The Ministry of Defence (MoD) has insisted that it is taking steps to engage with suppliers, especially small and medium-sized enterprises, following the delayed implementation of a new purchase to pay system that has left much of its supply base millions of pounds out of pocket.
The Purchase to Pay system, known as Contracting, Purchasing and Finance (CP&F) is intended to make doing business with the MoD more efficient.
The system went live on December 2, with the MoD endeavouring to clear all [issues] resulting from the system downtime as quickly as possible. It added, “However, some minor disruption for up to 2 weeks after ‘go live’ can be expected.”
Over two months later, however, suppliers have complained to Government Computing saying they are still not being paid.
One small and medium-sized company contacted us to say that the system did not appear to have gone live in a workable form, and as a result, a large number of contractors have not been paid by the MoD since October 2016. The suppliers had been given no indication of when that might change, the vendor said. Some, however, are beginning to see payments being made.
The company concerned, having not been paid millions of pounds on outstanding invoices, said it had to approach its bank for special support as a result of the Ministry’s inability to keep up with payments. Usually, the supplier said, once invoices have been signed off by the MoD, payment is quick, within a week. But now, as a result of the CP&F changes, suppliers are beginning to suffer hardship. The supplier said it has been struggling to pay its own suppliers, thus putting its own credit rating at risk.
However, since the row over the late payments erupted this week, one SME said it has now received 40% of the payments it is due, and hopes to receive the remaining payments within the next week. If not, it will consider its options.
One company representative said, “I am hopeful that the MoD are moving in the right direction and that we will continue to receive payments for the backlog of invoices now that the process has started but I am also prepared to be disappointed.” The company said if its overdue invoices are not all settled within the next week or so, then it will consider escalating things further.
It is understood that many SMEs are wary of taking legal action for fear of damaging their future relationship with the Ministry. But one option that seems to have an effect is threatening to stop work on MoD contracts with crucial milestones to meet. One company said adopting such an approach can have an effect in galvanising the relevant MoD project managers.
The MoD, however, has moved quickly to head off discontent, praising smaller suppliers for their role in the supply chain.
An MoD spokesperson said, “Small and medium-sized enterprises are a key part of the defence supply chain and we are committed to ensuring that we continue to support their important work. Now the new CP&F system has been implemented, business with the MoD will be far more efficient.
“We have processed over 90% of the invoices and are dealing with the last few. We are engaging with suppliers and are confident that any delays will be resolved rapidly.”
One SME said it understood the number of invoices that were “on hold” and had not been paid approached 10,000.
But the MoD insisted that since the start of the transition to the new CP&F system, it has paid over £6bn to suppliers, with 83,000 invoices processed and 24,000 requisitions and 23,000 purchase orders raised.
It added that suppliers have been contacted with information on how to resolve any problems. The department stressed that it is “striving to rectify any issues urgently through a series of focused activity to ensure swift transaction processing.”