Ministers will soon have the power to blacklist Whitehall IT suppliers after an overhaul of EU procurement rules which should come into effect later this year.
Cabinet Office Minister Francis Maude has marked certain suppliers as "high-risk" in recent months (although refrained from naming individual companies), but EU law has previously prevented departments from blacklisting.
A number of companies have recently been called into question over poor performance on government contracts, most notably G4S and Serco for allegations of fraud and overcharging on a Ministry of Justice Custodial Services contract.
The Financial Times has reported that once the EU updates its procurement rules later this year, Whitehall will be able to explicitly exclude suppliers from the bidding process for any "significant or persistent deficiencies" in previous contracts, so long as these led to some formal sanctions such as termination, or damages claims.
Blacklisting could also be extended to deals with other public authorities, rather than just the organisation where the issues occurred.
However, it appears that there will also be a clear rehabilitation process for banned companies that want to continue to win government business. The FT claims that suppliers will have to demonstrate that they have paid compensation, co-operated actively with authorities and taken steps to prevent any further problems.
The paper also claims that departments are planning to rapidly implement the new rules, although this has not been officially confirmed to Computerworld UK by the Cabinet Office.
Traditional IT suppliers to government, a handful of companies that dominate public sector procurement, have come under pressure over the past two years as the government aims to reduce the cost of its outsourcing agreements and introduce more SMEs to working with departments.
Some larger suppliers have begun to speak out against the changes, claiming that the reforms are putting public sector systems at risk.
However, given a string of high profile IT projects that have failed or are struggling, such as the National Programme for IT or Universal Credit, which have been led by the big names in outsourcing, the Cabinet Office and Ministers aren't showing any signs of letting up and are continuing to put pressure on the government's traditional commercial partners.
Georgina O'Toole, director at analyst house TechMarketView, said that the news of the EU law changes will be "ringing warning bells for some of the leading ICT suppliers to the sector".
"Though our initial reaction is that the Cabinet Office will be pleased that the EU rules are changing, it would seem unlikely that any supplier would be barred for long based on the rehabilitation rules," said O'Toole.
"But will this just be seen as yet another turn of events likely to make working with UK government even harder? There are some contracts, particularly those involving core infrastructure or complex systems integration, which will always be most suited to the large SIs."
She added: "Our concern is that the relationship between UK government and the leading players appears to be getting more strained by the day."
Sign up for CIO Asia eNewsletters.