Procurement in a Nutshell: Procurement Act 2023 – Poor Performance
14th October, 2024
This article will build upon our recently published Nutshell which explores the requirement to set key performance indictors (KPIs) in order to assess supplier performance, as well as outlining the obligations on contracting authorities in relation to the Contract Performance Notice.
In our previous Nutshell, we explained that, under Section 71, there are three circumstances in which a Contract Performance Notice must be published.
This Nutshell will evaluate the obligation to publish a notice in response to a supplier’s continued poor performance under Section 71(4).
Please see our future Nutshell for discussion on Section 71(5), the publication of the Contract Performance Notice following a breach of contract.
Refresh: Setting and publishing KPIs
Before entering into a public contract with an estimated value of more than £5 million, section 52(1) generally requires that a contracting authority must set at least three KPIs in respect of the contract.
Where a contracting authority has set KPIs in accordance with Section 52, Section 71(2) requires that it must assess and publish the supplier’s performance against those KPIs.
Section 71(4): Poor Performance
In addition to Section 71(2), a Contract Performance Notice must also be used to publish information about a supplier’s poor performance in accordance with Section 71(4).
The Act stresses that a supplier must have first been given proper opportunity to improve performance. Only if a supplier fails to do so may the notice be published under section 71(5). The guidance states that this is to provide an additional safeguard to suppliers given that, under Schedule 7, a contracting authority has discretion to exclude a supplier for poor performance.
The Contract Performance Notice must be published within 30 days of the day on which section 71(5) first applies in relation to the failure to perform. The guidance states that the contracting authority will need to determine the precise date when the supplier has failed to perform to the contracting authority’s satisfaction after having been given a proper opportunity to improve its performance. The guidance explains that this date may, for example, be the date on which a notice was issued to the supplier to the effect that it has failed to implement an agreed rectification plan.
Contracting authorities should note that Section 71(5) applies to most public contracts (not just those above £5 million, as is the case with Section 71(2)) including frameworks and concession contracts.
What does this mean?
As previously mentioned, the Act places more emphasis on the setting of KPIs and assessment of performance than has previously been the case.
Under Section 71(5), poor performing suppliers could be exposed in the public domain through the Contract Performance Notice, and, in extreme cases, excluded from future procurements under Schedule 7.
While this can act as an effective commercial tool for contracting authorities in securing a ‘good’ performance, we advise that a clear procedure for handling poor performance prior to the publication of a notice under Section 71(5) is set out in the contract.
For example, the contract cold provide that a contracting authority should serve notice on the supplier that their performance is unsatisfactory (with reasonable details explaining the problem) and require the supplier, within a specified time period, to provide (and subsequently action) an improvement plan. The contracting authority should stress to the supplier that in the event that their performance does not improve, a Section 71(5) notice must be issued. It is advised that contracting authorities provide the supplier with a further assessment of their performance, following their opportunity to improve, providing reasons as to whether a Contract Performance Notice will be published.
It is essential that contracting authorities retain robust records of decision making and correspondence between themselves and the supplier, particularly concerning discussions of poor performance, to reduce the likelihood of challenge from an aggrieved supplier.
For further information please contact Melanie Pears or Tim Care in our Public Sector Team
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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