Blacklisting in Employment: addressing the crimes of the past; moving towards best practice - Scottish Affairs Committee Contents

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 Wales

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.[30]

22. The Welsh Government spends approximately £4.3bn per annum on procurement, of which around £1bn is spent on construction.[31] In 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.[32] 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.[33] 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.[34] This covers 20 - 30% of the public sector's contracts in Wales.[35]

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".[36] 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.[37] 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.[38]

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.[39]. 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".[40]

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.[41] 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".[42] 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.

Pre-qualification questions

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.[43] 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.[44] 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 'self-cleaning'.

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 wrongdoing?

·  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?[45]

The Welsh Government has not yet excluded any contractors through this process: however, the guidance was only published on 10 September 2013.[46]

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 Back

31  Back

32  Back

33   See below for further detail. Back

34   Q3108 Back

35   Q3109 Back

36 Back

37   ibid. Back

38   ibid., p.5 Back

39   Q3106 Back

40   Q3113 Back

41   Q3111 Back

42   ibid. Back

43, Back

44, p.6 Back

45 Back

46 Back

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Prepared 14 March 2014