Procurement Bill [HL] (HL Bill 4)

Procurement Bill [HL]Page 100

(a)the Chapter II prohibition (within the meaning given by section 18 of
the Competition Act 1998), or

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

10(1)5A discretionary exclusion ground applies to a supplier if—

(a)the CMA has made a decision under the Competition Act 1998 that
the supplier or a connected person has infringed the Chapter II
prohibition, or

(b)a regulator or other authority outside the United Kingdom has made
10a decision that the supplier or a connected person has infringed any
substantially similar prohibition.

(2)In this paragraph the reference to the CMA includes a reference to a
regulator referred to in section 54(1) of the Competition Act 1998 in
circumstances where it exercises functions concurrently with the CMA in
15accordance with that Act.

11(1)A discretionary exclusion ground applies to a supplier if the decision-maker
considers that the supplier or a connected person has engaged in conduct
constituting—

(a)an offence under section 188 of the Enterprise Act 2002 (cartel
20offence), or

(b)a substantially similar offence under the law of a country or territory
outside the United Kingdom.

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

(a)the CMA has given written notice to the supplier or connected
25person under section 190(4) of the Enterprise Act 2002 (immunity
from prosecution for cartel offences) in connection with the conduct,
or

(b)a regulator or other authority outside the United Kingdom has
determined that the supplier or connected person is immune from
30prosecution in respect of the conduct.

Professional misconduct

12(1)A discretionary exclusion ground applies to a supplier if the decision-maker
considers that the supplier or a connected person has engaged in
professional misconduct which brings into question the supplier’s integrity.

(2)35A discretionary exclusion ground applies to a supplier if a court, regulator
or other authority has ruled that the supplier or connected person has
engaged in such professional misconduct.

(3)“Professional misconduct” includes conduct involving—

(a)dishonesty;

(b)40impropriety;

(c)a serious breach of ethical or professional standards applicable to the
supplier (whether those standards are mandatory or not).

Breach of contract and poor performance

13(1)A discretionary exclusion ground applies to a supplier if—

(a)45the supplier has breached a relevant contract, and

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(b)the breach was sufficiently serious.

(2)A discretionary exclusion ground applies to a supplier if—

(a)a court has ruled that the supplier breached a relevant contract, and

(b)the breach was sufficiently serious.

(3)5A discretionary exclusion ground applies to a supplier if the supplier—

(a)has not performed a relevant contract to the regulated authority’s
satisfaction,

(b)was given proper opportunity to improve performance, and

(c)failed to do so.

(4)10A discretionary exclusion ground applies to a supplier if a contracting
authority has published information under section 66(5) in respect of the
supplier (information concerning either breach or poor performance).

(5)For the purposes of this paragraph, a breach of a contract is “sufficiently
serious” if it results in—

(a)15termination (or partial termination) of the contract,

(b)the award of damages,

(c)a settlement agreement between the supplier and the regulated
authority.

(6)In this paragraph—

  • 20“regulated authority” means—

    (a)

    a contracting authority,

    (b)

    another public authority, or

    (c)

    an authority outside the United Kingdom that the decision-
    maker considers to be equivalent;

  • 25“relevant contract” means a contract to which a regulated authority is
    party.

Acting improperly in procurement

14(1)A discretionary exclusion ground applies to a supplier if a decision-maker
considers that—

(a)30the supplier has acted improperly in relation to any procurement,
and

(b)in so doing, the supplier put itself at an unfair advantage in relation
to the award of a public contract.

(2)A supplier might act improperly in relation to a procurement by—

(a)35failing to provide information requested by the contracting
authority;

(b)providing information that is incomplete, inaccurate or misleading;

(c)accessing confidential information;

(d)unduly influencing the contracting authority’s decision-making.

40National security

15A discretionary exclusion ground applies to a supplier if a decision-maker
determines that the supplier or a connected person poses a threat to the
national security of the United Kingdom.

