Procurement Bill [HL] (HL Bill 4)

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(b)the contracting authority considers that it is not in the best interests
of the individual to award the contract under section 18.

Defence and security

19The following conditions are met in relation to the public contract—

(a)5the contract is a defence and security contract,

(b)the contract relates to the supply of air or maritime transport services
to the armed forces or the security services—

(i)while they are deployed outside the United Kingdom, or

(ii)in order for them to be so deployed, and

(c)10the nature of the services is such that no reasonable supplier would
be able to guarantee that all of the terms that would be contained in
a tender submitted for the supply of those services by such a supplier
would remain in effect for the period of 10 days beginning with the
day of submission.

20(1)15The following conditions are met in relation to the public contract (the “new
contract”)—

(a)there is another contract between the contracting authority and the
supplier (the “existing contract”),

(b)either of the conditions in sub-paragraphs (2) and (3) is met in
20relation to the new contract, and

(c)the new contract would, if awarded directly, be a “qualifying defence
contract” under section 14(2) of the Defence Reform Act 2014
(regulations relating to qualifying defence contracts).

(2)The condition in this sub-paragraph is met if, treating the new contract as a
25modification of the existing contract, the new contract would not be a
substantial modification of the existing contract within the meaning given in
section 69(2).

(3)The condition in this sub-paragraph is met if, treating the new contract as a
modification of the existing contract, the new contract would be a
30modification of the existing contract of a kind described in—

(a)paragraph 4 of Schedule 8 (unforeseeable circumstances), or

(b)paragraph 8 of that Schedule (additional goods, services or works).

21The following conditions are met in relation to the public contract—

(a)the contract is a defence authority contract,

(b)35the contract is not a defence and security contract only by virtue of
section 6(1)(g) (or, in the case of a framework, section 6(1)(g) and (2)),
and

(c)it is necessary for the contract to be awarded directly in order to
enhance or maintain the operational capability, effectiveness,
40readiness for action, safety or security of the armed forces.

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Section 54

Schedule 6 Mandatory exclusion grounds

Part 1 Offences

15A mandatory exclusion ground applies to a supplier if the supplier or a
connected person has been convicted of an offence referred to in this Part of
this Schedule.

Corporate manslaughter or corporate homicide

2An offence under section 1 of the Corporate Manslaughter and Corporate
10Homicide Act 2007 (corporate manslaughter or corporate homicide).

Terrorism

3An offence listed in section 41 or 42 of the Counter-Terrorism Act 2008
(terrorism offences, and offences having a terrorist connection, in respect of
which the notification requirements under Part 4 of that Act apply).

15Theft, fraud, bribery etc

4An offence at common law in Scotland of theft, fraud, extortion, robbery,
theft by housebreaking, housebreaking with intent to steal, or reset.

5An offence under any of the following sections of the Theft Act 1968—

(a)sections 7 to 13 (theft, robbery, burglary, etc);

(b)20sections 17 to 21 (fraud and blackmail);

(c)sections 22 and 23 (offences relating to stolen goods);

(d)section 24A (dishonestly retaining a wrongful credit);

(e)section 25 (going equipped for stealing etc).

6An offence under any of the following sections of the Theft Act (Northern
25Ireland) 1969 (c. 16 (N.I.))—

(a)sections 7 to 13 (theft, robbery, burglary, etc);

(b)sections 17 to 20 (fraud and blackmail);

(c)sections 21 and 22 (offences relating to stolen goods);

(d)section 23A (dishonestly retaining a wrongful credit);

(e)30section 24 (going equipped for stealing etc).

7An offence under section 3 of the Theft Act 1978 (making off without
payment).

8An offence under section 5 of the Theft (Northern Ireland) Order 1978 (S.I.
1978/1407 (N.I. 23)) (making off without payment).

935An offence under section 58 of the Civic Government (Scotland) Act 1982
(convicted thief in possession).

10An offence under section 113 of the Representation of the People Act 1983
(bribery of electors).

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11An offence under section 178 of the Road Traffic Act 1988 (taking motor
vehicle without authority etc).

12An offence under section 327, 328 or 329 of the Proceeds of Crime Act 2002
(money laundering offences).

135An offence under section 2, 3, 4, 6 or 7 of the Fraud Act 2006 (fraud offences).

14An offence under section 993 of the Companies Act 2006 (fraudulent
trading).

15An offence under section 1, 2 or 6 of the Bribery Act 2010 (bribery offences).

