PPNs 015 and 018 on prompt payment in public procurement

Ahead of the commencement of the Procurement Act 2023 on 24 February 2025, the Cabinet Office announced on 3 December 2024 the release of Procurement Policy Note (PPN) 015 and 018. The PPNs mandate that 'in-scope organisations' impose a condition of participation as part of the procurement of major contracts, requiring suppliers to demonstrate prompt, fair and effective payment practices in their supply chains in line with the requirements set out below. A condition of participation is a condition that a supplier must satisfy to be considered for an award of a public contract. The PPNs apply to all central government departments, their executive agencies and non-departmental public bodies which are referred to as 'in-scope organisations'. PPNs 015 and 018 will supersede PPN 10/23 which addressed these concerns under the Public Contracts Regulations 2015 (SI 2015/102) and represent a further ratcheting-up of the standard suppliers to the public sector are required to demonstrate.

Details of the new PPNs are as follows:

PPN 015

1.    Applicability: Effective from 24 February 2025, PPN 015 applies to:

• public contracts for goods, services, or works expected to exceed £5 million per year (VAT inclusive), excluding special regime contracts (concession, utilities, defence and security and light touch contracts); and
• framework agreements and dynamic markets where the value of individual contracts is anticipated to be over £5 million per year (VAT inclusive).

2.    Requirements: Where PPN 015 applies, in-scope organisations will be required to assess, using the questions at Annex A of the guidance which accompanies the PPNs, whether suppliers:

• pay 95% of invoices within 60 days (or 90% with an action plan); and
• pay all invoices within 55 days on average.

3.    Implications: PPN 015 states that suppliers who fail to satisfy the requirements set out above should be deselected as this requirement is a condition of participation.

PPN 018

PPN 018 will replace PPN 015 from 1 October 2025. Whilst the applicability at paragraph 1 and implications at paragraph 3 above will remain the same, PPN 018 will alter the abovementioned 55-day period to 45 days.

To prepare for this, suppliers should ensure that the requirements in respect of settlement of payments are met. It may be useful to share this information with relevant teams such as finance to ensure payments are made on time.  Of particular note will be FAQs 16 and 17 of PPN 015 – day one for counting days is when the invoice is received and includes disputed invoices (i.e. an invoice which is disputed and paid beyond 55 (or 45) days will have to be counted as an invoice paid beyond the required timescale). Relevant contracting authorities will also need to take note of this change and alter processes accordingly. It may be sensible to warn bidders of this change so that they can get their house in order and avoid deselection.