Exclusion of Bidders due to Poor Past Performance

Exclusion of Bidders due to Poor Past Performance

Contracting authorities often query whether the poor performance of contractors on previous contracts can be a ground for excluding such entities from a tender process being run under the Public Contracts Regulations 2015 (“PCR”).

Under PCR Regulation 57(8)(g), contracting authorities are allowed to exclude bidders where there has been a significant or persistent deficiency in the performance of a substantive requirement under a prior public contract which led to early termination of that prior contract, damages or other comparable sanctions.

It is worth noting that the Reg 57(8) exclusion does not generally apply to persons or entities beyond the named bidder (e.g. parent companies), unless those entities are being relied upon to fulfil selection criteria. Another hurdle of note is that while a contracting authority may be aware of poor past performance of a bidder, it may not be able to exclude on this ground, because such performance had not led to early termination or comparable sanctions. For example, increased contract monitoring and remedial plans may have kicked in due to poor performance, but these are unlikely to be considered on par with contract termination or damages.

Meanwhile, PCR Regulation 58(16) permits the seeking of references from past contracts as evidence of sufficient experience. This may provide an opportunity to consider poor past performance, but in practice requires careful drafting of the selection criteria and assessment process in order to provide a meaningful but transparent and fair evaluation methodology. There is the added complication that the information being assessed is provided by a third party (e.g. other contracting authorities). Also, the procuring authority is usually at the hands of the bidder in providing names of past projects and referees. Naturally, the past projects named will usually demonstrate good rather than poor performance.

Against this backdrop, contracting authorities are likely to welcome the changes introduced by the Procurement Bill (the ‘Bill’) to the ‘exclusion’ regime. Notably, it introduces a centrally (government) managed debarment list of suppliers (Bill, Clause 59), and alongside this, a requirement for contracting authorities to publish instances where contractors have been given the opportunity to remedy a performance failure and have not done so (Bill, Clause 66(4)).

Hand in hand with these new features, the Bill extends the discretionary exclusion ground for poor past performance so that in contrast to the position under the PCR, it is not limited to cases of early termination or equivalent. Instead, Schedule 7 para 13(3) of the Bill provides a discretionary ground for exclusion if the bidder has not performed a contract to the authority’s satisfaction, was given proper opportunity to improve performance, and failed to do so. A discretionary ground for exclusion also arises where the bidder has been publicly listed by a contracting authority as having failed to remedy its poor performance on a prior contract.

Responses to the government’s consultation on earlier iterations of its proposals for a debarment list and exclusion for poor performance, suggest that some suppliers query if these proposals will be effective, and whether they might discourage market participation.[1] Unsurprisingly, contracting authorities broadly responded in favour of these proposals, and the government has introduced them in the draft Bill currently being scrutinised by Parliament. The final version of the legislation, once any amendments are agreed, is due to come into force in 2023. The debate over the effectiveness of regulated debarment and exclusion measures is unlikely to end just yet.

This blog is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published. If you would like further advice and assistance in relation to any of the issues raised in this article, please contact us today by telephone or email enquiries@sharpepritchard.co.uk.

[1] https://www.gov.uk/government/consultations/green-paper-transforming-public-procurement/outcome/transforming-public-procurement-government-response-to-consultation