The Procurement Act 2023 – shining a spotlight on supplier poor performance

The new Act places a spotlight on supplier poor performance in a number of ways:

1. Lower threshold in respect of poor performance to justify exclusion; 
2. Creation of a public register of excluded and excludable suppliers (the debarment list); and
3. Creation of two new substantive contract performance notes (KPIs and termination).

The grounds for exclusion have been broadened such that a supplier which has not performed to the contracting authority’s satisfaction, having been given the proper opportunity to improve performance and failed to do so, can now be excluded.  For the right to exclude to be established it is not necessary for the authority to evidence any actual breach of contract by the supplier.  Suppliers will therefore need to be alive to the potential future and wider impact of alleged performance issues as well as ensuring that they engage fully with any allegations of poor performance to protect their future position. Correspondingly, authorities making such allegations should ensure their position is robust and well-evidenced.  

Where a supplier is excluded from a procurement, the authority must give notice to the Government which will investigate and decide whether to add the supplier to the debarment list.  This will be a publicly available register and can have significant consequences in that a supplier can be excluded from all future procurements automatically for a specified period of time.  In addition, the Government can mandate that where a supplier is added to the debarment list on a discretionary exclusion ground, authorities should be exercising their discretion as to whether to exclude a supplier in all future procurements. Being added to the debarment list will undoubtedly detrimentally affect a supplier’s reputation and ability to compete for future contracts.

The grounds for exclusion have been broadened to include any breach of contract in the last three years which has resulted in the complete or partial termination of the contract, a payment of damages or a settlement (which now also gives rise to a requirement on an authority to publish a contract performance notice).  This information must also now be published in a contract performance notice moving forward. 

Authorities and suppliers will be used to negotiating mutual terminations of contracts in private and usually with control over what information in relation to the termination enters the public domain, i.e. by way of a pre-agreed statement.  Moving forward the terms on which a mutual termination is agreed will need to be carefully considered as a settlement agreement arising from a breach of contract establishes a discretionary right to exclude the supplier, whereas a settlement agreement which arises other than for a breach does not appear to do so. It is for a supplier to self-certify as to whether any grounds of exclusion apply.  A failure to disclose that a ground of exclusion applies can in and of itself constitute grounds for exclusion on the basis that the supplier has acted improperly in relation to any procurement.  Well-prepared suppliers will have taken the opportunity prior to the Act coming into force to seek to “self-clean”. 

Finally, for certain contracts the Act requires an authority to set at least three KPIs and publish every 12-months, up to and including the termination of the contract, contract performance notices rating the supplier’s performance against those KPIs.  This level of public scrutiny on supplier performance could result in suppliers being more cautious about entering into a procurement and authorities should ensure that KPIs are realistic and balanced.  

Competitor suppliers will undoubtedly pay careful attention to all contract notices that are issued and could potentially challenge an authority on the grounds that it is has failed to exercise its right to exclude an alternative supplier from a procurement they are competing in.