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Posted: Fri 25th Apr 2025
The government has published guidance for new mandatory spot checks within public supply chains to enforce prompt payment of invoices.
The update reveals that the changes, as part of the Procurement Act 2023 which became law on 24 February this year, mean that from 1 October 2025 all in-scope public sector organisations (those awarding contracts worth over £5 million annually) must include model contract terms enabling spot checks in their supply agreements to check that invoices are paid within 30 days.
The Procurement Act requires 30-day payment terms in contracts, including for sub-contractors. The policy note outlining the spot checks said:
"Being paid promptly for work done is critical for business cash flow and the government is committed to tackling late payment to businesses. Prompt payment ensures liquidity spreads throughout the economy, helps more small businesses within public procurement, and improves the resilience of public supply chains."
The guidance says contracting authorities will be required to conduct spot checks at least once every six months from the award date of a contract.
Checks can be carried out more frequently where a greater risk of non-compliance has been identified, such as contracts or sectors with a history of payment issues, liquidity concerns, or where complaints have been raised.
Contracting authorities need to request details from suppliers including copies of the contract's 30-day payment clauses, payment dispute resolution procedures and proof that the procedures have been shared with sub-contractors.
Suppliers have 20 days to respond to a spot check with evidence such as screenshots of finance systems, copies of invoices, bank statements, and verification from sub-contractors.
If late payment of invoices is identified, contracting authorities can take action including reminding suppliers and sub-contractors of their legal rights for 30-day payment terms, encouraging sub-contractors to pursue late payment interest, requiring suppliers to resolve non-compliant practices, and informing suppliers they may be in breach of contract.
After completing a spot check, the contracting authority is required to publish the outcome within three months on Find a Tender, the central digital platform for public sector contracts.
Contracting authorities can also advise sub-contractors on how can take action themselves, such as referring the contract to the Procurement Review Service which has powers to investigate supplier misconduct and ban them from winning future contracts.
