The Authority may have policies in relation to the prompt payment of invoices which might be reflected in the Contract. In any event, it is an essential feature of a well managed Contract that invoices are submitted and then paid on time, in line with the Contractual provisions. Late payments will incur interest and if there is a case of sustained non payment of monthly invoices then the Contract will allow the Contractor to terminate and claim compensation on terms that do not favour the Authority.
The Contract will set dates by which the invoice has to be submitted by the Contractor and the payment by the Authority is due. For example, in the WIDP Contract (Clause 45.2) the Contractor has to issue the invoice on the first Business Day of the month following the month for which the services have been invoiced and the due date for payment is the last Business Day of the month following the month for which the services have been invoiced (Clause 45.4). If payment is made after that date the Contractor is entitled to charge interest at the Prescribed Rate.
The Contract Manager must have systems in place to ensure payments are made in time. Given that the calculation of the payment is complex and the evidence that is provided to support each invoice may be copious these systems need to be streamlined and well managed. Individual responsibilities must be clear to all concerned and arrangements in place for dealing with absences due to annual leave etc. A decision tree setting out the internal approval process can be a useful addition to the Contract Management Manual.
In determining the monthly amount to invoice the Contractor will invariably make use of a spreadsheet, sometimes known as a payment model. Equally, the Authority should also use a payment model to ensure that the invoiced amount is correctly determined. It is good practice for the Authority and Contractor to agree a single payment model to be used by both parties. Each party should retain a copy of the model; the Contractor using it to generate the invoice and the Authority auditing the inputs using its copy of the model to confirm the invoiced total.
If there is a case of sustained late or non payment of monthly invoices then the Contract Manager should make sure that the Contract Management Board is aware of the circumstances. The issue is very likely to be raised by the Contractor and escalated quickly if the problem is sustained. The Contract Management Manual should set out the precise sums and the relevant timescales to allow the user to understand when non payment of the Unitary Charge would trigger Authority Default (see Section 8.5).