Contractors working in the public sector will face spot checks as the government attempts to clamp down on late payment in the supply chain.
All construction projects worth more than £5m could be examined by public sector bodies in an attempt to uphold 30-day payment times.
Documents published by the Cabinet Office last Thursday (24 April) detailed how from 1 October 2025 public sector organisations should “conduct spot checks on invoices at random to deter non-compliance with the terms set out in the Procurement Act 2023”.
“[They will also] be able to conduct targeted spot checks where an authority has assessed there to be an increased risk of poor performance”. This would be if they have previously found poor payment performance, or if there are increased risks with particular suppliers or industries, the guidance adds. All instances of poor performance will then be reported online.
“We know strong cashflow builds resilience, and helps small companies to grow,” said Daniel Elmer, senior policy advisor at the Cabinet Office.
“They should have the confidence of knowing they are going to be paid on time, without having to resort to claims against their contractors,” he added in a LinkedIn post last Friday.
The Procurement Act, drawn up by the former Conservative government, requires 30-day payment terms throughout the public sector supply chain, and places a duty on contracting authorities to consider removal of barriers to entry for SMEs.
It stipulates that payment must be made within 30 days of a valid invoice being received by the contractor, rather than within 30 days of it being validated.
Authorities in scope will be expected to conduct spot checks at least once every six months, from the date when contracts are awarded.
The government’s Public Procurement Review Service (PPRS) will also investigate payment procedures following complaints “against a contracting authority, a primary supplier, or any other supplier within the supply chain”.
Supply chain partners can raise complaints about late or unfair payment practices in the public sector by contacting the PPRS at publicprocurementreview@cabinetoffice.gov.uk.
Payment providers facing a spot check will be asked to provide evidence of prompt payment, which could include screenshots of finance systems, copies of invoices, or any verification from subcontractors.
In particular, the guidance advices public sector authorities to request at least three months’ worth of payment performance data, as well as details of all the procedures suppliers have for resolving disputed invoices “promptly and effectively”.
Contractors that do not meet the prompt payment guidelines could face warnings that they may be in breach of their contracts, and could be asked to explain why they have not paid on time and what they are doing to improve those payment times.
All spot checks will also be published online, and will be added to a central digital platform. The Cabinet Office has also published a template for public sector payment spot checks.
The notice applies to all central government departments, executive agencies and non-departmental public bodies, but other public sector contracting bodies are also invited to use the guidance to carry out similar checks on their supply chain’s payment times.
The guidance notice states: “Being paid promptly for work done is critical for business cashflow 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.”
Last September, the government announced plans for a fresh “crackdown” on late payment, vowing to use existing laws to “step up” enforcement of large companies not complying with their pay performance obligations. They threatened to land any who do not comply with “potentially unlimited fines and criminal records”.
The following month, the government announced more measures to crack down on late payment, forcing large contractors to report the proportion of retention sums they withhold from suppliers.