The Procurement Bill: exclusion and debarment
What you need to know if contracting with the UK Government
In June 2022, Freshfields and Monckton Chambers co-hosted an event on how the Procurement Bill proposes to reform public procurement law in the UK. We are now publishing a series of briefings to provide a summary of the key topics discussed and track the development of the Bill as it passes through the legislative process.
In this briefing, Elizabeth Forster (Freshfields) and Michael Bowsher QC (Monckton) address the provisions in the Bill relevant to exclusion and debarment and their likely effect.
Status of the Bill
The long-awaited Bill was introduced to the House of Lords on 11 May 2022, setting out the UK Government’s proposed reforms to public procurement rules in a post-Brexit world. While the Bill has dropped a number of the more drastic suggestions from the Government’s Green Paper on Transforming Public Procurement, it still proposes a number of significant changes which aim to simplify and improve the UK’s public procurement regime.
The Bill has had its first and second readings in the House of Lords. It is currently at “committee stage”, during which it undergoes a line-by-line examination. This is expected to run through to September, following which the Bill will be referred to report stage and a third reading before it starts its journey in the House of Commons.
The introduction of new exclusion grounds
As under the current regime, suppliers will risk being excluded from tender processes if mandatory or discretionary exclusion criteria apply. While these grounds have largely remained the same, there are a few notable changes:
Exclusion for poor performance (Schedule 7, para 13): The Bill introduces a new discretionary ground for exclusion where a supplier has committed a sufficiently serious breach of a “relevant contract” (which is defined so as to capture public contracts including those entered into with overseas contracting authorities). To be “sufficiently serious”, the breach must have resulted in termination, the award of damages or a settlement agreement between the supplier and the relevant authority.
The ground will also apply where:
- A court has ruled that the supplier has committed a sufficiently serious breach of a relevant contract; or
- The supplier has not performed a relevant contract to the relevant authority’s satisfaction, and was given proper opportunity to improve performance and failed to do so.
This proposed ground complements the addition of new rules in the Bill relating to performance, and reflects the Government’s intention to expand the focus of the public procurement regime from the process of awarding contracts to improving the performance of public contracts.
Exclusion for improper behaviour (clause 30): Under the Bill, a potential supplier may be excluded where the contracting authority determines that they have acted improperly in relation to a procurement and, by consequence, they have been put at an unfair advantage. Exclusion of the supplier must be the only way in which the unfair advantage can be avoided. A supplier may be deemed to have acted improperly in relation to a procurement where they have:
- failed to provide information requested by the contracting authority;
- provided information that is incomplete, inaccurate or misleading;
- accessed confidential information; or
- unduly influenced the contracting authority’s decision-making (clause 30(4)).
Before excluding a supplier on this basis, a contracting authority must give them “reasonable opportunity” to: (i) make representations, and (ii) provide relevant evidence.
A supplier may also be treated as an excluded supplier under clause 30(5) where a contracting authority has requested information about their connected persons or associated suppliers, to determine whether or not the supplier is an excluded or excludable supplier, and they have either: (i) failed to provide the information requested, or (ii) provided information that is incomplete, inaccurate or misleading.
A new test for the application of exclusion grounds
Under the proposed new regime, the existence of a mandatory or discretionary exclusion ground is not enough in itself to mean that a supplier will be “excluded” or “excludable”. Contracting authorities must first consider whether the circumstances giving rise to this exclusion ground are likely to occur again. In making this assessment, contracting authorities may have regard to certain matters, including:
- evidence that the circumstances have been taken seriously e.g. because compensation has been paid;
- steps that have been taken to ensure the circumstances do not happen again; and
- the time that has elapsed since the circumstances last occurred (clause 55(1)).
Interestingly, this places the onus on contracting authorities to make this assessment, and raises questions as to what evidence suppliers could provide to satisfy the contracting authority that the circumstances would not be repeated.
The extension of exclusion grounds to associated suppliers and subcontractors
Unlike under the current regime, suppliers under the proposed procurement rules may be excluded from a tender process by virtue of an exclusion ground applying to their associated suppliers, which includes any supplier that the bidding entity “is relying on in order to satisfy the conditions of participation” (clause 26(4)). To best prepare against the risk of being excluded on this basis, potential suppliers will therefore need to determine which of their suppliers they are“relying on”, how best to identify whether any exclusion grounds apply to those suppliers, and whether it is worth replacing that supplier if they do.
