Tue 28 May 2013

Assessing past performance and rewarding incumbents

The recent high profile contract failure of G4S as well as the questions surrounding the procurement of the West Coast Main Line contract have brought the issue of assessing (either positively or negatively) a bidder's past performance to the fore.

It is an easy headline catcher for politicians to say that an underperforming contractor should be "blacklisted" or that they will "never get another public contract again", as some were reported to have said in relation to the G4S Olympic security debacle. The trouble is, the rules that govern public procurement mean things are not quite that simple.

The starting point is that an authority can only assess a tender submission based on the answers to the questions received and the information requested and submitted or otherwise obtained as part of the procurement process. Those assessing the bids can only do so based on the information before them scored against pre-set qualification and evaluation criteria. They cannot allow their own knowledge of an individual contractor to enter into the process, and to do so would be a breach of the European Treaty principles of equality and non-discrimination.

Bearing that in mind, how then can an authority punish poor past performance or reward good incumbents? The answer lies in asking the right questions at the right time.

Poor past performance

Any procurement, whether carried out as a single stage tender or through the restricted procedure, will have three distinct stages: (i) exclusion; (ii) qualification; and (iii) selection. At which stage(s) is it appropriate to consider a bidder's past performance?


There are, of course, mandatory grounds for exclusion in terms of the Public Contracts (Scotland) Regulations 2012 ("the Regulations") which may apply. These are set out in Regulation 23. If, for example, a contractor has been convicted of certain criminal offences, including bribery, fraud and conspiracy, then they must automatically be excluded from the procurement process. Not only can an authority take these types of past behaviour into account, they must do so and exclude any culprits from the process altogether. So far, so good.

There are also a number of discretionary grounds (again set out in Regulation 23) which an authority may take into account including (i) acts of grave misconduct; and (ii) convictions in relation to the conduct of its business or profession. Unfortunately, there is little policy or judicial guidance on how to apply the discretionary grounds. As a general rule, it is left to the discretion of the contracting authority who must ensure that the criteria is proportionate, fair and does not discriminate. Any types of misconduct which an authority would consider to be "grave" should be set out in the tender documentation so that it is clear to all bidders what standards are being applied. Any decision to exclude a bidder on one of these discretionary grounds would have to be objectively justifiable and the same criteria applied to each bidder. The UK Government's new rules on assessing bidders' compliance (or otherwise) with tax rules would also fall into the discretionary grounds for exclusion, albeit the UK Government has mandated that this ground of exclusion be applied in contracts over a certain threshold.

Therefore applying the grounds for mandatory exclusion and defining what would constitute a breach of the discretionary grounds, provided that is done in accordance with Treaty principles, could serve an early knock-out blow to an errant contractor.


The second stage of the process is whether or not a contractor can comply with the minimum standards required of the authority.

Regulation 25 sets out the information that can be requested and taken into account when assessing the technical or professional ability of a bidder. It includes the "skills, efficiency, experience and reliability" of the bidder. Regulation 25(2)(b)(iii) also makes clear that in evidencing its skills, efficiency, experience and reliability a bidder can be requested to submit certificates of satisfactory completion which specify whether a contract was carried out according to the rules of the trade or profession and properly completed.

Under Regulation 26 an authority can also ask a bidder to provide information supplementing that provided under Regulation 25, in order to clarify it.

So what information can be sought to evidence a bidder's "experience and reliability". The big question is the extent to which references can be sought. In a letter of formal notice of infraction proceedings taken against the UK Government (2009/4613) the Commission has made clear that asking for information on customer satisfaction and an assessment of a bidder's performance under previous contracts would be in breach of the Directive and the Treaty Principles. As is always the case in public procurement, authorities are permitted to assess facts but not opinion. Requests for any references that introduce a subjective evaluation of a bidder's performance should be avoided. It is, however, open to authorities to ask such questions as they consider relevant to a bidder's experience provided they are relevant and proportionate to the contract being procured, the bidder then being obliged to answer those questions honestly.

The Cabinet Office also issued its Policy Note in November 2012 which, although restricted in its application to contracts of a certain type, over £20m in value, is also issued as best practice guidelines for all contracts. The Policy Note requires the introduction of minimum standards for reliability into the qualification stage of the procurement process. The bidder is required to provide details of past contracts as well as Certificates of Performance or self-certification that the contract has been satisfactorily completed. The procuring authority is also entitled to check the information with the relevant departments. It is also anticipated that a central store of all Certificates of Performance will be kept to make this process easier.


If, following the assessments permitted in terms of Regulations 23-26, a bidder has not been excluded from the procurement process, then the procurement moves into the selection stage. As part of the selection process, authorities should only ask questions which will establish whether or not a bidder has submitted the most economically advantageous tender/lowest price tender (depending on which selection criteria they have chosen to use). Questions relating to minimum standards (or indeed any of the other qualification criteria) should not form part of the selection criteria.

After Contract Award

Contract management is also key in making sure that contractors/suppliers are performing in accordance with the contract terms. The Policy Note also recommends that bidders are assessed against the minimum standards during the contract term to ensure that they continue to meet the standards expected of them and that contractual terms be introduced to provide the authority with a remedy should that prove not to be the case.

Rewarding Incumbents

As well as making sure that public contracts are not awarded to contractors who repeatedly fail in their delivery of the contract, authorities often want to ensure that contractors who have performed well in the past are rewarded for doing so. It is therefore assumed that a good contractor/supplier will not fall foul of any of the mandatory or discretionary grounds of exclusion and that they are capable of meeting the minimum standards required and that they can evidence their reliability through Certificates of Performance. How then can their previous performance be taken into account? The answer to this will lie in the evaluation criteria set and the weightings awarded to each. For example, authorities should consider carefully the criteria and weightings attached to each when drafting its procurement documentation. A high price to quality ratio may mean that good incumbents are excluded in favour of cheaper contractors at the cost of best overall value, which may not be the intention of the procuring authority.


The key to all of this is to ensure that your procurement documents, including the discretionary grounds of exclusion, minimum standards, evaluation criteria and weightings, are specifically crafted for the contract in question. Quality and good service is obviously more important in some contracts than others and it is not therefore appropriate to include all of these measures in all contracts. Aditionally, the Treaty principles of proportionality, equal treatment and non-discrimination always have to be applied.

It is clear given recent rules and guidelines issued by the Coalition Government that ensuring that public contracts are not awarded to unscrupulous contractors/suppliers is high on the political agenda, not least to save embarrassing headlines of the like we saw last summer. It is therefore likely that there will be more to come on this issue and it is a case of watch this space.

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