Procurement and Recession

The UK is predicted to soon enter recession and may have already done so.  Multiple stresses are weighing on the economy, both those that have built up over a long time, and those that have arisen in the last few weeks and months to further compound the problem.  Covid-19, government debt, inflation, the collapse of Sterling, energy prices, strikes and the cost of living are just a handful of the major factors at play. A recession will impact procurement, and businesses and contracting authorities need to be prepared.

For Businesses and Contracting Authorities:

• Review and understand your contract;
• Understand where your risk is, what that risk means and who bears that risk under the contract;
• Diversify your supply chain/understand your alternatives and how accessible they are; and
• Be aware of where risk from hyperinflation lies, and, if necessary, be prepared to pay associated costs in order to prevent supply chain insolvency.

For Contracting Authorities Consider:

• Including bonds, insolvency cover and collateral warranties in contracts as applicable;
• Whether your contracts cover you commercially for all potential risks;
• What your contracts say in the event that the supplier/contractor is not paying sub-contractors;
• Adequately investigating any abnormally low tender responses;
• Setting up a multi-supplier framework rather than a single supplier contract; and
• Establishing a system for identifying a supplier/contractor that is facing financial difficulty.

How Can Procurement Experts Quigg Golden Prepare you for a Potential Recession?

Procurement is already going through a period of change, due to the post-Brexit reworking of procurement law currently known as the Procurement Bill 2022.  Quigg Golden previously broke down and provided updates on this Procurement Bill in the Spring and Autumn editions of Insight Magazine, available here.

What’s more, it is possible the global economy may be about to enter a recession, with the US Federal Reserve putting up interest rates and national equivalents following suit.  Businesses in construction and elsewhere must ensure they are prepared in the short, medium and long term.  If you are worried that your contract does not cover you for particular risks, contact a member of our team who will assist you.

Check out the current stage of the proposed new Procurement Bill  here