Regulatory and compliance

The new debarment regime for UK public procurement: how contracting authorities can avoid the pitfalls

Published on 8th Jan 2024

What will the Procurement Act's introduction of a new debarment list for suppliers entail for contracting authorities?

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One of the headline changes of the Procurement Act 2023 is the introduction of a new debarment regime.  Once in force – which is expected to be in October 2024 – the regime will require the government to set up a centralised "debarment list" whereby suppliers, associated suppliers or sub-contractors who have been excluded from a competition are published.

While the debarment list will be centrally managed by Cabinet Office, individual contracting authorities will have direct involvement in the debarment process though reporting obligations and excluding debarred suppliers from public procurement competitions. 

How will the regime work?

The Procurement Act contains mandatory and discretionary exclusion grounds that lead to a supplier being an excluded or excludable supplier.  An excluded supplier is one where a mandatory exclusion ground applies and the contracting authority considers there is a likelihood of reoccurrence;  an excludable supplier is one where a discretionary exclusion ground applies and the contracting authority considers there is a likelihood of reoccurrence.

When a contracting authority rejects a tender from an excluded supplier or decides to exclude an excludable supplier, there is a new mandatory obligation to notify the Cabinet Office within 30 days of that exclusion.  This obligation to notify also arises when the contracting authority is aware of an associated person or sub-contractor having been replaced during a procurement as a result of being excluded or excludable.

Once it has received a notification, the Cabinet Office may decide to commence an investigation, culminating in publication of a report. If an investigation takes place, it will include examining evidence as to whether the supplier is excluded or excludable. The referring contracting authority may continue to be involved at this stage as the Cabinet Office has a power to request documents or other assistance if this is relevant to the investigation. Contracting authorities would, therefore, be well advised to ensure full records are kept of the basis for decisions regarding exclusion and governance processes around these decisions.

Once the investigation has concluded, Cabinet Office will publish a report of the findings of the investigation, subject to limited exceptions for national security or commercial sensitivity concerns. If the conclusion is that the supplier should be added to the debarment list, an eight working-day "standstill" period will commence from notice to the supplier that they will be placed on the list. During this standstill period, the supplier may seek to appeal their inclusion in the list.  While Cabinet Office would be the defendant in any such action, the referring contracting authority may also be involved in that litigation.

If a supplier is placed on the debarment list for a mandatory exclusion ground, the effect is that they are an excludable supplier without further reference to the likelihood of the ground for exclusion reoccurring. If a supplier is placed on the debarment list for a discretionary exclusion ground, authorities retain a discretion whether to exclude them from future competitions.

Risks and factors for authorities to consider

Contracting authorities will need to consider a number of things when applying the exclusion grounds that may ultimately lead to suppliers being placed on the debarment list.

Firstly, there is the amended self-cleaning test, which suppliers are able to use to evidence that they have taken steps to prevent the circumstances from occurring again. This includes a wider range of considerations than are currently captured in the Public Contracts Regulations 2015.  Contracting authorities when applying the exclusion grounds must allow suppliers to submit evidence and make representations that the circumstances are not likely to reoccur.  Care will need to be taken by contracting authorities to ensure they have applied the grounds correctly, as failure to do so could lead to the supplier challenging a decision to be excluded.

When deciding whether to exclude an excludable supplier, as with any exercise of discretion, contracting authorities will need to observe public law principles, including acting rationally, fairly and without actual or apparent bias.

When evaluating tenders in a public procurement competition, contracting authorities will need to check the Cabinet Office-managed debarment list. The advantage of the publicly published list is that it will allow contracting authorities to easily identify those suppliers that must or may be excluded. The list does not, however, remove the need for contracting authorities also to consider and apply the exclusion grounds as part of the procurement process.

Osborne Clarke comment

While the introduction of a debarment list will enhance visibility for contracting authorities as to which suppliers must or may be excluded, the new regime also poses new risks for contracting authorities in terms of legal challenges that could be brought by suppliers. It is important that contracting authorities understand how this new regime will work and what it requires of them.  

As the impact of being named in the debarment list is highly significant for suppliers, this is an area in which we can expect greater scrutiny of the application by contracting authorities of the mandatory and discretionary exclusion grounds in each procurement process and potentially challenges by suppliers where they consider grounds have been applied unfairly or outside of the Procurement Act.

Please visit our "Navigating the changes under the Procurement Act" microsite for our insights on the new regime.

If you would like to discuss any of the issues raised in this Insight, please get in touch with your usual Osborne Clarke contact, or one of the experts listed below.

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* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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