities should seek further evidence from the supplier. 

11. This evidence would not include personal data, only payment performance data relating to the contract in question.

12. If a contracting authority identifies that a supplier is not complying with the prompt payment rules, the contracting authority may choose to take the following actions:

a. inform the supplier that 30-day payments are implied into all contracts for the full or part performance of a public contract, that any term purporting to override that is invalid, and that their sub-contractors have the right to claim late payment interest where these terms are not adhered to

b. contact the sub-contractor and inform them that 30-day payments may be implied in their contract terms, even when not expressly included, that any term purporting to override that is invalid, and that they have the right to claim late payment interest where these terms are not adhered to. The contracting authority may also provide information on how the sub-contractor can take action themselves, such as referring the contract to the Public Procurement Review Service

c. request that the supplier explain why the terms have not been adhered to and what action is being taken to remediate the issue

d. inform the supplier that they may be in breach of their contract

13. 1. Contracting authorities should keep a record of any spot checks performed and may wish to create and send the supplier a summary report of the spot check covering the following information, specifically regarding the contract that was spot checked:

• confirmation the supplier expressly included 30-day payment terms in their sub-contracts at the time of the spot check
• confirmation the supplier had procedures in place for resolving disputed invoices promptly and effectively and evidence of this was shared with all sub-contractors on the contract in question at the time of the spot check
• number of invoices reviewed as part of the spot check
• % of invoices paid within agreed terms
• a reminder of statutory obligations

14. The contracting authority may wish to undertake a further spot check in the following months to ensure progress has been made if the contracting authority had any concerns regarding performance or adherence to the rules at the time of the spot check.

15. After a spot check has been conducted, the contracting authority should publish the outcome online within 3 months (the authority may wish to upload in bulk with other checks). The intention is to upload this information to the Central Digital Platform once this functionality has been added.

16. A template for publishing the outcome of a spot check is provided in Annex B. This should be published online until the Central Digital Platform can be used to upload the spot check outcomes.

Annex A - Example Contractual Terms

These terms are provided by way of example and should be used as a guide only. Contracting authorities should take their own legal advice on the use and suitability of the example terms below.

The definitions and references used below will need to be amended and adapted to fit within any relevant contract.

Example Definitions

Authority: [complete as appropriate];

Contract: this contract between the Authority and the Supplier;

Effective Date: the date on which the Contract comes into effect;

Services: any and all of the services to be provided by the Supplier under this Contract;

Sub-Contract: any contract or agreement (or proposed contract or agreement) between the Supplier (or a Sub-contractor) and any third party whereby that third party agrees to provide to the Supplier (or the Sub-contractor) all or any part of the Services or facilities or services which are material for the provision of the Services or any part thereof or necessary for the management, direction or control of the Services or any part thereof

Subcontractor: any person other than the Supplier who is a party to a Sub-contract and the servants or agents of that person

Supplier: [complete as appropriate].

1. Supply chain payment period compliance

1.1. The Supplier must on demand provide the Authority with all co-operation, assistance, documentation and other information that the Authority may reasonably require to allow it to effectively investigate and assess the Supplier’s and/or any Sub-contractor’s compliance with their respective obligations to pay undisputed invoices within a specified time period.

1.2. For Sub-contracts in the Supplier’s supply chain which are entered into wholly or substantially for the purpose of performing or contributing to the performance of the whole or any part of this Contract:

i. after the Effective Date, the Supplier will ensure that they all contain provisions that, or

ii. on or before the Effective Date, the Supplier will take all reasonable endeavours to ensure that they all contain provisions that:

1.2.1. require the Sub-contractor on demand to provide the Authority with all co-operation, assistance, documentation and other information that the Authority may reasonably require to allow it to effectively investigate and assess compliance with the Sub-contractor’s obligations to pay undisputed invoices within a specified time period;

1.2.2. expressly provide the Authority with the right to enforce the provisions in clause [1.2.1] above directly by reference to the Contracts (Rights of Third Parties) Act 1999; and

1.2.3. require the Sub-contractor to include terms equivalent to those in this clause [1.2] in any contracts it enters into wholly or substantially for the purpose of performing or contributing to the performance of the whole or any part of this Contract, such that each Sub-contractor is obliged to include equivalent terms in any of its own relevant Sub-contracts. In these Sub-contracts’ clauses, references to the “Supplier” and “Sub-contractor” are to be replaced with references to the respective Sub-contractors who are parties to the relevant contract.

Annex B - Payment Spot Checks Outcome publishing template

Spot check and contract information

Date of spot check	[XX Month Year]
Supplier company name	[Name]
Supplier company number	[XXXXXXX] or [Not applicable]

Contract name	[Name]
Procurement identifier (OCID)	[XXXX-XXXXXX-XXXXXX]

Spot check and contract information

Date of spot check:

Supplier company name:

Supplier company number:

Contract name:

Commercial Lead:

Spot check outcomes

Requirement	Outcome
Confirmation that 30-day payment terms have been included in sub-contracts for this contract	[Yes/No]
Confirmation that the supplier has procedures in place for resolving disputed invoices promptly and effectively	[Yes/No]
Confirmation that the procedures for resolving disputed invoices have been shared with all sub-contractors for this contract	[Yes/No]

Payment performance

Metric	Value
Number of invoice spot checks carried out	[XX]
Percentage (%) of invoices paid within agreed terms	[XX%]

Actions

Metric	Value
Was any further action taken following the spot check? If yes, please provide information on the next page	[Yes/No]

Actions taken

Please provide a brief overview of any actions taken by the contracting authority following the spot check. or [Not applicable:

Further information

Provide any further information that may be relevant or enter not applicable:

The information and data provided for this specific contract were correct at the time of the spot check.

This document may be published on GOV.UK and/or a contracting authority’s website.

For more information, please read PPN 021.