The Public Contacts Directive (2014/24/EC – the “2014 Directive”)^[1] sets out the legal framework for public procurement when contracting authorities seek to acquire supplies, services, or works (e.g. civil engineering or building). The intention is that procurement rules become simpler and more flexible. Despite the 2014 Directive not requiring transposition into Member States’^[2] law until April 2016, the UK prioritised the implementation through the Public Contracts Regulations 2015, which came into force on 26 February 2015 (with some exceptions).

The 2014 Directive provides that contracting authorities must follow certain procedures when considering suppliers for the award of contracts. Authorities can choose between a number of different types of procedures. The procedures only apply when the contract exceeds prescribed thresholds and will not apply if the contract qualifies for an exemption, such as grounds of national security, ‘in-house awards’ (i.e. contacts with an entity which the contracting authority controls) and ‘inter-authority cooperation’ (i.e. agreements between  two or more contracting authorities who deliver a public service jointly).

Interestingly, the 2014 Directive contains a number of provisions which should help combat bribery and corruption. These include:

1. A continued requirement that organisations convicted of corruption be subject to mandatory exclusion. Under the 2014 Directive, breaches of the UK Bribery Act 2010 section 1 (active bribery), section 2 (passive bribery) and section 6 (bribery of foreign public official) gives rise to a mandatory exclusion. Breach of section 7 (failure of commercial organisations to prevent bribery) however may give rise to discretionary exclusion but does not require mandatory exclusion.

2. Despite the continued exclusion requirements, the 2014 Directive provides that suppliers previously excluded from public procurement for bad practice (including but not limited to corruption) will be able to “self-clean” – i.e. their exclusion will be brought to an end, if they can prove they have sufficiently remediated and changed their behaviour to such an extent that they can demonstrate their reliability despite the existence of a relevant ground for exclusion. The contracting authority can then choose whether or not to accept that the organisation has “self-cleaned”. Only Austria, Germany and Italy previously had such provisions.

3.  Contracting authorities must implement procedures to deal with conflicts of interest. Although the specific procedures required are not defined, requiring employees to declare any interests that they have with potential contracting parties so that any dealings with them can be closely monitored, is likely to be sufficient.

4.  Suppliers will only be able to be excluded for a certain amount of time, which can be 3 or 5 years depending on the circumstances.

There are however specific requirements that an organisation must have undertaken for the “self-cleaning” provision to apply. An organisation must have:

1. paid or undertaken to pay compensation in respect of any damage caused by the criminal offence or misconduct;

2.  clarified the facts and circumstances in a comprehensive manner by actively collaborating with the investigating authorities; and

3. taken concrete technical, organisational and personnel measures that are appropriate to prevent further criminal offences or misconduct. These measures will be evaluated depending on the gravity and particular circumstances of the criminal conduct.

Given point C above, organisations that bid for public sector work and that have been convicted of corruption now have an even greater incentive to ensure that they implement remedial measures to ensure that they do not engage in further corrupt activities. Organisations should be mindful of the “adequate procedures” that the UK Bribery Act 2010 and its guidance requires organisations to implement to prevent bribery, as implementing these is likely to be sufficient to be able to mount a successful argument that the organisation has indeed “self-cleaned”.

_{[1] The 2014 Directive supersedes the Public Contracts Directive 2004/18/EC.}

_{[2] The rules in the 2014 Directive will be applicable to all countries in the EU and the EEA (European Economic Area) but also to all other countries who are signatories to the Government Procurement Agreement (GPA), these being: Armenia; Aruba; Canada; Hong Kong; China; Chinese Taipei; Iceland; Israel; Japan; Republic of Korea; Liechtenstein; Norway; Singapore; Switzerland; and the USA.}