The SQ and essential subcontractors

What is the SQ?

 The SQ was introduced to align with the European Single Procurement Document (ESPD) and to “simplify the supplier selection process for businesses.” The main change from the old style PQQ was the introduction of the requirement to supply information pertaining to “Essential Subcontractors,” in which bidding suppliers declare whether they rely on any other party to meet the selection criteria and subsequently obliging those supporting organisations to complete part 1 and part 2 of the SQ in addition to the bidder.

Part 1 of the SQ covers the basic information about the supplier, such as the contact details, details of parent companies, group bidding etc. Part 2 covers the mandatory and discretionary exclusion grounds. 

The PPN states:

We require all the organisations that you will rely on to meet the selection criteria to provide a completed Part 1 and Part 2. For example, these could be parent companies or sub-contractors you rely upon to meet the selection criteria.

We recognise that arrangements in relation to the use of sub-contractors, may be subject to change and will, therefore, not be finalised until a later date. The lead contact should notify the authority immediately of any change in the proposed arrangements and ensure a completed Part 1 and Part 2 is submitted for any new organisation relied on to meet the selection criteria. The authority will make a revised assessment of the submission based on the updated information.

Who is an “essential” subcontractor for this purpose?

 There is limited information regarding the definition of an essential subcontractor. Although it can be very clear cut in some scenarios, e.g. a print broker subcontracting 100% of the work to a printing house, procurements for services or works can pose more of a grey area where parts of services are outsourced but may not represent a significant portion of the provision or where a saturated supplier market may mean a bidder, although reliant on subcontracting provision is not reliant on a particular supplier to fulfil a service.

However, whether a Contracting Authority has a clear position on the definition or not, its interpretation will be primarily qualified by the bidding supplier and their own assumptions regarding whether their partners or subcontractors are “essential” to their operability.

Is this an issue?

This raises questions as to the availability of Contracting Authorities to audit and otherwise monitor the information provided by bidders at tender stage. It is a natural reality of contracting that during the life of an agreement, quality and cost of delivery is subject to change. A primary supplier, where offering fixed prices or levels of service may seek to make internal changes including the alteration of its supply chain to produce more favourable outcomes over the life of the contract. Therefore, a question is raised as to the accuracy of the information supplied on essential subcontractors where there is no duty imposed on a primary contractor to keep the supply chain intact during the life of the agreement. This might only be mitigated where such a duty is imposed, thus making service provision prohibitive ineffective or where Contracting Authorities have sufficient resource to continually monitor the essential contractors, alongside the primary contractor during the life of the contract.

The issue of available resource and audit of essential subcontractors can also be analysed in terms of the tender process itself. In large or complex tenders or in tenders for services with inherently large supply chains, duties imposed on bidders to supply information, and for Contracting Authorities to evaluate information on essential subcontractors could potentially significantly increase the time required for tender submission and evaluation. Without prior investigation and incorporation into the process timescales, submission of information pertaining to essential subcontractors could create difficulties in tender submissions for some bidders and delay the award of contracts where evaluation overruns, based on information that could quickly become outdated before an award can even be made.

However…

 Despite the issues regarding essential subcontractors, the importance of its inclusion in the SQ should not be underestimated concerning the valuable information that supply chain transparency can offer to Contracting Authorities. This links to recent events such as the introduction of the Modern Slavery Act and the relevance of how this previously unseen SQ information could aid the abolishment of slavery within supply chains.

In addition, it also enables Contracting Authorities to be proactive in situations of contractor insolvency, allowing them to undertake supply-chain mapping exercises to support the continuation of services in the event of a collapse within the supply chain. This is a poignant consideration following the fallout from the dissolution of public contracts giant, Carillion Plc and troubles highlighted within similar organisations responsible for delivery of public contracts.

Overall, the acceptance of the SQ has largely been positive, as has the acknowledgement of “Essential Subcontractors” as part of an ongoing drive towards transparency within publicly funded supply chains. However, questions remain as to exactly how far the transparency agenda can be progressed with the recent changes where there is ongoing uncertainty as to who is truly essential and how failures in reporting essential subcontractors can be acknowledged and addressed by Contracting Authorities. Time and the potential for ongoing development of the requirements may determine the value of this perceived transparency for the public sector in the long term.