Procurement Bill [HL] - Second Reading

– in the House of Lords at 4:00 pm on 25th May 2022.

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Lord True:

Moved by Lord True

That the Bill be now read a second time.

Photo of Lord True Lord True Chair, Intergenerational Fairness and Provision Committee, Minister of State (Cabinet Office), Chair, Intergenerational Fairness and Provision Committee

Since the British people voted to leave the European Union, and we finally got it done, this country is being freed from many bureaucratic and process-driven regulations that stifled our country and businesses for many years—

Noble Lords:

Oh!

Photo of Lord True Lord True Chair, Intergenerational Fairness and Provision Committee, Minister of State (Cabinet Office), Chair, Intergenerational Fairness and Provision Committee

Noble Lords opposite laugh at the concept, but one of the most prominent of these regulations was the EU public procurement network. Frankly, I would have thought that noble Lords would have heard that cry from businesses up and down this country. We now have the opportunity to reform it. I am delighted that the Second Reading of this important Bill has come to your Lordships’ House because it has a particular capacity to scrutinise complex matters. I look forward to working with your Lordships across the House on that basis.

Public procurement is one of the most important and influential duties of Her Majesty’s Government: £1 in every £3 of public money—some £300 billion a year—is spent on public procurement. Imagine the power of the most efficient and effective use of that money every year. Imagine the extra small businesses that we could help to hire more workers, expand their operations and contribute to the wealth of this nation. Imagine the efficiencies that we could achieve so that we could spend more on our National Health Service and other vital public services.

The Procurement Bill reflects over two years of intense policy development—I pay tribute to all those involved—a Green Paper, government responses and meetings with hundreds of stakeholders. This work is being carried forward by my right honourable friend the Minister for Government Efficiency, Mr Rees-Mogg. The Bill will reform the UK’s public procurement regime, making it quicker, simpler, more transparent and better able to meet the UK’s needs, while remaining compliant with our international obligations. It will introduce a new regime that is based on value for money, competition and objective criteria in decision-making. It will create a simpler and more flexible commercial system that better meets our country’s needs, and it will more effectively open up public procurement to new entrants such as small businesses and social enterprises, so that they can compete for and win more public contracts.

Before rising to speak, I listened to your Lordships’ concern on the matter of human rights abuses in China; I agree with many of the comments that were made. The Bill will strengthen the approach to excluding suppliers where there is clear evidence of their involvement in modern slavery practices—for example, in the increasing number of reports of human rights abuses in Xinjiang. Running through each part of the Bill is the theme of transparency. We want to deliver the highest possible standards of transparency in public procurement, and the Bill paves the way for that.

Leaving the EU has provided the UK with the responsibility and opportunity to overhaul the public procurement regulations. The current regimes for awarding public contracts are too restrictive, with too much red tape for buyers and suppliers alike, which results in attention being focused on the wrong activities rather than on value for money. There are currently over 350 different procurement regulations spread over a number of different regimes for different types of procurement, including defence and security. The Procurement Bill will consolidate these into a single regime that is quicker, simpler and better meets the needs of the UK. We have removed the duplication and overlap in the current four regimes to create one rulebook which everyone can use. The Bill will also enable the creation of a digital platform for suppliers to register their details once for use in any bids, while a central online transparency platform will allow suppliers to see all opportunities in one place. We hope that this will accelerate spending with SMEs.

This is a large and technical Bill. It includes a number of regulation-making powers, and I have no doubt that your Lordships will want to consider those carefully. We submit—and hope to convince your Lordships—that these powers are necessary to ensure that the legislation will continue to facilitate a modern procurement structure for many years to come, so that we can put in place a lasting model which will allow us to keep pace with technological advances and new trade agreements, and to stay ahead of those who may try to use procurement improperly. As we continue to scrutinise this legislation, we will revisit some of the powers included and will seek to improve on those, if necessary. I also accept that there are some areas that will need refinement, and we will come back at Committee with appropriate amendments.

