Route 3 - Develop Documents - Selection, Award and Exclusion Criteria - Exclusion Criteria

Route 3 - Develop Documents - Exclusion, Selection and Award Criteria - Exclusion Criteria

All exclusion criteria must be relevant and proportionate to the subject-matter of the contract.  Procurement Officers must set out the specific requirements, the relevant exclusion grounds and the minimum standards that are relevant for the procurement exercise in the Contract Notice

Statutory Guidance has been published on Selection of Tenderers and Award of Contracts.

The selection and award criteria must be developed and managed quite separately, however it is possible for Procurement Officers to conduct these stages simultaneously or in any order where the procedure allows.  For instance, when using an Open Procedure it may be desirable to assess the tenders (award stage) prior to checking minimum criteria are met when only a small number of bids have been received.  Where this is done you must still ensure that you verify the absence of grounds for exclusion and of fulfilment of the selection criteria.  This needs to be carried out in an impartial and transparent manner so that no contract is awarded to a bidder that should have been excluded or does not meet the selection criteria.

Exclusion Criteria

 

Some grounds for exclusion are circumstances in which a bidder must be excluded from the procurement process. Some other grounds for exclusion are circumstances in which the organisation may determine on a case by case basis whether a bidder should be excluded. These are referred to as mandatory and discretionary exclusion grounds respectively.

 

In all cases the bidder must be given the opportunity to provide evidence which proves that it has taken sufficient and appropriate remedial action to demonstrate that they have ‘self-cleansed’ (i.e. that the problem will not occur and that the bidder can be regarded as reliable).

 

Exclusion grounds, selection and award criteria must be clearly defined in the Contract Notice (or the Prior Information Notice when it is used as a means of calling for competition, and any other relevant procurement documents) to ensure a common understanding of the requirements by all bidders, and must not be changed or waived during the procurement process.

 

The exclusion and selection questions are contained in the European Single Procurement Document (Scotland) and should be used in conjunction with the Standardised Statements for the Contract Notice. More information on the ESPD (Scotland) and the Standardised Statements is contained in the ESPD (Scotland) station.

 

Exclusion Criteria Statement in the Contract Notice

In the Standardised Statement document, along with the selection statements, you can find two exclusion ground statements, one for the Contract Notice for below OJEU procurements and one for the OJEU Contract Notice. In the case of a Route 3 procurement, please make sure that you copy over the statement for an OJEU Contract Notice exclusion statement to the textbox in the Contract Notice under II.2.14 Additional Information. This will make sure that you have informed the bidders that you will apply mandatory and discretionary exclusion grounds in the procurement exercise.

 

Mandatory Exclusion Grounds

 

These must be applied in all Route 3 procurement exercises. These are contained in regulation 58(1) and (3) of the Public Contracts (Scotland) Regulations 2015.

[In the case of Care and Support Services the mandatory exclusion grounds (regulation 58(1) and (3) of the Public Contracts (Scotland) Regulations 2015) must be applied to all procurements, and you can also choose to apply the discretionary exclusion grounds.

Exlcusion statements should be put under II.2.14 Additional Information of the Social and other Specific Services Contract Notice.]

 

Criminal Offences

 

Where a bidder, or a member of the administrative, management or supervisory body of the bidder, or any other person who has powers of representation, decision or control in relation to the bidder has been convicted by final judgement of one of the criminal offences contained in the relevant regulations it must be excluded from the procurement process, unless it proves that it has taken measures sufficient to demonstrate its reliability despite the ground of exclusion.  These offences include:

 

  • Participation in a criminal organisation
  • Bribery or Corruption
  • Fraud
  • Terrorist offences or offences linked to terrorist activities
  • Money laundering or terrorist financing
  • Child labour and other forms of trafficking in human beings

 

Blacklisting

 

The Scottish Government regards blacklisting or the compiling of a blacklist as totally unacceptable.  Blacklisting refers to the practice of systematically denying individuals employment, who would otherwise be able to be employed, on the basis of certain information, accurate or not, held in some type of database.

