Public Contracts Regulations 2015 - Regulation 113

Regulation 113 - Payment of undisputed invoices within 30 days by contracting authorities, contractors and subcontractors

This Regulation establishes that valid and undisputed invoices should be paid within 30 days of their date by contracting authorities, contractors and subcontractors. This obligation should be included in the main contract and filters down through contractors and subcontractors on a "back-to-back" basis (paragraph 2). The Regulation goes further than just demanding explicit clauses to be included as in their absence, the 30 day payment obligation is to be considered as an implied term of contract (paragraph 6), in part defeating the purposes of the grandstanding claims in paragraph 2 that the obligation has to be explicitly included in the contract.

As usual, the obligation created by this Regulation may be subject to guidance by the Minister for the Cabinet Office, covering for example what constitutes a valid and undisputed invoice. Contracting authorities shall have regard for such guidance but there is no explicit consequence if they do not do so.

Not all contracting authorities are covered by the obligation on this Regulation however. Neither the procurement of health care servcies for the NHS under National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013(1) nor maintained schools or academies are subject to it.

Paragraph 7 imposes a heavy reporting obligation on contracting authorities, who have to publish "on the internet" information about its compliance with the obligation. The reporting obligation is clear cut, and in consequence compliance should be 100% but paragraph 7 is really looking to "name and shame" by forcing the disclosure of the proportion of invoices which were paid within 30 days and also the interest costs and payments incurred by non-compliance with the payment deadline. Although I have reservations about the underlying obligation* and consider the reporting obligations onerous, in terms of ensuring compliance, ensuring failure becomes public will increase the likelihood of compliance.

In my view the reporting obligation of paragraph 7 only covers the contracting authority and does not extend to contractors or subcontractors (and rightly so).

*It should be up to the market to determine how and when payments are due. Yes, I know the plight of sub-contractors all too well. Plus, depending on how the "valid and undisputed" elements will be developed in practice may have an impact in liability on complex contracts. There is also the possibility that contractors on large contracts will adopt a cautious approach of challenging invoices from sub-contractors either to maintain the current practice of delaying payments (easing their own cashflow) or to avoid liability risks.