Exclusions and Debarment – Grenfell Inquiry and the CMA

As discussed in this article, the Procurement Act 2023 (the Act) introduces some radical changes in respect of exclusion and debarment of suppliers.

In the Act’s opening week not only did the Competition and Markets Authority (CMA) publish an overview of exclusion grounds and debarment regime in respect of competition law, but Government released a statement regarding using its powers under the Act to investigate 7 suppliers as part of the Grenfell enquiry. Debarment and exclusion could well prove to be the most significant of the reforms introduced by the Act.

Where a supplier meets the grounds for exclusion, authorities must assess whether it should be excluded. Alternatively, Cabinet Office may decide that such bidders are to be added to the debarment list, potentially debarring the supplier from bidding for any public contracts.

Nicola Cullen, Associate in our Public Law and Regulatory team, outlines the key takeaways from both announcements.

Statement from Government

The Cabinet Office has reviewed the Phase 2 Report of the Grenfell Inquiry and noted the Inquiry found failings by specific organisations in relation to the Grenfell fire. In light of those findings, the Cabinet Office announced its intention to launch investigations into 7 organisations using the new debarment powers under the Act.

The investigations will establish whether the organisations were engaged in professional misconduct for the purposes of the Act. If certain grounds are met, the suppliers’ names will be published on the central debarment register.

Investigations into other organisations may be launched in due course.

The intention is that use of the new power will enable the Cabinet Office to take stronger and broader action in relation to supplier misconduct and will, where appropriate, hold organisations to account.

Competition and Markets Authority Guidance

The CMA considers that public procurement is particularly vulnerable to bid-rigging. Its guidance puts down a marker that it intends to work with Cabinet Office to ensure cartelists are excluded from bidding for public contracts. Exclusion may be mandatory or discretionary:

Mandatory exclusion applies when:

• a supplier has been found (by the CMA or another regulator) to have broken competition law by taking part in cartel activity (which includes colluding with competitors to rig bids, fix prices or share markets) under the Competition Act 1998, or has been convicted of the criminal cartel offence under the Enterprise Act 2002; and
• the circumstances giving rise to the exclusion ground are continuing or likely to occur again.

Discretionary exclusion applies when:

• the contracting authority or Minister considers that a supplier has engaged in cartel activity or in other non-cartel infringement decisions, including anti-competitive agreements, abuse of a dominant position (such as excessive or discriminatory pricing) or resale price maintenance; and
• the circumstances giving rise to the exclusion ground are continuing or likely to occur again.

Suppliers should note that they may be excluded from public procurement contracts if an exclusion ground applies to a ‘connected’ or ‘associated’ person. This can include directors, parent or subsidiary companies, and key sub-contractors.

Things suppliers can do

Of course, the best way to avoid exclusion or debarment is to remain compliant with competition law, but if a supplier realises it has infringed competition law, there are some steps they can take to make amends and avoid exclusion:

1. Admit wrongdoing and apply for leniency – if the supplier reports cartel activity to the CMA it may be eligible for a 100% discount on fines, in which case it will not be excluded or debarred.
2. Self-cleaning – suppliers will not be excluded if they can demonstrate that the circumstances giving rise to the exclusion are not continuing or are unlikely to occur again. Example evidence of self-cleaning:
   1. evidence that they have taken the circumstances seriously, for example by paying compensation;
   2. steps that they have taken to prevent the circumstances occurring again, for example by changing staff or management;
   3. commitments that such steps will be taken, or to provide information or access to allow verification or monitoring of such steps; and
   4. the time that has elapsed since the circumstances last occurred.

Things contracting authorities can do

When assessing whether or not to exclude suppliers, contracting authorities could use the following resources to assist:

• check the central debarment list on GOV.UK before procurement exercises
• check the CMA decisions register for infringement decisions
• check for ongoing investigations by the CMA and the sector regulators
• ask the CMA for information to assist in determining whether the supplier may be under investigation.

The last option hints at a radically new approach by the CMA: historically it had declined to name parties under investigation until it publishes its statement of objections – thus depriving authorities of vital information on possible infringements of competition law.

What does this mean

These announcements from the Cabinet Office and CMA released just days after the Act ‘go live’ date suggest that there is going to be a strong emphasis to target excludable behaviour by suppliers and therefore both suppliers and contracting authorities need to be diligent. The aim is to hold suppliers to a higher level of integrity and account, and ensure the market is fairer, better quality and more competitive.

The changes in respect of both exclusions and debarment should be welcomed in helping to ensure that public contracts are protected from corrupt or shoddy practices within the supply chain. This in itself will be a key step in ensuring value for money and protecting public funds.

Nicola Cullen

Associate

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