Show me the money: new guidance for NHS contracts

The Cabinet Office Procurement Policy Note PPN 02/20 has been supplemented by some equally exciting guidance aimed at NHS bodies. This is actually quite helpful.

It lasts until 30 June 2020, it may be extended if the Government decides to do that but it is not designed to take precedence over PPN 02/20.

Here are the main points.

Payment terms

NHS Organisations (CCGs, Trusts and Foundation Trusts) must aim to:

  1. Pay invoices in seven days of receipt.
  2. Process undisputed elements of invoices currently on hold.
  3. Resolve all queries within seven days.

The process is aimed to ensure cash flow is kept manageable during the pandemic. It recommends using BACS, processing payments early in the working day and using standard business measures (which are not defined).

The proposal does not supplant financial governance and value for money. Neither does it follow that changes to the contracts will be automatically made due to the PPN. Each variation will have to be assessed.


The PPN does indicate that if the Accountable Officer decides they can authorise prepayment. It is not an automatic entitlement. There are a few pre-conditions:

  1. It is for use in extremely limited and exceptional circumstances when the AO decides that goods are to be supplied but that the supplier needs the money to maintain stock levels and cash flow.
  2. Must not exceed 25 per cent of contract value.
  3. The prepayments must be accounted for against those supplied.
  4. Consider a prepayment carefully if the supplier is an under performer.

Prepayment schemes will cease on 30 June 2020.

Payment when supply is reduced or paused

In the case of a supplier who is of national importance and of a strategic nature, NHS England and NHS Improvement may allow flexibility in payment if due to Covid supplies have ceased or are temporarily delayed.

Any payment will be reconciled once the situation has eased up, or after 30 June 2020.

Suppliers may be asked to provide substitute items or redeploy staff to remedy the problem.

NHSE and NHSI may decide that even if a local supplier is not of strategic importance their contribution nationally is of such value that they qualify for these payments.

It is, it would seem, a decision for NHSE and NHSI.

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Every piece of content we create is correct on the date it’s published but please don’t rely on it as legal advice. If you’d like to speak to us about your own legal requirements, please contact one of our expert lawyers.


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