 

The Employment Relations Act 1999 (Blacklists) Regulations 2010 make it unlawful to compile, use, sell or supply ‘prohibited lists' and provide rights for individuals if blacklisting results in refusal of employment, detriment, dismissal or redundancy. Any bidder which has been found to breach or which has admitted to breaching these Regulations must be excluded from the procurement process unless it demonstrates to the satisfaction of the organisation that it has taken appropriate remedial steps.

  

 

Tax and Social Security Obligations

 

The Scottish Government treats tax and social security obligations seriously.

 

Organisations must exclude bidders where they have been subject to a binding decision (judicial or administrative) which found a breach of legal obligations to pay tax or social security contributions.  A judicial decision is one which is made by a court or tribunal. An administrative decision is one which is made by the relevant tax authority in the UK or in the Member State where the bidder is established.

 

There is also a discretionary ground for exclusion for tax and social security obligations. Organisations can also exclude a bidder where they establish by any appropriate means that the bidder has breached their tax or social security obligations. This means that where there has not been a judicial or administrative decision, organisations still have the option of excluding an bidder. Organisations must determine on an individual basis whether a particular piece of evidence is sufficient to demonstrate “appropriate means” to establish that the bidder has breached their tax or social security obligations.

 

Examples of evidence which may demonstrate breaches in tax or social security obligations, which organisations can seek clarification on from bidders, could include:

  • credit references, i.e. details of any outstanding tax debt;
  • company accounts, depending on the size of the tax debt the bidder may be obliged to include this in their accounts;
  • an admission by the bidder to an Occasion of Non-Compliance (OONC); or,
  • an admission by the bidder of the failure of an avoidance scheme which they were involved in and was, or should have been, notified under Disclosure of Tax Avoidance Scheme (DOTAS).

Where a bidder admits to a breach of its tax or social security obligations, which did not involve a judicial or administrative decision, in order to determine the nature of the breach, the organisation can request further details and any mitigating factors, from the bidder. This could include:

  • a brief description of the OONC and which tax it applied to;
  • where the OONC relates to a DOTAS, the number of the relevant scheme;
  • the date of the original breach;
  • corrective action taken by the bidder to date;
  • planned corrective action to be taken;
  • changes in personnel or ownership since OONC; and,
  • changes in financial, accounting, audit or management procedures since the OONC.

Note – these examples relate to the UK tax regime, and there will be equivalents in other Member States which should be considered as required.

 

 

Self-Cleansing – Tax and Social Security Contributions

 

Where the bidder can provide evidence that it has fulfilled its obligations by paying the amount due, including any applicable interest or fines due, or has entered into a binding agreement to do so, or the obligation to make repayment otherwise ceases, the bidder must not be excluded from the procurement exercise on the basis of its failure to pay tax and social contributions. Evidence of this could include a receipt or confirmation of payment requested from the relevant tax authority or a written copy of the agreement to pay obligations.

 

Additionally, where the exclusion of a bidder would be clearly disproportionate, in particular, either because only a minor amount of tax or social security contributions are owed or because a bidder has not had sufficient time to arrange to pay the amount owed, an organisation may decide not to exclude the bidder. An organisation must take a balanced view when deciding not to exclude on this basis.  This could include consideration of the bidder’s overall tax and social security obligations and the overall risk to the effective delivery of the contract.  For example there may be instances where an apparent “minor amount” may significantly affect the liquidity of an bidder and its ability to perform the contract, or where the Organisation considers that sufficient time did exist for the outstanding amounts to be paid.

 

 

Derogation from Mandatory Exclusion Considerations

 

Where there are exceptional circumstances, organisations may, for overriding reasons relating to the public interest, disregard any of the mandatory exclusion grounds when making a decision in respect of the selection of a bidder. This provision is known as a derogation from the mandatory exclusion considerations. This ensures that organisations are able to respond to unforeseen emergency circumstances.

