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Entrepreneurs supplying the public sector received welcome news today when Alistair Darling announced that the ban on assignment of debt within government contracts will be abolished.
The ban on assignment has prohibited companies from raising funds against invoices from public sector contracts. Now, after lobbying from the Asset Based Finance Association (ABFA), the Office of Government Commerce has committed to removing the standard requirement for departmental consent from their model procurement clauses.
The move was revealed in the Government’s new strategy paper ‘Enterprise: unlocking the UK’s talent’, which was launched to coincide with the Chancellor’s first Budget. It will affect existing and new contracts and means that thousands of companies using invoice finance will now be able to compete on a level playing field for government tenders.
Kate Sharp, Chief Executive of the Asset Based Finance Association, comments: "The ban on assignment of debts has prohibited a company which wishes to tender for a public contract from using an intermediary such as a factor or invoice discounter to raise finance without prior permission. As a result, this has prevented many SMEs, which are more likely to use such services in order to improve cash flow, from tendering for pubic contracts.
"We are pleased that the Government has taken on board our comments and recognised that factoring and invoice discounting is an important source of finance to a large number of UK companies."
ABFA has been lobbying hard on this issue, first in Scotland and latterly in Westminster. Following our discussions, the Scottish Government’s Cabinet Secretary for Finance and Sustainable Growth, John Swinney, announced in October last year that the ban would be lifted north of the border.
In view of the success in Scotland last year, ABFA began a campaign to encourage similar moves in the UK Parliament. ABFA has since met with officials from various government departments including HM Treasury, the Office of Government Commerce and the Department of Business, Enterprise and Regulatory Reform, as well as interested Ministers, to discuss revising the standard guidance on public contracts.
Sharp concludes: "We are grateful to the Ministers and officials we met who have listened to what we have said, and will continue to engage with those responsible for revising the guidance over the next few months."
Notes:
John Swinney announced a change to the Scottish Government’s standard terms and conditions of contract to permit assignation of debts at the third Scottish public procurement conference in October 2007.
He also offered guidance on the removal of the standard ban on assignation of debts in the wider public sector procurement market in Scotland.
The Scottish Government recommended
the use of a clause permitting the assignation of debts or alternatively a standard
waiver for suppliers to send to contracting authorities.