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Contract Bidding Exclusions

Wednesday November 7th, 2012

In the wake of the G4S Olympic security controversy, the Cabinet Office is proposing a policy whereby a supplier’s record in performing contracts can lead to their exclusion from bidding for central government contracts. David Hansom outlines the issues raised by the move and its potential implications.

David Hansom

David Hansom

In response to calls by the Home Affairs Select Committee to create a ‘blacklist’ of companies with a poor record of delivering public contracts, the Cabinet Office stated that such companies would ‘find it more difficult to secure more work with the government in the future’.

Supporters of this policy will highlight the reduced chances of a contract failing to be fulfilled and the effect of market forces in ensuring that companies raise their game so as not to find themselves out of favour with government departments.

However, all is not as clear as it seems. While the Cabinet Office holds the opinion that such a policy is completely consistent with the EU procurement rules, there is much doubt as to whether such a move would be compatible.

While the Public Contracts Regulations 2006 (Regulations) provide that a contracting authority may take into consideration a bidder’s experience and reliability when assessing whether or not the bidder meets the minimum technical or professional standard required to fulfil a contract, this is an assessment which is applied on a case-by-case basis in each procurement process.

A general principle of the Regulations and EU procurement law is that there should be an open and non-discriminatory competition for public contracts consistent with the requirements of free movement of people and services. Contracting authorities are obliged to ensure equality of treatment, non-discrimination and transparency in all procurement processes. Such principles are very difficult to match with such a Member State-specific blacklist, which necessarily excludes suppliers from the local market without the ability to assess specific past performance in each instance.

Practically, it is also very difficult to apply blacklist measures to consortia and group company bidders. Even if the blacklist did not amount to discriminatory treatment, it is likely that consortium members outside of the list would complain about their exclusion from a process in relation to performance issues that are not related to them. Bidders which have undergone significant internal restructuring and which have put increased efficiency structures in place may also suffer as a result of a contract which was poorly managed by the previous regime.

It is likely that, should the policy be introduced, the measure will be challenged at both domestic and European Court of Justice level.

CBIThe CBI has also criticised the move as a policy which harms businesses at a time of financial pressure when they have previously supported the Government’s drive for efficiency by offering their intellectual property and sharing ideas.

With public contracts worth billions of pounds to companies every year, the loss of any opportunity to secure a public contract has the potential to have a highly damaging effect in the current challenging economic climate. Leading suppliers will be nervous about being associated with blanket blacklists and are likely to complain or challenge where they are effectively excluded from a whole chunk of the market. While proponents of the signalled policy will highlight the fact that efficient and competent companies will gain as a result of its implementation, its enforceability and lawfulness is, as yet, far from clear.

Veale Wasbrough Vizards leads in advising on a range of innovative social enterprise and partnering projects across the charities, education, health and public sectors.

 

David Hansom

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