 

There is no definitive list of situations in which this derogation can be used and decisions should be made on a case by case basis. Organisations should be able to demonstrate that the actual or potential harm is so great, that the public interest in using the derogation outweighs the public interest in excluding a bidder. An example may be where urgently needed vaccines or emergency equipment can only be purchased from a bidder to whom one of the mandatory exclusion grounds otherwise applies.

Each situation must be judged on its merits, but the following situations are, on their own, unlikely to meet this test:

  • when a bidder which should be excluded is offering a substantially better quality / more economical product or service;
  • when there would otherwise be a lack of competition.

 

Discretionary exclusion grounds

 

These may be applied to Route 3 procurement exercises. These are circumstances in which a bidder is in one of the situations listed in regulation 58(4) and (8) of the Public Contracts (Scotland) Regulations 2015.

 

 

Social, Environmental and Labour Laws or Obligations

 

One of several discretionary grounds for exclusion relates to social, environmental and labour law obligations. These obligations include any relevant national and European law, as well as relevant collective agreements and specific international agreements.

 

Bidders may be excluded where the organisation can demonstrate that the bidder has breached any of these obligations. This exclusion ground is discretionary and it is therefore for the organisation to decide if exclusion is appropriate.

 

When determining whether to exclude a bidder on this basis, organisations should be proportionate in their decision, taking into account the size of the contracts, the relevance of the breach, and its impact on the operational and reputational risk to the delivery of the contract.

 

 

Bankrupt or Insolvent Businesses

 

Another discretionary ground for exclusion relates to bankruptcy, insolvency and winding up. Where a bidder is bankrupt or is the subject of insolvency or winding up proceedings the organisation can choose whether to exclude it from the procurement exercise. Potential evidence to assist in making this decision could include: copies of accounts verifying they have sufficient liquidity to perform the contract; its business plan outlining steps the potential supplier will take to address concerns, or references from other recent customers.

 

When considering whether to exclude a bidder who has become bankrupt or the subject of insolvency or winding up proceedings, organisations should consider the potential risks associated with the delivery of the contract. This includes the impact this may have on the sub-contracting supply chain. This can also include the scale of the contract and any potential consequences of the contract failing.  Additionally, organisations may take into account the potential benefits of awarding a contract to such a bidder. These can include providing opportunities to contribute to: increased employment opportunities in communities; the wellbeing of local and regional communities or helping unlock the innovation or economic potential with local businesses .

 

 

Self-Cleansing

 

Specific guidance on how bidders can take self-cleansing action in respect of tax and social security obligations is detailed earlier in this station. If a bidder is in a situation which might result in its exclusion other than for reasons of tax or social security obligations, it may provide evidence to show that it has taken remedial action to demonstrate its reliability. If the organisation is satisfied that the evidence provided is sufficient to demonstrate its reliability despite the existence of a relevant ground of exclusion, the organisation must not exclude the bidder from the procurement procedure on those grounds (although the bidder may, by application of the contract-specific selection criteria, subsequently not be selected to submit a bid). This is known as self-cleansing. 

 

The bidder must prove that it has:

  • paid or undertaken to pay compensation in respect of any damage caused by the criminal offence or misconduct;
  • clarified the facts and circumstances in a comprehensive manner by actively collaborating with the investigating authorities; and
  • taken concrete technical, organisational and personnel measures that are appropriate to prevent further criminal offences or misconduct.

When considering any self-cleansing measures, organisations must consider all relevant factors, including the gravity and particular circumstances of the criminal offence or misconduct. 

 

Where an organisation is of the view that the remedial action taken is not sufficient to demonstrate the potential bidder’s reliability, they must provide the bidder with a statement outlining the reasons for the decision. The statement of reasons must be provided as soon as is reasonably practicable. It should be in writing and allow the bidder to understand why the self-cleansing measures taken are insufficient and the basis of the decision.

