UK Procurement Bill overhauls rules for exclusion of suppliers

The Procurement Bill, currently before the House of Lords, implements a range of changes to the procurement regime, including in relation to exclusion of bidders for certain offences or other misconduct. 

Mandatory and discretionary exclusion of suppliers was an area identified as unclear and confusing in the current regime and a number of the changes are intended to make the exclusions simpler, clearer and more focused on suppliers that pose an unacceptable risk to effective competition for contracts, on reliable delivery, and on the protection of the public, the environment, public funds and national security interests.

From a supplier's perspective, the Bill will increase the degree of scrutiny of past offences or misconduct and, as such, requires action to plan for these changes.

Exclusion of suppliers

The concepts of mandatory and discretionary grounds for exclusion are set to continue under the new regime but are overlaid with the new concepts of "excluded" and "excludable" suppliers. 

An excluded supplier is one to whom a mandatory exclusion ground applies and the contracting authority considers there is a likelihood of reoccurrence; an excludable supplier is one to whom a discretionary exclusion ground applies and the contracting authority considers there is a likelihood of reoccurrence.

The effect of a supplier being excluded is that the contracting authority must exclude that supplier from the competition, whereas they have a discretion to exclude an excludable supplier. 

This likelihood of reoccurrence is a new matter for contracting authorities to consider. It is somewhat akin to the previous concept of self-cleaning, but the focus is more heavily on future behaviour rather than steps taken to repair past errors. 

Determining reoccurrence

There are specific statutory factors that should be considered in determining the likelihood of reoccurrence of the events that gave rise to the ground for exclusion:

• Evidence that the supplier took the circumstances seriously; for example, by paying compensation.
• Steps the supplier has taken to prevent the circumstances occurring again.
• The supplier's commitment to taking such steps; for example, by provision of information or allowing access to enable monitoring or verification of the steps.
• The time that has elapsed since the relevant events.
• Any other evidence or explanation the authority considers relevant. 

These factors are similar to the process of self-cleaning in the current regime, with the introduction of the time since the event took place as a new factor. In the Bill, there is no specific period during which it is considered the circumstances may be likely to reoccur; though it might be considered that the longer ago that the events took place and the longer the period during which they have not reoccurred, then the lower the likelihood that they will reoccur. 

With the need for the additional consideration of the likelihood of reoccurrence, therefore, the periods set out in relation to the duration of mandatory and discretionary grounds provide less certainty for a supplier as to the point at which events which led to that ground being met will no loner result in exclusion.

Scope extended

The Bill also extends the scope of parties to whom mandatory and discretionary exclusions may be applied. Specifically included are:

• Associated suppliers. A party relied upon to meet participation criteria (for example this might be a parent, consortium member or sub-contractor).
• Sub-contractors. There is no de minimis provision regarding the scale of the subcontract, so, in theory, the contracting authority can require visibility of the whole supply chain and apply exclusion grounds to any party within it. 

Where a contracting authority intends to exclude a supplier on the basis of either an associated supplier or a sub-contractor, the supplier must be given a reasonable opportunity to replace the supplier or sub-contractor before it is excluded from the competition. 

Debarment list introduced

In addition to these changes in how suppliers may be excluded from a competition, the Bill introduces a debarment list.

Some of the detail of how this will work will be contained in secondary legislation and, as such, is not yet visible; however, in summary, contracting authorities that have excluded a supplier, associated supplier or sub-contractor on the basis that they were either excluded or excludable will be required to notify the relevant minister of this occurrence. The minister also has the power – without having been notified in this way – to investigate a supplier for inclusion on the list.

The minister then has a power to investigate the supplier for inclusion on the debarment list. The  process may entail production of documentary evidence and must include an invitation to the supplier to submit representations before the minister determines whether the supplier should be added to the debarment list. 

Checks and balances

Once on the list, there are additional checks and balances with both an appeal process and the possibility of requesting reconsideration on the basis of a material change in circumstances or significant new information. 

If it is on the debarment list for a mandatory ground, the supplier will be excluded and this status is binding on all contracting authorities. In respect of discretionary exclusion grounds, the supplier will be excludable and contracting authorities retain a discretion to determine whether they should be excluded from a given competition.

The intention behind this change is to introduce a more consistent approach to exclusion and avoid the need for contracting authorities to consider the same information about a supplier before determining that a mandatory ground has been met, though they will still need to consider information regarding discretionary grounds in order to exercise their discretion to exclude on that basis.

Osborne Clarke comment

The Bill is currently in the early stages of its passage through Parliament and, even when enacted, the government is clear that there will be a six-month window to allow for preparation for implementation. On a conservative estimate, therefore, these provisions will not be law before late 2023 at the earliest.

Despite the long lead time, there is much to do now. Full visibility of supply chains and consideration of the exclusion grounds in respect of each party in that chain is no small task. We recommends that suppliers start that process now to ensure any changes needed can be secured and embedded comfortably in advance of the new regime taking effect.