Agenda item

Ramani Chelliah, Chief Contracts Lawyer, Governance and HR was present at the meeting and outlined the report.

During discussion of the report the following main points were made –

·         The legal framework that needed to be considered was outlined in the report and whilst there had been initiatives that the Council had taken in relation to blacklisting and the London Living Wage this would be more difficult in the area of tax evasion, given the legal framework

·         The Committee were informed that there were mandatory and discretionary exclusions from participating in a procurement process and these were outlined in the report and there were even exceptions to the mandatory exclusion

·         In addition any economic operator that is in one of the situations of mandatory or discretionary exclusion may provide evidence to the effect that measures taken by the economic operator are sufficient to demonstrate its reliability despite the existence of a relevant ground for exclusion. This is known as self cleansing

·         It was also stated that the law around tax evasion is complex and it is for HMRC to establish whether companies have evaded tax. Even where this is the case HMRC can reach an agreement with the company to pay the tax and therefore the company can avoid prosecution

·         Members were informed that in relation to mandatory exclusion for tax evasion, the period of exclusion is 5 years from the date of conviction, subject to exemptions and self cleansing, and in relation to discretionary exclusion for tax evasion, the period of exclusion is 3 years from the date of the relevant event

·         It was noted that the standard form of Pre- Qualification Questionnaire (PPQ) used by the Council asks the tenderer for a declaration in relation to whether any of the grounds for mandatory exclusion apply together with supplementary information, where relevant. The standard from of PPQ, contains additional provisions in relation to discretionary exclusion for non - payment of taxes but these provisions currently only apply to central government contracts over the value of £5m

·         The view was expressed that the Council should amend the standard form of PPQ used by the Council in order for these provisions to also apply to Council contracts over the value of £5m. The qualifying threshold of £5m has been adopted by the Cabinet Office, in order to avoid adding an administrative burden to lower value procurements and to small businesses

·         In response to a question it was stated that the Head of Procurement would provide the Committee with details of companies that had been found guilty of tax evasion

·         In addition it was stated that if an investigation is carried out and companies were found to be guilty of tax evasion the Council would still need to find out if they had taken action to rectify this or self cleanse

·         Reference was made to the financial implications in the report and that if additional requirements within the procurement process were adopted this may result in an increased administrative burden on the Council, however at present as this would be limited this could be met within existing resources. The view was expressed that if additional resources were needed this would be on a similar basis to the recommendations on resources proposed in the Blacklisting scrutiny review

·         A Member enquired as to the exceptions to the mandatory exclusions in relation to the public interest such as public health or the protection of the environment and it was stated that this may include an instance where there is only contractor who specialises in such work

·         A Member also referred to companies whom he knew the Council contracted with that had been guilty of not paying tax, including health contracts that should be looked at once the Committee gets the list of contracts

·         In response to an enquiry as to whether the threshold of £5m could be lowered it was stated that this is a relatively low limit as it covered the whole length of the contract and that if it was a 10 year contract then this only equated to £500k per annum

·         Members stated that it would be useful to look at the contracts that the Council currently had and the length and value of such contracts

RESOLVED:

(a)  That consideration be given to the amendment of the Council’s standard contract conditions, for contracts over the value of £5m, to allow for contract termination for non-compliance with tax payment obligations when recommendations are made to the Executive

(b)  That consideration be given to widen the scope of tax enquiries made of suppliers during the pre- qualification stage of the procurement process for contracts with a value of over £5m when recommendations are made to the Executive

(c)  That the information relating to the legal framework for dealing with the issue of non-payment of tax, as part of the procurement process be noted

(d)  That the Head of Procurement provide details of those companies that had been found guilty of tax evasion to Members of the Committee within the next 2 weeks

(e)  That details be provided to Members of the Committee on the value of the contracts that the Council currently had and who these contracts were with