The Procurement Act 2023 will reform the UK’s public procurement process with the aim of creating a fairer and more transparent system. It also intends to make public procurement more accessible to small businesses in addition to voluntary, charitable, and social enterprises, by enabling them to compete for public contracts. 

Whilst much of the Act focuses on how our colleagues in Procurement will need to operate, Finance and Accounts Payable will have a part to play, as there will be a greater emphasis on how to manage and monitor public sector contracts and increased transparency of these processes. 

In our recent P2P Advisory Forum, we discussed the changes that P2P and Accounts Payable colleagues will need to prepare for.  

The Government are still rolling out the full guidance, and we expect to learn more in the coming months, ahead of the go live date of 28th October 2024. Oxygen Finance will produce follow-ups to this article as more guidance is published. 

The current guidance focusses on 3 key areas: 

Payments Compliance Notices 

There will be an increased number of notices requiring publication as part of the Act, of which one will be a new payment compliance notice: a post contract performance and management notice.  

The Payment Compliance Notices are expected to come into force as part of Phase 1.5 of the Procurement Act 2023 roll out. The draft legislation has defined what must be included in these notices, but we are yet to see the full format expectation. It is understood that all notices will be published on a Central Digital Platform. 

To date, the following has been confirmed. 

For each defined ‘payment period’ the contracting authority must report on the ‘average number of days to make payments’ where day 1 is the first day after the ‘invoice day’, including the percentage of payments made:​ 

• Within the period beginning on day 1 and ending with day 30​ 

• Within the period beginning on day 31 and ending with day 60​ 

• On or after day 61​ 

• The percentage of those payments which were not made within the reporting period, and​ 

• A statement of the director or similar officer of the contracting authority setting out that they approve the payments compliance notice and that person’s name and job title.​ 

Our P2P Forum welcomed the definition of the ‘invoice day’ as this will ensure that all reporting is comparable and avoids ambiguity in the reports they will need to produce.  

Implied Payment Terms  

Any sum due to be paid under the public contract by the contracting authority must be paid before the end of the period of 30 days beginning on the day on which an invoice is received by the contracting authority. If later, payment must be paid the day on which the payment falls due in accordance with the invoice.​ 

This does not apply if the contracting authority:​ 

• Considers the invoice invalid, or​ 

• Disputes the invoice.​ 

On receiving an invoice from a payee, the contracting authority must notify the payee without undue delay if:​ 

• It considers the invoice invalid, or​ 

• It disputes the invoice. 

There is still ambiguity which we hope to resolve through the Phase 1.5 roll out, regarding what is considered undue delay. We discussed that it was not always possible for the AP team to have visibility of disputes, especially where the invoices are not sent to a central location, or where the Service Areas do not update the ERP system.  

Given the reporting periods and the need to avoid unnecessary delays, a robust and well-communicated No PO No Pay Policy will be beneficial. Suppliers should be able to readily access information to support the sending of compliant invoices. Colleagues need to be aware of their responsibilities and how to access support and training if required. 

Valid Invoice Definition 

The Act also defines what is to be classed as a valid invoice;

An invoice is valid if​

• It is an electronic invoice issued in the required electronic form, or​ 

• It sets out the minimum required information and meets any other requirement set out in the contract.​ 

The minimum required information is​

• The name of the invoicing party,​ 

• A description of the goods, services or works supplied,​ 

• The sum requested,​ 

• A unique identification number.​ 

Our P2P Forum attendees discussed that this definition is not as tight as some of their own authority definitions, but the consensus was that it was an accessible definition to all suppliers.  

Many of the authorities present do not regularly reject invoices if they do not contain information such as an open and valid Purchase Order number, but we agreed that it would be something to consider moving forwards. The legislation will provide staff with greater confidence to reject invalid invoices.  

Whilst there are still many questions to answer, we hope this blog provides some insight into the key responsibilities that AP teams will have in the implementation of the Procurement Act and how these areas may support current objectives. Standardising definitions will drive consistency through reporting and increase supplier awareness of their responsibilities. When it comes to internal best practice, Director-level approval of the new payment compliance notice may result in increased impetus from leaders to drive internal compliance and garner greater support from colleagues.  

We’ll continue to keep you updated and if you have any thoughts or feedback, please don’t hesitate to let us know: info@oxygen-finance.com