Risky Business: Does Debarring Poor Performers Mitigate Future Performance Risk?

Collin Swan, Counsel (Sanctions) and Belita Manka Senior Counsel, Procurement, World Bank Group

In a recent working paper, Collin Swan, Counsel (Sanctions) in the World Bank's Office of Suspension and Debarment and Belita Manka Senior Counsel, Procurement in the World Bank Group's Legal Vice Presidency raise the interesting question whether Debarring Poor Performers Mitigate Future Performance Risk? The paper was presented in the Third International Conference on Public Procurement Law Africa, organized by the African Procurement Law Unit at Stellenbosch University from 1-2 November 2018.

Procurement experts have long recognized that a contractor’s ability to deliver goods and services can be predicted, in part, by the contractor's past performance. One way to protect against unreliable contractors is to require bidders and offerors to demonstrate that they have a satisfactory performance record. Taken further, bidders with a history of serious performance issues—like a contractual default—could risk being excluded from participating in future procurements altogether. As procurement experts around the world continue to acknowledge the significant impacts that poor performing contractors can have on procurement outcomes,4 many jurisdictions are using exclusions and "debarments" (also referred to as disqualification, suspension, or blacklisting) to protect their public funds from poor performers, in addition to wrongdoers. As an example of this trend, the European Union recognized for the first time, in its 2014 Procurement Directive, that contracting authorities should "be able to exclude candidates or tenderers whose performance in earlier public contracts has shown major deficiencies with regard to substantive requirements

The increasing efforts by many jurisdictions to find ways to address poor performers is also forcing procurement experts to reassess the purpose and impact of using exclusions in procurement. The use of exclusions rose in prominence over the last decade primarily as an anti-corruption tool, and discussions about exclusions are often tinged with an anti-corruption focus. But exclusions based on poor performance do not necessarily fit within the "deterrence" and "punishment" paradigms that often justify exclusions based on malfeasance. Performance failures are often highly contextual. Failing to perform a high-value complex construction contract may not necessarily imply that the contractor would be unable to perform a low-value supply contract, or that a previous contractor for construction works would be unable to deliver services.

This article provides a comparative analysis of several jurisdictions that consider a contractor's poor performance as a basis for either disqualification or debarment. As noted below, although many jurisdictions include poor performance as a basis for exclusion, the available guidance, prevalence, and experiences of using this basis varies widely. To the extent possible, the article analyzes what constitutes sufficiently poor performance to justify exclusion in each jurisdiction and the types of factors that should ultimately be considered when determining if a potential contractor should be disqualified or publicly debarred for poor performance. The paper outlines the many policy rationales for using exclusions in a procurement system and the authors’ desk review of the legal procurement frameworks for 24 jurisdictions, 15 of which allow for the exclusion of a contractor based on some level of poor performance.

Please access the paper and the full report from the links below:

Paper: APLU_Risky Business(Manka Swan)(Working Paper) (11.1.18)

Full report: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3287348