16An offence under section 49 of the Criminal Justice and Licensing (Scotland)
10Act 2010 (asp 13) (offences relating to articles for use in fraud).

Labour market, slavery and human trafficking offences

17An offence under the Employment Agencies Act 1973 (offences relating to
employment agencies) other than an offence under section 9(4)(b) of that
Act.

1815An offence under the Employment (Miscellaneous Provisions) (Northern
Ireland) Order 1981 (S.I. 1981/839) (N.I. 20)) (offences relating to
employment agencies) other than an offence under Article 7B(11) of that
Order.

19An offence under section 31(1) of the National Minimum Wage Act 1998
20(refusal or wilful neglect to pay the national minimum wage).

20An offence under the Gangmasters (Licensing) Act 2004 (offences relating to
gangmasters).

21An offence under section 1, 2, 4 or 30 of the Modern Slavery Act 2015 (slavery
and human trafficking offences).

2225An offence under section 1, 4 or 32 of the Human Trafficking and
Exploitation (Scotland) Act 2015 (asp 12) (slavery and human trafficking
offences).

23An offence under section 1, 2 or 4 of the Human Trafficking and Exploitation
(Criminal Justice and Support for Victims) Act (Northern Ireland) 2015 (c. 2)
30(N.I.)), or paragraph 16 of Schedule 3 to that Act (slavery and human
trafficking offences).

24An offence under section 27 of the Immigration Act 2016 (failure to comply
with labour market enforcement order).

Organised crime

2535An offence under section 28 of the Criminal Justice and Licensing (Scotland)
Act 2010 (agreeing to become involved in serious organised crime).

26An offence under section 45 of the Serious Crime Act 2015 (participating in
activities of organised crime group).

Tax offences

2740An offence at common law of cheating the public revenue.

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28An offence under section 170 of the Customs and Excise Management Act
1979 (fraudulent evasion of duty etc).

29An offence under section 72 of the Value Added Tax Act 1994 (fraudulent
evasion of VATetc).

305An offence under section 45 or 46 of the Criminal Finances Act 2017 (failure
to prevent facilitation of tax evasion).

Cartel offence

31An offence under section 188 of the Enterprise Act 2002 (cartel offence).

Ancillary offences

3210In relation to an offence otherwise referred to in this Part, any of the
following offences—

(a)aiding, abetting, counselling or procuring the commission of the
offence;

(b)in Scotland, being art and part in the commission of the offence;

(c)15an offence under Part 2 of the Serious Crime Act 2007 (encouraging
or assisting crime) in relation to the offence;

(d)inciting a person to commit the offence;

(e)attempting or conspiring to commit the offence.

Offences committed outside the United Kingdom

33(1)20An offence under the law of a country or territory outside the United
Kingdom which would be an offence otherwise referred to in this Part of this
Schedule if the conduct constituting that offence was carried out in any part
of the United Kingdom.

(2)For the purposes of this paragraph, an act punishable under the law of a
25country or territory outside the United Kingdom constitutes an offence
under that law, however it is described in that law.

Part 2 Other mandatory exclusion grounds

Misconduct in relation to tax

34(1)30A mandatory exclusion ground applies to a supplier if the supplier or a
connected person has been liable to a penalty under—

(a)section 69C of the Value Added Tax Act 1994 (transactions connected
with VAT fraud) except where the penalty is reduced under section
70 of that Act, or

(b)35section 25 of the Finance Act 2003 (evasion of tax or duty).

(2)The supplier or connected person is not to be treated as having been liable
to such a penalty unless HMRC has assessed the amount of the penalty and
the time for any appeal or further appeal relating to the penalty has expired
or, if later, any appeal or final appeal relating to it has been finally
40determined.

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35(1)A mandatory exclusion ground applies to a supplier if a penalty has been
payable by the supplier or a connected person under—

(a)Schedule 24 to the Finance Act 2007 (errors in tax documentation), or

(b)Schedule 41 to the Finance Act 2008 (failure to notify and certain
5VAT and excise wrongdoing),

but only where the conduct giving rise to that penalty was deliberate.

(2)Such a penalty is not to be treated as having been payable unless—

(a)if the penalty has been assessed, the time for any appeal or further
appeal relating to the penalty has expired or, if later, any appeal or
10final appeal relating to it has been finally determined, or

(b)a contract has been made between HMRC and the supplier or
connected person, under which HMRC undertook not to assess the
penalty or (if it was assessed) not to take proceedings to recover it.

