Procurement Policy Note 02/23 – Tackling Modern Slavery in Government Supply Chains
On 13 February 2023, the Cabinet Office published a new Procurement Policy Note dealing with modern slavery in Government supply chains. Procurement Policy Note 02/23 (the PPN) looks at how contracting authorities can tackle the issue of modern slavery in their supply chains. Cabinet Office has also published a guidance note to accompany the PPN.
The PPN applies to all central government departments and their executive agencies and non-departmental public bodies and NHS bodies (In-Scope Organisations). All In-Scope Organisations must apply the actions set out in the PPN to both existing contracts and new procurement activities from 1 April this year. Other public sector contracting authorities are also encouraged to apply the approach set out in the PPN.
Modern slavery is an umbrella term which encompasses the offences of slavery, servitude, forced and compulsory labour and human trafficking. Modern slavery is often a hidden crime involving one person denying another person their freedom. The International Labour Organisation estimates that there are 50 million people living in modern slavery across the world.
The PPN seeks to use the UK public sector's extensive buying power to mitigate the risks of modern slavery occurring in supply chains by adopting new processes and procedures in both procurement and supplier management.
In-Scope Organisations must read and implement the guidance note and note:
- the updates made to the table for assessing the risk of modern slavery;
- the new requirement for supply chain information to be provided at the selection stage of new procurements which are designated as having a high risk of modern slavery; and
- the additional guidance on enhanced due diligence and on using existing exclusion grounds more effectively.
Other contracting authorities are encouraged to take the above actions.
Assessing the risk of modern slavery
The guidance note sets out four key areas of activity: identifying and managing risks in new procurements; assessing existing contracts; taking action when victims of modern slavery are identified; and training.
Contracting authorities should use the guidance note to identify modern slavery risks in their commercial activity and procurements. Certain industry areas, including construction, manufacturing and electronics, and healthcare and social care, are identified as being high-risk in the guidance note.
Other areas are identified as being considerations for risk assessment purposes, such as the nature of workforce being used, the supplier's location, the context in which the supplier operates, commodity types, and the business or supply chain model.
When identifying and managing risks in new procurements, contracting authorities must always act proportionately and not impose unnecessary burdens which may deter a wide variety of suppliers including small and medium sized enterprises (SMEs) or voluntary, community and social enterprises (VCSEs).
Supply chain information
If a contracting authority identifies during its pre-procurement assessment that the risk of modern slavery is high, then bidders should be asked additional and/or more detailed questions on how they will address the requirements set out in the specification.
Any questions asked during the procurement process must be relevant to the subject matter of the contract and proportionate so as to not discriminate against certain types of bidders. Identifying where modern slavery risks sit within the contract will therefore be vital to be able to develop the right questions to ask during the procurement process.
Bidders should also be questioned if their bid prices appear abnormally low. This may be relevant in the context of modern slavery risks and the explanation could uncover information which gives rise to concerns around modern slavery which must be investigated further.
Enhanced due diligence
Certain offences under the Modern Slavery Act 2015 are mandatory exclusion grounds under the Public Contracts Regulations 2015 (Regulation 57) and evidence of modern slavery without a conviction may be a discretionary exclusion ground. This means that, unless the bidder can demonstrate sufficient evidence of 'self-cleaning' (as discussed below), contracting authorities may exclude the bidder from the procurement process.
Contracting authorities should remember that the exclusion grounds should be considered not just at the outset of a procurement process when bidders submit their selection questionnaires, but also before contract award and at any time between those two points if information arises which suggests there may be a modern slavery issue.
Even if a bidder self-declares that the exclusion grounds do not apply, contracting authorities should undertake due diligence on the bidder and its supply chain. Any evidence which suggests that a discretionary exclusion ground may apply must be investigated sufficiently to satisfy the contracting authority whether or not an exclusion ground applies.
Bidders should also be given the opportunity to submit evidence of 'self-cleaning', which means they demonstrate measures taken which are sufficient to demonstrate reliability despite an exclusion ground applying. Self-cleaning is particularly important in the case of modern slavery as remediation and prevention often result in the best outcome for works affected.
Note also that the risk of modern slavery in a contract is not linked to its value and even when a contract is below the relevant procurement thresholds, the modern slavery risk can be high. Contracting authorities should therefore always consider whether it is appropriate to ask questions about modern slavery risks.
Contract conditions and management
Most public sector contracts already include terms and conditions which help to manage modern slavery issues. Contracting authorities should consider whether these are sufficient for the contract they are procuring, particularly if it has been identified as being high-risk for modern slavery.
Additional contract terms may be helpful for high-risk contracts, such as obligations on the supplier to provide information to demonstrate its approach to modern slavery and human trafficking or auditing requirements.
Of equal importance is ongoing contract management where all parties take positive, proactive and collaborative measures to ensure transparency and ensure any issues are flagged as they arise. However, contracting authorities must remember to ensure any measures put in place are proportionate to the contract so as to not over-burden SMEs or VCSEs.
Taking action when victims of modern slavery are identified
When specific instances of modern slavery and human rights abuses have been uncovered in the supply chain, they must be addressed immediately and in a manner that is proportionate and adapted to the circumstances of the case.
Contracting authorities should work collaboratively with suppliers and in accordance with the terms of the contract to address instances of modern slavery. A blueprint remediation plan for handling such occurrences should be in place which sets out the process for dealing with such instances which sets out roles and responsibilities. Termination of a contract is often not the best course of action and can leave victims more vulnerable.
Most importantly, if there is a suspicion that workers are being subjected to modern slavery the contracting authority must involve the appropriate law enforcement agencies immediately.
All staff involved in letting and managing contracts must be given appropriate training. This will help to raise awareness of the issues, train staff in how to identify the risks and ensure that suspected instances of modern slavery are handled correctly.
The PPN and guidance note can both be accessed here and more information on modern slavery can be found on the Home Office's modern slavery webpages. For further information on how to implement the recommendations in your procurements and existing contracts please get in touch with a member of our specialist procurement team.