Even if it is established that an exclusion ground applies to one of its associated suppliers, a supplier has two lifelines: first, as noted above, contracting authorities must consider whether the “circumstances giving rise to the application of the exclusion ground” are likely to occur again. Second, under clause 27(4), before excluding a supplier by virtue of one of its associated suppliers, contracting authorities must provide the supplier with “reasonable opportunity” to replace that associated supplier. In either case, suppliers will have the opportunity to rectify the situation.
Under the existing procurement regime, contracting authorities may verify whether any of the grounds for exclusion under Regulation 57 apply to a supplier’s subcontractor. If they do, it must or can (depending on whether a mandatory or discretionary ground has been identified) require the supplier to replace that subcontractor.
The proposed Bill takes this a step further. Under clause 28(2) of the Bill, if the contracting authority considers the subcontractor to be an excluded or excludable supplier, then the contracting authority will also be permitted to treat the supplier itself as excluded or excludable and may proceed to exclude the supplier from participating, or taking further part in, the tender process on this basis. As is the case in respect of associated suppliers, before excluding suppliers by virtue of a subcontractor, contracting authorities must provide them with “reasonable opportunity” to find an alternative supplier with which to subcontract (clause 28(4)).
The introduction of a debarment list
As noted in our previous blog post, one of the key changes envisaged under the new procurement regime is the introduction of a public debarment list, akin to that of international organisations such as the World Bank. If suppliers are placed on this list for mandatory or discretionary exclusion grounds, they will be excluded or excludable suppliers respectively (regardless of whether the circumstances are likely to occur again).
A supplier can only be added to the debarment list by a Minister of the Crown, following:
- an investigation (conducted under clause 57) pursuant to which the Minister is satisfied that the supplier is an excluded or excludable supplier (clause 59(1)(b)), or
- the failure by a supplier to comply with an investigation conducted by an authority, and a subsequent determination by the Minister that this failure was sufficiently serious so as to constitute a mandatory exclusion ground (clause 59(2)).
Suppliers must be given notice of any investigation conducted under clause 57, setting out the relevant potential exclusion grounds and how and when the supplier can make representations (clause 57(3)). The Minister may also by notice require a contracting authority, the supplier or a person connected with the supplier to provide relevant documents for the purposes of the investigation or give other assistance in connection with the investigation (clause 57(4) and (6)).
In terms of the circumstances in which an investigation may be initiated, it appears this will be heavily reliant on the new duty of contracting authorities to notify the relevant Minister whenever they exclude a supplier (or sub-contractor).
If and when the Minister decides to add a supplier to the debarment list it will need to:
- give the supplier notice setting out its decision, along with an explanation of the supplier’s rights to appeal (clause 59(5)).
- prepare a report in relation to the findings of the investigation, give a copy to the relevant supplier as soon as reasonably practicable and publish it (clause 58(3)).
The debarment list will be kept under review and entries may be amended or removed at any time (clause 59(6)). Suppliers that are added to the list will be able to apply at any time for their removal, although such applications will only be considered if (i) there has been a material change of circumstances; or (ii) if they are accompanied by significant information that has not previously been considered (clause 60). Suppliers can also appeal a Minister’s decision to enter their name on the list, or not to remove their name further to a clause 60 application – the rules governing such applications will be set out in regulations yet to be published.
Much of the detail around the debarment list (including in respect of the appeals process) is likely to be clarified in secondary legislation.
The logic behind introducing a debarment list is clear: contracting authorities will more easily be able to identify entities that must or should be excluded from procurements, and thus, as explained in the Explanatory Notes to the Bill, it would provide “additional protection against contracts being awarded to unfit suppliers”. For government contractors, however, the consequences of being excluded from a particular tender process will now be even more severe – both commercially, since a single exclusion decision may now lead to their exclusion from other public tenders more widely, and reputationally, since the reasons for an exclusion may now be made public in a report.
While government contractors should already be assessing the risk of exclusion when preparing bids for public contracts, under the proposed changes they would have to factor in additional risks including when selecting their own suppliers and when performing existing public contracts. The consequences of exclusion would also be amplified with the introduction of a debarment list, particularly for entities that frequently bid for government contracts and/or across multiple departments, since exclusion from a single procurement could – in severe cases – essentially lead to a blanket ban from any public tenders.
This briefing is part of a series. See also: