The cold shoulder

The OGC has revised its guidance on the 'blackballing' of potential contract bidders. Deborah Ramshaw outlines the changes and assesses the implications for public sector purchasers

The OGC has now published its revised guidance on the mandatory exclusion of bidders from procurement exercises. Generally the public procurement legislation is not used as a tool to further other EU policies, however, there is one very important exception to this: a requirement for contracting authorities to exclude from public procurement procedures firms which are convicted of participation in corruption, money laundering, fraud or a criminal organisation.

Background

The Public Contracts Regulations 2006 require that a contracting authority “shall” treat as ineligible to participate in a procurement process and “shall not” select a bidder if the authority has “actual knowledge” that the bidder (or its directors or other persons with powers of representation, decision or control) has been convicted of any of the following:

• Conspiracy relating to participation in a criminal organisation;
• Corruption;
• Bribery;
• Fraud affecting the financial interests of the European Communities (e.g. cheating the Revenue; conspiracy to defraud; fraudulent trading; and, defrauding Customs);
• Money laundering; or
• Any other offence within the meaning of Article 45 of the Public Sector Directive.

Derogation for Overriding Reasons of General Interest

The UK Government chose to include a derogation available in the Directive which allows an exception to mandatory exclusion. The contracting authority can disregard the prohibition if it is “satisfied that there are overriding requirements in the general interest which justify doing so in relation to that economic operator”.  See below for further detail on this aspect.

Authorities Must be Aware of the Conviction

The provision only applies to convictions of which the authority is aware. However, there has been some uncertainty about what steps an authority must take in order to ensure compliance with The Regulations. The OGC published updated guidance on this subject matter on 15 March 2010. (Available on the OGC website at the Policy and Standards Framework section).  The guidance has been updated to take account of on-going discussions with the European Commission and Member States and as a result of the proposed new Bribery Bill once it receives Royal Assent.

What Steps Must an Authority Take to Establish Whether a Bidder Has Been Convicted of a Relevant Offence?

The Regulations are silent on this aspect: in other words, the Regulations themselves do not set out the steps that should be taken to establish whether any such convictions are in place. OGC’s view is that to require evidence from every bidder, for all procurements, would be unduly burdensome. This is where authorities must therefore exercise discretion in terms of having regard to the nature of the contract being tendered. As a minimum though, OGC expects that all bidders should be asked to sign a declaration confirming that they have not been convicted of any of the relevant offences. Typically this will be included at the pre-qualification stage. OGC have a recommended template for this declaration which authorities are advised to use (see http://www.ogc.gov.uk/documents/pqq.doc).

If the response to such a declaration is ambiguous or incomplete then the OGC guidance suggests that further clarification should be sought from the bidder in question. If the authority is still not satisfied with the response it receives it should then consider applying to the “relevant competent authority” for further information.

“Relevant Competent Authority”?

The Regulations provide that an authority may apply to the relevant competent authority to obtain further information regarding a bidder and any potential convictions if it considers it needs such information in order decide on a mandatory exclusion. The OGC guidance states that in the UK the local authority would contact Disclosure Scotland and the Criminal Records Bureau (CRB) for further information by way of a “Disclosure”. If the bidder is not based in the UK the authority would need to apply to the competent authority of the relevant Member State.

Level of Disclosure

Two levels of Disclosure are relevant with regard to procurement: Basic and Standard. A Basic Disclosure provides details of all unspent convictions of individuals. A Standard Disclosure will detail all convictions (spent or unspent) of an individual. OGC guidance is that a Standard Disclosure should only be sought where the authority believes that the subject matter of the contract being awarded requires full disclosure.

Basic Disclosure (for all UK companies) is only currently available through Disclosure Scotland and the authority would have to require the relevant individuals to apply for Disclosure which would then have to be forwarded to the authority once received by the individual.  If this Disclosure revealed relevant unspent convictions then the authority must exclude the bidder from the procurement process unless it is satisfied that there is an overriding reason in the public interest not to do so (see below).
Standard Disclosure is available from the CRB but is a more thorough and demanding process than that for Basic Disclosure. Further detail on the Standard Disclosure process is set out in the OGC guidance.

OGC Guidance on General Interest Derogation

As noted above the authority could, in theory, make use of the derogation and not exclude a bidder where it was satisfied that there were overriding requirements in the general interest which justified this. However, the OGC guidance states that “these exceptions should only be used in the most serious of circumstances, for example in the case of national emergency. In such cases the approval of the Accounting Officer or Minister, as appropriate, should be sought and obtained…” In practice therefore the derogation is unlikely to be available for most procurements and where information is obtained of relevant convictions the authority will have to exclude the bidder from the procurement process.

Corporate Convictions

The disclosure process outlined above refers only to convictions against individuals and not corporate convictions. Currently such corporate convictions never become spent and there is no official central record held. If an authority were to receive knowledge of a relevant corporate conviction then it would have to exclude the bidder from the process: for the bidder this could of course result in permanent exclusion from public contracts.

Conclusion

Local authorities should have regard to the revised OGC guidance on the mandatory exclusion provisions. For most straight-forward procurements the relevant certificate should be signed by bidders and any refusal to sign or any voluntary disclosure made is likely to lead to exclusion. In other cases it appears there is a wide degree of discretion for authorities as to further enquiries it can choose to undertake in terms of Disclosure. The level of enquiry should be appropriate to the subject-matter of contract and so must be considered on a case-by-case basis. It is suggested that this approach is set out in the relevant internal procurement guidance / standing orders of the authority.

Deborah Ramshaw is Head of Procurement at Dickinson Dees LLP
www.dickinson-dees.com