Procurement in a Nutshell – Procurement Act 2023 Guidance: Exclusion Grounds
22nd November, 2024
This Nutshell will evaluate the guidance on the exclusion regime under the new Procurement Act, with a particular focus on the exclusion grounds. To supplement this, the upcoming Nutshell with analyse how the exclusion grounds apply to associated persons and sub-contractors.
You can find the guidance referenced here.
Introduction
The Procurement Act 2023 is expected to come into force on 24th February 2025.
The Act will, in particular, revoke the following:
- Public Contracts Regulations 2015 (PCR)
- Concession Contracts Regulations 2016
- Utilities Contracts Regulations 2016
Key Terminology
An “excluded supplier”, under Section 57, 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.
When conducting a competitive procurement under the Act, a contracting authority must disregard a tender from an excluded supplier or exclude them from participating in the procurement process.
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 discretionary exclusion ground.
A contracting authority may disregard a tender from an excludable supplier or exclude them from participating in the competitive procurement. When deciding whether to exercise their discretion to exclude, contracting authorities should also have regard to the objectives under Section 12 such as maximising public benefit.
Please note that we will specifically address and evaluate the Debarment List in a future Nutshell.
Exclusion Grounds
Schedule 6 of the Act outlines the mandatory exclusion grounds, while Schedule 7 sets out the discretionary exclusion grounds.
The mandatory exclusion grounds remain largely the same as those established under the PCRs. As summarised by the guidance, many mandatory exclusion grounds require a criminal conviction of specific offences such as money laundering, fraud, corporate homicide and human trafficking. The application of a mandatory ground also applies to ancillary offences, such as aiding and abetting.
Other mandatory grounds include threats to national security, certain tax misconduct and competition law infringements.
Under Schedule 7, the discretionary exclusion grounds include (among others) if the supplier has become bankrupt or is the subject of an administration order; professional misconduct and acting improperly during a procurement (for example by failing to provide the relevant information to the contracting authority).
Importantly, a discretionary exclusion ground also now 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. As a result, not only will information regarding the performance of a supplier be publicly available through the Contract Performance Notice (please our Nutshell here for more information), but suppliers could also be at risk of being excluded from future procurement opportunities.
Time Periods
The guidance stresses that the purpose of the exclusions regime is not to punish suppliers for past misconduct but rather to safeguard against unacceptable risks.
As such, Schedule 6 prevents consideration of convictions or conduct which occurred more than 5 years ago.
Schedule 7 prevents consideration of events which the contracting authority was aware of (or which a reasonably well-informed decision-maker in their position would have been aware of) more than 5 years ago.
To be clear, for the mandatory exclusion grounds the legal test is when the conviction, decision or other event occurred, whereas for discretionary exclusion grounds the test is when the contracting authority was aware of the event.
For exclusion grounds which are new (such as corporate manslaughter as a mandatory exclusion ground), events which occurred before the exclusions regime came into force cannot be considered by the contracting authority.
For exclusion grounds which are the same as, or substantially similar to, a discretionary exclusion ground under the previous legislation, then events which occurred more than 3 years before the new regime comes into force cannot be considered. For example, the guidance explains that professional misconduct is similar to the discretionary exclusion ground of grave professional misconduct under the previous legislation, therefore any such misconduct that occurred 3 years before the Act comes into effect cannot be considered.
What does this mean?
While many of the mandatory and discretionary exclusion grounds remain the same as those under the PCRs, the Act has 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 Contract Performance Notice), but potentially excluded from future procurements, providing an incentive to comply with contract requirements.
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 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
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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