I will now provide a more detailed overview of some of the key aspects of the Bill. Turning first to territorial application, we have delivered this Bill in a spirit of co-operation with the other nations of the United Kingdom—I welcome this. As part of the policy development process, we welcomed Welsh and Northern Irish policy officials into our team so that they had a critical role in shaping this legislation from the very beginning. The result is legislation whose general scope applies to all contracting authorities in England, Wales and Northern Ireland. This will ensure that contracting authorities and suppliers can benefit from the efficiencies of having a broadly consistent regime operating across the constituent parts of the United Kingdom. The Scottish Government have opted not to join the UK Government Bill and will retain their own procurement regulations in respect of devolved Scottish authorities. This is similar to how the current regulations operate, with the Scottish Government having transposed the EU directives into their own statute book. There may be some in both Houses who will regret this. I am sure that we would all welcome our Scottish friends if they wished to join the new system proposed by the Bill; taxpayers and public services alike would benefit across the whole United Kingdom.

Part 1 of the Bill sets out which authorities and contracts it applies to. It covers contracts awarded by most central government departments, their arms-length bodies and the wider public sector, including local government and health authorities. This also includes contracts awarded by utilities companies operating in the water, energy and transport sectors, and concession contracts. The Bill also sets out a small number of simpler rules which apply to lower-value contracts, and it makes provision to carve out those procurements regulated by the Health and Care Act in order to ensure clarity about which regime applies.

The Bill consolidates the current procurement regimes and therefore extends to defence and security contracts. Defence procurement will benefit from the simplification and increased flexibility of the core regime. There are a limited number of derogations that meet the specific needs of defence and security procurements, and which will support delivery of the Defence and Security Industrial Strategy published in March 2021. A national security exemption has also been retained to protect our national interest. The Bill also includes a separate schedule to enable reforms to the Single Source Contract Regulations 2014. The proposed reforms seek to ensure that these regulations fully support the delivery of the Defence and Security Industrial Strategy by supporting a more strategic relationship between government and the defence and security industries. My noble friend Lady Goldie will be assisting your Lordships on these provisions.

Part 2 of the Bill is focused on the principles and objectives that must underlie the awarding of a public contract. Contracting authorities must have regard to delivering value for money, maximising public benefit, transparency, and acting with integrity. Integrity must sit at the heart of the process. It means that there must be good management, prevention of misconduct, and control to prevent fraud and corruption.

Part 5 of the Bill sets out the particular requirements on contracting authorities to identify and manage conflicts of interest.

Public procurement should also support the delivery of strategic national priorities, and this part of the Bill makes provision for a national procurement policy statement and a Wales procurement policy statement to support this.

In Part 3, the Bill sets out how a contracting authority can undertake a procurement and award a contract. Competition is at the heart of the regime. The Bill introduces a new procedure for running a competitive tendering process colloquially known as the “competitive flexible procedure”—I am not quite sure how colloquial that is—ensuring for the very first time that contracting authorities can design a competition to best suit the particular needs of their contract and market.

There will continue to be a special regime for certain social, health and education services, specifically identified by secondary legislation, which may be procured as “light-touch contracts”, leaving room for authorities to design procurement procedures that are more appropriate for these types of services. These light-touch contracts are still subject to the necessary safeguarding requirements.

The Bill also continues the existing ability to reserve certain contracts for public service mutuals and for supported employment providers. There are a limited number of circumstances in which it may be necessary to award a contract without competition. The Bill sets these out, including new rules governing the award of contracts to protect life and public order.

Part 3 also sets out the circumstances in which a supplier may be excluded from a procurement due to serious misconduct, unacceptably poor performance or other circumstances which make the supplier unfit to bid for public contracts. Contracting authorities will be able more easily to reject bids from suppliers which pose unacceptable risks.

Part 3 also legislates for the introduction of a public debarment list for serious cases of misconduct. For far too long, too many unscrupulous suppliers have continued to win public sector contracts due to the ambiguity of the rules, multiplicity of systems and lack of central effective oversight.

The important work on procurement does not stop once a contract has been awarded, so Part 4 of the Bill sets out steps that must be taken to manage a contract. This includes the strengthening of rules ensuring that suppliers are paid on time and new requirements to assess and publish information about how suppliers are performing.

