113.These sections create a civil compliance regime to ensure compliance with key aspects of the regulatory framework. A person may be liable to a penalty if they do any of the following:
fail to comply with specified reporting, record keeping, or access to record requirements (sections 23, 24 and 25);
provide a specified report under section 24 which is misleading in a material respect (knowing it to be misleading or being reckless as to that);
fail to comply with the duty to notify the Secretary of State of the occurrence of a relevant event etc (section 26);
in circumstances where the person is required to make an assessment as to whether a sub-contract is a qualifying sub-contract (section 29(1) or (3)), fail to make that assessment;
incorrectly make a negative assessment in respect of a proposed sub-contract (section 29(1) or (3)); or
fail to provide the required notification of an assessment (section 29(2)(b) or (4)(b)).
114.The procedure will be as follows. The Secretary of State may issue a compliance notice, which will describe the contravention and set out the steps that must be taken to remedy it (section 31(1) and (2)), but a compliance notice will only be issued if there are steps which the person can take to remedy the contravention (section 31(1)(b)). If the contravention cannot be remedied, there will be no compliance notice, just a penalty notice (section 32(3)).
115.The SSCRs will set out different time limits for the issue of a compliance notice depending on the type of contravention (sections 31(5)) and 42(2)). These are likely to change over time as the SSRO recommends refinements to them. However, it is intended that the first SSCRs will provide that for failures to make reports on time (section 31(3)(a)(ii)), the time limit within which a compliance notice may be issued will be 12 months from the due date. This allows for a period of local negotiation before the Secretary of State may decide to issue a formal compliance notice. For other failures it is not possible to determine a specific due date. It is also possible that the Secretary of State may only become aware of a failure after the contract has been completed, for example during a post-contract cost investigation. So for these failures, it is intended that the time limit within which a compliance notice may be issued will be set at 24 months after the end of the contract.
116.If the person who receives the contravention notice fails to take the steps specified in it, a penalty notice will be issued, which will state the amount of the penalty. If the matter cannot be rectified, this penalty notice will be issued without the compliance notice being issued first (section 32(3)(b)).
117.The due date for the payment of a penalty will be 6 months after the date of the penalty notice (section 32(4)), subject to any amendment of that time period by the SSCRs (section 32(10)). This is to allow a person a reasonable period in which to consider whether or not to exercise their right to apply to the SSRO for a determination under section 32(8).
118.The SSRO has the power to review and make a determination in relation to relevant matters upon the application of a person who has been issued with a penalty notice (section 32(8)). The SSRO may review:
whether the person has committed the contravention, or failed to take the steps required in the compliance notice (or both);
whether the person had a reasonable excuse for the contravention or failing to take those steps (or both); and
the amount of the penalty.
119.The determination of the SSRO is final. Such decisions will be open to judicial review, but there is no appeal mechanism.
120.A penalty notice may specify circumstances in which a penalty of a reduced amount specified in the notice is payable. This allows the Secretary of State to create measures to encourage compliance even after a penalty notice has been issued (for example by reducing a penalty should the person subsequently take the steps specified in the compliance notice within a specified time period).