Debarment lists - exclude suppliers for 5 years

Procurement Bill

Public procurement consultant Naomi Clews discusses the UK governments Procurement Bill and how it will provide a power for a Minister of the Crown to add suppliers to a public debarment list (for both mandatory and discretionary exclusion grounds) if they are assessed as meeting a ground for exclusion and there is insufficient evidence of self-cleaning.

What is an exclusion framework?
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The proposed exclusion framework is a key part of the governments Procurement Bill, which they state will be simpler, clearer and more focused on suppliers who pose an unacceptable risk to:

• effective competition for contracts,
• reliable delivery,
• protection of the public, the environment, public funds, national security interests or the rights of employees.

In order to mitigate the impact of the retrospective effect of the new exclusion’s regime, the Cabinet Office intends to provide for a transitional regime for the introduction of the new exclusion grounds.

This will mean that only grounds which are the same as, or substantially similar to, exclusion grounds under the current regime will have retrospective effect i.e. suppliers may be excluded on the basis of events which occurred prior to these new grounds coming into force.

The proposed debarment regime will have the following features:

• suppliers will be considered for debarment when they are excluded by a contracting authority during a procurement;

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• the Crown Commercial Service can refer suppliers to be added to the debarment list, without having excluded them;

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• the new Procurement Review Unit will be responsible for considering cases and making recommendations to the Minister;

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• suppliers can apply for early removal from the debarment list before the end of the five year period of exclusion, if they can show they have self-cleaned;

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• suppliers can appeal a decision to put them on the debarment list to the court.​

Contracting authorities will continue to exclude suppliers not on the debarment list on a case by case basis but must exclude suppliers on the debarment list for mandatory exclusion grounds.  

Who do the exclusion grounds apply to?
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The government will specify a set of individuals and entities with a direct connection to the supplier that must be considered for the purpose of determining whether any of either the mandatory or discretionary exclusion grounds apply to the supplier.

The set of individuals and entities to be considered are:

• ‘Persons of Significant Control’ within the meaning of the Companies Act 2006;

 

• directors of the supplier, including shadow directors;

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• parent companies of the supplier;

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• subsidiary companies of the supplier;

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• insolvent companies where the company’s business has been transferred to the supplier and where one or more of the supplier’s directors was a director of the predecessor company when it ceased to trade.

For suppliers which are not subject to the provisions, the government intends to cover individuals or entities which are in an analogous position.

The government intends to implement a separate provision (regarding the application of the exclusions to subcontractors and to other entities on which the supplier is reliant) to meet the selection criteria.

All details relating to beneficial ownership and tenders will be included and published in the Contract Award Notice. 

What supplier due diligence checks do the government recommend? 
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For now, the Cabinet Office recommends due diligence checks of supplier details from the Companies House Register.

However, Open Democracy reported on the 24th February 2022 that 623 new ‘British’ companies are actually controlled from Russia. 

​The article states that analysis suggests thousands of firms listed on the UK’s business register (Companies House) are controlled by Russian nationals who live in Russia, with some linked to Putin’s allies.

The Cabinet Office suggests reviewing information captured at the selection stage of the procurement process to identify a Russian or Belarusian supplier as:
 
(i) an entity constituted or organised under the law of Russia or Belarus;

or
 
(ii) an entity registered in the UK or with substantive business operations in the UK, or another country but controlled by an entity based in Russia or Belarus (e.g. a parent company or by ‘Persons of Significant Control’)
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Where the supplier has a more complex group structure involving parent or group companies based or operating in the UK, or in a country the UK has a relevant international agreement with reciprocal rights of access to procurement, the Cabinet Office advises to consider the specific circumstances and take legal advice where appropriate.

Is there official guidance on how to identify Russian and Belarusian owned suppliers?
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Yes, in the statement published by the Cabinet Office on the 28th March 2022 they recommend a due diligence approach.

​A summary of the Cabinet Offices approach to uncovering Russian and Belarusian owned suppliers and terminating their contracts is provided below:
 
1. Seek legal advice to review Intellectual Property Rights, termination clauses and any early termination costs within relevant contracts.
 
2. Consider any Russian/Belarusian subcontractors in the supply chain to be managed with the prime contractor.
 
3. Establish an alternative source of supply considering business criticality, timescales, switching costs, supply chain disruption and risk to any remaining contracts with the same supplier.   
 
4. Assess the risk of financial implications of terminating the contract and clearly document recommendations on whether or not to terminate relevant contracts.
 
5. Where volume-based contracts exist, a reduction in volume to zero could achieve the same effect if termination is not feasible.
 
6. Clearly document all your decision making in relation to assessing whether contracts should or should not be terminated and ensure there is an audit-trail to support your decision.
 
7. The most senior commercial/procurement professional in your organisation should approve your recommendation and any approval for additional funds.  
 
8. Supplement your assessment and recommendations with legal advice where necessary.

Who do I contact if I have concerns?
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The Cabinet Office state that a full supply chain mapping exercise is not recommended at this time.

A review of contract portfolios is suggested to identify major contracts with the most impact and influence on the Russian or Belarusian regimes.

This includes contracts awarded by the Crown Commercial Service (CCS).

The statement advises,

“where your contract is via a Crown Commercial Service commercial agreement, contact the CCS helpdesk on 0345 410 2222 or email info@crowncommercial.gov.uk”.
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For other framework agreement owners, the suggestion is to contact them directly.

About the Author 

Naomi Clews

Naomi Clews is a UK based independent procurement consultant who specialises in public procurement and helping suppliers to navigate the complex public procurement process. Find out more here.