Many organisations are failing to publish information on their payment practices, which could lead to being barred from government contracts or even the spectre of regulatory enforcement.
Regulations came into force in 20171 requiring all large UK companies and LLPs to publish information on their payment practices and performance twice a year (for further background see Travers Smith's earlier briefing here). A key aim of these measures was to promote transparency around large business' payment of suppliers and the timeliness of payments to small and medium enterprises.
As with the Modern Slavery Act (reported on in our briefing here), this forms part of a continued trend towards increasing corporate transparency and accountability.
Our recent review would suggest that many companies and LLPs are failing to publish the information required. Not only could this lead to legal liability, but it could also directly impact their ability to bid for government contracts.
As of 1 September 2019, any organisation that bids for a central government contract in excess of £5M per annum needs to answer questions about its supply chain management and payment tracking systems. This includes details about payment practices, processes and performance such as the percentage of invoices paid within 60 days.
As a part of this, the government has set a standard of 95% of all supply chain invoices to be paid within 60 days in at least one of the two previous six month periods for organisations who wish to do business with the government. Suppliers who do not comply with this standard could be prevented from winning government contracts.
The Cabinet Office has taken a pro-active approach in this area by recently contacting a number of UK companies who are selling or may plan to sell to government, reminding them of their prompt payment obligations.
For more detail, please see the UK Government's Prompt Payment Policy guidance (available here).