The New Procurement Act 2023 Exclusion and debarment of suppliers: What's new?

The Procurement Act 2023 is currently anticipated to come into force in October 2024.

Some of the most significant changes in the Act are the new regime for excluding suppliers from procurements and the introduction of a debarment list. This blog gives an overview of these key changes.

Suppliers need to be aware of these changes as they could have a significant impact on their market share.

Contracting authorities need to be aware of these changes as:

• they need to be prepared for how suppliers will react to issues which could lead to exclusion; and
• they need to understand the onus on authorities to either exclude, or exercise their discretion as to whether to exclude.

What changes have been made to the discretionary grounds for exclusion?

Contractual performance

This is not an entirely new ground but it is more prescriptive and detailed. This includes:

• not performing to the authority’s satisfaction, being given the opportunity to improve performance and failing to do so;
• sufficiently serious breaches of contract (i.e. leading to termination, damages or a settlement);
• a court judgment confirming a sufficiently serious breach; or
• a notice being published relating to breach/poor performance.

The authority must consider whether the circumstances giving rise to the relevant exclusion ground are continuing or likely to re-occur.

The first of these grounds is significant – no actual breach of contract seems to be required, let alone a serious breach. Therefore, the threshold is relatively low.

Currently, if there is a dispute about the supplier’s performance, this tends to be a private matter between the parties. But, under the new Act, the authority is obliged to publish a notice with details of the unsatisfactory performance/breach. This means other authorities and rival suppliers will have visibility of those issues, presenting a reputational risk for suppliers (and authorities).

There is also a practical impact of this as other authorities may exclude the supplier from future competitions on the basis of the notice. However, this is only possible if the supplier cannot show that the unsatisfactory performance/breach is not likely to re-occur. Suppliers need to ensure they protect their position and respond appropriately to poor performance accusations that could lead to a notice being published.

Authorities need to ensure that correspondence about poor performance with suppliers is robust as there will be increasing push-back from suppliers given the wider consequences.

Rival suppliers may use these notices to apply pressure on authorities to exclude suppliers if they are bidding alongside them, challenging why the authority has not exercised its discretion to exclude.

Authorities need to be aware of whether notices have been issued in relation to the bidders in their procurement. If so, authorities must consider these properly and have an audit trail evidencing their decision on whether or not to exclude.

Improper behaviour

This discretionary ground includes:

• failing to provide information requested by the authority;
• providing incomplete, inaccurate or misleading information;
• accessing confidential information; or
• unduly influencing the authority’s decision-making.

These grounds are not entirely new but are wider. Before excluding a supplier, authorities need to show that:

• the supplier gains an unfair advantage because of its behaviour which requires exclusion; and
• no other alternative remedy is available.

Suppliers must also be allowed to make representations and provide relevant evidence to challenge the exclusion.

What is the new debarment list?

This is a new robust power for Government to use against suppliers. By adding a supplier to the debarment list, Government is able to either:

• exclude a particular supplier from all future procurements automatically for a specified period of time (where a supplier is added to the debarment list on a mandatory exclusion ground); or
• mandate that authorities should be exercising their discretion as to whether to exclude a particular supplier in all future procurements (where a supplier is added to the debarment list on a discretionary exclusion ground).

Suppliers may be added to the debarment list where:

• a supplier is excluded from a procurement, following which the authority must give notice to the Government;
• following the notice, the Government investigates (and may require further information from the supplier/authority and/or allow the supplier to make representations);
• following investigation, Government publishes a report setting out the decision to add the supplier to the debarment list and gives notice to the supplier; and
• the 8-working day standstill period expires, in which suppliers can apply to the court for suspension of the debarment decision (suppliers have 30 days to appeal the decision if there was a material mistake of law).

Beyond the standstill period, a supplier can apply to be taken off the list (or to revise the period they are on the list). There must be a material change of circumstances or significant new information available, not already taken into account by the Government.

The remedy for a supplier’s successful challenge is an order setting aside the decision and/or for the supplier’s wasted bid costs prior to exclusion.