Exclusion from procedures leading to the award of public contracts

On 24 February 2025, suppliers to the public sector will face an additional challenge when they seek appointment as a supplier to a public sector body. Their past and future compliance with competition law in the United Kingdom and abroad, or the conduct of others that they work with or rely upon, will or may exclude them from being awarded public contracts.

When the Procurement Act 2023 comes into force on 24 February 2025, public sector bodies to whom the Act applies (i.e. contracting authorities) must disregard a tender for the award of a public contract from an excluded supplier and may disregard a tender from an excludable supplier. Excluded suppliers will be, and excludable suppliers may be, denied the opportunity to be awarded public contracts – in some cases due to the conduct of associated or connected persons.

A contracting authority may consider a decision by the CMA made up to three years before 24 February 2025 that the supplier or a connected person had been party to an unlawful anti-competitive arrangement when it decides whether a supplier is an excluded supplier. Similarly, when a contracting authority is deciding whether a supplier is an excludable supplier, it may consider any event that it was aware of (or a reasonably well-informed decision-maker in the same position would have been aware of) that happened up to three years before the decision.

Excluded and excludable suppliers

The Procurement Act introduces the new concepts of excluded and excludable suppliers – suppliers that are or may be prevented from participating in a procedure leading to the award of a public contract as a result of their conduct – including their infringement of domestic or foreign competition law. The effect of these new provisions is to multiply the detrimental effect to the supplier of involvement in infringements of competition law.

Excluded suppliers

A supplier will become an excluded supplier if any of the Competition and Markets Authority, the Office of Communications, the Gas and Electricity Markets Authority, the Water Services Regulation Authority, the Office of Rail and Road, the Civil Aviation Authority, the Payments System Regulator or the Financial Conduct Authority make a decision that the supplier or a connected person was party to an arrangement between two or more competitors aimed at co-ordinating their competitive behaviour or otherwise improperly influencing competition in a market.

The following persons are "connected persons": a person with significant control over the supplier; a director or shadow director of the supplier; a parent or subsidiary of the supplier; a predecessor company; any person with actual or potential significant influence or control over the supplier; and any person over which the supplier has actual or potential significant influence or control.

The Act provides a number of incentives for suppliers to take active steps to comply with competition law. The first incentive is that if the supplier has admitted its involvement in the cartel, has agreed to cooperate with the regulator in the investigation of the cartel and entered into a leniency arrangement to that effect, the supplier will not be an excluded supplier and may participate in procedures leading to the award of public contracts. The second incentive is to engage in 'self-cleaning', described below.

A supplier becoming an excluded supplier because it is entered on the Debarment List is also considered below.

Excludable suppliers

A supplier will be an excludable supplier if a contracting authority considers that a supplier or a connected person has been a party to an arrangement between undertakings which may affect trade in the United Kingdom and has the object or effect of preventing, restricting or distorting competition within the United Kingdom. Again, a supplier will not be an excludable supplier if it or the connected person is a party to a leniency agreement with the relevant regulator in the United Kingdom or in a jurisdiction outside the United Kingdom.

A supplier will be an excludable supplier if a contracting authority considers that the supplier or a connected person has abused a dominant position on a market and the abuse may affect trade in the United Kingdom. A supplier will also be an excludable supplier if a contracting authority considers that a supplier or a connected person has infringed substantially similar laws in a jurisdiction outside the United Kingdom.

A supplier becoming an excludable supplier because it is entered on the Debarment List is also considered below.

Post-award sanctions

The involvement of suppliers in infringements of competition law in the United Kingdom and other jurisdictions has adverse consequences both before and after the award of a public contract. A contracting authority may terminate a public contract if the supplier or a sub-contractor becomes an excluded or excludable supplier after the award of the contract.

Prevention and inclusion

The risk of being excluded from awards of public contracts can be mitigated by practices that every well-managed undertaking should operate. They include:

• establishing and effectively operating a competition compliance policy;
• carrying out competition due diligence on the essential members of your supply chain; and
• establishing and maintaining evidence that the circumstances giving rise to the exclusion ground are no longer continuing or are unlikely to recur.

Continuing and recurring infringements, and self-cleaning

A supplier will not be an excluded or excludable supplier unless a contracting authority considers that the circumstances giving rise to the supplier being excluded or excludable are continuing or are likely to occur again.

It is a condition of most leniency programmes that the applicant must cease infringing competition law. Successful applicants for leniency will not be excluded or excludable suppliers, in part because they have ceased to infringe competition law. Suppliers who have not applied for or been granted leniency will be required to prove a negative – that they are not continuing to infringe competition law – before a contracting authority can be certain that they are not an excluded or excludable supplier.

Suppliers will wish to consider the benefits of participation in a leniency programme, including not being excluded from being awarded public contracts, and the disadvantages of participation, including the possibility of liability for damages as a result of admitting infringing competition law.

Contracting authorities may have regard to the steps that a supplier, an associated person or a connected person has taken to prevent the circumstances continuing or occurring again, such as putting compliance procedures in place and providing compliance training, when considering whether the grounds for exclusion are continuing or are likely to occur again. A supplier's commitment to implement effective compliance procedures and provide training, and a means of verifying or monitoring compliance with the commitment, may also be considered by the contracting authority.

Debarment

A supplier is an excluded supplier if it or an associated person is on the Debarment List because of a mandatory exclusion ground. A supplier is an excludable supplier if it or an associated person is on the Debarment List because of a discretionary exclusion ground. The Debarment List is a list maintained and published by a Minister of the Crown of excluded and excludable suppliers.

A contracting authority must inform a Minister if it determines that a supplier, a sub-contractor or an associated person is either an excluded or an excludable supplier. The Minister may then investigate whether the supplier, sub-contractor or associated person is an excluded supplier or an excludable supplier and must prepare and publish a report of the investigation's findings.

The Minister may enter the supplier's name on the Debarment List (with information about the exclusion ground and the date when the Minister expects the exclusion ground to cease to apply) if the Minister is satisfied that the supplier is an excluded or excludable supplier. A supplier whose name is entered on the Debarment List may apply for suspension of a Minister's decision to enter it onto the List, may apply to the Minister for the removal or revision of an entry on the List, and appeal to a court against a decision of a Minister to enter the supplier's name on the Debarment List.

Conclusion

Infringing competition law gives rise to the risk of financial, civil and criminal penalties, of rendering contractual arrangements ineffective and of reputational damage. When the Procurement Act comes into force this month, suppliers wishing to be awarded public contracts will face the additional risk of being excluded from competitions leading to the award of public contracts or the termination of contracts awarded to them.

Effective competition compliance programmes, with appropriate training, continually operated will ensure suppliers mitigate the new risk.