PPN 021: Payment Spot Checks in Public Sub-Contracts · first published 23 April 2025
The Procurement Act 2023 (Section 73) automatically writes 30-day payment terms into every public sub-contract — meaning if you supply a prime contractor who holds a central government contract, you are legally entitled to be paid within 30 days of sending a valid, undisputed invoice, even if your contract says nothing about it. This Procurement Policy Note (PPN) 021 goes further: it requires central government buyers to actively spot-check their supply chains to make sure those 30-day terms are actually being honoured. Spot checks must happen at least every six months on in-scope contracts. If you are being paid late, you can now report it to the Public Procurement Review Service. The rules kick in for new contracts advertised from 1 October 2025 and apply to sub-contracts under public contracts worth more than £5 million per year (including VAT).
WHO THIS APPLIES TO
THE ENKII VIEW
This is a practical win for small businesses sitting in tier-2 or tier-3 supply chains: the 30-day payment right was already in law, but now buyers are obliged to check compliance every six months rather than waiting for problems to escalate. The formal complaints route to the Public Procurement Review Service gives SMEs a low-cost lever against late-paying prime contractors without having to go to court. The risk to watch: the £5m-per-annum threshold means sub-contracts under smaller public contracts are not covered, so SMEs on lower-value work still lack this specific protection.
1. Keep records of every invoice you send to your prime contractor — date sent, amount, and date paid. If payment exceeds 30 days from receipt of a valid, undisputed invoice, you now have a documented case to raise.
SMEs supplying tier-1 (prime) contractors on central government contracts >£5m p.a. — Section 73(1) of the Procurement Act 2023 automatically implies 30-day payment terms into your sub-contract. Documented invoicing evidence is what a spot check or complaint investigation will rely on.
2. Report late payment to the Public Procurement Review Service by emailing publicprocurementreview@cabinetoffice.gov.uk — include your invoice records, the contract details, and the name of the prime contractor.
SMEs being paid late by a prime contractor on a qualifying public contract — The PPN states 'The Public Procurement Review Service will investigate when a specific complaint has been raised against a contracting authority, a primary supplier, or any other supplier within the supply chain', giving you a formal, no-cost route to escalate.
3. Check the new contract terms for the model spot-check clause; ensure your own sub-contractor payment processes and records can withstand a six-monthly audit, and brief your finance team accordingly.
SMEs bidding to be prime (tier-1) suppliers on new central government contracts advertised from 1 October 2025 — In-scope buyers must include a model contractual term enabling spot checks and must run them at least every six months. Failure to pay your own sub-contractors within 30 days could surface in a check and put your contract at risk.
4. Monitor whether your buyer adopts these spot-check practices voluntarily; the same 30-day right under Section 73 of the Procurement Act 2023 applies to you, even though the mandatory spot-check regime does not (yet) extend beyond central government.
SMEs in supply chains of wider public sector bodies (e.g. NHS trusts, local authorities) — The PPN notes that 'other public sector contracting authorities may use this guidance' voluntarily — wider adoption is encouraged, meaning these protections may spread even if not yet mandatory outside central government.
Every rule below quotes the official document verbatim.
The PPN applies to all central government departments, their executive agencies and non-departmental public bodies (referred to as 'in-scope organisations'). (Central government departments, executive agencies and NDPBs)
“This PPN applies to all central government departments, their executive agencies and non-departmental public bodies. Such bodies are referred to as 'in-scope organisations'.”
The PPN applies to sub-contracts under public contracts with a value of more than £5 million per annum including VAT. (Public sub-contracts, central government, from 1 October 2025)
“This PPN applies to all sub-contracts substantially for the purpose of performing (or contributing to the performance of) all or any part of a public contract for goods and/or services and/or works, other than a special regime contract, with a value of more than £5 million per annum (including VAT).”
The PPN does not apply to concession contracts, utilities contracts awarded by a private utility, or contracts awarded by a school. (All in-scope organisations)
“This PPN does not apply to concession contracts, utilities contracts awarded by a private utility, or contracts awarded by a school.”
In-scope contracting authorities must apply this PPN from 1 October 2025, for new contracts advertised (via a UK4 tender notice) from that date. (Central government departments, executive agencies and NDPBs)
“In-scope contracting authorities should apply this PPN from 1 October 2025.”
Section 73(1) of the Procurement Act 2023 automatically implies 30-day payment terms into every public sub-contract, even if not explicitly included. (All public sub-contracts)
“Section 73(1) of the Procurement Act 2023 implies 30-day payment terms into every public sub-contract.”
Payment must be made within 30 days of a valid and undisputed invoice being received, not within 30 days of the invoice being validated. (All public sub-contracts under the Procurement Act 2023)
“payment must be made within 30 days of a valid and undisputed invoice being received, rather than within 30 days of being validated.”
In-scope buyers must conduct payment spot checks on supply chains at least once every six months from the contract award date. (Central government, contracts >£5m p.a. inc. VAT, advertised from 1 October 2025)
“In-scope contracting authorities should conduct payment spot checks within the supply chain for contracts in scope of this PPN at least once every six months from the award date of the contract.”
Spot checks will be conducted on invoices at random to deter non-compliance, but targeted checks are permitted where increased risk of poor performance is identified. (Central government, in-scope contracts)
“In-scope contracting authorities should conduct payment spot checks on invoices at random to deter non-compliance with the terms set out in the Procurement Act 2023 (Section 73), but will be able to conduct targeted payment spot checks where an authority has assessed there to be an increased risk of poor performance.”
In-scope buyers must include a model contractual term in new in-scope contracts to enable them to conduct payment spot checks. (Central government, new contracts advertised from 1 October 2025)
“In-scope contracting authorities should include a model contractual term in new in-scope contracts, advertised from 1 October 2025, to enable them to conduct payment spot checks.”
Suppliers can report complaints about late or unfair payments to the Public Procurement Review Service at publicprocurementreview@cabinetoffice.gov.uk. (All suppliers in public contract supply chains)
“Suppliers are encouraged to report any complaints for late or unfair payments in public sector contracts by contacting: publicprocurementreview@cabinetoffice.gov.uk.”
Other public sector contracting authorities (outside central government) may use this guidance voluntarily to carry out supply-chain spot checks. (Wider public sector (voluntary))
“Other public sector contracting authorities may use this guidance to carry out spot checks to ensure that 30-day payment terms are being implemented throughout their supply chain in public sub-contracts.”
This briefing is enkii's interpretation of the official document — the official text always governs.
Source document © Crown copyright, reused under the Open Government Licence v3.0 via the GOV.UK Content API. enkii tracks every Procurement Policy Note and briefs changes the day they land — see all briefings.