 

 

Applying Exclusion Grounds to Sub-Contractors

 

Organisations must consider how, in conducting a procurement, they can facilitate the involvement of small and medium enterprises, third sector bodies and supported businesses in that process. This can include the use of sub-contractors to support the delivery of the contract.

 

Organisations can, at their discretion, require verification of whether there are any grounds for the exclusion of any sub-contractor involved in the delivery. Where this information is sought the ESPD (Scotland) must be used.

 

Where this verification shows that there are mandatory grounds for the exclusion of a sub-contractor, the organisation must require that they are replaced. 

 

Where there are discretionary grounds for the exclusion of a sub-contractor, the organisation can choose whether it should be substituted. Organisations must decide whether to apply discretionary exclusion grounds to sub-contractors involved in the contract delivery on a case by case basis, taking into account the various circumstances of the contract.

 

 

Timescales for Exclusion

 

Bidders must not be excluded indefinitely from participating in procurement activity. A bidder must only be excluded:

  • for a maximum of 5 years from the date of conviction by final judgment for one of the criminal offences listed in regulation 58(1) of the Public Contracts (Scotland) Regulations 2015;

  • until it has paid its outstanding tax or social security obligations, including any applicable interest or fines, has entered into a binding agreement to do so or the obligation to make repayment ceases; or

  • a maximum of 3 years from the date of the relevant event for all other grounds for exclusion.

 

Mandatory and Discretionary Exclusion Grounds Split

 

The following table provides a summary of the breakdown of different types of exclusion grounds, stating whether they are mandatory or discretionary. Please refer to 58 of the Public Contracts (Scotland) Regulations 2015 for the full list of mandatory and discretionary exclusion grounds.

 

In all cases a bidder is able to provide evidence that they have taken remedial action to demonstrate their reliability (self-cleansing).

 

Exclusion Grounds

Mandatory Exclusion Grounds

Discretionary Exclusion Grounds

Conviction by final judgment of any of the following criminal offences:

  • Participation in a criminal organisation or serious organised crime,
  • Bribery or Corruption,
  • Fraud,
  • Terrorism offences or offences linked to terrorist activities,
  • Money laundering,
  • Slavery, compulsory labour (including in respect of children) or human trafficking, or
  • Offences in connection with the proceeds of drug trafficking

x

 

Breach of The Employment Relations Act 1999 (Blacklists) Regulations 2010 

x

 

Breach of tax and social security obligations

  • established by judicial or administrative decision having final and binding effect

 

x

 

Breach of tax and social security obligations

  • established by any appropriate means

 

x

Breach of environmental, social and labour laws

 

x

Bidder:

  • Subject to bankruptcy or insolvency or winding up proceedings,
  • Has its assets being administered by a liquidator or court,
  • Is in an arrangement with creditors,
  • Has suspended its business activities, or
  • Is in any analogous situation.

 

x

Grave professional misconduct, which renders the bidder’s integrity questionable

 

 

x

Where the organisation has sufficiently plausible indications that the bidder has entered into agreements with others to distort competition

 

 

x

Conflict of interest which cannot be effectively remedied by other less intrusive measures

 

 

x

Distortion of competition from the prior involvement of the bidder in the preparation of the procurement exercise, that can’t be remedied by other less intrusive measures

 

 

x

Bidder has shown significant or persistent deficiencies in the performance of a substantive requirement under a previous public contract, which led to early termination of that contract, damages or other comparable sanctions

 

 

x

Bidder is guilty of serious misrepresentation in supplying the information required for the verification of absence of grounds for exclusion or fulfilment of the selection criteria or has withheld this information or is not able to submit the ESPD supporting documents

 

 

x

Bidder has or has undertaken to unduly influence the decision making process of the organisation, to obtain confidential information that may confer undue advantages or to negligently provide misleading information that may have a material influence on decision concerning exclusion, selection and award

 

x

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