Procurement in a Nutshell – Procurement Act 2023: Exclusions

On 26^th October 2023 the Procurement Bill received Royal Assent and is now expected to come into force in October 2024.

The Act will, in particular, revoke the following:

• Public Contracts Regulations 2015 (PCR)
• Concession Contracts Regulations 2016
• Utilities Contracts Regulations 2016

What’s new?

Terminology (Section 57)

The Act introduces two key terms in relation to exclusions, namely, an “excluded supplier” and an “excludable supplier”.

An “excluded supplier” is a supplier to which a mandatory exclusion ground applies AND the circumstances giving rise to the application of that exclusion ground are likely to occur again; OR the supplier is on the debarment list by virtue of a mandatory exclusion ground.

An “excludable supplier” is a supplier to which a discretionary exclusion ground applies AND the circumstances giving rise to the application of that exclusion ground are likely to occur again; OR the supplier is on the debarment list by virtue of a mandatory exclusion ground.

Schedule 6 of the Act outlines the mandatory exclusion grounds, while Schedule 7 sets out the discretionary exclusion grounds.

Obligations (Section 27)

A contracting authority must, before allowing a supplier to participate in a competitive procurement procedure, (other than the open procedure) determine whether the supplier is excluded or excludable.

A contracting authority must disregard a tender from an excluded supplier or exclude them from participating in the procurement process. A contracting authority must consider whether a supplier is an excludable supplier and may disregard their tender or exclude them from participating.

Under Section 30, if a supplier has acted improperly during the procurement process and as a result is put at an unfair advantage in relation to the award of a public contract, and that unfair advantage cannot be avoided other than by excluding that supplier, then the contracting authority must treat that supplier as an excluded supplier.

A supplier is said to be acting improperly if it fails to provide information requested by a contracting authority, it provides information that is incomplete, inaccurate or misleading, it accesses confidential information or it unduly influences the contracting authority’s decision-making.

The contracting authority must, before the end of the period of 30 days beginning with the day on which the tender was disregarded or the supplier excluded, replaced or removed, give notice of that fact to the relevant appropriate authority.

“Associated Suppliers” (Section 27)

“Associated Suppliers” (an organisation which the supplier is relying on in order to satisfy the conditions of participation, as defined in Section 26(4)) can also be excluded or excludable. This means that the supplier’s tender can be disregarded, however contracting authorities must allow the supplier reasonable opportunity to replace that associated supplier.

If a contractual authority has requested information about a supplier’s associated suppliers, as part of its investigation as to whether or not the supplier is an excluded or excludable supplier, and the supplier has failed to provide that information or it is incomplete, inaccurate or misleading, then the contracting authority must treat that supplier as an excluded supplier.

Sub-contracting (Section 28)

A contracting authority must request information about whether the supplier intends to sub-contract and whether any intended sub-contractor is on the debarment list.

A contracting authority may request information for the purpose of determining whether any intended sub-contractor is an excluded or excludable supplier. If the contracting authority considers a proposed sub-contractor to be an excluded supplier, then the supplier must be treated as excluded, provided that the contracting authority has allowed the supplier reasonable opportunity to replace that sub-contractor. If the contracting authority considers a proposed sub-contractor to be an excludable supplier, then the supplier must be treated as excludable.

New grounds for exclusion

Contracting authorities should note that Schedule 7 changes the way in which poor performance can be taken into account.

A discretionary exclusion ground applies if the supplier has breached a relevant contract and that breach was sufficiently serious. A breach will be considered ‘sufficiently serious’ if it resulted in termination, partial termination, the award of damages or a settlement agreement. This is essentially the same as the current PCR provision.

However, a discretionary exclusion ground also applies if the supplier has not performed a relevant contract to the authority’s satisfaction, was given proper opportunity to improve performance, and has failed to do so. Information regarding the performance of a supplier will be publicly available under the Act as contracting authorities must now publish the Assessment of Contract Performance Notice. This notice is explored in more depth in our Nutshell titled Transparency Pt2.

Schedule 6 also updates the offences treated as a mandatory exclusion ground including (among others) labour market, slavery and human trafficking offences and corporate homicide or manslaughter.

What’s changed?

While many of the mandatory and discretionary exclusion grounds remain the same as those under the PCR, the Act has significantly expanded the scope for supplier exclusion.

A key change under the Procurement Act is the introduction of a supplier’s poor contract performance as a discretionary exclusion ground. This new exclusion ground could be useful to contracting authorities as a supplier who fails to meet their contractual requirements will not only be exposed in the public domain (via the Assessment of Contract Performance Notice), but potentially excluded from future procurements, providing an incentive to comply with contract requirements. This will also overlap with the treatment of suppliers under contracts where KPIs are set, providing a further incentive on suppliers to satisfy the KPIs to a ‘good’ standard.

Another point of difference is that suppliers can now be excluded due to their relationship with associated suppliers and sub-contractors, as opposed to merely their own performance.

What does this mean?

As the Act broadens the exclusion grounds, contracting authorities should review, and update, their internal policies and processes to ensure they thoroughly assess whether suppliers, associated suppliers and sub-contractors are excluded or excludable at the start of the procurement process.

Contracting authorities should also be prepared to incorporate more detailed KPIs into public contracts so that suppliers are clear on how to meet the contract obligations and avoid being excluded from upcoming procurements.

For further information please contact Melanie Pears or Tim Care in our Public Sector Team.