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Masthead Healthcare - Procurement and Contracts

Supply chain visibility

Procurement iStock 000002542569XSmall 146x219Following the government's publication of a new procurement policy note on supply chain visibility, do you need to update your T&Cs? Ruth Smith explains.

A new Procurement Policy Note (PPN) from the Crown Commercial Service requires in-scope organisations to take action to update their terms and conditions to include new obligations on suppliers relating to supply chain visibility. Check below to see if this applies to you and, if so, what you need to do.

In scope organisations

The PPN applies to all Central Government Departments, Executive Agencies and Non-Departmental Public Bodies (NDPBs).

What’s required?

For all new procurements commencing from 1st May 2018 which are covered by the Public Contracts Regulations 2015 and which are valued at over £5m per annum, in-scope organisations must update their contract terms and conditions to include clauses which place new obligations on successful prime supplier(s) to:

  • advertise on Contracts Finder, sub-contract opportunities arising from that contract with a value above £25,000; and
  • report on how much they spend on sub-contracting and, separately, how much they spend directly with SMEs and VCSEs in delivering the contract.

The standard clauses for inclusion in the contract with the prime supplier are provided in the Annexes to the PPN.

Prime supplier to advertise sub-contracting opportunities

The obligation on a prime supplier to advertise sub-contracting opportunities does not apply to sub-contracts arranged or existing prior to the award of the contract (e.g. as part of the tender process).

The inclusion of this new contract condition, requiring the prime to advertise sub-contracts over the specified threshold, must still be relevant and proportionate to the subject matter of the contract. The PPN acknowledges that there may therefore be some exceptions when inclusion of this condition will not be required, or where the threshold for advertising should be increased. For example, if national security interests mean sub-contracts cannot be openly advertised; or if the £25,000 threshold for advertising would be unduly burdensome in the specific circumstances. The test of what is relevant and proportional must be considered on a case by case basis and according to the specific circumstances of the contract.

Beyond advertising, the standard clause does not specify how the prime should conduct the procurement of the sub-contract but there is an expectation that a reasonable time period is given for potential sub-contractors to respond.

The prime should also update the Contracts Finder notice within 90 days of the award to include the appointed sub-contractor(s) details.

Providing data on supply chain spend with SMEs

This further new contract condition requires successful suppliers to provide in scope organisations with data on their direct spend with SME/VCSEs in the supply chain relating to that contract. The data provided, at frequencies to be specified by the in scope organisation, must include:

  • the value of contract revenue sub-contracted; and
  • the value of contract revenue subcontracted to SMEs or VCSEs.

Again, inclusion of this requirement is still subject to the test that the obligation is both relevant and proportionate in the circumstances.

For further details, the PPN (including the suggested standard clauses for inclusion in contracts) is available here.

Ruth Smith is a consultant at Mills & Reeve. She can be contacted on 01223 222585 or This email address is being protected from spambots. You need JavaScript enabled to view it.. This article first appeared on the firm's Procurement Portal.

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