Contractual performance, KPIs and debarment under the Procurement Act 2023: what are the implications for suppliers?

The Procurement Act 2023 (the “Act”), which came into force on 24 February 2025, introduces important changes to the procurement landscape. One of the most important that suppliers bidding for public contracts will need to be aware of concerns the management and assessment of contract performance and delivery: in particular, the enhanced role of ‘key performance indicators’ (“KPIs”), exclusion grounds for poor performance and debarment provisions.

The following points should be noted:

• Heightened Importance of KPIs: The Act establishes the use of mandatory KPIs to provide benchmarks for contracting authorities to assess supplier performance over the lifetime of the contract. Contracts above £5 million require at least three KPIs to be set and published (unless an authority deems them inappropriate, for example, where the contract provides for the one-off delivery of goods). What are appropriate KPIs will depend on the nature of the contract and services in question but could include, for example, delivery timelines, quality thresholds and environmental targets. 

• Annual Performance Reviews and Publication: Contracting authorities must assess suppliers against the KPIs at least annually and publish the results in a formal ‘contract performance notice’. Failure to meet or maintain satisfactory performance levels can be documented and made publicly available. In addition, where the supplier has breached the contract (resulting in termination, the award of damages or a settlement) or the authority considers that the supplier is not performing to the authority’s satisfaction (and has been given the opportunity to improve performance but has failed to do so), the authority is required to publish information about the breach or non-performance within 30 days.  

• Potential Exclusion from Future Bids: While the old regime included grounds for authorities to exclude suppliers, these have been enhanced under the Act through a new single exclusion regime under which suppliers can be designated as “excluded” or “excludable” suppliers. This includes the ability for authorities to exclude a supplier on broader discretionary grounds for poor performance, including where a supplier has committed a sufficiently serious breach of contract or where its performance has been unsatisfactory, and it has failed to improve performance to the authority’s satisfaction (after being given an opportunity to do so). Before any exclusion occurs, suppliers must be given the opportunity to make representations, including whether the circumstances are likely to repeat again. The Act includes a revised ‘self-cleaning’ process which suppliers can use to show how the risk of recurrence has been mitigated.

• Subcontractors: As part of a competitive tendering procedure, authorities are required to seek information about subcontractors including whether any subcontractor is on the debarment list (as explained further below). It may also request information as to whether the subcontractor is an excluded or excludable supplier. If the subcontractor is an excluded supplier then the authority must treat the main contractor as excluded for the purpose of assessing tenders and may do so where the subcontractor is an excludable supplier (although where a contractor is to be excluded in these circumstances, it must be given a reasonable opportunity to find a replacement subcontractor).

• Debarment List: The Act introduces a new centralised “debarment list” to which Ministers can add suppliers. Suppliers added to the “mandatory” debarment list will be excluded from all procurements for a specified period, while those added to the “discretionary” debarment list may be excluded from specific projects at an authority’s discretion. Before being added to the list, there must be an investigation by the applicable regulatory authority (for example, the Procurement Review Unit) during which the supplier is entitled to make representations. Following the investigation, a report must be published detailing any applicable exclusion grounds and the supplier will be notified of any decision to add it to the list. 

• Right to Challenge: If the supplier wishes to challenge a decision to include it on the list, it has a short period (eight working days) within which to apply to the court to suspend the debarment, pending the hearing of an appeal. Proceedings challenging a debarment decision must be commenced within 30 days of the date that the supplier knew, or ought to have known, of the decision. The grounds of appeal are limited to material mistakes of law.

Key Takeaways 

The mandatory use of KPIs and the publication requirements mean there will be enhanced transparency and accountability in public procurements and the performance of contracts post-award. Key takeaways for suppliers include:

1. Suppliers will need to ensure that all KPIs are clearly defined, measurable, and attainable to minimize the risk of adverse performance findings and potentially any  disputes as to whether those findings are justified.

2. Suppliers must be prepared for more frequent reviews as authorities can conduct additional assessments to monitor ongoing service delivery. Even a single severe failure could negatively impact future contract awards if authorities perceive the risk of repeated poor performance. 

3. Internal systems should be implemented by suppliers to ensure that they can: (a) track and report on performance against KPIs; and (b) be alerted, if possible, in advance of targets being missed. These will need to be accompanied by robust internal escalation processes, and remediation plans, to remedy performance issues quickly. Project teams should also be educated on the compliance requirements. Open communication with authorities should be maintained to ensure issues can be discussed and addressed before they escalate.

4. Given the serious commercial and reputational consequences that result from debarment/exclusion, and the potentially subjective nature of an authority’s assessment as to whether the supplier’s performance has been satisfactory, disputes are more likely. Suppliers should therefore ensure that accurate project records are maintained, in particular, those that are relevant to performance. To mitigate their risk, suppliers should also ensure that they exercise their contractual remedies where appropriate, including the use of relief notices and contract change provisions.

5. The publication of performance criteria, and issues related to exclusion and debarment, will give rise to reputational risks that suppliers will need to consider and manage.

6. Given the risk of a supplier being excluded by virtue of its subcontractor, suppliers will need to carry out thorough due diligence to ensure that its subcontractors are neither excluded nor excludable.

If you have any concerns regarding these changes and the implications to existing or future contracts please contact the authors who will be happy to discuss these issues with you.