Grounds for exclusion in public procurement – assessing a bidder's background and reliability
The Procurement Act requires companies taking part in public tenders to be reliable and financially sound and to have met their statutory obligations. To ensure this, the legislation contains grounds for exclusion whose application bars a company from taking part in a tender.
Knowing the grounds for exclusion is essential for a bidding company from a risk-management point of view. They are divided into mandatory and discretionary grounds, and their application often extends to the subcontractors the bidder uses.
1. Mandatory grounds for exclusion (section 80)
When a mandatory ground for exclusion applies, the contracting authority has no discretion: the law requires it to exclude the bidder from the procedure. These grounds relate to serious crimes and failures towards society.
A bidder must be excluded if a senior officer of the company, or a person exercising powers of representation, decision or control, has been convicted by a final judgment of, for example:
- Bribery or participation in an organised criminal group.
- A terrorist offence or human trafficking.
- An occupational safety offence or a working hours protection offence.
The effect of the June 2026 amendment: With the reform of the Procurement Act that entered into force in June 2026, serious environmental and nature conservation offences were also added to the mandatory grounds for exclusion.
A mandatory ground for exclusion also covers unpaid taxes and social security contributions. If a bidder has unpaid taxes established by a final decision, the company is excluded from the tender. The exception is where the bidder has made a binding payment arrangement with the authority and is observing it.
2. Discretionary grounds for exclusion (section 81)
Discretionary grounds give the contracting authority the right, but not an absolute duty, to reject a bidder. In these situations the authority must weigh proportionality: is exclusion proportionate to the seriousness of the breach?
Typical discretionary grounds are:
- A serious professional failing: The bidder has committed a failing that calls its professional reliability into question (distorting competition or a serious information security breach, for example).
- Weak financial standing: The bidder is bankrupt, in restructuring proceedings or in liquidation.
- Significant breaches of earlier contracts: The bidder has repeatedly or significantly failed to meet its obligations under earlier public contracts, and this has led to the contract being terminated, cancelled or to significant damages.
- Giving false information: The bidder has given materially false or misleading information in the documents concerning suitability (on the ESPD form, for example).
3. Demonstrating reliability and corrective measures (section 82)
Even where a mandatory or discretionary ground for exclusion applies to a bidder, the Procurement Act contains a so-called self-cleaning mechanism for restoring reliability.
A bidder may present the contracting authority with evidence that it has taken sufficient measures to restore its reliability. The corrective measures defined in the law include:
- Paying full compensation for the damage caused by the offence or breach.
- Active cooperation with the investigating authorities to clarify the matter.
- Concrete technical, organisational or personnel changes that prevent similar failings from recurring (replacing senior officers or renewing internal control processes, for example).
If the contracting authority considers the corrective measures sufficient, the bidder may not be excluded from the tender.
4. The role of subcontractors in the grounds for exclusion
The examination of the grounds for exclusion is not limited to the main bidder. If a bidder uses capacity-providing subcontractors (subcontractors whose resources are relied on to meet the suitability requirements), the contracting authority must also check those companies' backgrounds.
If a mandatory ground applies to a capacity-providing subcontractor, the contracting authority must require the bidder to replace that subcontractor. For discretionary grounds the authority has the right to require a replacement, but it is not an absolute duty. A bidding company should therefore make sure that not only its own background but also that of its subcontracting chain is beyond reproach before submitting a bid.
Frequently asked questions
What is the difference between mandatory and discretionary grounds for exclusion?
When a mandatory ground (section 80) applies, the contracting authority must exclude the bidder — bribery, human trafficking, an occupational safety offence or tax failures established by a final decision, for example. With discretionary grounds (section 81) the buyer has the right but not the duty to exclude, and proportionality must be weighed.
What did the June 2026 amendment change in the grounds for exclusion?
Serious environmental and nature conservation offences were added to the mandatory grounds. The change strengthens responsibility requirements in subcontracting chains as well.
Can a company take part in tenders after an earlier breach?
Yes. The self-cleaning mechanism in section 82 of the Procurement Act allows reliability to be restored: a company can demonstrate that it has put its practices right through compensation and corrective measures, for example.