Cabinet Office admits majority of firms working on schemes under threat from pandemic
Public authorities have been told to keep paying "at risk" contractors if projects have been stopped by the coronavirus lockdown.
The Cabinet Office has issued guidance telling public sector clients to help support firms through the coronavirus crisis.
It said: "The contracting authority should continue to pay suppliers at risk due to covid-19 on a continuity and retention basis until at least the end of June 2020."
The government said it needed to do this to ensure supplier cash flow and maintain cash flow in the supply chain.
It also said continued payment would help protect jobs and ensure suppliers are better able to cope with the current crisis and to fulfil contractual obligations once the coronavirus crisis is over.
The guidance said this advice applies where works are required to be stopped or scaled back at short notice due to the impact of covid-19 and non-payment could result in supply chains collapsing or significant financial implications that could lead to job losses.
It also said: "It would be value for money and important to business continuity to continue to pay suppliers in the short term, regardless of whether contracting authorities are able to reconcile at a later stage, to ensure that the supplier can complete the works in due course."
Contracting authorities have been told to identify their suppliers at risk and this should be taken on a case by case basis.
The Cabinet Office added: "We anticipate the majority of suppliers will be at risk during this period and authorities do not need to undertake a detailed assessment of suppliers’ financial viability to determine whether they are at risk, but clearly suppliers that are not impacted by covid-19 should not benefit from relief."
The advice also said there were a range of ways to provide payment relief to suppliers during this period.
It said: "Contracting authorities can continue to pay at usual contractual rates or consider other options such as payment against revised/extended milestones or timescales, interim payments, forward ordering, payment on order or payment in advance."
Suppliers able to continue delivering their contract as normal should be paid as normal under the agreed payment regime, it added.