The Procurement Act 2023: a new regime for exclusion and debarment

What you need to know if contracting with the UK Government post-24 February 2025.

On 14 January 2025, Freshfields and Monckton Chambers co-hosted an event on how the Procurement Act 2023 will reform public procurement law in the UK when it comes into force on 24 February.  

We are now publishing a series of briefings to provide a summary of the key changes likely to be of particular interest to our clients. In this briefing – the first of the series - we discuss the changes to the exclusion and debarment regime introduced by the Act. 

Overview: an expanded exclusion regime and a new debarment list 

As with the previous regime, suppliers will continue to risk being excluded from public tender processes if mandatory or discretionary exclusion criteria apply. While the grounds largely remain the same there are a number of notable changes. First, there are expanded exclusion grounds including for risk to the national security of the UK; infringements of competition law; poor performance; and environmental misconduct. Second, the Act for the first time permits contracting authorities to exclude suppliers on the basis that the supplier’s own subcontractors, suppliers, and other “associated” persons fall foul of the exclusion grounds (expanding the current provisions focussed on connected persons). This has the potential to pose significant risk and suppliers will  need to actively scrutinise and manage their supply chains. 

One of the most significant changes introduced by the Act is the creation of a wholly new centrally managed debarment list, akin to that of international organisations such as the World Bank. Following exclusion and subsequent investigation a supplier can be added to the list by a Minister of the Crown. The consequences are severe including exclusion from all public contracting for 5 years for suppliers debarred on mandatory exclusion grounds. As yet, there is little clarity or guidance regarding when investigations leading to debarment will occur. We expect there to be significant political and public interest in the use of the list and legal challenges in the coming months and years as the first investigations commence and names are added to the list.  

Expanded exclusion grounds 

While the grounds have largely remained the same, there are a few notable changes.

Changes to the mandatory grounds include:

Exclusion for criminal convictions for specific offences within the past five years (Part 1, Schedule 6)

The Act introduces new mandatory grounds for exclusion where a supplier has been convicted of certain offences, including corporate manslaughter, corporate homicide, involvement in a cartel (see below), and ancillary offences such as aiding, abetting and conspiring. 

It also expands some of the existing mandatory grounds for exclusion, including on the grounds of conviction for theft, fraud, bribery, money laundering, tax offences, labour market, slavery and human trafficking.  Other crime-related grounds remain largely the same – it was previously the case that suppliers could be excluded as a result of convictions for organised crime and terrorism. That continues to be the case.

Exclusion on the basis of serious misconduct within the past five years (with no conviction needed) (Part 2, Schedule 6)

The Act introduces new mandatory grounds for exclusion where a supplier has been engaged in certain types of serious misconduct within the last five years, even if there was no criminal conviction. The new grounds of misconduct include infringements to competition law (see below) and failure to cooperate with a debarment investigation (s 62) (see below). 

Suppliers will also be excluded (at least for public contracts in the defence sector) under a new mandatory ground if they pose a threat to the national security of the United Kingdom.  Some other grounds remain largely the same – for example suppliers can still be excluded as a result of tax misconduct. 

Exclusion on competition law grounds 

As noted above, involvement in a cartel or other infringements to competition law are new mandatory grounds for exclusion under the Act. The government is understood to have introduced these grounds partly in response to increased instances of alleged bid-rigging by contractors (for example, in 2023, the CMA fined 10 construction firms nearly £60 million for rigging bids to win demolition and asbestos removal contracts). Relatedly, the UK’s Competition and Markets Authority recently announced that it plans to tackle bid-rigging by introduction of an AI tool designed to track tender data and spot collusion between tenderers. The expanded competition law grounds are expected to attract significant attention and pose considerable risk to suppliers.  

Changes to the discretionary exclusion grounds include:

Exclusion on the basis of certain types of misconduct that occurred within the last five years (Schedule 7)

Suppliers can continue to be excluded on the basis they were or are insolvent or facing bankruptcy, or that they have been found to be involved in professional misconduct. The Act introduces expanded discretionary grounds for exclusion, including misconduct in relation to the environment, labour market or modern slavery.

It is likely that the government will face social pressure from climate activists and other groups to apply the expanded grounds to suppliers accused of environmental wrongdoing and to consider debarment for these breaches. 

Exclusion for previous poor performance (Schedule 7, para 12)

The Act introduces a ground for exclusion where a supplier has committed a sufficiently serious breach of a “relevant contract” (which is defined so as to capture public contracts including those entered into with overseas contracting authorities). To be “sufficiently serious”, the breach must have resulted in full or partial termination, the award of damages or a settlement agreement between the supplier and the relevant authority. This ground complements the addition of new rules relating to performance, and reflects the Government’s intention to expand the focus of the public procurement regime from the process of awarding contracts to improving the performance of public contracts.

The Act also includes discretionary exclusion if a decision-maker considers that the supplier has acted improperly in relation to any procurement, and in so doing, the supplier put itself at an unfair advantage in relation to the award of a public contract. (Schedule 7, para 13)  

A new test for the application of exclusion grounds

The existence of a mandatory or discretionary exclusion ground is not enough in itself to mean that a supplier will be “excluded” or “excludable”. 

