Bribery Act 2010 and its effect on procurement

Wednesday April 20th, 2011

By Ruth McNaught, Solicitor, Harper Macleod LLP

The UK Government has released a guidance paper about the procedures that commercial organisations can put in place to reduce their exposure to bribery and to improve understanding of the mechanics of the Bribery Act 2010 (‘the 2010 Act’), which extends to England and Wales, Northern Ireland and Scotland.

The guidance relates to section 7 of the 2010 Act, which provides that a relevant commercial organisation is guilty of an offence if a person associated with it bribes another person with the intention of obtaining or retaining business or an advantage in the conduct of business for the commercial organisation.

In issuing the guidance, the UK Government also announced its decision that conviction of a commercial organisation under section 7 of the 2010 Act will attract discretionary rather than mandatory exclusion from public procurement under the UK’s implementation of the EU Procurement Directive 2004/18/EC.

In Scotland, the relevant provisions are Regulation 23(1) and Regulation 23(4) of the Public Contracts (Scotland) Regulations 2006 (‘the 2006 Regulations’).

Regulation 23(1) sets out the mandatory disqualification criteria: a contracting authority must treat a prospective bidder as ineligible and not select that bidder if it, or its directors, has been convicted of (among other things) conspiracy; corruption; bribery; fraud; or money laundering.

The contracting authority must have actual knowledge that the bidder, its directors or any other person who has powers of representation, decision or control of the economic operator has been convicted of these offences.

Regulation 23(4) sets out discretionary criteria, allowing the contracting authority to choose not to qualify the economic entity. The criteria include: bankruptcy, being the subject of a receiving order, winding up order or administration order (or similar); conviction of a criminal offence relating to the conduct of its business or profession; commission of an act of grave misconduct in the course of its business or profession; and failure to fulfil obligations relating to the payment of social security contributions or taxes.

Unlike regulation 23(1), regulation 23(4) only applies to the economic operator itself, not to its directors or others with the necessary level of control.

In most cases, contracting authorities will prefer to retain discretion over whether to reject a bidder. However, contracting authorities must have regard to the general procurement principles and treat all bidders the same; for example, unless clearly justifiable, the contracting authority could not disqualify one bidder on a discretionary ground and not disqualify another bidder on the same ground.

The UK Government’s announcement has placed convictions under section 7 of the 2010 Act squarely in the remit of the discretionary criteria. Contracting authorities will, therefore, have the choice of whether or not to reject a bidder on the basis of such a conviction. Contracting authorities should consider their procurement policies in light of this announcement to ensure that a consistent and transparent approach to bidders falling into this category is taken.

Ruth is a solicitor at Harper Macleod LLP and can be contacted on [email protected]

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