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Procurement in a Nutshell – Procurement Policy Note: Applying exclusions in public procurement, managing conflicts of interest and whistleblowing

On 22 February 2019, the Cabinet Office published a Procurement Policy Note, as well as accompanying documentation, providing guidance on the application of exclusions in public procurement, the management of conflicts of interest and procedures relating to whistleblowing. The note applies to the general public sector including local authorities and NHS bodies.

Click here to view the Procurement Policy Note.

Mandatory exclusions

Under the Public Contracts Regulations (the “Regulations”), all in-scope Contracting Authorities must exclude a potential supplier where it has been established that that organisation has been convicted of a relevant mandatory offence, as set out by Regulation 57 (1) of the Regulations.

Importantly, the guidance emphasises that exclusion is also mandatory if a member of a potential supplier’s administrative, management or supervisory body, i.e. a company director (or equivalent), has been convicted of a relevant offence. It is important to be aware of this given that such offences are relatively wide-ranging.

Furthermore, it is worth noting that in-scope organisations may only disregard any of the grounds for mandatory exclusion on an exceptional basis where “there are overriding reasons relating to the public interest such as public health or protection of the environment”. Consequently, a thorough review must take place prior to a decision to disregard a ground for mandatory exclusion.

Discretionary exclusions

Regulation 57 (8) of the Regulations sets out a list of discretionary exclusions for which a Contracting Authority has the choice of deciding whether or not to exclude a bidder where it is found that they are guilty of such an offence.

Examples include:

  • Bankruptcy – Where the bidder is bankrupt or the subject of insolvency proceedings;
  • Grave professional misconduct – Where there has been a violation of formal rules, as well as wrongful conduct which impacts on the professional integrity of the bidder; and
  • Serious misrepresentation – Where an economic operator has been guilty of a misrepresentation during the bidding process.

Consequently, Contracting Authorities should be sure to monitor whether any of the grounds for discretionary exclusion apply throughout their procurement procedures, as well as considering whether to exclude a bidder on that basis.

Conflicts of interest

The guidance reiterates the requirements set out by Regulation 24 of the Public Contracts Regulations i.e.:

“Contracting Authorities shall take appropriate measures to effectively prevent, identify and remedy conflicts of interest arising in the conduct of procurement procedures so as to avoid any distortion of competition and to ensure equal treatment of all economic operators.”

It is explained that this covers the situation where relevant staff members have a “direct or indirect financial, economic or other personal interest which might be perceived to compromise their impartiality and independence in the procurement process.” We would, however, remind you that this is only one example of how a conflict can arise and we often see procurements that ask for a certificate that there are no conflicts, but which only refer to that one example in Regulation 24. That is too narrow.

Contracting Authorities should remember that a conflict of interest only constitutes a discretionary ground for exclusion and, as such, a bidder should only be excluded in circumstances where there is no other way to treat all bidders equally. Furthermore, where a bidder is to be excluded, that bidder must be given the opportunity to prove that their previous involvement would not be capable of distorting competition.

Why is this important?

The Policy Note serves as a useful reminder to Contracting Authorities of their obligations to apply exclusions where certain factors are relevant to a procurement process. It is apparent that Contracting Authorities should ensure that care is taken to review whether any of the grounds for exclusion apply to a particular bidder, as well as giving considerable thought to, and properly documenting, any decision to make an exclusion on that basis.

Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.

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