PPN Prompt Payment (PPN 03)
The Cabinet Office PPN requiring central government suppliers to pay 95 percent of supply chain invoices within 30 days.
Definition
PPN Prompt Payment (formally PPN 03, formerly PPN 07/23) is the Cabinet Office Procurement Policy Note requiring central government suppliers to pay 95 percent of valid supply chain invoices within 30 days. The PPN supports the wider government policy of prompt payment to SMEs and is one of the conditions for bidding on central government contracts. Supplier prompt payment performance is reported and (under the Procurement Act 2023 transparency regime) increasingly visible through the supplier conduct record.
How it works in practice
PPN 03 operates as a pass-fail check at the SQ stage: bidders must confirm they pay 95 percent of supply chain invoices within 30 days, with at least 80 percent within 60 days. Failure to meet the threshold disqualifies the bid from in-scope central government contracts. Suppliers must report actual payment performance through the Government Companies Reporting Reform Act 2023 (formerly the Reporting on Payment Practices and Performance Regulations 2017): UK companies above defined size thresholds must publish twice-yearly reports of payment practices including average payment time and percentage paid within 30 / 60 days. The Cabinet Office maintains a database of prompt payment reports accessible to procurement teams. Suppliers reporting poor prompt payment performance face exclusion from in-scope central government bids. The Prompt Payment Code, operated separately by the Office of the Small Business Commissioner, is a voluntary code requiring 95 percent of invoices paid within 60 days and 95 percent of small supplier invoices within 30 days. Many public sector bidders also hold Prompt Payment Code accreditation alongside PPN 03 compliance. PA 2023 strengthens prompt payment expectations: 30-day payment terms are mandated in public contracts with cascading obligations through the supply chain.
Common questions
What is the PPN 03 payment threshold?
95 percent of valid supply chain invoices within 30 days, with at least 80 percent within 60 days. Failure to meet either threshold disqualifies the bidder from in-scope central government contracts. The threshold applies to the bidder organisation's overall payment performance, not just performance on the specific contract being procured.
How is prompt payment reported?
UK companies above defined size thresholds publish twice-yearly reports under the Reporting on Payment Practices and Performance Regulations 2017 (replaced by the Government Companies Reporting Reform Act 2023). Reports cover average payment time, percentage paid within 30 / 60 days, payment terms, and dispute resolution time. Cabinet Office maintains the database accessible to procurement teams.
Does the Procurement Act 2023 strengthen prompt payment?
Yes. PA 2023 mandates 30-day payment terms in public contracts with cascading obligations through the supply chain: the contracting authority pays the prime contractor in 30 days, the prime pays subcontractors in 30 days, and so on. The transparency regime publishes prompt payment performance feeding the supplier conduct record.