IN THIS POST ON THE PROCUREMENT ACT 2023 WE LOOK AT THE INTRODUCTION OF THE NEW 'DEBARMENT LIST'.

Updated 19 January 2024

This is perhaps one of the most significant developments in the Procurement Act 2023 (the Act). There are a number of ways to look at this – it is useful for checking bidder eligibility; it creates a restriction on who can bid, reducing the competitive market; it is an easy way to challenge the award of a contract; it is a devastating blow to your public sector business.

In this post, we explain what it is, how it works and what we recommend you do about it.

What is it? 

The new debarment list sits alongside the exclusion framework and will be centrally managed and must be published by a Minister (it is not clear whether this will be available to the public, and this was a key bone of contention in the consultation process for the reforms and has not been clarified in the explanatory notes to the Act). The key driver is taking tougher action on underperforming suppliers, ensuring consistency across the public sector and de-duplicating effort in screening suppliers.

Looking at these changes in more detail… 

When is a supplier entered on the list?

A supplier may be excluded from a procurement for being an 'excluded' or 'excludable' supplier. The detail of what constitutes an excluded or excludable supplier is beyond the scope of this note but is broadly similar to breach of mandatory and discretionary exclusion grounds, with which most will be familiar. 

When a supplier is excluded, the contracting authority is required to notify the appropriate authority (a Minister of the Crown). This may lead to an investigation by the appropriate authority to determine whether the supplier should be on the debarment list. (Investigations can also occur independently to exclusion from a procurement.) An investigation leads to a report and a decision by a Minister of the Crown on whether the supplier is in fact an excluded or excludable supplier and determines when this will cease to be the case. Until such time as a supplier ceases to be an excluded or excludable supplier, it will be entered on (or kept on) the debarment list. There is a right to appeal the decision – an appeal must be made within 8 working days of receiving notice of a decision to enter a supplier on the debarment list.

There is a process to this investigation and suppliers will want to actively engage, not least because failure to cooperate may itself be enough to justify entry onto the debarment list. More importantly, a supplier will want to argue its case and ensure confidential information is redacted from any public records.

When is a supplier removed from the list?

Both the appeals and application for removal processes are set out in the Act itself.

The appeal process sets out important interim relief – a supplier gains the benefit of an automatic suspension from being entered onto the debarment list until the appeal is determined, discontinued or otherwise disposed of so long as the appeal is brought within the eight working day "debarment standstill period" and the Minister is notified. Otherwise, appeals must be made within 30 days of knowing (or having ought to have known) of the decision to be entered onto the debarment list.  applications will only be considered if there has been a material change in circumstances or there is significant new information since the supplier was added.

Suppliers will note that the potential harm suffered from being wrongfully included on the debarment list is significant – the relief for being wrongfully included is limited to the costs of participating in a procurement from which the supplier is excluded as a result of the wrongful inclusion (i.e. the opportunity to win the contract is lost). This means the appeal process during the "debarment standstill period" will be key, and any appeals must be commenced rapidly and with fervour.

A potential area of concern for suppliers is that the court will only intervene in a decision to add a supplier onto the debarment list where there has been a "material mistake of law" – this leaves room for opinions to be formed, e.g. as to seriousness of poor performance. 

Applications for removal only have to be considered if there has been a material change in circumstances or there is significant new information since the supplier was added.

What should you do? 

Suppliers

In the run up to the Act coming into force suppliers should:

• identify potential reasons they (and the sub-contractor supply chain and strategic partners) may be excluded or excludable and seek to 'self-clean';
• keep track of competitors, including sub-contractors who should be placed on the debarment list (this is a strong argument if challenging an award); 
• reviewing internal policies and updating training and corporate governance to protect against exclusion grounds being breached; and
• ensure policies are fed down the supply chain, requiring adherence to certain standards, to report information back and to agree to undertake self-cleaning measures which will ensure standards are adhered to over the long-term (corresponding termination clauses will help prevent being locked into a supply chain which excludes you from public contracting).

In particular circumstances, a supplier may elect to initiate an investigation into a potential exclusion ground (e.g. where there is no argument that it has self-cleaned). The benefit of this would be to obtain clarity on when the exclusion ground ceases to have effect. Clearly, this option would be a drastic step. 

Authorities

The debarment list will help exclude underperforming suppliers. It will also reduce the burden of asking for and evaluating this material. 

On the other hand, authorities may find themselves involved in more detailed investigations regarding exclusion of suppliers when the debarment list is being considered – decisions to exclude a bidder therefore become much more contentious and it is no longer about whether the supplier will be minded to challenge for that contract alone, but potentially all public contracts. As noted in the response to the Green Paper, a ban on bidding for public contracts could be a question of insolvency for some suppliers.

In addition, authorities will need to keep in mind the potential impact performance criteria (n.b. the requirement for certain public contracts to have a minimum of three KPIs) may have on suppliers' appetites for bidding on contracts. The consequences of poor performance may result in being put on the debarment list so suppliers are likely to become more selective about bidding for realistic and achievable contracts.