For any UK and non-UK company that derives significant revenues from UK publicly procured contracts, the prospect of debarment is extremely serious. Not only can a company be excluded from a particular procurement process, but it can also be barred from bidding for any UK public contracts.
The Procurement Act 2023 (PA23) makes significant changes to the previous exclusion and debarment regime (under legislation, principally the Public Contracts Regulations 2015 and Utilities Contracts Regulations 2016, which were derived from EU rules) . Any company facing enforcement action for alleged financial crimes and a wide range of other wrongdoing, whether in the UK or abroad, should consider the impact of enforcement outcomes on its ability to bid for public contracts in the UK. This may impact strategic decisions made during an external investigation.
The PA23 came into force on February 24, 2025. Just two days later, the UK Government announced it would use the new powers granted by the PA23 to investigate (for possible entry onto the new public debarment list) several construction suppliers in relation to the Grenfell Tower fire.
This article summarises the following key changes under the PA23:
- Wider application of the exclusion regime to certain group companies and other third parties.
- Wider, and more specific, financial crime exclusion grounds.
- Competition law infringements now included as mandatory and discretionary exclusion grounds.
- A new public debarment list – with debarred suppliers to be named.
Wider application of the exclusion regime on group companies and other third parties
The exclusion grounds expressly apply to a “connected person” to a supplier, which is prescribed as:
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any person with ‘significant control’ over the supplier; or
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any person who exercises (or has the right to exercise) significant influence or control over the supplier; or
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any person over which the supplier exercises (or has the right to exercise) significant influence or control, or
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directors, shadow directors, parent undertakings, subsidiary undertakings and predecessor companies of the supplier.
Notably, the definition is concerned with control, so sister companies are not automatically captured.
Certain group companies now fall within the ambit of PA23, even where those companies are not engaging in the underlying procurement process. For example, where a parent undertaking (whether UK or non-UK) of the supplier has been convicted for a specified offence under the Bribery Act 20101 , notwithstanding the fact that the supplier itself has not been convicted, the mandatory exclusion ground applies to the supplier. As the mandatory exclusion grounds also apply to non-UK offences where the overseas conduct, had it taken place here, would constitute an offence here, enforcement action abroad against a group company could impact a supplier’s ability to bid or be awarded a UK public contract. Notably, modern slavery and human trafficking offences are included for mandatory exclusion.
The exclusion grounds are similarly extended to apply to anyone the supplier would be relying upon to satisfy the conditions of the public contract, were it to be awarded. Suppliers should bear this in mind when selecting business partners such as sub-contractors.
Wider, and more specific, financial crime exclusion grounds
The PA23 sets out more prescriptive, and wider, mandatory and discretionary exclusion grounds than its predecessor regime.
The PA23 specifies that conviction for certain offences by a supplier or a “connected person” is a mandatory ground for exclusion. Offences specified for the first time include offences under the Theft Act 1968 (e.g., false accounting), the Fraud Act 2006 and the Companies Act 2006. An overseas conviction for an offence committed outside the UK, which would be an offence with grounds for a mandatory exclusion if committed in the UK, will also be treated as a mandatory exclusion ground.
Although some “failure to prevent” offences are included (such as the failure to prevent facilitation of tax evasion offences under the Criminal Finances Act 2017), the failure to prevent bribery offence under s7 Bribery Act 2010 is not captured, nor the failure to prevent fraud offence under s199 Economic Crime and Corporate Transparency Act 2023. However, the discretionary exclusion ground of professional misconduct is broad. It includes dishonesty, impropriety or a serious breach of ethical or professional standards applicable to the supplier, and therefore this discretionary exclusion ground would likely be capable of capturing these offences.
Suppliers must be given a reasonable opportunity to make representations and provide evidence against the application of a mandatory (or discretionary) exclusion ground by a contracting public body by showing ‘self-cleaning’, as with the predecessor regime. Contracting authorities ‘may have regard’, for example, to evidence that the supplier has taken the circumstances seriously (for example by paying compensation) and steps they have taken to prevent the circumstances continuing or recurring.
Some other aspects of the predecessor regime also remain – the PA23 does not define the term ‘conviction’, so it carries its general meaning, which suggests that mandatory exclusion on the basis of conviction for an offence would not apply to, for example, penalty orders or DPAs.
However, discretionary exclusion grounds may apply in these circumstances. These do not require a conviction but are situations which may pose unacceptable risks for the contracting authority, such as insolvency, potential competition law infringements, professional misconduct, breach of contract and poor performance, general national security threats and labour and environment misconduct. This analysis will be fact-specific, but the discretionary exclusion ground of professional misconduct could apply to the underlying conduct that led to a DPA related to financial crime, as PA23 defines professional misconduct broadly to include conduct involving dishonesty, impropriety, or a serious breach of ethical standards (whether the standards are mandatory or not). It would then be for the contractor to show evidence of self cleaning and the Guidance to the PA23 indicates that a DPA may be evidence of self-cleaning, as it could demonstrate that misconduct is not likely to occur again due to measures agreed as part of the DPA.
