New exclusion ground in the Procurement Act coming up: what does it mean for contracting authorities and bidders?

The Deforestation Ordinance and the related change in law impose new obligations on companies trading in commodities that may cause deforestation. These companies must prepare a due diligence statement. To do so, they must collect the following information, document it and make it available to the Dutch Food and Consumer Product Safety Authority (NVWA) upon request:

• A description, including trade name and type of relevant products;
• The quantity of relevant products;
• The country of production and, where appropriate, parts thereof;
• The geolocation of all plots of land where the relevant raw materials containing or used to manufacture the relevant product were produced, as well as the date or time period of production;
• Name, postal address and e-mail address of the companies, operators or traders who supplied the relevant products;
• Name, mailing address and e-mail address of the companies or individuals to whom the relevant products were delivered;
• Sufficient and verifiable information demonstrating that the relevant products are deforestation-free; and
• Sufficient and verifiable information demonstrating that the relevant raw materials have been produced in accordance with the relevant legislation of the country of production, including arrangements granting the right to use the area concerned for the production of the relevant raw material.

When do the new requirements apply and what happens in case of non-compliance?

To give companies time to gather this information, the new rules under the Deforestation Regulation will apply to large companies from Dec. 30, 2025, and to SMEs and sole proprietors from June 30, 2026.

Companies that fail to meet their obligations after these dates - for example, if a furniture supplier offers tropical hardwood without demonstrating that it comes from an area where no deforestation took place after Dec. 31, 2020, or if a distributor of rubber work gloves fails to provide documentation on the origin of the rubber - may face a sanction from the NVWA.

The possible sanction is a temporary exclusion of up to 12 months from participation in tender procedures and from access to public funding, including tender procedures, subsidies and concessions. This sanction will be added to the list of administrative measures in Article 18.16a, second paragraph (n) of the Environment Act.

What is changing in the 2012 Procurement Act?

Section 2.86 Aw2012 adds a mandatory ground for exclusion:

"8. A contracting authority shall exclude from participation in a procurement procedure a candidate or tenderer subject to an exclusion decision as referred to in Article 18.16a(2)(n) of the Environment Act."

Because it is a mandatory ground for exclusion, a contracting authority must exclude a bidder from a procurement procedure (above the threshold) if this ground for exclusion applies.

What can you do if the grounds for exclusion apply?

When a company has received an exclusion order from NVWA for a violation of the Deforestation Ordinance, the consequence is that participation in tender procedures is not possible for up to 12 months. Normally, a company can avoid this exclusion by demonstrating that it has taken sufficient measures to restore its reliability. These are called "self-cleaning measures. If the contracting authority assesses these measures as sufficient, the company need not be excluded from participation in the procurement procedure.

As currently worded, there seems to be no possibility of such self-cleaning measures when the new exclusion ground applies. Indeed, the legislative amendment only adds a new eighth paragraph to Section 2.86 Aw2012, and leaves Section 2.87a Aw2012 - which includes the possibility of self-cleaning - unchanged.

We find it difficult to imagine that the legislature intended this change to completely deny these bidders the opportunity for rehabilitation. It is noteworthy that bidders convicted of serious crimes, such as fraud, terrorism or child labor, do have the opportunity to demonstrate their reliability through remedial measures. Companies that have violated the Deforestation Ordinance do not seem to have that opportunity - at least at present. It may well be that in time, through further regulations or case law, there will still be room for admitting companies that have taken demonstrable steps to improve their compliance, for example through investigative measures or chain responsibility.

Please note that if a company does not report this exclusion in the tender documents, this is considered a false declaration. If the contracting authority has chosen to declare the optional ground for exclusion under Section 2.87(1)(h) of Aw2012 (false declaration) applicable, this leads to an even heavier penalty: an exclusion of three years from the time of the tender in which the false declaration was made.

Conclusion

The Deforestation Regulation and the related legislative change in the Procurement Act entail far-reaching obligations and risks for companies operating in relevant chains. We therefore advise companies affected by the Deforestation Regulation to check the chain in a timely manner, have documentation in order and be transparent in procurement procedures. The consequences of non-compliance can be significant and last for an extended period of time.

Questions about the new grounds for exclusion or what it means for your organization? The specialists at Straatman Koster Lawyers are ready to assist you.