Laura Wisdom, partner at independent UK law firm Burges Salmon explores the legal ramifications of the Procurement Act.

This is a time of significant change for public procurement in the UK. The Procurement Act 2023 (“PA23”) is due to “go live” on 28 October 2024. The legislation represents the most significant transformation to purchasing law for decades. Through it, the UK Government seeks to break away from the current European law-based procurement regime. The act, they hope, will “speed up and simplify public procurement processes” and meet a variety of other domestic objectives. The PA23 intends to consolidate and streamline the current regulatory framework, which is currently based on legacy EU law. In doing so, it will simplify the procurement process to better meet the UK’s needs.

This is part of a series of deep dives into the new procurement lifecycle. It focuses on the selection stage of a procurement and the introduction of a new ”debarment” regime.

Conditions of participation

The PA23 introduces a change in terminology by replacing selection questions with “conditions of participation”. Unlike under the current regime, the inclusion of conditions of participation by a contracting authority is not mandatory.

A contracting authority may only set conditions of participation in relation to the award of a public contract if it is satisfied that the conditions are a proportionate means of ensuring that suppliers have the legal and financial ability or the technical ability to perform the contract. Whether a condition is proportionate depends on to the nature, complexity and cost of the public contract.

There remains some ambiguity in the PA23. It isunclear whether a contracting authority must or may disregard any tender from a supplier that does not satisfy the conditions of participation. Further guidance is required to resolve this point. 

Excluded and excludable suppliers

Before permitting a supplier to participate in a competitive flexible procedure, the contracting authority must assess whether a supplier is an “excluded” supplier or an “excludable” supplier. If a mandatory exclusion ground applies, the authority must exclude the supplier. The applicability of a discretionary ground for exclusion will render the supplier ”excludable”. This means the contractor may exclude the supplier if they choose. 

The Act also introduces provisions which permit the exclusion of suppliers by reference to their sub-contractors or where an “associated supplier” is excluded or excludable.

The mandatory and discretionary grounds for exclusion are based upon the grounds under the existing regime, but with some changes. Both contracting authorities and bidders should familiarise themselves with these grounds. It’s important they note the introduction of a discretionary exclusion ground for breach of contract and poor performance. This allows a contracting authority to exclude a supplier in situations where:

  • the supplier has breached a contract and the breach was ‘sufficiently serious’
  • the supplier has not performed the contract to the authority’s satisfaction. They have also failed to do so when given the opportunity to improve
  • a Contract Performance Notice has been published by a contracting authority evidencing either a breach of contract or poor performance.

What happens when a contract is breached?

A breach of contract will be “sufficiently serious” for these purposes if it results in meaningful consequences. These include partial/full termination of a contract, the award of damages or a settlement agreement.

It will be interesting to see how this new discretionary exclusion ground operates in practice. It’s worth noting that poor performance is typically managed on a commercial level by the parties. Failure to improve performance does not consider circumstances beyond a supplier’s control. The occurrence of a force majeure event, for example, would not count against supplier performance.

The risk to suppliers may be mitigated by the requirement for a contracting authority to “have regard to” procurement objectives. These include an obligation to act with integrity. However, it is unclear how this will in itself apply.

The debarment regime: What is it?

The Act introduces a new debarment regime, which allows a controlling authority to add excluded suppliers to a central, publicly available debarment list. Addition of a supplier to this list must be preceded by an investigation in the first instance and has the potential to automatically exclude that supplier from all future procurements for up to five years.

What kind of impact will the new debarment regime have?

The debarment regime is likely to be significant for both contracting authorities and bidders. We anticipate the contents of debarment notices will be closely scrutinised.

If a contracting authority decides to exclude a bidder from a procurement, the contracting authority must notify the Cabinet Office of the exclusion within 30 days.

Exclusion in itself does not mean a bidder will be added to the debarment list. It is possible that, following investigation, the relevant Minister (likely acting through Cabinet Office) decides whilst it is correct for the bidder to be excluded from that particular procurement process, the bidder does not need to be added to the debarment list.

However, if it is determined that debarment is appropriate, the supplier’s name will be added to a list. The list will be central and publicly available. The entry will also confirm the applicable exclusion ground, and whether it is mandatory or discretionary. It will also include the date on which it is expected the exclusion ground will cease to apply. This will help contracting authorities identify suppliers that must or may be excluded from a procurement process. Also, with contracting authorities now permitted to apply exclusion grounds to “associated persons” (including subcontractors), should also help identify risks within the wider supply chain.

The supplier will be notified of the intention to add it to the debarment list. Then, once a debarment notice has been issued, a “debarment standstill period” will commence. This will prevent the supplier’s name from being entered on the debarment list until eight working days have passed. A supplier cannot be added to the list if there is an outstanding application for interim relief.

Challenging debarment

The PA23 provides three ways in which a supplier can challenge the decision to be entered on the debarment list:

  • Application for interim relief: A supplier may apply to the High Court for suspension of the Minister’s decision to enter the supplier’s name on the debarment list. The application must be made within the debarment standstill period.
  • Application for removal or revision of the entry: A supplier may apply to the Cabinet Office at any time for the removal or revision of an entry on the debarment list. The Minister is only required to consider the application if, “in the opinion of the Minister, there has been a material change of circumstances” since the entry was made or last revised. The PA23 provides no guidance as to what constitutes a “material change” – we expect secondary legislation or guidance will follow. Once the application has been determined, the Minister is required to notify the supplier of the outcome in writing.
  • Appeal: A supplier may appeal to the High Court against the decision to enter the supplier’s name on the debarment list. The supplier must be able to demonstrate that the Minister made a material mistake of law which resulted in their exclusion. Applications to appeal must be made within 30 days of the date on which the supplier first knew, or ought to have known, about the decision the supplier seeks to challenge. If successful, the Court may set aside the decision and/or make an order requiring the Cabinet Office to compensate the supplier for any bid costs incurred prior to exclusion. 

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