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Published 19 October 2022
As with many of the clauses set out in the recent Procurement Bill, at first glance the provisions on conflicts of interest appear to be broadly similar to those we are more familiar with in the Public Contracts Regulations 2015. Clause 74 deals with the concept of conflicts of interest, clause 75 sets out contracting authorities’ duty to mitigate a conflict, including a power to exclude a supplier, and clause 76 requires authorities to prepare a “conflicts assessment” before launching a procurement - putting into legislative form what was already best practice in preparing for procurement. However, on closer inspection, all may not be as it seems…
In this article we look more closely at clauses 74-76 of the Bill, and the potential impact of the clauses on how both contracting authorities and suppliers may approach this issue in future procurements.
Concept of a conflict of interest
Clause 74 of the Bill sets out the concept of a conflict of interest. Two elements of this concept are worth highlighting: first, clause 74(2)(a) sets out that there is a “conflict of interest in relation to a procurement” if either “a person acting for or on behalf of the contracting authority in relation to the procurement has a conflict of interest”, or “a Minister acting in relation to the procurement has a conflict of interest”. Clause 74(3) further clarifies that “a person who influences a decision made by or on behalf of a contracting authority in relation to a procurement is treated as acting in relation to the procurement”. This is notable for its omission of the concept of “relevant staff member” included within Reg. 24(2) and 24(3) PCR which covered anyone involved at all with the procurement procedure as well as those who could influence the outcome; although the concept of conflict of interest in the Regulations could cover other situations not involving “relevant staff members”, often the contracting authority’s ability to justify the discretionary exclusion of a supplier under Reg. 57(8) as a result of a conflict of interest, turns on whether the person concerned is a “relevant staff member”.
Whether or not this is a narrower definition in reality, contracting authorities will need to look as a matter of course at all those who have been involved in the decision making process in relation to the procurement, in order to fulfil their “duty to identify” conflicts under clause 74(1). In the context of procurement in the health sector in particular, this definition of a conflicted person is in line with a more collaborative approach to procurement likely to follow from the structural changes brought about by the Health and Care Act 2022. It could include individuals with no formal role in the procurement but who nevertheless by their actions influence the formal decision makers. In this regard the recent case of Consultant Connect Limited v NHS Bath and North East Somerset, Swindon and Wiltshire ICB and others  EWHC 2037 (TCC) is informative.
Secondly, clause 74(1) nor 74(4) includes reference to a perceived conflict, as is expressly included in Reg. 24(2) PCR. This raises the question of whether the duties placed on contracting authorities by clauses 74-76 to identify, keep under review and mitigate conflicts of interest, will only apply where there is an actual rather than perceived conflict of interest. Often it is the perception rather than existence of unequal treatment which can increase the risk of a challenge to a procurement. The duty to mitigate does arise for potential conflicts of interest under 74(1) but is this the same as a perceived conflict if viewed objectively by third parties? If the answer is yes, then what is notable by its absence is reference to exclusion for a potential conflict under clause 75 - which raises the question of how much evidence of certainty does one need before one can exclude a bidder? Remember the conflicted person is a member of authority staff not the bidder’s staff, so must there be firm evidence that the bidder obtained an actual advantage from that conflicted or potentially conflicted person, in order to exclude under clause 75?
Grounds for exclusion
The impact of a narrower scope of application of clauses 74-76 may be compounded by the omission of conflicts of interest from the lists of mandatory and discretionary exclusion grounds in Schedule 7 to the Bill. Clause 75(4) requires authorities to “treat a supplier as an excluded supplier in relation to the award of the public contract” if that supplier refuses to take steps that the authority considers necessary to neutralise its unfair advantage; however, it is unclear whether treating a supplier as excluded would mean that that supplier would be considered an “excluded supplier” within the meaning of clause 54. Clause 54(1) seems to suggest that a mandatory exclusion ground must apply to the supplier in order for it to be an “excluded supplier”, which would not apply to suppliers meeting the requirements of clause 75. Further, the clauses dealing with debarment for “excluded suppliers” (clauses 54-61) would not ‘bite’, because they also refer back to the mandatory and discretionary exclusion grounds set out in Schedules 6 and 7.
Amendments tabled for debate in the House of Lords at the time of writing go some way towards clarifying the meaning of clause 75(4), by proposing express references to the actual exclusion of the supplier from any competitive tendering procedure. However, in our view these do not go far enough to provide certainty around the ramifications of this clause.
In addition, from a practical perspective, although the new requirement for a “conflicts assessment” is likely to encourage authorities to think more carefully about conflicts at an earlier stage in the procurement process, the omission of conflict of interest grounds from the mandatory and discretionary exclusion grounds could mean that authorities have to make a positive decision to include conflicts as an additional ground for exclusion in each procurement, rather than relying on the standard list of selection questions referring back to discretionary exclusion grounds as a matter of course. It is also likely that authority preparations for procurement procedures will become more front-loaded with regard to internal information barriers to ensure no conflicts issues arise; the other side of this coin may be an increase in applications for disclosure seeking evidence of a conflict which a challenger could claim should have caused an authority to exclude a bidder. Internal record keeping regarding steps taken and decisions made regarding conflicts is likely to become even more important in this context going forward.
Whilst in many ways the conflicts of interest clauses in the Bill provide a fairly common sense approach to the existing PCR regime and the realities of dealing with conflicts in practice, in our view both authorities and suppliers would benefit from further legislative certainty, in particular regarding the interaction between the conflicts clauses and the exclusion mechanisms in the Bill.
Should you require any advice on the practical implications of any of the points covered above, please get in touch with one of our experts.
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