Historically, the qualification of bidders refers to the process by which contracting authorities assess the suitability of potential suppliers to fulfil a public contract, select which bidders to take through to later bidding rounds and assess whether a supplier triggers the grounds for exclusion.
As part of our series of articles on the changes being brought into effect by the Procurement Act 2023 (the Act), Tod Davies & Jack Dunne set out the key changes in relation to this important stage of the procurement process and how this will affect bidders, consortium members, and sub-contractors. Following changes announced on 12 September, the Act is expected to come into force on 24 February 2025.
Conditions of participation
Whereas the old Regulations such as the PCR refer to selection criteria, s22 of the Act replaces this terminology with conditions of participation.
The conditions of participation are set by the contracting authority. They must be a proportionate means of ensuring that suppliers have the legal, financial or technical ability to perform the contract being procured. If any one of the conditions of participation is not satisfied, then the contracting authority cannot award the contract to that supplier. Guidance makes clear that, as under the old Regulations, conditions of participation may be assessed on a pass/fail basis and/or in the case of the competitive flexible procedure on a scored basis.
The Act introduces an element of flexibility into the qualification process, whilst also seeking to remove barriers typically faced by SMEs under the old Regulations, as demonstrated by the key differences set out below:
- Under the old Regulations, the selection criteria must be applied at stage one of the multi-staged procurement process, whereas conditions of participation may be assessed at any point during a competitive flexible or open procedure under the Act. Accordingly, contracting authorities may choose the timing at which they check conditions of participation, potentially affording suppliers more time to gather the necessary evidence to prove that they meet those conditions. Nevertheless, in practice we anticipate that contracting authorities will generally assess the conditions of participation at the outset (except perhaps in the case of the open procedure).
- The old Regulations set out an exhaustive list of means of proof that can be used by contracting authorities to assess standards of technical or professional ability. There is no such list in the Act, with the only requirements for evidence being that it is proportionate to the assessment and directly linked to the legal and financial capacity, or technical ability, of a supplier. This permits a wider range of evidence to be considered as means of proof for meeting the conditions of participation. This may be beneficial to SMEs who might struggle to provide certain evidence. Contracting authorities are likely also to welcome the added flexibility, which for example now permits them to obtain scores from credit reference agencies.
- Under the Act, contracting authorities can only require audited accounts from those suppliers who are required by the Companies Act 2006 or an overseas equivalent to file audited accounts.
- Contracting authorities can no longer require suppliers to have in place insurance that relates to contract performance before the contract award – though this does not prevent contracting authorities from requiring such insurance to be in place when the contract commences. These provisions remove barriers that have typically discouraged SMEs from participation in the process under the old Regulations.
Similarly to the old Regulations, under the Act, suppliers can satisfy a condition of participation by relying on a supplier associated with them that satisfies the condition. As such, a supplier may choose to submit a joint tender, form a consortium or enter into a sub-contracting arrangement with another supplier who satisfies the condition of participation.
Excluded suppliers
In keeping with the old Regulations, the Act sets out a list of grounds for excluding bidders, such as money laundering, theft, fraud and bribery. Both the terminology and the detail have changed compared with the old Regulations.
The contracting authority must exclude an “excluded supplier” from the procurement. It may exclude an “excludable supplier”.
A supplier is an excluded supplier if:
- The contracting authority considers that “mandatory exclusion grounds” apply to the supplier or its associated persons and are continuing or are likely to recur; or
- The supplier or its associated persons is on the central government’s debarment list (see further below).
A supplier is an excludable supplier if:
- The contracting authority considers that “discretionary exclusion grounds” apply to the supplier or its associated persons and are continuing or are likely to recur; or
- The supplier or its associated persons is on the central government’s debarment list.
When considering whether the supplier is excluded or excludable, the contracting authority must have regard to the factors set out in s58 of the Act, which largely reflect what was referred to as self cleaning in the old Regulations.
The Act contains some significant changes to the exclusion provisions, as outlined below:
- The Act has expanded the offences that fall within the mandatory and discretionary exclusion grounds. Most notably, the Act includes a new discretionary ground of poor performance to cover situations where a supplier has not performed one or more contracts to a satisfactory level, and has failed to improve that failure despite being given proper opportunity to improve performance. Further, under the Act, the contracting authority is obliged to publish a notice detailing the unsatisfactory performance, making this visible to other contracting authorities and competitors. These changes are likely to be significant and are an attempt to address the perceived poor quality of delivery from some suppliers to the public sector.
