Procurement in a Nutshell – National Security under the Procurement Act
27th March, 2025
This Nutshell will assess the national security grounds under the Act, and outline the process which must be followed by contracting authorities to exclude a supplier or terminate a contract on the basis of national security.
The Procurement Act 2023 (the Act) came into force on 24th February 2025.
The Act, in particular, revoked the following:
- Public Contracts Regulations 2015 (PCR)
- Concession Contracts Regulations 2016
- Utilities Contracts Regulations 2016
Contracting authorities must assess the national security threat posed by suppliers, their associated persons and (intended) sub-contractors in all covered procurements.
Debarment
Debarment on national security grounds are as follows:
- Discretionary – a contracting authority has the discretion to allow the supplier to participate in procurements; and
- Mandatory (context-dependent) – a contracting authority must not allow the supplier to participate in procurements for certain types of contracts.
Exclusion
There is a mandatory exclusion ground (Schedule 6, Paragraph 25) and a discretionary exclusion ground (Schedule 7, Paragraph 14) in relation to national security under of the Act.
The mandatory national security exclusion ground applies where a supplier poses a threat to the national security of the United Kingdom in relation to public contracts of a particular description as outlined on the Debarment List.
A supplier to whom a mandatory exclusion ground applies, due to there being a relevant entry on the Debarment List, is referred to as an ‘excluded supplier’ and must be excluded from the procurement by the contracting authority.
In contrast to the mandatory exclusion ground, the discretionary exclusion ground is not specific to contracts of a particular description and can apply to any type of public contract where either:
- a supplier, associated person or intended sub-contractor has been placed on the Debarment List on the basis of discretionary national security ground; or
- a contracting authority concludes that the discretionary national security ground applies to a supplier, associated person or intended sub-contractor based on its own assessment.
Assessing national security threats
Firstly, a contracting authority must determine whether a supplier is already an excluded or excludable supplier on national security grounds. For example, if the supplier is on the Debarment List on a mandatory ground for contracts of the same description as the one being procured or terminated then the supplier is an excluded supplier.
If the supplier has not already been classified as excluded or excludable, the contracting authority should conduct its own assessment as to whether the supplier poses a threat to national security.
If the contracting authority considers that the discretional national security grounds may apply, they should notify the supplier, and consider any representations or evidence provided in order to decide whether they should exercise their discretion to exclude the supplier or terminate the contract.
If the contracting authority intends to take action to exclude a supplier or terminate a public contract on the basis of the discretionary national security exclusion ground, it will need to make a referral to the National Security Unit for Procurement (NSUP) for agreement from the Cabinet Office Minister. The contracting authority will only be able to exclude or terminate if the Minister agrees as mandated by Section 29 of the Act.
If action is taken to exclude or terminate, the contracting authority may be required to notify the Minister or publish a Termination Notice.
Practical considerations
The Act does not define ‘national security’ nor does it provide an outline of those types of procurements which are likely to pose higher risks to national security. However, it is likely that procurements relating to defence and security will be considered ‘sensitive’ procurements as well contracts relating to counter terrorism, cyber and energy security.
While assessing whether a supplier is excluded or excludable is applicable to all procurements under the Act, for ‘sensitive’ procurements, contracting authorities should consider at the earliest stage of the procurement process the additional time that may be required if a referral to the NSUP for Ministerial agreement is necessary. Contracting authorities should also consider any additional information they may need from suppliers to carry out an assessment, which may take the form of additional questions for the supplier in the Procurement Specific Questionnaire.
Contracting authorities should note that they will make all final decisions on whether to exclude a supplier or terminate a contract on national security grounds, although they must first seek Ministerial agreement where a national security ground applies.
What does this mean?
The Act seeks to ensure that national security risks are thoroughly evaluated during public procurements. Contracting authorities must assess whether suppliers, associated persons, or subcontractors pose a national security threat, either through mandatory exclusion or discretionary grounds.
Contracting authorities should plan for additional time and information gathering in sensitive procurements and ensure compliance with the necessary legal steps.
For further information please contact Tim Care or Melanie Pears 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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