It is notable that the position is slightly different for procurements conducted by private utilities (for example, private suppliers to the public of gas, heat, electricity, water or transport). In those circumstances, where a mandatory exclusion ground applies to a supplier (and therefore that supplier would be an excluded supplier), private utilities should regard such a supplier as excludable, as if a discretionary exclusion ground applies to it). Therefore, private utilities may disregard tenders from a supplier, but do not have to.
Competition law infringements now included as mandatory and additional discretionary exclusion grounds
Additional grounds for mandatory exclusion can arise without any criminal conviction. Certain types of ‘tax misconduct’ continue to be a mandatory exclusion ground.
Significantly, for the first time, certain infringements of competition law can lead to mandatory exclusion—not just where a relevant individual has committed a criminal cartel offence, but also where the UK Competition and Markets Authority (CMA) (or a concurrent regulator) has made a decision that a supplier has infringed the Chapter I prohibition of the Competition Act 1998 through participation in a cartel and has not been awarded immunity. UK-equivalent competition law infringements which take place outside the UK would also be caught.
There are also provisions for discretionary exclusion where a contracting or appropriate authority considers that the supplier (or a connected person) that does not benefit from immunity has engaged in conduct in breach of competition law – either being a party to an anticompetitive agreement (even if not a ‘cartel’), an abuse of dominant position or a criminal cartel offence – whether under UK law or under any substantially similar rules in another country, and whether or not there has been a finding of infringement by a competition authority. This appears to expand significantly the previous discretionary exclusion that was limited to anticompetitive agreements by the ‘economic operator’.
Further, a determination by the UK Government that a supplier poses a threat to national security is a new exclusion ground that can operate both on a mandatory or discretionary basis.
A new public debarment list – debarred suppliers to be named
A centrally published debarment list is a key new addition to the procurement regime under PA23. In addition to unwelcome public attention, inclusion on the list means that a supplier is not, or may not be, allowed to participate in procurements or be awarded public contracts, depending on whether the exclusion ground for which the supplier has been put on the debarment list is mandatory or discretionary.
All contracting authorities must check the debarment list in each procurement and must exclude (or have a discretion to exclude) suppliers, if they are on the debarment list. A supplier will remain on the debarment list for up to five years.
Entry onto the public debarment list
So how will a supplier find itself on this list? A contracting authority must notify the UK Government if it decides that a supplier is excluded (mandatory exclusion ground applies) or excludable (discretionary exclusion ground applies) and takes relevant action (i.e. disregards a tender from such a supplier).
The UK Government will then consider whether to investigate if an exclusion ground applies to the supplier and consider whether to add the supplier to the public debarment list. While it is envisaged that these notifications from contracting authorities will be the starting point for entry onto the debarment list, they are not a pre-requisite for entry (as was the case with the UK Government’s announcement of an investigation into suppliers in relation to the Grenfell Tower fire). Suppliers must be notified if the UK Government decides to investigate and may be required to assist the investigation through the provision of documents or other information. A failure to cooperate with such a request can in itself be a mandatory exclusion ground.
Making representations
Because of the potential impact of a contracting authority’s exclusion decision, suppliers will want to make representations and evidence self-cleaning as much as possible to the contracting authority, to avoid being considered for further investigation by the UK Government and ultimately entry onto the debarment list. A supplier can only be considered for debarment if any of the mandatory or discretionary exclusion grounds apply and the circumstances giving rise to the exclusion ground are continuing or are likely to happen again. If representations to avoid exclusion are unsuccessful, suppliers can also make representations during the UK Government’s investigation against being added to the debarment list. Although suppliers do not have a legal duty to comply with requests for information or other assistance in this context, failure to do so could result in debarment by virtue of the mandatory exclusion ground for failure to cooperate with an investigation.
In addition to these representations, a standstill period will apply for eight working days following the decision to enter a supplier onto the debarment list. During this standstill period, suppliers can apply to the court for a suspension of that decision while they appeal the decision itself.
If suppliers are ultimately unsuccessful, and are entered on the debarment list, suppliers can still apply for their removal or a revision of the entry, where the supplier is able to present significant new information or if there has been a material change in circumstances.
Publicity
However, although these mechanisms exist to challenge entry onto the debarment list, they are onerous.
The UK Government Guidance states that it is not intended as a punishment for past misconduct, but rather to manage risks associated with procurement and the award of public contracts. The fact of an enforcement will likely have already been reported in the UK media, but while it is not intended as a punishment, most companies (and their stakeholders) would view being entered onto the list as a public sanction, given the reputational implications.
Conclusion
Businesses that contract with the UK Government will already be accustomed to many of the features of the new exclusion regime from the predecessor regime.
But the broad application of the new exclusion regime, capturing both overseas offences and misconduct, as well as certain group companies (even where non-UK), means that suppliers need to be especially alive to the impact of decisions made outside the UK to potential procurement risk. The public debarment list is certainly one to watch. The reputational and financial consequences of entry could be great, and so suppliers will want to be ready to make compelling representations if required and factor this risk into its response to both internal and external investigations.
The PA23 came into force on February 24, 2025.
Footnotes
1. Active bribery (s1), passive bribery (s2) and bribery of a foreign public official (s6)