Running throughout the Bill are requirements to publish notices. These are the foundations for the new standards of transparency which will play such a crucial role in the new regime. Our ambitions are high, and we want to ensure that procurement information is publicly available, not only to support effective competition but to provide the public with insight into how their money is being spent. Part 8 of the Bill provides for regulations which will require contracting authorities to publish these notices, resulting in more transparency and greater scrutiny.

In respect of Covid-19 contracts, the Government are clear that all offers for PPE, regardless of the route through which they were identified, underwent rigorous financial, commercial, legal and policy assessment led by officials from various government departments.

Part 9 details what remedies are available to suppliers for breach of the new regime by contracting authorities where that has resulted in loss or damage. Having an effective and well-functioning remedies regime is essential to the successful operation of any public procurement regime.

Any claims made during an applicable standstill period—between the award decision and the entering into of the contract—will result in the procurement being automatically suspended. We will introduce a new test for the court to consider, when hearing applications for the automatic suspension to be lifted, that is better suited to procurement than the one currently applied.

Part 10 of the Bill gives an appropriate authority oversight over contracting authorities and the power to investigate their compliance with this new Act as part of a new procurement review unit.

The UK is already party to a number of international agreements which guarantee valuable market access for UK suppliers. For example, our membership of the WTO’s Agreement on Government Procurement gives British businesses access to £1.3 trillion in public procurement opportunities overseas. Access to these markets is a two-way street and requires the UK to ensure that treaty state suppliers have equivalent access to UK markets. Part 7 prohibits a contracting authority from discriminating against suppliers from those states. This part also contains a power to make regulations specifying the agreements listed in that schedule. This provides greater flexibility to be able to extend the procurement regime to cover matters covered by the UK’s international procurement agreements, both current and future. This is a well-defined and tightly restricted power which will enable the procurement aspects of future trade agreements to be enacted efficiently, but I have no doubt we will discuss this in Committee. It is not an open door to changing UK procurement regulations to meet international commitments. This power allows only for the extension of the UK procurement regime to cover overseas suppliers covered by such agreements. Amendment of the UK’s procurement rules is outside the scope of this power, even if it were to be required as part of an international agreement. It would not, for example, allow the opening up of NHS clinical healthcare procurements to private providers from any state. To do so would require broader legislative changes, and this power has been carefully drafted so as not to allow for that.

In conclusion, there has never been a piece of UK procurement legislation as comprehensive as this. I hope that I will be able to demonstrate, in our discussions on the Bill, how this Government plan to reform procurement so that we can collectively boost business, spread opportunity, level up the country and strengthen our union. I very much look forward to taking the Bill through your Lordships’ House and I will be keen to hear any questions and suggestions your Lordships may have, today and throughout our proceedings. I commend the Bill to the House, and I beg to move.

Photo of Baroness Hayman of Ullock Baroness Hayman of Ullock Opposition Whip (Lords), Shadow Spokesperson (Environment, Food and Rural Affairs), Shadow Spokesperson (Levelling Up, Housing, Communities and Local Government) 4:17 pm, 25th May 2022

My Lords, I thank the Minister for his comprehensive introduction to the Bill, which is quite complex in some areas. I begin by saying that we welcome this Bill. Changes to the procurement regime are long overdue, not least as a procurement Bill was promised in the last Session, so it is good that we finally have it before us today. I know from my experience of navigating OJEU just how complicated the EU procurement regime can be, so we support the Government’s stated ambition of speeding up and simplifying the processes. We welcome particularly the move from awarding contracts based on most advantageous tender, or MAT, rather than MEAT, the most economically advantageous tender, which will allow more flexibility around procurement, and the duty to consider breaking contracts into lots will also help social enterprises and SMEs.

The first part of the Bill, which replaces definitions that came about from long negotiations between EU member states with clearer definitions, has been welcomed across the board, as has the ambition to simplify rules and bring a range of existing rules together into one place. Having said that, recent events and investigations have shone a light on the clear failures of the current procurement regime and government practices during the Covid pandemic, with huge concerns raised in a time of great sacrifice for many people.

