Suppliers must pay invoices within 55 days to secure government contracts

Businesses vying for government contracts over £5m must adhere to updated Prompt Payment Guidance. They must pay 95% of invoices within 60 days and maintain an average payment time of 55 days. Non-compliance risks eligibility. Suppliers failing slightly may submit corrective action plans.

Businesses bidding for government contracts worth more than £5m must now ensure that they pay their invoices from suppliers within an average of at least 55 days. The change is part of an update to the Prompt Payment Guidance policy and became effective on 1 April. Failure to abide by the policy could lead to companies losing their eligibility to bid for major projects and works.

The guidance states that to show that government suppliers have an effective payment system, they 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

Suppliers must fulfil both criteria in at least one of the two previous six-month reporting periods, otherwise they will fail 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.

The guidance offers the following advice for businesses wishing to secure government contracts:

1. Pay suppliers on time and within agreed terms.
2. Give clear guidance to suppliers on terms, dispute resolution and prompt notification of late payment.
3. Support good practices throughout their supply chain by encouraging the adoption of the Prompt Payment Code.

If you would like more information about the issues raised in this article or any aspect of contract law, please contact a member of our team on 020 8290 0333 or email info@judge-priestley.co.uk

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