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Excluded matters

16(1)For the purpose of determining whether a discretionary exclusion ground
applies to a supplier, the decision-maker must ignore any event that—

(a)the decision-maker was aware of before the five-year period ending
5with the date on which the determination is made, or

(b)a reasonably well-informed decision-maker in their position would
have been aware of before that period.

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

(2)In determining whether a discretionary exclusion ground within sub-
10paragraph (3) applies to a supplier, the decision-maker must also ignore any
event that—

(a)the decision-maker was aware of before the three-year period ending
with the date on which the determination is made, or

(b)a reasonably well-informed decision-maker in their position would
15have been aware of before that period.

(3)The grounds are those listed in—

(a)paragraphs 5 to 7 (insolvency, bankruptcy etc);

(b)paragraphs 8 to 11 (potential competition infringements);

(c)paragraph 12 (professional misconduct);

(d)20paragraph 13(1) or (2) (breach of contract);

(e)paragraph 14 (acting improperly in a procurement).

(4)In determining whether a discretionary exclusion ground listed in any of the
following paragraphs applies to a supplier, the decision-maker must also
ignore any event that occurred before the coming into force of this
25Schedule—

(a)paragraphs 1 to 3 (labour market misconduct);

(b)paragraph 4 (environmental misconduct);

(c)paragraph 13(3) (poor performance);

(d)paragraph 15 (national security).

30Definitions

17In this Schedule—

  • “decision-maker”, in relation to a supplier, means a contracting
    35authority or an appropriate authority that is considering whether a
    discretionary exclusion ground applies to the supplier;

  • “information” includes evidence verifying that information.

18Other terms used in this Schedule and defined in Schedule 6 have the
meanings given in that Schedule.

Section 69

Schedule 8 Permitted contract modifications

40Provided for in the contract

1A modification is a permitted modification if—

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(a)the possibility of the modification is unambiguously provided for
in—

(i)the contract as awarded, and

(ii)the tender or transparency notice for the award of that
5contract, and

(b)the modification would not change the overall nature of the contract.

Urgency and the protection of life, etc

2A modification is a permitted modification if—

(a)its purpose could otherwise be achieved by the direct award of a
10contract under section 40, and

(b)such an award could be made by reference to—

(i)paragraph 13 of Schedule 5 (extreme and unavoidable
urgency), or

(ii)regulations under section 41 (direct award to protect life, etc).

315Assume, for the purposes of paragraph 2, that the contract would be a public
contract as defined in section 2.

Unforeseeable circumstances

4(1)A modification is a permitted modification if—

(a)the circumstances giving rise to the modification could not
20reasonably have been foreseen by the contracting authority before
the award of the contract,

(b)the modification would not change the overall nature of the contract,
and

(c)the modification would not increase the estimated value of the
25contract by more than 50 per cent.

(2)Sub-paragraph (1)(c) does not apply if the contract being modified is a
utilities contract.

Materialisation of a known risk

5(1)A modification is a permitted modification if—

(a)30the contracting authority considers that—

(i)a known risk has materialised otherwise than as a result of
any act or omission of the contracting authority or the
supplier,

(ii)because of that fact, the contract cannot be performed to the
35satisfaction of the contracting authority,

(iii)the modification goes no further than necessary to remedy
that fact, and

(iv)awarding a further contract under Part 3 (instead of
modifying the contract) would not be in the public interest in
40the circumstances, and

(b)the modification would not increase the estimated value of the
contract by more than 50 per cent ignoring, for the purpose of
estimating the value of the contract, the fact that the risk has
materialised.

Procurement Bill [HL]Page 104

(2)Sub-paragraph (1)(b) does not apply if the contract being modified is a
utilities contract.

6In paragraph 5, a “known risk” means a risk that—

(a)the contracting authority considered—

(i)5could jeopardise the satisfactory performance of the contract,
but

(ii)because of its nature, could not be addressed in the contract
as awarded, and

(b)was identified in the tender or transparency notice for award of the
10contract, including by reference to—

(i)its meeting the description in paragraph (a), and

(ii)the possibility of modification under paragraph 5.

