PPN 04/21: Applying Exclusions in Public Procurement, Managing Conflicts of Interest and Whistleblowing

On 20 May 2021 the Cabinet Office published PPN 04/2021, covering the issue of conflicts of interest in awarding contracts and interpretation of the relevant exclusions provisions where contractors commit certain breaches. 

This PPN replaces PPN 01/19 which covered similar topics, although the guidance on conflicts of interests has been expanded. The whistleblowing section remains unchanged.

It should be noted that this PPN applies to central government bodies, their executive agencies and non-departmental public bodies, and not specifically to NHS bodies, local government, housing associations and other sub-central contracting authorities, although it is "relevant" for them and represents best practice in this area.

Conflicts of interest are an essential consideration for any procurement officer: in order to protect the probity and effectiveness of each procurement process they must be identified and dealt with effectively. This PPN should be of practical use for procurement officers as to how they should deal with each type of conflict as they arise and it merits close scrutiny. 

Mandatory and discretionary exclusion grounds

PPN 04/2021 restates the mandatory and discretionary exclusion grounds which officers working in public procurement will recognise as those contained in Regulations 57 – 60 of the Public Contracts Regulations 2015 (as well as the CCS standard Selection Questionnaire). It should be noted that conflicts of interest which cannot be remedied by a less intrusive measure is also a discretionary exclusion ground.

Conflicts of interest 

The conflicts of interest section of the PPN comprises the most substantial update to the PPN01/19. It outlines the difference between an actual, potential or perceived conflict. 

Under the Public Contracts Regulations 2015, Regulation 24 includes an obligation for all organisations to prevent, identify and remedy conflicts arising in procurement procedures, which may include having an individual removed from the procurement process, this is also highlighted as an action that should be noted in the Regulation 84 report on the procurement.
The PPN mandates that in-scope organisations have internal framework of procedures and guidance, including checks and balances comprising: guidance and training; declarations of interests; conflict identification and resolution; audit and sanctions; and supply-side requirements. 

Guidance and training

The PPN includes some additional detail around what conflicts guidance and training should include. Some examples of training modules available are listed as available through Civil Service Learning and the Chartered Institute of Purchasing & Supply. 

Declarations of interest 

The PPN includes a dedicated section on declarations of interest. This declaration seems to be proposed as the primary method by which conflicts are identified. An example declaration is included in Annex A to the PPN.
Declarations of interests should be produced by those with the opportunity (or a perceived opportunity) to influence decision-making. Examples given include senior responsible officers, budget holders and a wide range of other officers. 

Identifying and remedying conflicts 

Whilst conflicts will primarily be managed through declarations, accounting officers or their nominees should assess all relevant risks (which may come about through the media, open data sources, counter-fraud governmental activity and whistleblowing) or which may be flagged through unusual behaviour. 

Any recommendations of suppliers should be subject to declaration requirements above, and recommendations for inviting organisations to bid should be on the basis of expertise, experience, capacity according to the criteria for the procurement.

Audit and sanctions

Recording information shall be key in responding to any audit of data, which may include audit of processes and procedures, internal data such as a gifts and hospitality register, contracts database, commercial decisions, contract implementation (eg. variations, extensions, etc). 

Additionally, guidance should include escalation procedures for staff concerns. Any failure to declare interests discovered by audit should be a serious incident with potential sanctions in line with HR processes. 

Supply side requirements

The Government's Supplier Code of Conduct is also highlighted, which requires in-scope organisations to have in place proportionate assurance that suppliers have similar processes to deal with conflicts.
Other measures that in-scope organisations should consider are: Ethical Wall Agreements on retendering; avoidance of gifts and hospitality that would compromise integrity; conflict obligations in terms and conditions. 

Special situations

The PPN notes that there are certain situations where special measures may be relevant including:

  1. direct awards of contracts (including proportionate approvals – eg. high value complex procurements approvals to more senior officers) an example direct award escalation process is included at Annex B to the Commercial Guide, 
  2. pro bono work, and 
  3. employment of civil servants – formerly employed civil servants may form part of a risk analysis of potential conflicts of interest (such a risk analysis should use the test of reasonableness). 

The FAQs published with the PPN includes some additional information around:

  1. checks to be undertaken on winning bidders prior to entering contracts;
  2. what constitutes grave professional misconduct under Reg 57(8)(c) under EU case law and under the public procurement directive;
  3. what constitutes "significant or persistent deficiencies" under Regulation 57(8)(g) – which incorporates some EU case-law; 
  4. whether international debarment lists can be used to justify exclusion – the answer to which is that entry on such a list is not, in itself, sufficient grounds without further investigation; 
  5. reference to guidance from the European Commission's Anti Fraud Office guidance and the MHCLG's review as to risks of fraud and corruption in local government"; and 
  6. management of conflicts of interests, including how data analytics could be used to identify and manage conflicts. 

We know that conflicts of interest are often grounds for a procurement challenge and, in the current climate (following recent challenges of central government procurement), conflicts are at the forefront of procurement practitioners' and bidders' minds. Overall this PPN 04/21 is helpful in providing more detail around how contracting authorities can avoid and mitigate conflicts - although much of the content is already common place - procurement officers should familiarise themselves with the concepts covered.  


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