11/09/2024
Following publication of the Grenfell Tower Inquiry Phase 2 Report, on 4 September 2024, the Prime Minister made a statement to the House of Commons in which he committed the Government to writing to the companies found by the Inquiry to have been part of the failings “as the first step to stopping them being awarded government contracts”. In doing so, he appeared to indicate the Government’s intention to ban named companies from future government contracts.
This plainly has implications for public procurement. Some may recall that in 2019, the then Housing Secretary Robert Jenrick called on the principal contractor for the refurbishment of Grenfell Tower, not to bid for public contracts. At the same time the Cabinet Office released a statement saying “under existing EU rules, we are not legally allowed to preclude Rydon Construction from bidding for government contracts.”
In this article, we examine exclusion/debarment under the current procurement regime (as set out in the Public Contracts Regulations 2015 (“the PCR”) and the new procurement regime that is expected to come into force with effect from 28 October 2024 under the Procurement Act 2023 (“the Act”).
How can suppliers be excluded from public procurement now?
Under the PCR, when awarding public contracts contracting authorities must assess whether suppliers fall into one (or more) of the “mandatory” or “discretionary” exclusion grounds contained in regulation 57.
The mandatory exclusion grounds (found mainly in Regulation 57(1)) relate mainly to situations where the supplier (or a key person within the supplier such as a board director) has been convicted of a named criminal offence within the previous 5 years. If that is the case, the supplier must be excluded from the procurement unless (1) there is an overriding reason relating to the public interest for the provider not to be excluded; or (2) it can “self-clean” i.e. provide evidence (to the contracting authority’s satisfaction) that it is a reliable supplier notwithstanding the existence of the exclusion ground.
The discretionary exclusion grounds are wider and require the authority to consider whether the supplier is in one of the situations set out in regulation 57(8). Those situations are generally linked to the supplier’s conduct. To take just a couple of examples, a discretionary exclusion ground applies:
- where the contracting authority can demonstrate by appropriate means that the economic operator is guilty of grave professional misconduct, which renders its integrity questionable;
- where the economic operator has shown significant or persistent deficiencies in the performance of a substantive requirement of a prior public contract, which led to the early termination of that prior contract, damages or other comparable sanctions.
As with the mandatory exclusion grounds the contracting authority must allow for self-cleaning. Where a discretionary exclusion ground applies an authority must consider the relevant circumstances, evidence and take a considered decision on whether to exclude or not that takes into account the principles of transparency, equal treatment, proportionality and non-discrimination.
For present purposes (and although it has been attempted on a handful of occasions) arguably there is no express basis in UK procurement law for the government (or any contracting authority) to mandate on a blanket basis that public contracts cannot be awarded to particular suppliers. The PCR points towards consideration on a case-by-case basis and there is no formal debarment regime.
What does the future hold?
Things will be different when the Act comes into full force (anticipated to be very shortly – 28 October 2024). That is because the Act introduces, for the first time, a “debarment list”.
The debarment list will be a centrally held register of suppliers who have been named following an investigation by an appropriate authority (e.g. a Minister of the Crown) under section 60 of the Act. The Act gives powers to the Minister to request documents and the assistance of the supplier under investigation (with failure to co-operate with an investigation being a mandatory exclusion ground itself). If a supplier is on the debarment list contracting authorities either must or may exclude them from tenders (depending on which ground for exclusion applies to the supplier on the list).
The debarment list therefore will provide a new way for the government to identify certain suppliers and place them at risk of being excluded from consideration for public contracts. Contracting authorities must check the debarment list before allowing a supplier to participate in a procurement.
However, whilst the debarment list is a new and powerful tool, it is subject to a number of limitations including
1. A supplier may only be placed on the debarment list if an exclusion ground applies.
The exclusion grounds maintain a distinction between mandatory and discretionary grounds for exclusion, however both lists have been expanded. Mandatory exclusion grounds will now include a range of offences not covered by the PCR including corporate manslaughter or corporate homicide and refusal or wilful neglect to pay the minimum wage. Additional discretionary grounds now include failure to perform a contract satisfactorily (despite being given the opportunity to improve) and the existing discretionary ground relating to breach of contract has been expanded.
2. The Minister must allow the supplier to make representations, give them notice before entering them on the debarment list and observe a standstill period before their name is added.
The supplier can apply to Court during the debarment standstill period (8 working days) to seek to have the Minister’s decision suspended pending an appeal to Court.
3. Entry on to the debarment list does not necessarily lead to automatic exclusion
Where a supplier is placed on the debarment list for a mandatory exclusion ground a contracting authority must treat them as an “excluded” supplier and therefore must exclude them from the procurement. This differs from the situation when a supplier falls into a mandatory exclusion ground but is not on the debarment list. In that scenario before deciding whether the supplier is an excluded supplier the authority must consider whether the circumstances giving rise to the exclusion ground are continuing or likely to apply again and they must give the supplier the opportunity to make representations and provide evidence to that effect. The debarment list cuts out those processes.
However, where a supplier is placed on the debarment list for a discretionary exclusion ground the authority “may” exclude them from a procurement – it is not obliged to. In that situation the authority will need to consider the discretion that it has (to exclude or not) and take a reasoned decision that weighs up relevant factors. Any decision should be documented with reasons.
4. Exclusion grounds can only look back a certain period of time
When establishing whether or not an exclusion ground applies contracting authorities may only consider “events” (which include convictions, decisions, rulings or failures) within a period of time that is set out in the Act.
As a broad generalisation, the “look back” period for mandatory exclusion grounds that are continued over from the PCR to the Act is either 5 years or 3 years. However, where the Act has introduced a brand new mandatory exclusion ground (such as corporate manslaughter or homicide) authorities must ignore events that took place prior to the Act coming into force.
For discretionary exclusion grounds the picture is similar: there is a mix of 3 or 5 year look back periods but where the ground is not found in the PCR (in other words is “new” to the Act) the authority must ignore events that took place before the Act comes into force (on 28 October 2024).
Open questions
The Prime Minister’s statement raises a number of interesting points and questions from a procurement law perspective such as:
- By writing to the contractors in question is the government signalling its intention to start a debarment investigation under the Act when it comes into force?
- If so, what grounds will the investigation focus on noting that the Inquiry does not have jurisdiction to rule on questions of legal liability and we are not aware of any criminal offences having yet been established, nor criminal convictions, despite the Inquiry’s obvious criticisms of companies involved. This would appear, at present, to rule out mandatory exclusion grounds.
- Will the investigation therefore focus on discretionary exclusion grounds, if so which ones?
- The Grenfell Tower fire took place more than 7 years ago and the Inquiry’s Phase 2 Report was published on 4 September 2024. Which of those events (or others) will the government rely on to trigger exclusion?
The new exclusion and debarment regime is likely to be of interest to both suppliers and contracting authorities as they navigate through the changes that the Act introduces.
For more detail on the new processes and mechanisms available under the Procurement Act 2023 please see our Talking Heads series which breaks down different aspects of the Act (including exclusion and debarment) into navigable segments.
Please contact Laura Brealey or Kyle Duggan for more information.
