BIS Consultation could lead to procurement challenge risks

In a consultation paper issued in early March, and giving only a month for responses, the Department for Business Innovation & Skills (BIS) consulted on proposals for any company wishing to bid for public contracts to be required to identify their “beneficial owners”. A “beneficial owner” will include anyone holding more than 25% of the shares in the company or having significant rights to influence it, for example, by appointing a majority of the board. This is currently the test for UK companies to register “people with significant control” and provide details of them to Companies House.

The consultation suggested four “options” to require bidders to provide “beneficial ownership” information:

• to require non-EU companies to register their beneficial ownership information centrally and then to require all bidders to refer to the relevant register when either responding to the standard PQQ or submitting a European Single Procurement Document (ESPD). The non-provision of this information would then be made a ground to exclude the bidder from the procurement;
• to require non-UK companies to provide beneficial ownership information direct to the contracting authority;
• to treat a failure to provide beneficial ownership information as making a bid incomplete or non-compliant; or
• to make it a condition of awarding a contract that beneficial ownership information is provided.

We responded to the consultation, saying that the main problem with all of these options is that, under the public procurement case law, it is difficult to add further exclusion grounds unilaterally. If a contracting authority tries to exclude a bidder for a failure to provide information which the Public Contracts Regulations (or their Utilities and Concessions equivalents) do not require bidders to provide, this would clearly open up the contracting authority to a procurement challenge.

We also highlighted the fact that there could be significant administrative costs for contracting authorities if they were required to “go looking” for beneficial ownership information or were to have to check it.

We suggested that, if the Government wishes to make it a condition of tendering that beneficial ownership information is provided, they should lobby the European Commission to change the public procurement Directives to allow for this. There was ample opportunity to have done this in the two-year consultation period leading to the 2014 public procurement Directives, and this is a pity that the Government did not address this then.

We are happy to provide a copy of our full response to the consultation to anyone who would be interested to receive one.

For more information

Contact Andrew Millross.

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