Excluding suppliers based on poor past performance
Posted by Line Olsen on January 10, 2017
All of the UK has now transposed the new EU Public Sector Directive 2014. One of the existing provisions is that buyers now have a discretionary right to exclude suppliers based on poor past performance.
We have all heard the stories. A supplier winning a contract because they make all the right promises, but when the contract starts, they just don’t meet the standards expected. The buyer is not happy. They are stuck in a contract that most likely ends up costing them more. In addition, the suppliers that didn’t win are demoralized. What is the point of bidding when other suppliers just lie and win? Therefore, this is a welcome provision by many, a hope of getting rid of the unscrupulous operators in the market.
But is it that easy? As a buyer, and you have had a bad experience with this one supplier who is bidding on your contract – or you have heard about their poor performance from someone else – can you decide to exclude them just like that?
No, it is never that easy is it? Moreover, for that reason, you need some safety measures in place to ensure fair treatment of suppliers and prevent misuse.
When is poor performance grounds for exclusion?
Regulation 57(8)(g) PCR2015 (England, Wales, Northern Ireland), 58(8)(g) PCR(Scotland)2015 (Scotland) and 57(8)(g) Statutory Instruments NO 284 of 2016 (Ireland) first states that the performance must have been significantly or persistently deficient. Secondly, that the poor performance must have led to early termination, damages or other comparable sanctions.
When a contract is first entered into, getting out of it is not easy (or cheap). There are so many things to consider: the relationship with the supplier, outstanding orders, third parties, a tender procedure to get a new supplier, exit arrangements and handover. Sometimes a buyer will just continue on a ‘bad’ contract because it is thought to be less time consuming and costly than the time and the money involved in terminating a contract.
As stated in regulation 57(12) PCR2015, 58(12) PCR(Scotland)2015 and 57(20) Statutory Instrument NO 284 of 2016, you must also consider how long ago the past performance occurred. A supplier can only be excluded during the three years after the relevant event.
Poor performance has been proven, can I now exclude?
No, not straight away. From regulation 57(13)(14) PCR2015, 58(13)(14) PCR(Scotland)2015 and 57(12)(13) Statutory Instruments NO 284 of 2016 we can see that a supplier, who has taken action to prevent poor performance again (‘self-cleaning’), can demonstrate that they are now reliable. by providing evidence of the ‘self-cleaning’ measures they have taken, and if you find this evidence sufficient, you cannot exclude the supplier.
You have to carefully consider the evidence of the supplier, if you do not find it sufficient, regulation 57(17) PCR2015, 58(17) PCR(Scotland)2015 and 57(16) Statutory Instruments NO 284 of 2016 states that you must provide the supplier with a good reason for your decision.
In summary, to exclude a supplier based on poor past performance, the significant offence that lead to early termination of a contract or other sanctions must have happened within three years. The supplier must have taken no self-cleaning measures, or the measures were found to be unsatisfactory.
Poor past performance is just one of many ways to exclude suppliers. Understanding them all takes time and effort which people don’t always have to spare. If you are a buyer or a supplier and need to ask about exclusion criteria, Millstream’s Training and Consultancy team can help.
We would like to hear others thoughts on exclusions based on past poor performance. Please leave a comment below.