The latest of Supply Management magazine’s fortnightly “SM100” polls of one hundred leading procurement professionals has revealed that over a quarter practise active “blacklisting” of underperforming suppliers. Service providers that have failed in contract delivery, shown financial frailty or committed unlawful acts are being struck from procuring authorities shortlists. This raises a potential risk of challenge under the EU procurement rules.
Debarment of suppliers is permitted under the procurement rules on both mandatory (e.g. corruption or bribery offences) or discretionary (e.g. financial irregularity) grounds, but only as part of a “down-selection” process at the pre-qualification stage in a competitive tender. Ruling certain suppliers out before any proper consideration of their tenders potentially means that the contracting authority is failing to observe the requisite procedure.
Now it has come to suppliers’ attention that the practice of “blacklisting” is rather more widespread, this might mean that the likelihood of procurement challenges increases markedly. Suppliers are likely to claim that, for instance, contracting authorities are exercising bias, failing to act transparently and failing to treat tenderers in a non-discriminatory way.
Recent moves towards “blacklisting” have seemingly been promoted from the very top of Government, following high profile failures by major suppliers in headline projects. Francis Maude’s July letter to the Cabinet, encouraging procuring authorities to consider “blacklisting” (and bemoaning the fact that the Government has “not always taken existing performance into account” when awarding public contracts), came on the back of recent, acrimonious failings by suppliers Fujitsu and G4S, the former regarding IT security for the NHS and the latter in relation to security at the London 2012 Games. The G4S Olympics episode, in particular, seems to have prompted the Government’s present stance.
Suppliers to have experienced difficulties in performing public contracts in recent times will now feel that their prospects of participating in pipeline procurements have been prejudiced by an altered mind-set among contracting bodies and their advisors. Ministers, meanwhile, might also worry that suppliers will become reticent about tendering for Government contracts on account of fearing wasting costs because they have already been “blacklisted”.
This issue is of significant on-going legal interest as not only does the practice of “blacklisting” raise the spectre of speculative challenges but, as a result, it may be that further guidance is needed from, for instance, BIS or the Treasury, to bolster the Public Contracts Regulations 2006 and assure suppliers that contracting authorities will remain compliant with selection processes, notwithstanding recent evidence of and support for “blacklisting” from various quarters.