This guidance is aimed at helping maintained schools and academy trusts understand how they can support suppliers through the pandemic
To ensure service continuity during and after the pandemic, schools are advised to support their at-risk suppliers in a range of ways to ensure business and service continuity and to protect jobs.
This guidance only applies to contracted goods, services and works contracts, such as for building works, where there is a direct relationship between the contracting authority and its suppliers under a procured contract; it does not apply to other funding mechanisms such as grants.
While contracting authorities have a responsibility to their own suppliers, this guidance is advisory only; it does not bind contracting authorities to do anything other than what they feel is appropriate under these challenging and complex circumstances.
Reviewing and responding to supplier requests
The definition of ‘suppliers’ can include all organisations providing goods and services to your school, including local authorities and local authority trading services. The DfE knows that schools and trusts are already being contacted by suppliers, and that responding to their requests for relief can be complex and time-consuming. To help you decide how best to respond to any requests, the DfE would like to share details of its approach.
The Department for Education’s five-stage approach
The DfE has previously used the five-stage approach, below, to evaluate suppliers who request relief. This approach may not work for all schools and trusts, as it reflects the complexity and scale of the DfE’s commercial arrangements; it is intended to provide you with some overarching guidance and principles as to how you could choose to support your suppliers.
Stage one: assessment of whether the supplier has considered other measures announced by the government
This involves asking if they have explored, and applied for, as applicable, all other forms of support available to them, including the wider government business support schemes. This is to avoid duplication of funding, such as providing both supplier relief and payment of related workers who have been furloughed under the Coronavirus Job Retention Scheme (CJRS).
Stage two: assessment of whether they are a critical supplier to your organisation
The main consideration here is whether you feel the supplier provides a service or good(s) that are critical to your school in the medium and long term, and are important to business continuity to provide relief against the contract. This may include an assessment of whether the supplier was meeting contract performance standards before service delivery was disrupted.
Stage three: assessment of whether the supplier is financially ‘at risk’ as a result of COVID
In principle a supplier is deemed at risk where they are unable to fulfil the contractual obligations of a contract, due to COVID, and are experiencing financial difficulties as a result.
Stage four: commercial interventions to manage supplier
It is important that commercial judgement is used when considering the type of support, which could include:
payments for previously anticipated volumes, even if not met, or for the advanced order of materials, where appropriate;
continuing to pay for services to suppliers who give their best endeavours to continue delivery despite performance being somewhat affected;
considering an extension of time for contract performance – for example, revised milestones or delivery dates;
taking a more reasonable view on agreed lead times which, despite best endeavours, might not be met by suppliers, and ensuring that their payments are not negatively affected by this;
consider supplementing service delivery through your own resources – though this is likely to be difficult, it may help alleviate the challenges the supplier is suffering as a result of COVID
Stage five: financial interventions
As with the commercial interventions, financial judgement should be used when considering any of the suggested options below:
variation of payment mechanism – specifically beneficial where contracts are based upon the delivery of outcomes or outputs. You can vary the payment mechanisms to provide greater short term cash flow to the supplier, for example moving from payments on delivery of services, works or goods to aligning payments to the costs being incurred by the supplier, or breaking down milestone payments into multiple, smaller payments;
increasing speed of payment – such as paying reconciled invoices before their due date.
If you do choose to make any commercial or financial interventions, you need to make sure they are documented, using the change control clauses contained in the contracts, even if this takes place retrospectively. The Cabinet Office developed a series of model clauses to support Procurement Policy Note 02/20 (expired 30 June 2020) which may be useful.
You also need to work in partnership with the supplier to plan an exit from the agreed interventions and a transition to a new, sustainable, operating model. Read the transition planning section of this guidance.
There are a number of other important points to note when considering how best to implement this guidance for your school or trust:
Maintained schools should get advice from their local authorities on how they are supporting their suppliers, especially where they are accessing supplier contracts that they manage.
Suppliers should not expect to make profits on elements of a contract that are undelivered during this period, and all suppliers are expected to operate with integrity. Suppliers receiving relief should agree to act on an open book basis and make cost data available to you during this period, so please ensure they do so where relevant.
Any relief payments to suppliers can be used to help cover non-furloughed staff costs and other non-staff expenses only. Relief payments must not be used to cover costs associated with staff furloughed under the job retention scheme.
Keeping a record of your agreed approach, and supporting rationale, along with details of any payments made, assessment of risks or contractual changes, is important to show that you have an audit trail. This needs to be maintained throughout the period, and retained afterwards for any future audit purposes.
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