7In considering whether awarding a new contract would be in the public
interest for the purposes of paragraph 5, a contracting authority—

(a)15must consider whether a new contract could provide more value for
money, and

(b)may consider technical and operational matters.

Additional goods, services or works

8(1)A modification is a permitted modification if—

(a)20the modification provides for the supply of goods, services or works
in addition to the goods, services or works already provided for in
the contract,

(b)using a different supplier would result in the supply of goods,
services or works that are different from, or incompatible with, those
25already provided for in the contract,

(c)the contracting authority considers that the difference or
incompatibility would result in—

(i)disproportionate technical difficulties in operation or
maintenance or other significant inconvenience, and

(ii)30the substantial duplication of costs for the authority, and

(d)the modification would not increase the estimated value of the
contract by more than 50 per cent.

(2)Sub-paragraph (1)(d) does not apply if the contract being modified is a
utilities contract.

35Transfer on corporate restructuring

9A novation or assignment of a public contract to a supplier that is not an
excluded supplier is a permitted modification if it is required following a
corporate restructuring or similar circumstance.

Defence authority contracts

1040A modification of a defence authority contract is a permitted modification
where it is necessary to enable the contracting authority to—

(a)take advantage of developments in technology, or

(b)prevent or mitigate any adverse effect of those developments.

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11A modification of a defence authority contract is a permitted modification
where—

(a)the continuous supply of the goods, services or works supplied
under the contract is necessary to ensure the ability of the Armed
5Forces to maintain their operational capabilities, effectiveness,
readiness for action, safety, security, or logistical capabilities, and

(b)the modification is necessary to ensure there is continuous supply of
those goods, services or works.

Section 81

Schedule 9 10Treaty state suppliers (specified international agreements)

1The Agreement on Government Procurement signed at Marrakesh on 15
April 1994, as amended on or before the day on which this Schedule comes
into force.

2Agreement establishing an Association between the United Kingdom of
15Great Britain and Northern Ireland and the Republic of Chile, signed at
Santiago on 30 January 2019.

3Trade Agreement between the United Kingdom of Great Britain and
Northern Ireland and the Swiss Confederation, signed at Bern on 11
February 2019.

420Trade and Partnership Agreement between the Government of the United
Kingdom of Great Britain and Northern Ireland and the Government of the
State of Israel, signed at Tel Aviv on 18 February 2019.

5Economic Partnership Agreement between the CARIFORUM States, of the
one part, and the United Kingdom of Great Britain and Northern Ireland, of
25the other part, signed at Castries, Saint Lucia on 22 March 2019.

6Trade Agreement between the United Kingdom of Great Britain and
Northern Ireland, of the one part, and the Republic of Colombia, the
Republic of Ecuador and the Republic of Peru, of the other part, signed at
Quito on 15 May 2019.

730Agreement Establishing an Association between the United Kingdom of
Great Britain and Northern Ireland and Central America, signed at Managua
on 18 July 2019.

8Free Trade Agreement between the United Kingdom of Great Britain and
Northern Ireland, of the one part, and the Republic of Korea, of the other
35part, signed at London on 22 August 2019.

9 Strategic Partnership and Cooperation Agreement between the United
Kingdom of Great Britain and Northern Ireland and Georgia, signed at
London on 21 October 2019.

10Partnership, Trade and Cooperation Agreement between the United
40Kingdom of Great Britain and Northern Ireland and the Republic of Kosovo,
signed at Pristina on 3 December 2019.

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11Political, Free Trade and Strategic Partnership Agreement between the
United Kingdom of Great Britain and Northern Ireland and Ukraine, signed
at London on 8 October 2020.

12Agreement between the United Kingdom of Great Britain and Northern
5Ireland and Japan for a Comprehensive Economic Partnership, signed at
Tokyo on 23 October 2020.

