Procurement Act 2023 Update 6

What is the new Debarment List?

The debarment list is a wholly new concept introduced under the Procurement Act 2023 (“Act”), which is a list kept by a Minister of excluded and excludable suppliers, who have been included on the list following an investigation of their circumstances. 

“Excluded” suppliers are those to which a mandatory exclusion ground applies, and “excludable” suppliers are those to which a discretionary exclusion ground applies.

Once a supplier has been added to the Debarment List, the Minister can either:

• if a mandatory exclusion ground applies, exclude a particular supplier from all future procurements automatically for a specified period of time; 

• if a discretionary ground applies, mandate that authorities should be exercising their discretion as to whether to exclude a particular supplier in all future procurements.

What is the process for adding a supplier to the Debarment List?

The process for suppliers to be added to the Debarment List starts with the government receiving notice from a contracting authority that a supplier has been excluded from a procurement. 

A Minister then investigates (which may include obtaining further information from the supplier/authority and/or allowing the supplier to make representations) and once it has concluded that investigation, it publishes a report setting out whether it intends to add the supplier to the Debarment List or not. The supplier is given notice and a standstill period applies during which the supplier can apply to a Court to suspend the decision. After that period has expired, and in the absence of any successful challenge through the Court, the supplier will be added to the Debarment List. A supplier can subsequently apply to be taken off the list (or to revise the period they are to be on the Debarment List). However, there must be a material change of circumstances or significant new information available, not already taken into account by the Government to be considered further to be removed.

What are the consequences of these changes?

The Debarment List now clearly creates greater hazards for a supplier who is potentially being excluded from a procurement (it could well have wide-ranging implications for them - affecting their future participation in procurements and subjecting them to the reputational damage of being publicly named on the Debarment List). Therefore, contracting authorities should be aware that suppliers are more likely to push back firmly against any decision to exclude them and, as such they should be in a position to ensure that their decision making is properly defensible and sufficiently supported by a robust evidence base.

Are there any changes to the mandatory or discretionary grounds for exclusion?

The Act also makes certain changes to the grounds for supplier exclusion, but perhaps those of greatest impact are the changes made to the discretionary ground relating to poor performance of suppliers.

Poor supplier performance has often been discussed as a ground for exclusion but, whereas the old regime applied a relatively high threshold before poor performance could be used to justify exclusion (such that there had to be have been some serious sanction as a result of the poor performance, such as having a contract terminated or damages awarded), the Act makes it clear that the right to exclude can now be engaged merely where the supplier has not performed to the authority’s satisfaction, was given proper opportunity to improve performance, and has failed to do so.

This has potentially serious ramifications because no actual breach of contract (serious or otherwise) needs to be established to exercise this discretion, so the threshold needed to exclude a supplier under this ground is much lower. As a result of these obligations, suppliers are likely to fiercely resist allegations of poor performance in current contracts to avoid the consequences this ground being applied in future procurements. 

Wider impact of changes regarding supplier performance – additional transparency requirements

Because of the new transparency requirements about supplier performance, poor performance by a supplier is also much more likely to be in the public domain. Section 71 of the Act for example requires contracting authorities to review a supplier’s performance, in respect of larger value contracts (this applies to contracts where the value is in excess of £5m ), at least every 12 months during a contract term and also upon its termination and to publish that information. Additionally, if there is a breach of a public contract, or again the contracting authority considers that the supplier has not performed to its satisfaction and has failed to improve having been given an opportunity to do so, the same provision of the Act requires a contracting authority to publish that information. A contracting authority could only exercise the right to exclude a supplier where a supplier is unable to show that the poor performance was unlikely to recur, but nevertheless, suppliers may well feel the need to protect their position with one eye on these rules.

Please see our previous article on this: Procurement Act Update 5 - Assessment Summaries and Remedies