Re: How do they do it?
Did you read the document you linked?
It is almost impossible to apply and leaves you open to challenge due to subjectivities.
I've worked in large scale procurement and it's incredibly hard to use bad past performance to exclude vendors. In particular, the assessment is always, IME, based only on what you receive as part of the process so you've to be super careful and clever if youre going to exclude on past failures.
Three pragmatic approaches I've used:
1) BEFORE you tender: bring the supplier in for repeated bollockings on basis of their current poor performance. Make it incredibly uncomfortable to be your supplier. Verbally, and as clearly as you dare, leave them in no doubt that if you seem pissed off now it's nothing to what you'll be like if they wander back in to sell you more. Make the individual agents of company believe that you'll hold it against them personally in future; even if they turn up representing a different company in the future.
2) Again, BEFORE you tender, get the supplier black listed because of their performance or because an investigation is ongoing. Hard, and might not stick when you actually launch tender, but good if it works.
3) Most by the book, but hard: Set up the assessment criteria to heavily weight what the bad supplier is bad at. Hope that they don't manage to spoof their way through it
Fundamentally, it's hard to punish your current suppliers for their failures in next tender. But it's almost impossible to punish them for failures serving other customers (e.g. for DfE to punish Capita because they made a balls of MoD contracts). Some of it is regs, but it's also the asymmetry. They know directly the scenario, you (e.g. in DfE) have indirect hearsay, and beyond that end up relying on the submissions of your vendors (read the linked doc!)
When I've intimidated/deterred a supplier to f*** off, it's only ever temporary. When/if they turn up again in 4 years they will explain that they've been on a big quality/improvement drive and are now so much better. And you have to give them a fair shot