36(1)A mandatory exclusion ground applies to a supplier if—

(a)15the supplier or a connected person has entered into or carried out a
tax arrangement that is abusive, and

(b)an adjustment has accordingly been made by HMRC under section
209 of the Finance Act 2013 (countering tax advantages), including as
it applies under section 10 of the National Insurance Contributions
20Act 2014.

(2)The adjustment is not to be treated as having been made by HMRC until it
can no longer be challenged, whether on appeal or otherwise.

37(1)A mandatory exclusion ground applies to a supplier if the supplier or a
connected person has been found by HMRC, in exercise of its powers in
25respect of VAT, to have engaged in an abusive practice.

(2)The supplier or connected person is not to be treated as having been found
by HMRC to have engaged in those arrangements or practices until the
finding can no longer be challenged, whether on appeal or otherwise.

38A mandatory exclusion ground applies to a supplier if the supplier or a
30connected person has incurred a defeat in respect of abusive tax
arrangements, within the meaning given by paragraph 4 of Schedule 16 to
the Finance (No. 2) Act 2017.

Competition law infringements

39(1)A mandatory exclusion ground applies to a supplier if the CMA has made a
35decision under the Competition Act 1998 that the Chapter I prohibition
(within the meaning given by section 2 of that Act) has been infringed by an
agreement or concerted practice—

(a)to which the supplier or a connected person was party, and

(b)which was a cartel (within the meaning given by paragraph 4(1) of
40Schedule 8A to that Act).

(2)Sub-paragraph (1) does not apply if—

(a)the CMA did not impose a penalty on the supplier or connected
person in respect of the infringement because the supplier or
connected person was an immunity recipient (within the meaning
45given by paragraph 14 of Schedule 8A to the Competition Act 1998),
or

Procurement Bill [HL]Page 95

(b)the CMA gave written notice to a connected person under section
190(4) of the Enterprise Act 2002 (immunity from prosecution for
cartel offences) in connection with the infringement.

(3)In this paragraph, references to the CMA include references to a regulator
5referred to in section 54(1) of the Competition Act 1998 in circumstances
where it exercises functions concurrently with the CMA in accordance with
that Act.

Equivalents outside the United Kingdom

40A mandatory exclusion ground applies to a supplier if the supplier or a
10connected person—

(a)has been subject to a penalty or a decision by a regulator, court or
other authority outside the United Kingdom, where the conduct
giving rise to that penalty or decision is conduct that would give rise
to a penalty or decision referred to in any of paragraphs 34 to 39 if
15committed in the United Kingdom, in circumstances where the
penalty or decision would be a mandatory exclusion ground, or

(b)has had a tax advantage counteracted outside the United Kingdom,
in circumstances where the supplier or connected person would
have incurred a defeat of the kind referred to in paragraph 38 had the
20tax advantage arisen in respect of tax payable in the United
Kingdom.

Failure to cooperate with investigation

41A mandatory exclusion ground applies to a supplier if—

(a)an appropriate authority has given the supplier or a connected
25person notice under section 57(6) (requests for documents or other
assistance in connection with investigation),

(b)the supplier or connected person has failed to comply with the notice
to the satisfaction of the authority before the end of the period
specified in the notice, and

(c)30a Minister of the Crown has made a determination that the failure to
do so was sufficiently serious so as to warrant constituting a
mandatory exclusion ground.

Part 3 General

35Excluded matters

42(1)In determining whether a mandatory exclusion ground applies to a supplier,
the decision-maker must ignore any event that occurred before the five-year
period ending with the date on which the determination is made.

This is subject to sub-paragraphs (2) to (4).

(2)40In determining whether a mandatory exclusion ground listed in any of the
following paragraphs applies to a supplier, sub-paragraph (1) applies
whether the event occurred before or after the coming into force of this
Schedule—

(a)paragraph 3 (terrorism offences);

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(b)paragraph 10 or 15 (bribery);

(c)paragraph 12 (money laundering offences);

(d)paragraph 21, where the ground in that paragraph applies by virtue
of an offence under section 1, 2 or 4 of the Modern Slavery Act 2015
5(slavery and trafficking offences);

(e)paragraph 22, where the ground in that paragraph applies by virtue
of an offence under section 1 or 4 of the Human Trafficking and
Exploitation (Scotland) Act 2015 (slavery and trafficking offences);

(f)paragraph 23, where the ground in that paragraph applies by virtue
10of an offence under section 1, 2 or 4 of the Human Trafficking and
Exploitation (Criminal Justice and Support for Victims) Act
(Northern Ireland) 2015 (slavery and trafficking offences);

(g)paragraph 25 or 26 (organised crime);

(h)paragraph 32 or 33, so far as relating to any offence that constitutes a
15mandatory exclusion ground listed in any of the paragraphs within
paragraph (a) to (g) above (inchoate offences and corresponding
offences outside the United Kingdom).