13Partnership, Trade and Cooperation Agreement between the United
Kingdom of Great Britain and Northern Ireland and the Republic of North
Macedonia, signed at Skopje on 3 December 2020.

1410 Agreement on Trade Continuity between the United Kingdom of Great
Britain and Northern Ireland and Canada, signed at Ottawa on 9 December
2020.

15Free Trade Agreement between the United Kingdom of Great Britain and
Northern Ireland and the Republic of Singapore, signed at Singapore on 10
15December 2020.

16Trade Continuity Agreement between the United Kingdom of Great Britain
and Northern Ireland and the United Mexican States, signed at Mexico City
on 15 December 2020.

17Strategic Partnership, Trade and Cooperation Agreement between the
20United Kingdom of Great Britain and Northern Ireland and the Republic of
Moldova, signed at Chisnau on 24 December 2020.

18Free Trade Agreement between the United Kingdom of Great Britain and
Northern Ireland and the Socialist Republic of Viet Nam, signed at London
on 29 December 2020.

1925Trade and Cooperation Agreement between the United Kingdom of Great
Britain and Northern Ireland, of the one part, and the European Union and
the European Atomic Energy Community, of the other part, signed at
Brussels and London on 30 December 2020.

20Partnership, Trade and Cooperation Agreement between the United
30Kingdom of Great Britain and Northern Ireland and the Republic of Albania,
signed at Tirana on 5 February 2021.

21Partnership, Trade and Cooperation Agreement between the Government of
the United Kingdom of Great Britain and Northern Ireland and the
Government of the Republic of Serbia, signed at Belgrade on 16 April 2021.

2235Free Trade Agreement between Iceland, the Principality of Liechtenstein
and the Kingdom of Norway and the United Kingdom of Great Britain and
Northern Ireland, signed at London on 8 July 2021.

23Free Trade Agreement between the United Kingdom of Great Britain and
Northern Ireland and Australia, signed at London on 16 December 2021 and
40at Adelaide on 17 December 2021.

24Free Trade Agreement between the United Kingdom of Great Britain and
Northern Ireland and New Zealand signed at London on 28 February 2022.

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Section 105

Schedule 10 Single source defence contracts

1The Defence Reform Act 2014 is amended as follows.

Definition of qualifying defence contract

2(1)5Section 14 (regulations relating to qualifying defence contracts) is amended
as follows.

(2)In subsection (2)(a), after “goods, works or services” insert “wholly or
substantially”.

(5A)10Single source contract regulations may specify circumstances in
which a contract entered into by the Secretary of State with a primary
contractor is or is not to be treated as amending an existing contract
between those parties for the purposes of subsection (4) or (5).”

(8A)15The regulations may also specify when a contract is to be treated as
substantially for defence purposes.”

Pricing of qualifying defence contracts

3(1)Section 15 (pricing of qualifying defence contracts) is amended as follows.

(2)In subsection (1), after “qualifying defence contract” insert “, and, where the
20contract is divided into components, each component of that contract,”.

(2)The regulations must provide for the price payable under the
contract, or any component, to be determined—

(a)in accordance with the formula in subsection (4), or

(b)25in such circumstances as may be specified in the regulations,
in accordance with another method.

(2A)The regulations must only specify circumstances for the purposes of
subsection (2)(b) if the Secretary of State is satisfied that the factors
referred to in section 13(2) may be ensured in those circumstances if
30another method is used.

(2B)The regulations may also make provision requiring a particular
method specified in the regulations to be used in certain of the
circumstances specified for the purposes of subsection (2)(b).”

(4)In subsection (3)(a)—

(a)35after “contract” insert “or each amended component of that
contract,”;

(b)for “the formula in subsection (4)” substitute “the method applicable
by virtue of subsection (2)”.

(5)In subsection (3)(b) for “formula” substitute “method”.

