On 15 March 2010, the Office of Government Commerce (OGC) published guidance on the mandatory requirement for contracting authorities to exclude economic operators (suppliers, contracts and services providers) from public contracts where they have been convicted of certain offences. These include participation in criminal organisations, corruption, money laundering and fraud (the guidance gives a full list). Exclusion is no longer at the discretion of the contracting authority.
The Public Contracts Regulations 2006 and the Utilities Contracts Regulations 2006 both require procuring entities not to select an economic operator where they have actual knowledge that the economic operator has been convicted of a particular offence. The requirement also applies to convictions applicable to that economic operator’s directors or any other persons with powers of representation, decision or control for that economic operator.
The guidance covers:
- to whom the mandatory exclusion applies;
- how to obtain disclosure of convictions, including who is the “competent authority” to contact;
- the two levels of disclosure – “Basic Disclosure” (unspent convictions only) and “Standard Disclosure” (spent and unspent convictions);
- the position on corporate convictions (as opposed to convictions of natural persons);
- exceptions to the mandatory exclusion.
General guidance points include:
- procuring entities should, as a minimum, seek a declaration from all economic operators – either in the pre-qualification questionnaire or the invitation to tender – confirming that they have not been convicted of any of the relevant offences;
- “economic operator” refers only to the contractor, supplier or services provider applying to tender for the specific contract in question, not to subsidiaries or sub-contractors who may be engaged by the economic operator to perform some of the work under the contract. The guidance states that there is no mandatory exclusion of a subsidiary which is an “economic operator” where the parent company of that subsidiary has been convicted of a relevant offence, unless that parent exercises “direct control” over the subsidiary. Unfortunately the guidance misses the opportunity to elaborate on the meaning of direct control and the overall implications for wider group relationships.
Observations arising from this guidance include:
- there is no clear test for whether a Basic or Standard Disclosure is required. Rather this is open to interpretation (and accompanying uncertainty), as “a contracting authority should only need to consider the Standard Disclosure where it believes that the subject matter of the contract being awarded requires full disclosure ”and a Standard Disclosure should be requested where “the sensitivities surrounding the specific contract are such that information on spent convictions is required”;
- the procedure for obtaining disclosure of convictions is likely to be lengthy – with knock-on effects on contract timing;
- corporate convictions will effectively exclude a company permanently from public procurement contract opportunities as such convictions do not become spent and the available exception is very limited - the only example of the exception given by the OGC is where there is a national emergency.