(3)In determining whether a mandatory exclusion ground listed in any of the
following paragraphs applies to a supplier, the decision-maker must also
20ignore any event that occurred before the coming into force of this
Schedule—

(a)paragraph 2 (corporate manslaughter or homicide);

(b)paragraph 4, 5(a) or (c) to (e), 6(a) or (c) to (e), 7 to 9 or 11 (theft,
robbery, burglary etc);

(c)25paragraph 32 or 33, so far as relating to any offence that constitutes a
mandatory exclusion ground listed in any of the paragraphs within
paragraph (a) and (b) above (inchoate offences and corresponding
offences outside the United Kingdom).

(4)In determining whether a mandatory exclusion ground listed in any of the
30following paragraphs applies to a supplier, the decision-maker must also
ignore any event that occurred before the three-year period ending with the
coming into force of this Schedule—

(a)paragraph 5(b) or 6(b) (blackmail);

(b)paragraph 13, 14 or 16 (fraud and fraudulent trading);

(c)35paragraphs 17 to 20 (labour market offences);

(d)paragraph 21, where the ground in that paragraph applies by virtue
of an offence under section 30 of the Modern Slavery Act 2015
(breach of orders under that Act);

(e)paragraph 22, where the ground in that paragraph applies by virtue
40of an offence under section 32 of the Human Trafficking and
Exploitation (Scotland) Act 2015 (breach of orders under that Act);

(f)paragraph 23, where the ground in that paragraph applies by virtue
of an offence under paragraph 16 of Schedule 3 to the Human
Trafficking and Exploitation (Criminal Justice and Support for
45Victims) Act (Northern Ireland) 2015 (breach of orders under that
Act);

(g)paragraph 24 (breach of labour market enforcement order);

(h)paragraphs 27 to 30 (tax offences);

(i)paragraph 31 (cartel offence);

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(j)paragraph 32 or 33, so far as relating to any offence that constitutes a
mandatory exclusion ground listed in any of the paragraphs within
paragraphs (a) to (i) above;

(k)paragraphs 34 to 38 (tax misconduct);

(l)5paragraph 39 (competition law infringements);

(m)paragraph 40 (equivalents to tax misconduct and competition law
infringements outside the United Kingdom).

Definitions

43In this Schedule—

  • 10the “CMA” means the Competition and Markets Authority;

  • “conduct” includes acts and omissions;

  • “connected person”, in relation to a supplier, means any of the
    following—

    (a)

    a person with “significant control” over the supplier (within
    15the meaning given by section 790C(2) of the Companies Act
    2006 (“CA 2006”));

    (b)

    a director or shadow director of the supplier;

    (c)

    a parent undertaking or a subsidiary undertaking of the
    supplier;

    (d)

    20a predecessor company;

    (e)

    any other person who it can reasonably be considered stands
    in an equivalent position in relation to the supplier as a
    person within paragraph (a) to (d);

    (f)

    any person with the right to exercise, or who actually
    25exercises, significant influence or control over the supplier;

    (g)

    any person over which the supplier has the right to exercise,
    or actually exercises, significant influence or control;

  • “court” includes a tribunal;

  • “decision-maker”, in relation to a supplier, means a contracting
    30authority or an appropriate authority that is considering whether a
    mandatory exclusion ground applies to the supplier;

  • “director” has the meaning given in section 250 of CA 2006;

  • “event” means a conviction, decision, ruling, failure or other event by
    virtue of which a mandatory exclusion ground would apply to a
    35supplier;

  • HMRC” means Her Majesty’s Revenue and Customs;

  • “parent undertaking” and “subsidiary undertaking” have the meanings
    given in section 1162 of CA 2006;

  • “predecessor company” means a company which—

    (a)

    40became insolvent and ceased to trade,

    (b)

    before it ceased to trade, carried on the same or substantially
    the same business as the supplier,

    (c)

    has transferred all or substantially all of its assets to the
    supplier, and

    (d)

    45had at least one director or shadow director who is or has
    been a director or shadow director of the supplier;

  • “shadow director” has the meaning given in section 251 of CA 2006.