I heard what the Minister said on this matter in his introduction, but taxpayers’ money was wasted— £9 billion spent on PPE was written off, with £2.6 billion spent on items that were “not suitable” for the NHS. That is one in 10 of all items. There is also £800 million of additional stock that has not been used. We also know that there were major issues with direct awards. We appreciate that Governments have to act quickly during a crisis, but contracts worth tens of millions that were given out through the VIP fast lane, totalling almost £2 billion, lacked scrutiny or transparency. This Bill gives us the opportunity to fix that—to put in place a rigorous procurement regime which would prevent these practices happening again.

We are concerned that transparency seems to have slipped down the agenda when compared to the original proposals in the Green Paper. The Public Contracts Regulations 2015 have more on transparency than the Bill before us, so why are the Government taking a step backwards? Since the Government did not comply with the current transparency rules during the pandemic, can the Minister reassure noble Lords that this is not because they are finding transparency rules a little bit tricky to comply with? While we welcome the Bill, we do have concerns that many of the positive changes proposed in the 2020 Green Paper and the Government’s response to the consultation appear to be either missing or watered down, despite being welcomed by business, industry, trade unions and other stakeholders.

What we need from this Bill is a genuine commitment to reshape procurement to the very highest standards—from the integrity of the process to the delivery of real social and economic value. While we will no doubt explore these issues in more detail in Committee, I would like to raise some of my key concerns with the Minister at this stage. I look forward to clarification in his response today and further discussion on how improvements can be made as the Bill progresses through your Lordships’ House.

Turning first to the principles, the majority of the more than 600 respondents to the Green Paper consultation supported legal principles for procurement. In their response, the Government stated that they would

“introduce the proposed principles of public procurement into legislation as described”.

The proposed principles are

“public good, value for money, transparency, integrity, fair treatment of suppliers and non-discrimination”,

and we absolutely support them.

However, disappointingly, Part 2—“Principles and objectives”—does not have the principles laid out clearly in a clause on the face of the Bill, despite doing so for the objectives. The principles are an integral part of procurement. They are a vital tool for setting out what legislation is designed to achieve and by what its success will be judged. The rest of the world knows this; almost every other piece of procurement legislation in the world starts with clear principles, so it is surprising that this is not in the Bill, and we believe that this needs to be revised. Furthermore,

“acting, and being seen to act, with integrity”,

as set out in the objectives, could also include a wider duty of transparency. Even in the midst of a crisis, integrity and transparency should be non-negotiable.

Looking at the objectives, we believe that the Government are wasting a huge opportunity to put the environment and tackling climate change right at the centre of how public money is spent. Why is there no mention of this in the objectives, no commitment to sustainable procurement, and no duty for all government departments to comply with the carbon reduction plan and demonstrate sustainable procurement performance? If the Government are to achieve their goal of net zero, climate and nature goals must be an integral part of any new legislation that will have an impact on its delivery. Does the Minister not agree that sustainable procurement will help avoid damage to the environment while at the same time generating benefits for business, society and the economy?

Another gap in the Bill is a commitment to social value, which does not appear at all. There should be specific reference to social value being part of the public benefit in order to provide clarity to public bodies, companies and social enterprises. Social value should be embedded in the procurement system through appropriate guidance and reporting requirements for public bodies, as seemed to be the case in the Green Paper proposals. In fact, the Government’s response to the consultation stated:

“A procurement regime that is simple, flexible and takes greater account of social value can play a big role in contributing to the Government’s levelling-up goals.”

I absolutely agree. As a matter of principle, social value will improve circumstances for residents by bringing money and jobs to local areas, which should in turn go some way towards helping to level up the country.

This is especially true in more disadvantaged areas. A more responsive, community-focused supply chain spreads the social value net further, helping to maximise environmental and social well-being at every level, and would contribute positively to the Government’s levelling-up ambitions. So why is it no longer in the Bill? Have the Government already given up on their levelling-up goals, or does the Minister recognise that this is an oversight in the drafting that needs to be corrected?

