Public Services > National Security

MoD delays with online procurement system hit SMEs’ pockets

David Bicknell Published 13 February 2017

Smaller suppliers say delays with “CP&F” upgrade means they have not been paid since October 2016, forcing them to approach their banks for financial support

 

The Ministry of Defence (MoD) is under fire from suppliers, particularly small and medium-sized companies, after failing to pay them because of ongoing problems with the upgrade of its procurement systems.

The MoD’s new system, called “Contracting, Purchasing and Finance” (CP&F) is intended to provide a single end-to-end capability which will enable significant improvements for both MOD and suppliers. The MoD has said it will enhance both contract visibility and the contract management processes.

Late last year, in a briefing note on CP&F, the MoD said it had implemented Release 2 of the purchasing and finance components of the CP&F programme, with the systems going live on December 5 2016, combining some functions performed under the previous system.

It said the work would bring a number of applications together, but should be considered more than just a simple merger of these systems. It said improved process changes have been introduced, specifically in the management of contract data and control of contract spend; the on-boarding of new suppliers; the management of catalogue data; changes to managing suppliers and customers; and changes to the processing of invoices.

In its note, the MoD said the process for managing the backlog of outstanding transactions was started on December 2, endeavouring to clear all 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 that they are still not being paid.

One contacted Government Computing 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 MoD since October 2016.  The suppliers have been given no indication of when that might change, the vendor said.

The company concerned, having not been paid millions of pounds on outstanding invoices, has 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 that contacted Government Computing said it has been struggling to pay its suppliers, thus putting its own credit rating at risk.

Suppliers are understood to have contacted the Aerospace Defence and Security (ADS) defence trade group to step up the pressure on the MoD and get answers as to why payments have been delayed.

The supplier said it is continuing to support the MoD with existing work, but fears that payments for invoices for current work will be consequently be held up by the current administrative backlog.

It told Government Computing , “I’m not sure if anything at all happened on the 5th December.

“Basically so far since the “go live” date we have been able to access Exostar, which was and still remains the means by which we submit our invoices to MoD, but until very recently the MoD Project Managers have been unable to raise orders or to see invoices raised against them via the new CP&F system and have therefore been unable to authorise them for payment. 

One vendor said it had recently managed to invoice for the last (and newest) of its contracts. But it believes that there may be a problem with the CP&F firewall meaning that although its invoices are visible to both itself and the MoD project teams (who sign off the invoices for payment), they cannot be seen by Defence Business Services (DBS) Liverpool which actually pays them.

It told Government Computing , “So as a result we have not been paid for the majority work done in Q4 of 2016.  I understand that we are not the only company experiencing these problems and the impression I get from contact with ADS is that there are actually a large number of MoD suppliers who are in the same position.”

Any problems with late payment from government departments such as in this MoD example, risks turning SMEs away from pitching for government business and so failing to provide the “innovation” that the Cabinet Office has been saying is much-needed in government.

GlobalData Public Sector senior analyst Daniel Jones said, “Delays in payments will always disproportionately impact smaller companies. However, this is a particular concern for the defence sector since many smaller firms engaged in this area are highly reliant on defence as their core market, as a percentage of overall revenue.

“In addition, the latest MOD SME policy set a target of increasing SME procurement spend to 25% by 2020. Timely payments underpin all efforts in this area, and continued delays will risk undermining both the MoD’s long term goals and its reputation in the SME supplier community.”

The Ministry of Defence has been contacted for comment.







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