Procurement Bill [HL]Page 98

Section 54

Schedule 7 Discretionary exclusion grounds

Labour market misconduct

1A discretionary exclusion ground applies to a supplier if any of the
5following orders has been made against the supplier or a connected
person—

(a)a slavery and trafficking prevention order, an interim slavery and
trafficking prevention order, a slavery and trafficking risk order or
an interim slavery and trafficking risk order under Part 2 of the
10Modern Slavery Act 2015;

(b)a trafficking and exploitation prevention order, an interim
trafficking and exploitation prevention order, a trafficking and
exploitation risk order or an interim trafficking and exploitation risk
order under Part 4 of the Human Trafficking and Exploitation
15(Scotland) Act 2015 (asp 12);

(c)a slavery and trafficking prevention order or an interim slavery and
trafficking prevention order under Schedule 3 to the Human
Trafficking and Exploitation (Criminal Justice and Support for
Victims) Act (Northern Ireland) 2015 (c.2 (N.I.));

(d)20a labour market enforcement order under section 18 of the
Immigration Act 2016.

2A discretionary exclusion ground applies to a supplier if the supplier or a
connected person has engaged in conduct outside the United Kingdom that
the decision-maker considers could result in any such order being made if
25the conduct occurred in the United Kingdom.

3A discretionary exclusion ground applies to a supplier if the decision-maker
considers that there is sufficient evidence that the supplier or a connected
person has engaged in conduct (whether in or outside the United Kingdom)
constituting (or that would, if it occurred in the United Kingdom, constitute)
30an offence referred to in—

(a)section 1, 2, 4 or 30 of the Modern Slavery Act 2015,

(b)section 1, 4 or 32 of the Human Trafficking and Exploitation
(Scotland) Act 2015, or

(c)section 1, 2 or 4 of the Human Trafficking and Exploitation (Criminal
35Justice and Support for Victims) Act (Northern Ireland) 2015, or
paragraph 16 of Schedule 3 to that Act.

Environmental misconduct

4A discretionary exclusion ground applies to a supplier if—

(a) the supplier or a connected person has been convicted of an offence
40(whether in or outside the United Kingdom), and

(b)the conduct constituting the offence caused, or had the potential to
cause, significant harm to the environment, including the life and
health of plants and animals.

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Insolvency, bankruptcy, etc

5A discretionary exclusion ground applies to a supplier if the supplier or a
connected person has—

(a)become bankrupt (or, in Scotland, its estate has been sequestrated),

(b)5become subject to insolvency or winding-up proceedings,

(c)had its assets subject to administration or receivership, including by
a liquidator or court,

(d)entered into an arrangement with its creditors,

(e)become subject to a petition or application for any such procedures
10or arrangements, or

(f)in any jurisdiction, been subject to a procedure or an application the
decision-maker considers to correspond to any procedure or
application mentioned in paragraphs (a) to (e).

6A discretionary exclusion ground applies to a supplier if the supplier or a
15connected person is—

(a)in the case of a company, unable to pay its debts within the meaning
given by section 123 of the Insolvency Act 1986 or Article 103 of the
Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405) (N.I. 19),

(b)in the case of an individual—

(i)20unable to pay their debts or with no reasonable prospects of
paying their debts, each within the meaning given by section
268 of that Act or Article 242 of that Order, or

(ii)apparently insolvent within the meaning of section 16 of the
Bankruptcy (Scotland) Act 2016 (asp 21), or

(c)25in a corresponding position in any jurisdiction in the opinion of the
decision-maker.

7A discretionary exclusion ground applies to a supplier if the supplier or a
connected person has suspended or ceased carrying on all or a substantial
part of its business.

30Potential competition infringements

8(1)A discretionary exclusion ground applies to a supplier if the decision-maker
considers that an agreement or concerted practice to which the supplier or a
connected person is party has infringed—

(a)the Chapter I prohibition (within the meaning given by section 2 of
35the Competition Act 1998), or

(b)any substantially similar prohibition applicable in a jurisdiction
outside the United Kingdom.

(2)Sub-paragraph (1) does not apply where the supplier or connected person
is—

(a)40an immunity recipient (within the meaning given by paragraph 14 of
Schedule 8A to that Act), or

(b)a regulator or other authority outside the United Kingdom has
granted the supplier or connected person immunity from penalties
in respect of the infringement.

945A discretionary exclusion ground applies to a supplier if the decision-maker
considers that the supplier or a connected person has infringed—