The Procurement Bill will extend the ground for exclusion of suppliers from the tendering process based on past poor performance in an effort to improve the standard of suppliers and to make it easier for contracting authorities to reject suppliers for previous poor performance.
Public Contracts Regulations 2015 (PCR)
Under the current legislation, contracting authorities have a discretionary right to exclude suppliers based on past poor performance. However, in order to use the exclusion, contracting authorities must provide evidence of the following:
- sufficient or persistent deficiencies in the supplier’s performance of a substantive requirement under the past contract; and
- this led to early termination of that contract or payment of damages or other comparable sanctions.
Unsurprisingly, contracting authorities frequently do not have sufficient evidence to reach this threshold. In practice, poor performance is rarely dealt with by a court order or early termination but rather contractually between the relevant parties. Therefore, the exclusion is rarely used.
The Procurement Bill reforms
The reforms, due to come into effect in Autumn 2023, seek to implement clear instructions as to how past performance should be measured. The discretionary exclusion for poor performance can now apply in the following circumstances (Schedule 7, paragraph 12(1)-(4)):
- If the supplier has breached a relevant contract, and the breach was sufficiently serious;
- If a court has ruled that the supplier breached a relevant contract, and the breach was sufficiently serious;
- If the supplier has not performed a relevant contract to the regulated authority’s satisfaction and was given proper opportunity to improve performance but failed to do so; and
- If a contracting authority has published information under s70(5) in respect of the supplier (information concerning either breach or poor performance).
The Procurement Bill has clarified that a breach of contract will be considered “sufficiently serious” if it results in: termination (or partial termination) of the contract; the award of damages; and/or a settlement agreement between the supplier and the regulated authority.
How will the reforms effect contracting authorities?
The proposed reforms will allow contracting authorities to exclude a supplier based on prior poor performance in a wider range of circumstances than under the PCR. This should allow the ground to be more widely used and provide contracting authorities with a useful tool to improve the quality of performance by suppliers.
However, exclusion is only one tool available to contracting authorities in the Procurement Bill to ensure the quality of contractual performance. Contracting authorities will be supported in managing their contracts by new clauses in the Procurement Bill: clause 52 on Key Performance Indicators (KPIs) and clause 70 on assessment of contract performance.
Clause 52: contracting authorities must set and publish at least three KPIs, before entering into a public contract with an estimated value of more than £2 million.
Clause 70: where contracting authorities have set KPIs, at least once every 12 months during the contract term and on termination, it must assess the supplier’s performance against the KPIs and publish information to be specified in regulations in relation to that assessment.
Provided the KPIs are realistic and set with careful consideration, these will provide valuable support to contracting authorities in managing contractual performance.
The widening of the grounds for exclusion for prior poor performance should provide an effective tool for contracting authorities to ensure high quality performance of their public contracts. Taken in conjunction with the KPI requirements discussed above, the Procurement Bill ensures that contracting authorities will be well equipped to effectively manage contracts during the delivery phase.