Head of Dispute Resolution | Head of Procurement | Banking & Finance
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This is the fourth – and penultimate - instalment in our series looking at some of the key changes proposed by the Procurement Bill (the Bill), which is currently nearing completion of its passage through Parliament.
This article considers the likely impact of the new exclusion and debarment regime on suppliers and contracting authorities.
The most significant change to the current exclusion and debarment regime is the introduction of a single, public debarment list (the Debarment List) which will be centrally managed and published by the Government. The Debarment List will comprise of both 'excluded' and 'excludable' suppliers.
The Bill contains definitions of these terms, but in essence an excluded supplier is a supplier to whom a mandatory exclusion applies, and an excludable supplier is one to whom a discretionary exclusion applies. An excluded supplier on the Debarment List will be barred from bidding for public contracts for a specified period and an excludable supplier may find any tender submitted being disregarded by a contracting authority. For the purpose of covered procurements undertaken by Private Utilities, an excluded supplier is to be treated as an excludable supplier.
The mandatory and discretionary grounds for exclusion are set out in schedules to the Bill, and are not hugely dissimilar to the existing regime, but particular note should be taken of:
All of these are discretionary grounds, and their inclusion in the Bill reinforces and reflects a marked commitment from the Government to toughen up the position on suppliers who perform poorly.
Even if a supplier does not appear on the Debarment List, a contracting authority is still required to consider details of mandatory and discretionary exclusion grounds when conducting tender exercises. When considered in conjunction with the transparency obligations on contracting authorities to report on poor performance and contract breaches (as covered in our last briefing), the risk of a supplier's past conduct catching up with it is far more likely. It is also not difficult to imagine that suppliers might be willing to helpfully point out to contracting authorities where their competitors have been the subject of negative reports.
Before being placed on the Debarment List, a Government minister must first carry out an investigation, consider whether a mandatory or discretionary exclusion ground applies and decide whether or not the supplier should be placed on the Debarment List.
Clearly, being publicly named in this way may have very serious and significant financial and reputational consequences for a supplier. For that reason, the minister must give the supplier notice of the start of the investigation and the opportunity to make representations, as well as notice of the decision in relation to debarment and the reasons for that decision.
Once a decision to debar has been made, the supplier will have the benefit of a standstill period of eight days before its name is placed on the Debarment List, during which time it can instigate Court proceedings in order to suspend the entry (i.e., a process that is very similar to the existing automatic suspension provisions in the current regime). Such suspension is to allow time for a formal challenge to be brought as detailed below.
Suppliers also have an (albeit, limited) right of challenge. Any challenge must be brought within 30 days from when the supplier "knew or ought to have known the Minister's decision" to debar, and "may only be brought on the grounds that, in making the decision, the Minister made a material mistake of law". If the challenge succeeds, the Court may set aside the Minister's decision and/or award compensation (limited to the wasted costs incurred by the supplier in respect of the tender for which it was excluded).
Once on the Debarment List, the debarment will last for a length of time specified by the Minister unless the supplier is able successfully to apply for their removal. Typically, this will be on the basis that there has been a material change of circumstances, or significant new information is available. It will be interesting to see, as the new regime beds in, how such applications are managed and the extent to which they are successful.
As mentioned above, the consequences of being placed on the Debarment List are significant and are likely to impact the supplier not only financially but also reputationally. In certain circumstances, and depending on the length of the debarment, suppliers may find themselves at risk of losing their ability to compete in the market.
To manage this risk, suppliers should take pre-emptive action now and assess to what extent they (and/or potentially also key sub-contractors in their supply chains) might be vulnerable to exclusion. With some forward planning, any such issues which do arise in this regard should be capable of resolution or mitigation before the Bill comes into force.
Due to the tight time frames, suppliers will also need to ensure that they are agile and organised enough to act quickly once notified of an investigation – as mentioned above, they only have 8 days to file an application for interim relief and a further 22 days to issue proceedings if the decision to debar is to be challenged.
Suppliers will also likely want to keep an eye on the Debarment List to see if their competitors are placed on the List which will likely provide them with a competitive advantage going forward.
The purpose of the Debarment List is to help prevent contracts being awarded to unsuitable suppliers and reduce the due diligence burden on contracting authorities in this regard, with the overall aim of improving supplier performance. In this respect, it is difficult to identify any significant disadvantages of the new regime for contracting authorities, save that there is a possibility that some suppliers may become more selective about which contracts they bid for in in circumstances where poor performance could land them on the Debarment List.
Whether or not this gives rise to a tangible chilling effect, thereby reducing the size of the competitive market to the overall detriment of the public, remains to be seen.
In the final briefing of our series, we will look at how the provisions of the Bill will impact on challenges to a procurement process and remedies. Keep an eye on our website and social media channels for this in the next few weeks. In the meantime, please do get in touch with our team of procurement experts below if you require any further information or help.