(6)40In subsection (4)—

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(a)after “for the contract” insert “or component”;

(b)after “under the contract” insert “or component”.

(7)In subsection (5), after “contract” insert “or component”.

(6)5In this Part, “component”, in relation to a contract, means a part of
the contract that the parties to it agree is to be treated distinctly from
other such parts in determining the price payable under the contract.

(7)Single source contract regulations may specify circumstances in
which certain parts of a qualifying defence contract may or may not
10be treated distinctly from other parts of the same contract.”

4(1)Section 16 (pricing of contracts: supplementary) is amended as follows.

(2)In subsection (1)(b)(i), after “contract” insert “or, where relevant, a
component of that contract”.

(4)15Single source contract regulations may provide that the SSRO—

(a)must, on an application by a person within subsection (5),
determine whether the method used to determine the price
payable under a qualifying defence contract or a component
of that contract was appropriate;

(b)20may, in consequence of a determination under paragraph (a),
determine that the price payable under the contract is to be
adjusted by an amount specified by the SSRO.

(5)The following persons are within this subsection—

(a)the Secretary of State,

(b)25an authorised person, and

(c)the primary contractor.”

(2A)Provision made under subsection (2) may include provision dealing
with how, in the case of a qualifying defence contract divided into
30components, the components are to be taken into account in
determining the amount of any adjustments to the total price payable
under such a contract.”

6In section 22(1)(a) (recovery of unpaid amounts), after “section” insert
“16(4),”.

735In section 43 (interpretation etc), at the appropriate place insert—

  • ““component” has the meaning given by section 15(6).”

Contract profit rate

8(1)Section 17 (contract profit rate) is amended as follows.

(2)In subsection (1) at the end insert “, or, where the contract is divided into
40components, any component of that contract”.

(3)In subsection (2)—

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(a)in step 2, for the words from “the risk” to “estimated allowable costs”
substitute “the financial risks to the primary contractor of entering
into the contract or component, taking into account the particular
type of activities to be carried out by the primary contractor under
5that contract or component.”;

(b)omit steps 3 and 4 (and, accordingly, renumber steps 5 and 6 as steps
3 and 4);

(c)in new step 3, after “determines” insert “, having taken into account
any factors relevant to the determination specified in the
10regulations,”;

(d)in new step 3, for “4” substitute “2”;

(e)in new step 3, after “contract” insert “or component”;

(f)in new step 4, for “5” substitute “3”;

(g)in new step 4, after “contract”, in both places it occurs, insert “or
15component”.

(4)In subsection (3) for “6”, in both places it occurs, substitute “4”.

(5)In subsection (4)(b), for “6” substitute “4”.

9(1)Section 18 (contract profit rate: supplementary) is amended as follows.

(2)In subsection (2)(a)—

(a)20for “6” substitute “4”;

(b)after “paragraph” insert “, or a component of such a contract”.

(3)In subsection (2)(b), after “contract” insert “or component”.

(4)In subsection (2)(c), after “those contracts” insert “or components of those
contracts”.

(a)may, on an application by a person within subsection (4),
determine whether—

(i)the baseline profit rate identified under step 1 in
section 17(2) is correct in relation to a qualifying
30defence contract or a component of such a contract;

(ii)an adjustment agreed under any of steps 2 to 4 in
section 17(2) is appropriate;

(iii)an adjustment agreed under step 3 in section 17(2) is
in accordance with the regulations.”

10(1)35Section 19 (rates etc relevant to determining contract profit rate) is amended
as follows.

(2)In subsection (1) omit “the SSRO funding adjustment”.

(3)In subsection (2)—

(a)omit “and the SSRO funding adjustment”;

(b)40omit “or funding adjustment”.

(4)In subsection (4) omit “, and the SSRO funding adjustment for that year,”.

(5)In subsection (5)—

(a)omit “or the SSRO funding adjustment”;

(b)omit “or funding adjustment” in both places it occurs.