The full impact of COVID-19 on suppliers, supply chains and the economy is still unknown. For this reason departments should consider carefully the likelihood and impact of supplier failure when making purchasing decisions; both in respect of which suppliers it purchases from but also the commercial terms it agrees with those suppliers.
For purchases >£25k (ex-VAT) the University continues to recommend the use of the Supplier Questionnaire to gather due diligence on potential suppliers (who are not preferred). For purchases <£25k (ex-VAT) the Supplier Checklist is also available for use, and is recommended in particular when the supplier is new to the University or not regularly used. In the event that these checks raise concerns regarding financial viability the Financial Reporting Team are able to support with more detailed financial checks and advice on mitigations to identified risks.
In respect of payment terms, wherever possible payment should be made on the acceptance of goods or services delivered. Generally the University should resist requests for advance payment to suppliers and should only consider such payments if there is a clear and commercially reasonable justification. Where advance payments are agreed Financial Regulations require these to be protected by a bank guarantee when they exceed £50k (ex-VAT).
In these uncertain economic times, it is inevitable that some suppliers will fail and the University must take all proportionate measures to ensure that its charitable funds are appropriately protected. Whilst there may be a temptation to reduce due diligence checks or to agree to sub-optimal commercial terms in the interests of expediency, it is important to consider that these decisions are being made in the context of an increasingly uncertain economic environment with many organisations facing serious liquidity challenges.
Where ongoing supplies are business critical departments should also consider making contact with key suppliers as part of their contingency planning to understand their emergency arrangements.
The Purchasing Department continues to be in regular contact with preferred suppliers regarding their plans. It is therefore recommended that departments use preferred suppliers wherever possible. Use of preferred suppliers saves departments time in minimising the need to obtain quotations, check terms and conditions and complete supplier checks. Specific updates regarding preferred suppliers will be provided via Purchasing News.