Amongst the many changes introduced by the Procurement Act 2023 (the 2023 Act), the ability to exclude bidders and even terminate contracts early, where one of the many grounds for exclusion has been satisfied, has been attracting headlines. 

As discussed in our recent article, the 2023 Act entered into force on 24 February 2025. This was followed swiftly by an announcement that the Government was taking steps to add certain suppliers involved in the Grenfell tragedy to the new Central Debarment Register (the Register), which could see them excluded from future public contracts for up to five years. 

The CMA also published guidance and a blog highlighting how these rules interact with the wider competition law regime. Given the CMA’s recent focus on bid-rigging in public contracts, it is reasonable to expect that those involved in infringement decisions relating to public contracts will also face the threat of being added to the Register, in addition to fines and private damages actions. 

The 2023 Act has significantly expanded the circumstances in which exclusions from public tenders or contracts may apply. Notably, suppliers under investigation for competition law breaches may also face exclusion, even though a finding of infringement is yet to be reached. Below, we consider the key elements of the 2023 Act relating to exclusion that businesses should be mindful of going forward. 

The competition law grounds for exclusion have been expanded

The 2023 Act builds on the previous procurement regime, and specifies the circumstances that can lead to a supplier being deemed to be an “excluded” or “excludable” supplier and consequently subject to, respectively, mandatory or discretionary exclusion from public contracts. It also established the Register, on which Ministers can, after suitable investigation, list a supplier as being an “excluded” or “excludable” supplier for up to five years. A listing on the Register will require contracting authorities to treat the relevant supplier as being subject to mandatory or discretionary exclusion, depending upon the categorisation on the Register.

As summarised below, the exclusion grounds relating to competition law have been expanded, and new grounds relating to national security concerns have been introduced. 

The 2023 Act provides that the competition law exclusions will not apply to those successfully awarded immunity. However, this does not extend to those awarded leniency, who will remain at risk of exclusion. It is also notable that, as the discretionary grounds of exclusion no longer require a finding of infringement but now cover scenarios where an investigation is ongoing, immunity applicants may still be at risk of discretionary exclusion where the fact of their being under investigation is public (considering they must keep the fact of their immunity application confidential). This also means that parties could be subject to discretionary exclusion whilst a competition investigation is ongoing, only to find the clock resets and they become subject to a mandatory exclusion if the CMA issues an infringement decision finding the supplier participated in a cartel. 

Exclusion is generally assessed by reference to a two-limb test 

However, it is important to note that, with the exception of those “excluded” suppliers who are subject to a mandatory debarment listed on the Register, there is a two-limb test to assess whether a supplier should in fact be excluded. Accordingly, in addition to meeting one of the grounds for exclusion, the relevant contracting authority must also consider that the circumstances are continuing or likely to occur again. 

In assessing this second limb, the 2023 Act provides a non-exhaustive list of factors that the contracting authority “may have regard to”, to assess whether the supplier meets the second limb of the test. Some of the aspects they may consider include the following:

• evidence that the supplier, associated person or connected person has taken the circumstances seriously, for example by paying compensation;
• steps that the supplier, associated person or connected person has taken to prevent the circumstances continuing or occurring again, for example by changing staff or management or putting procedures and training in place;
• commitments that such steps will be taken, or to provide information or access to allow verification or monitoring of such steps;
• the time that has elapsed since the circumstances last occurred; and
• any other evidence, explanation or factor that the authority considers appropriate.

Before deciding whether to exclude a supplier, the contracting authority must give the supplier a reasonable opportunity to make representations and provide evidence as to whether the exclusion grounds apply and whether the circumstances giving rise to any application are likely to occur again. 

Exclusions on the basis of competition law considerations

Clearly, any steps taken to update and refresh a supplier’s competition law compliance policies will be important in persuading a contracting authority that the second limb of the test is not satisfied. It is also relevant to note that the contracting authority’s obligations are to “have regard to” relevant factors. This is traditionally a relatively low bar in public law terms and, accordingly, a failure to make compensation payments to those harmed by the anti-competitive behaviour should not automatically result in a decision to exclude the supplier; conversely, undertaking one or more of the above steps is not an absolute defence to any proposed exclusion. 

Cabinet Office guidance states that when the contracting authority is considering whether the circumstances are continuing or likely to occur again, it should consider any expectations set by the appropriate authority, including the CMA. This could therefore capture scenarios where the CMA has closed a case by way of commitments decision.

Additionally, that guidance also states that contracting authorities should consider the level and nature of co-operation from the supplier with the appropriate competition authority when determining whether they have taken the circumstances seriously. This may provide an opportunity for leniency applications or settlement decisions to be taken into account as reasons why exclusion is not appropriate. Conversely, if a supplier was fined during a CMA investigation for non-cooperation (e.g. failure to preserve and/or provide documents in response to an information request) this could be regarded as an indication that the supplier in question did not take the circumstances seriously.

Another more practical consideration that contracting authorities may wish to take into account is the impact on the competitiveness of the tender if all those involved in a cartel (other than the immunity applicant) were excluded. Would the exclusions create a de facto monopoly in favour of the immunity applicant, and how would that impact the contracting authority’s wider procurement obligations regarding value for money etc.? 

Exclusions on the basis of national security considerations 

As a general principle, it is expected that any exclusions on the grounds of national security will be targeted at more sensitive procurements or contracts, such as those relating to critical national infrastructure. Although the decision to exclude suppliers (or potentially terminate contracts – see further below) will normally be taken by the relevant contracting authority, the authority is expected to work closely with the new National Security Unit for Procurement (NSUP), and must ultimately seek Ministerial agreement before any exclusion is applied. This approval process is anticipated to take around two months. 

Exclusions can occur even after the contract has been awarded 

Under the old procurement regime, the question as to whether grounds of exclusion applied were limited to the period during the tender process. However, for contracts governed by the 2023 Act, contracting authorities have an implied right to terminate a contract where the supplier becomes subject to a ground of exclusion during the life of the contract (or circumstances have changed since the tender), should the authority wish to do so.

The 2023 Act also enables contracting authorities to take account of circumstances arising in the five years preceding the exclusion decision, although there are a number of transitional provisions in place which mean that, in practice, only those circumstances arising three years before the 2023 Act came into force can be taken into account. 

More generally, when assessing whether any of the exclusion grounds are met, the 2023 Act makes clear that contracting authorities should consider the circumstances of the specific legal entity that is bidding for/has been awarded the contract. In addition, it is also necessary to consider the supplier’s “connected persons” and any “associated persons” (i.e. a person that the supplier is relying on in order to satisfy the conditions of participation, such as a named sub-contractor or a consortium member). An associated person does not, however, extend to a person who is acting as a guarantor under the contract.

A connected person is defined as a person with significant influence over the supplier, e.g., majority shareholders, directors, parent and/or subsidiary companies, predecessor companies; and any other person who can reasonably be considered to stand in an equivalent position.

Conclusion

Unsurprisingly, the CMA and others have been keen to highlight this tougher exclusion regime, whilst promoting the benefits of their immunity and leniency programmes. However, the extent to which individual contracting authorities may feel sufficiently confident to exclude suppliers, especially in the absence of an infringement decision from the CMA or similar regulator, is unclear. It also remains to be seen whether contracting authorities will consider the issuance of a Statement of Objections by the CMA as grounds to consider a supplier as excludable, or if judgments in standalone CAT claims that conclude competition law has been breached will be taken into account. There is also likely to be uncertainty around the assessment of whether conduct is likely to occur again, and how high a hurdle this will present in practice. As such, this is likely to be a topic for debate for quite some time.