A curious fight to pick?
Richard Bonnar
Lawyer specialising in major projects for Government and former Professor, public procurement law and practice
According to the headlines the UK Government has banned Bain & Co from Government contracts, as a result of Bain’s alleged involvement in the “state capture” of the South African Revenue Service[1]. Bain has now apparently sought a judicial review of the decision of the Minister of the Cabinet Office. [2]
I have no axe to grind for anyone in this dispute – but it does raise some curious points and provides an interesting context to the current “ debarment” proposals in the Procurement Bill.
The first curious point is that the “ban” would appear to arise from consistent pressure from ex- Labour minister Lord Peter Hain, who seems an unlikely ally of the Minister for the Cabinet Office responsible for the “ban”, at the time, Jacob Rees-Mogg. ?
A second, and certainly the biggest, curiosity is that the Cabinet Office cannot have banned Bain from all Government contracts, quite simply because it has no power to do so. ?A closer reading of some, but not all, of the journalistic coverage is that Bain has been banned by the Cabinet Office from Cabinet Office contracts and, it would seem, the Minister has written to other Government Departments asking them to do likewise. This is not the same as an outright ban from all UK Government contracts.?I will come back to this point later.
Which takes me to my next curiosity – why has such a direct course of action been chosen, when the approach with other (arguably more strategic) suppliers to the UK Government has to date been much more consensual??Most recently KPMG voluntarily and temporarily withdrew from bidding for UK Government work as a result of audit failings in the UK[3], whilst historically G4S and Serco have likewise agreed with Cabinet Office corporate resolution plans to restore their position as trusted suppliers to Government following performance issues on Government contracts.
The final curiosity is that of timing. The Procurement Bill does contain “ debarment” powers [ see my previous blog in another life[4]] but progress is slow [see also my ?most recent blog[5]]. ?So, on the face of it, it appears that the Government is exercising powers it does not yet have. As I say, that’s probably not what has happened in practice – but the optics of this are certainly interesting.
Turning to the action taken by the Cabinet Office, some of the following is necessarily a matter of surmise at this stage as I’ve neither seen the relevant letter from the Cabinet Office nor the statement of claim from Bain and am relying on reported content.
Current powers of “debarment” – some hurdles
The current legal system allows procuring authorities to exclude suppliers from planned procurements [ exclusion], subject to certain safeguards, but does not allow for the systemic exclusion of a supplier across the whole of Government [debarment]. Put simply, the Minister for the Cabinet Office can ban Bain from Cabinet Office contracts but only the Secretary of State for Defence can ban Bain from defence contracts (and so on).
The legal basis for the Cabinet Office’s action would seem to be Regulation 57 (8)(c ) [6] which allows Cabinet Office to exclude Bain from its procurement procedures – where it can “ demonstrate by appropriate means that?[Bain] is guilty of grave professional misconduct which renders its integrity questionable”[7]. ?The maximum period of exclusion is 3 years from the relevant event[8] . Bain may provide evidence that it has taken measures to demonstrate its reliability [ Reg 57(13) to (17], otherwise known as “ self-cleaning”. It’s interesting to see that the Cabinet Office has apparently commented that “This decision has been taken in light of Bain’s responsibility as a global brand for its South Africa division and the company’s failure to clarify the facts and circumstances of its involvement”. This echoes the provisions of Regulation 57(15) which refer to [ the supplier ] clarifying “ the facts and circumstances in a comprehensive manner by actively collaborating with the investigating authorities” – which I would take in this case to be a reference to the authorities in SA – although that may also be a point to be explored in by the Court.
So, the burden of proof will be on Cabinet Office to demonstrate that the threshold has been met, which will come down to the strength of the evidence before the Minister and the processes followed. ?The conclusion of any independent third party ( eg an inquiry) that Bain is guilty of behaviour which, in UK terms, would be grave professional misconduct will strongly help in this regard.
Bain can or may seek to show that, even if the threshold for " grave professional misconduct" is met, it has “ self-cleaned”. Even then, the Cabinet Office can take account of the gravity of the alleged misconduct in evaluating those measures. If the Cabinet Office considers the measures insufficient it must explain its reasons to Bain (which is presumably the letter from the Cabinet Office). The public position taken by Bain would now seem to be that “ serious mistakes were made” and that it has repaid its fees, but it remains to be seen if that is sufficient, assuming the threshold for grave misconduct is met in the first place.???
An interesting point , and alluded to in the Cabinet Office's statement, ?is whether overseas acts of Bain ( or an affiliate of Bain) can be taken into account in the UK. The first point seems more straightforward to me on the wording of the Regulation. ?It may be that the second ( how far can a UK organization/supplier be “tainted” by a sister affiliate? ) does not arise in this particular case as it may be that Bain and Co trades as a single legal entity. ?However, it does raise some very interesting issues about global corporates and professional services organisations in the Government contracting marketplace – which are extensively picked up in the draft Bill and which I will address in my next blog.
A further battleground is likely to be the wider effects which the Cabinet Office may be seeking to achieve by “ advising” other Government Departments to come to a similar conclusion to itself.?Most acquisitions of advisory services will be made (by central Government at least) through CCS frameworks such as Management Consultancy Services 3 and will be subject to Cabinet Office spend controls –with limited transparency on call-offs under frameworks other than an obligation to publish ?awards in Contracts Finder. Even if not a full legal ban, Bain may argue that there is an illegal “ de facto” ban imposed by the Cabinet Office. This raises some interesting public law issues as to whether the Cabinet Office has overreached itself and interfered with the decision-making procedures of other government departments, recognizing that the Cabinet Office has an entirely proper role as the custodian of public procurement policy. I come back to my main point – there is no debarment power and I suspect the Courts will be interested in the substance of what is going on here.
All of this neatly leads me to reflect on the proposed new debarment regime in the Bill.?I made some initial observations about the potential regime prior to the publication of the Bill[9]. In a following blog I will look at what has actually emerged ( like other parts of the Bill, different in a number of respects from the Green Paper Response) and the issues the proposals raise for policy-makers, authorities and the supply-side marketplace.
The author is a part-time professor of public procurement law and practice at the School of Law, University of Leeds. The views expressed in this article are his and his alone.
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[1] https://www.theguardian.com/business/2022/aug/03/bain-and-co-barred-from-uk-government-contracts-over-grave-misconduct-in-south-africa
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“Bain and Co takes legal action to overturn UK state contract ban “, Financial Times, 2 September 2022
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[4] https://blogs.dlapiper.com/uk-government-blog/2022/05/debarment-from-uk-government-contracts-back-to-the-future/
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[6] Public Contracts Regulations 2015 or PCR
[7] Readers will recognize how this wording has found its way into the Cabinet Office statements
[8] Noting that the events complained of took place, it would seem, between 2011- 2015.
Thought provoking Richard Bonnar - certainly agree the move, if as described, would be at best somewhat previous … Agree there have to be limits… or if not my alma mater Proxima may need to review their public sector strategy!
Commercial and Procurement Lawyer ready to embrace new legislation
2 年Hard to keep up Indeed!