Before determining that a supplier is “excluded” or “excludable”, a contracting authority must first consider whether the circumstances giving rise to this exclusion ground are likely to occur again (unless the supplier is on the debarment list – see below) (s 57(1)(a)(ii) and (2)(a)(ii)). In making this assessment, contracting authorities may have regard to certain factors, including:

• evidence that the circumstances have been taken seriously e.g. because compensation has been paid;
• steps that have been taken to ensure the circumstances do not happen again (eg changing staff); 
• commitments have been made that such steps will be taken, or to provide information or access to allow verification or monitoring of such steps; and
• the time that has elapsed since the circumstances last occurred (s 55(1)).

Interestingly, this places the onus on contracting authorities to make this assessment, and raises questions as to what evidence suppliers could provide to satisfy the contracting authority that the circumstances would not be repeated. It is a shift in approach from the current “self-cleaning” regime and suppliers should consider early, active engagement with relevant contracting authorities on the steps to be taken should a risk of exclusion arise. 

The extension of exclusion grounds to associated suppliers and subcontractors

Under the Act (in addition to exclusion as a result of a connected person which replicates the current regime) a supplier may be excluded by virtue of an exclusion ground applying to an ‘associated person’ or where the associated person is named on the debarment list. Further, a supplier can be excluded by virtue of a connected person of an associated person (e.g. a director of a supplier’s associated person).

“Associated person” means anyone that the supplier is relying on to satisfy the conditions of participation (other than a guarantor) (s 26(4)), for example a subcontractor or a consortium partner. “Connected person” means (Schedule 6): anyone who exercises, or has the right to exercise, significant control or influence over the supplier; anyone over whom the supplier exercises, or has the right to exercise, significant influence or control; directors and shadow directors; parent and subsidiary companies; predecessor companies; and persons equivalent to the above categories.

It is therefore now essential for suppliers to determine early on what companies they are “relying on” for the bid and set clear and robust mechanisms and internal processes to identify potential exclusion risk. 

However, even if it is established that an exclusion ground applies to one of its associated suppliers, a supplier has two lifelines: (i) by taking the “self-cleaning” steps outlined above, which a Contracting Authority must consider prior to an exclusion-decision; and (ii) under s 27(4), before excluding a supplier by virtue of one of its associated suppliers, contracting authorities must provide the supplier with “reasonable opportunity” to replace that associated supplier. 

Subcontractors

Expanding on the current regime (where contracting authorities could require subcontractors to be replaced) under the Act (s 28(3)), if the contracting authority considers a subcontractor to be an excluded or excludable entity, then the supplier itself may be treated as excluded or excludable (unless it takes the opportunity to replace the subcontractor first (s 28(5))). 

The introduction of a debarment list

The Act introduces a new public centralised debarment list. This is a significant change. 

When a supplier is excluded, the contracting authority must notify a Minister (s 59), which may lead to an investigation (s 60) and then decision (s 62) as to whether the supplier should be added to the debarment list.

If a supplier is placed on this list as a result of a mandatory ground, the supplier will be barred from bidding or being awarded a public contract in any competitive tender procedure or by way of direct award (with a few exceptions).

If a supplier is placed on the list as a result of a discretionary ground, it will still be permitted to bid for and be awarded a public contract (but only after careful review by the Contracting Authority). 

The consequences of exclusion from a particular tender process are therefore potentially  severe, as a single exclusion decision may now lead to debarment from all public tenders, and the reasons for an exclusion may now be made public .

Suppliers must be given notice of any investigation, setting out the relevant potential exclusion grounds and how and when the supplier can make representations. 

If the Minister decides to add a supplier to the debarment list it will need to give the supplier notice setting out its decision, triggering a standstill period of 8 working days before their name is added to the list (s 62). Suppliers can apply to court for interim relief to suspend the debarment decision during the standstill period (s63), and/or appeal the debarment decision within 30 days if they believe there has been a material mistake of law (s 65).  As yet, there is little clarity or guidance regarding when investigations leading to debarment will occur. We expect there to be significant political and public interest in the use of the list and legal challenges in the coming months and years as the first investigations commence and names are added to the list. 

Removal from the debarment list 

Most suppliers will remain on the list for five years (unless stated). The debarment list will be kept under review and entries may be amended or removed at any time. 

Suppliers that are added to the list will be able to apply at any time for their removal (s 64). 

Removal from the list can take place where: (i) the Minister considers that there are no longer grounds for debarment (eg the exclusion ground no longer applies); or (ii) the court sets aside a debarment decision following a successful appeal by the supplier (appeals must be commenced within 8 days of receiving notice of decision to have the benefit of interim relief) (s 65).

As yet, there is little clarity or guidance regarding when investigations leading to debarment will occur. We expect there to be significant political and public interest in the use of the list and legal challenges in the coming months and years as the first investigations commence and names are added to the list. 

The Procurement Bill: exclusion and debarment | Freshfields 

Reforming the exclusion rules in UK public procurement, Oliver Sangster, Ben Morgan

With thanks to Monckton Chambers