- The Act introduces a central debarment list upon which a Minister may enter the name of an excluded or excludable supplier. The suppliers named on this list are debarred from competing in the procurement process for a specified period. There are mechanisms for debarred suppliers to appeal to the courts (due to errors or law) or to apply for removal from the list (if they can demonstrate that there has been a material change in circumstance).
- The ‘self cleaning’ element of the exclusion process has been adapted to allow greater opportunities for excluded suppliers to demonstrate their ability to perform the contract. The old Regulations set out three exhaustive tests that had to be satisfied for an economic operator to prove its reliability despite the existence of an exclusion ground, whereas the Act has replaced these with a wider and more flexible range of factors that may be considered.
- As noted above, the supplier may rely on an associated person to fulfil the conditions of participation. By the same token, the contracting authority must assess whether both the associated person and all sub-contractors are on the debarment list. It must assess whether associated suppliers are excluded or excludable suppliers and it may assess whether the rest of the supply chain is excluded or excludable. These are important changes compared with the old Regulations, where the assessment was only in relation to significant sub-contractors on which the supplier relied to meet the selection criteria. The aim is to ensure that risk to public contracts is minimised throughout the supply chain.
- Where a ‘connected’ person falls foul of the mandatory or discretionary exclusion grounds or is on the debarment list, the contracting authority must exclude (or in the case of discretionary exclusion grounds consider whether to exclude) the supplier from the procurement. Significantly, the categories of connected person have been significantly expanded compared to the old Regulations, to include for example directors and shadow directors, persons with significant control or the right to exercise significant influence over the supplier and group companies.
- The contracting authority must give the supplier notice of its intention to exclude it from the procurement as well as giving the supplier opportunity to make representations and provide evidence. If the exclusion is due to a sub-contractor or associated person, the contracting authority must give reasonable opportunity to find an alternative associated person or sub-contractor before excluding the supplier from the procurement. Accordingly, bidders looking to sub-contract must take much more care than under the previous regime when assessing who they will associate themselves with. Contracting authorities are likely to welcome the express opportunity to engage with suppliers before excluding them – something many did not feel able to do under the old Regulations.
- Where after contract award it becomes clear to the contracting authority that the supplier, its connected persons, associated persons or sub-contractors are (or were) excluded or excludable, it has various rights to terminate the contract or require replacement of the sub-contractor. Care is required to ensure the contracting authority complies with the precise requirements of s78, which are detailed and complex.
- In most cases, the mandatory or discretionary exclusion grounds apply for 5 years. This is in contrast to the old Regulations on discretionary exclusion, which only applied for 3 years. It is however important for contracting authorities to pay close attention to the transitional rules.
- Assessment of mandatory and discretionary exclusion grounds (and checking of the debarment list) must in many cases be carried out twice: first when selecting which bidders will proceed to invitation to tender stages of a competitive flexible procedure; and then again prior to awarding the contract. This is logical.
- Where a contracting authority excludes a bid or requires a sub-contractor’s replacement due to mandatory or discretionary exclusion grounds, it must notify this to the debarment list.
- The rules on exclusion are complex. The guidance makes clear however that contracting authorities must make a genuine case by case assessment of the discretionary exclusion grounds and self cleaning. They should not adopt a generalised policy to reject (or to not reject) bids from suppliers who fall foul of the discretionary exclusion grounds. Paragraphs 75 to 82 of the guidance given useful further information.
Further information can be found in the official guidance on exclusions and debarment, and at ss 26-30, 57-66 and schedules 6 and 7 of the Act.
Comment
As a result of changes to the conditions of participation and exclusion of suppliers brought about by the Act, the qualification of suppliers in the UK procurement regime has become more rigorous but also more flexible. It should provide greater opportunities for suppliers to demonstrate their reliability, encourages cooperation between suppliers, and drastically lowers barriers to entry for SMEs. It remains to be seen to what extent in practice it also results in serial poor performers being excluded from bidding for public contracts.
We’re here to help
Our dedicated Procurement Hub offers access to various online resources, where our leading procurement experts keep you updated during the transition to the new regime. In the coming months, we will continue to brief you on the changes expected at each stage of the procurement lifecycle, specifically addressing the new Act and guidance.
Whether you’re a contracting authority or a bidder frequently tendering for regulated contracts, our team of Procurement specialists is here to assist you through the transition.
