How should public bodies approach the question of providing suppliers with commercial relief in response to the COVID-19 pandemic?
A large volume of guidance has now been issued by the Scottish Government and the Scottish Futures Trust on this topic (see links below) and it is hard to keep up with the ever evolving position. On 17 June 2020, the latest Construction Policy Note 5/2020 was issued by the Scottish Government extending the duration of CPN 1/2020 regarding the impact of Coronavirus on construction contracts until 30 September 2020.
It’s a good time to pause, take stock and consider the key overarching principles that have emerged from this body of guidance.
The main thrust is to encourage public bodies to give appropriate supplier relief on a fair and equitable basis in recognition of the unprecedented nature of the pandemic so as to avoid supplier failures and disputes.
Whilst not etched on tablets of stone, the following Ten Commandments can be distilled from the guidance issued to date.
- Adopt a pragmatic approach and have honest, open and constructive discussions with suppliers.
- Focus on maintaining progress and regular cashflow within existing budgets.
- Maintain accurate records and an audit trail of decisions regarding any supplier relief granted.
- Ensure that supplier relief is demonstrably linked to COVID-19 delays and costs rather than delays and costs which arise separately.
- Ensure transparency and open book accounting including vouching of, and diligence on, reasonable and properly mitigated costs (not including profit) incurred by suppliers.
- Ensure that related payments are made by suppliers to their supply chain timeously.
- Insist on clawback provisions to recover payments made where a supplier fails to act with transparency and integrity.
- Use existing commercial flexibility and mechanisms within contracts and/or enter into formal contract variations where appropriate.
- Adopt a pragmatic, timely and effective approach to contentious issues in order to avoid, and quickly resolve, any disputes.
- Obtain legal advice where appropriate, particularly in respect of contractual rights/variations and compliance with procurement regulations.
The extent to which these Ten Commandments will be obeyed and put into practice as we move forward together out of lockdown remains to be seen.
Links to Scottish Government and SFT Guidance
SPPN 4/2020: procurement regulations for public bodies - 20 March 2020
SPPN 5/2020: supplier relief - 26 March 2020
SFT: Guidance on Operational PPP Projects and COVID-19 – 6 April 2020
CPN 1/2020: impact on construction contracts - 9 April 2020
CPN 2/2020 Project bank accounts signing requirements during COVID-19 CPN 2/2020 – 14 April 2020:
CPN3/2020: preparations for contracting authorities to restart the procurement and management of construction contracts – 28 May 2020
SFT Guidance: Addressing the Impact of COVID-19 on Existing hub Contracts - 20 April 2020
SFT Guidance: Standard Form Contract Amendment for COVID-19 Related Delay (hub D&B Projects) – 14 May 2020
CPN 4/2020: managing disputes and cashflow – 28 May 2020
SPPN 6/2020: making best use of procurement resources during COVID-19 outbreak SPPN
SPPN 7/2020: Annual procurement reports, revised procurement strategies and notifying Scottish Ministers – 4 June 2020
SPPN 8/2020: recovery and transition from COVID-19 – 12 June 2020
CPN 5/2020: CPN1/2020 duration extended – 17 June 2020
Chris Mackay
Consultant
Construction
Chris is a consultant in the firm's Construction and Projects team. Chris specialises in contentious construction law and is a recognised expert in this field.
Andrew Little
Partner
Construction
Andrew provides holistic non-contentious and contentious support for construction, engineering and public infrastructure projects.
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