The Cabinet Office has recently published a Procurement Policy Note (PPN) on taking bidders' past performance into account when assessing bids.
When does the PPN apply?
The PPN applies to:
- contracts and framework agreements entered into from 8 November 2012;
- by government departments executive agencies and non-department public bodies;
- where these are anticipated to be worth over ?20 million; and
- where the subject matter of the contract is IT services facilities management or business processing outsourcing.
What does the PPN require?
- Tender documents must contain the standard wording set out at annex 1 of the PPN explaining this policy;
- The OJEU notice must set out the minimum standards required together with the information the contracting authority will need to make the assessment as to whether those standards are reached. Bidders must provide certification that they have met the standards. Annex 2 to the PPN contains sample wording for the OJEU notice;
- Departmental bodies should provide certificates to past suppliers who have requested them as part of the implementation of this policy; copies must be sent to the Cabinet Office. A template certificate is provided at Annex 3. Where poor performance has meant a public body is not prepared to provide a certificate reasons must be given;
- Contracting authorities must verify the information obtained being careful to treat all bidders equally and not discriminate and to act transparently. A panel should be appointed to adjudicate on whether the minimum standards are met in any particular case.
This new policy is the government's attempt to ensure there is no repeat of previous high-cost and high profile public procurements where suppliers failed to deliver particularly in the IT sector. It remains to be seen how the policy will operate on the ground. However one can foresee certain pitfalls from a procurement law perspective which contracting authorities will need to negotiate sensitively. For example:
- The danger that past performance will creep into the evaluation stage. This is a developing area of case law but at present the status quo is represented by the Lianakis case; this firmly prohibited the assessment of past performance in the award criteria;
- The risk that in exercising its discretion to verify certificates and references received (see paragraph 31 of the PPN) and to ultimately come to its own conclusions a contracting authority will offend against the basic EC Treaty principles of non-discrimination equality of treatment and transparency giving rise to a ground for challenge by bidders;
- In their capacity as previous customers will contracting authorities be prepared to refuse to provide certificates and thereby to admit that past procurements have 'gone wrong'
- Will the certification regime set out in the PPN only operate in practice in respect of previous public contracts whereas suppliers may well have performed poorly in other private commercial contracts in the past?
Readers should also note that the proposals for a new directive on public procurement include at Article 55 (of the October 2012 draft) a provision allowing member states to provide that contracting authorities must or alternatively may exclude bidders who have "shown significant or persistent deficiencies in the performance of a substantive requirement under a prior public contract or a prior contract with a contracting entity which led to early termination of that prior contract damages or other comparable sanctions."