3 Towards best practice: procurement
in the public sector |
20. As well as seeking redress for the victims of
blacklisting, a key part of our inquiry has been to explore how
best blacklisting can be eradicated. We found examples of best
practice in both the public and private sectors, and it is to
these examples we now turn.
Public procurement: a lead from
21. Following the Information Commissioner's Office's
investigation into blacklisting in 2009 which uncovered The Consulting
Association's (TCA) blacklisting of 3,212 people, the BBC subsequently
reported that at least 111 of these were Welsh workers.
22. The Welsh Government spends approximately £4.3bn
per annum on procurement, of which around £1bn is spent on
June 2013, the Welsh Government produced a Policy Advice Note
(PAN) with the specific aim of tackling blacklisting through public
procurement. The note sets out guidance for public sector organisations
about blacklisting and how to exclude contractors that have been
involved in the practice from tendering for public contracts,
unless they have complied with the conditions set out below.
This was the first guidance of its kind to be issued at Government
level in the UK.
23. The measures outlined in the note focus on the
introduction of new Pre-Qualification Questions (PQQs) and the
requirement that contractors previously alleged to have engaged
in blacklisting demonstrate adequate "self-cleaning",
discussed in the following section.
The PQQs apply to companies tendering for public contracts via
the newly-established Welsh National Procurement Service. So far,
78 public sector bodies in Wales have signed up to this service,
which includes a formal commitment to only procure through this
route. This covers
20 - 30% of the public sector's contracts in Wales.
24. Following the publication of the Welsh Government's
advice, the Scottish Government released a similar set of guidelines
on 20 November 2013, immediately prior to our meeting with the
Welsh Government. The Scottish Government stated that it is "determined
to ensure that blacklisting is not used in connection with the
performance of public contracts in Scotland".
While very similar to the Welsh Government's PAN, the Scottish
Government's equivalent Scottish Policy Procurement Note (SPPN)
also included a new contract clause in its standard terms and
conditions which allows for termination of a contract if a contractor
is found to have breached legislation subsequent to being awarded
that contract. The
Welsh and Scottish Governments have both stated that they are
following the progress of our inquiry with interest and that they
may review and amend their guidance following the outcomes and
recommendations presented in our reports.
25. Both the Welsh and Scottish Government's advice
is non-statutory and therefore non-mandatory. Jane Hutt AM stated
that this is currently the case for all public procurement policy
in Wales as the Welsh Government does not have legislative competence
in this area..
Ms Hutt therefore emphasised the importance of political
and ministerial leadership on this issue. She described the Welsh
Government's PAN as a "message to the construction industry",
and recognised that the Welsh Government will be held responsible
for enforcing this. She said that "we must not underestimate
that political and ministerial leadership can have a lot of clout,
even in the absence of mandatory guidance".
26. Sean Bradley, Legal Advisor to the Welsh Government,
explained that the Welsh Government does not have the powers within
the current devolution settlement to impose mandatory guidance
on contracting authorities.
However, the advice note "does have a legal impact to the
extent that the Welsh Ministers are committing to comply with
this policy advice note in their own procurement".
The UK Government has not yet issued any comparable guidance.
Both the Scottish and UK Governments have the necessary
legislative powers to put in place statutory guidance. We recommend
that they do so.
27. One of the ways in which the Welsh and Scottish
Governments are attempting to address blacklisting through procurement
is by introducing new Pre-Qualification Questions (PQQs) into
their tendering processes. These require potential contractors
to disclose whether they have ever been involved in blacklisting
and, if so, to demonstrate what remedial action has been taken
to prevent the practice from occurring in future.
The exclusion of contractors through PQQs is subject to
certain requirements, notably with reference to their meeting
the conditions of 'self-cleaning'.
28. If contractors admit to blacklisting through
PQQs, then in principle, it is possible for contracting authorities
to exclude these contractors from tendering for public contracts.
However, as Jane Hutt explained, a blanket ban on such companies
would not be lawful: exclusions must be proportionate and considered
on a case by case basis. The exclusion must also be justified
on the evidence: usually, this would entail an admission of wrongdoing
by the operator or the decision of a tribunal, court or public
body exercising similar functions.
Exclusion cannot be used as means of punishing operators for past
wrongdoing: it must be a means of putting right wrongdoing and
ensuring that it does not happen again. This is referred to as
29. The Welsh Government's Policy Advice Note outlines
the process of self-cleaning as follows:
· Clarification of the relevant facts and
circumstances: what are the facts and circumstances of the wrongdoing?
When did the wrongdoing take place? Has there been any subsequent
· Effective repair of the damage caused:
what has the economic operator done to repair the damage caused
by its wrongdoing? This could take the form of compensation to
the victims of blacklisting but does not entitle the contracting
authority to require an apology
· Personnel measures: have any staffing/personnel
measures been put in place to avoid re-occurrence?
· Structural and organisational measures:
what structural and organisational measures have been put in place
to avoid a re-occurrence?
The Welsh Government has not yet excluded any contractors
through this process: however, the guidance was only published
on 10 September 2013.
30. We welcome the Welsh Government's pioneering
approach to tackling blacklisting through public procurement and
congratulate them for the political leadership they have shown
on this issue. If the UK Government are reluctant to issue statutory
guidance, we are keen that such measures should have the strongest
possible legal foundation and recommend that consideration be
given to devolving the appropriate legislative powers to enable
the Welsh Government to put its guidance on a statutory footing.
31. Self-cleaning is an important step as it places
responsibility on contractors to demonstrate how they have changed
and to make amends for their past blacklisting activity. We recommend
that firms that have been involved in blacklisting should be required
to demonstrate how they have self-cleaned before being allowed
to tender for future public contracts. It is our view that firms
which do not participate fully in an agreed compensation scheme
after having been caught using the blacklisting service of TCA
or any similar conspiracy, should be deemed not to have 'self-cleaned'.
32. We recommend that the UK and devolved Governments
take appropriate steps to prevent those companies which have participated
in blacklisting, and which have not adequately self-cleaned, from
being allowed to tender for publicly funded contracts in future.
During the next stage of our inquiry, we will take evidence on
what measures would be required to implement these proposals and
to extend them into procurement in the private sector.
30 http://www.bbc.co.uk/news/uk-wales-21319239 Back
See below for further detail. Back
ibid., p.5 Back