The Government’s 2019 manifesto asserted that the public sector should

“‘Buy British’ to support our farmers and reduce environmental costs.”

Public procurement has the potential to create thousands of jobs for UK farmers and food producers and to help deliver the Government’s climate and nature emergency commitments. Can the Minister outline how the Bill before us will achieve those commitments? We need to do what we can to ensure that far more public contracts are awarded to British businesses—something that will have a positive effect on our economy but also support those who are struggling to get through the current cost of living crisis.

Moving on to the fair treatment of suppliers, we have concerns that the language on requiring contracting authorities to make impartial decisions without conflict of interest has been weakened, as too has the important principle of non-discrimination. I hope that the Government will therefore commit to tightening up these areas of the Bill as we move into Committee.

The Green Paper included a positive commitment to the digital single suppliers portal, operating on a “tell us once” principle. This would not quite level the playing field between supersized corporate bidders such as Serco and SMEs from across the country, but it would certainly be a step in the right direction, removing an unnecessary obstacle for smaller, less well-resourced options. My understanding is that this is still the Government’s intention, but I can see nothing in the Bill to ensure that it will actually happen. Do the Government remain committed to putting this on a statutory footing, or will further regulation and guidance be published? If this is linked to other digital systems such as Contracts Finder—again, I hope the Minister can confirm that this is still happening—it could also help to level the playing field when contracting authorities are making decisions.

There are also several areas of exemption in the Bill. Part 13 includes powers

“to disapply this Act in relation to procurement by NHS in England” and

“to amend this Act in relation to private utilities”.

Schedule 2, “Exempted contracts”, includes defence and security contracts, which my noble friend Lord Coaker will consider further in his winding-up speech. What criteria were used to draw up this group of exemptions? Following the Minister’s introduction, can he clarify exactly how ministerial discretion for NHS procurement will apply? For example, what services is this intended to cover? Will it apply just to clinical services? I am sure your Lordships’ House will agree that we do not want to see a repeat of what happened during the pandemic.

The Minister mentioned—and we are aware—that there is going to be a six-month lead-in for the implementation of the Act’s provisions once it is passed. Even so, there will be significant challenges to meet the timescales, considering the number of changes proposed in the Bill. Does the Minister agree that the Government will need to provide substantial support; for example, for staff training, for communicating the many changes to the system to prospective suppliers, and to cash-strapped local authorities? If so, will he outline what that support will look like?

This really is an opportunity for the Government to be bold, to address these concerns, and to help rebuild public confidence in how taxpayers’ money is spent. There is much in the Bill that I have not had the time to cover today, and we will, of course, be tabling amendments to try to improve it. I offer the Minister our constructive support to work closely with him and his department officials so that, by the time it leaves this place, it will be truly fit for purpose.

Photo of Lord Fox Lord Fox Liberal Democrat Lords Spokesperson (Business, Energy and Industrial Strategy) 4:30 pm, 25th May 2022

My Lords, it is a great pleasure to be working on this Bill with a new set of colleagues: a new set of Front-Bench spokespeople from Her Majesty’s loyal Opposition and a new Minister. I look forward, as the noble Baroness does, to a fruitful process in working on this Bill.

In framing the Bill, the Government explained that they had three options: to do nothing, to do the minimum or to carry out wholesale reform. They have chosen reform, which we welcome; the Bill is the result of that reform process. What is it for, and how wholesale are those reforms? The reforms are less wholesale than the Green Paper suggested they might be, as the noble Baroness, Lady Hayman, just said in her excellent speech. I will not try to cover the same ground that she did, but I associate myself with all of her comments.

I will, however, start with the point with which she started: the missing principles for the Bill. Without those principles, it will be difficult to guide the rest of what we are doing. There are objectives, and they appear in Clause 11. As we have seen, they are value for money, maximising public benefit, sharing information and acting with integrity. We would all sign up to those. Elsewhere in the Bill documentation, there are all sorts of other lists that are all similar, but different in a subtle way. This is not nit-picking, because it is important to understand where the Bill is headed and what it is seeking to achieve. Some of the objectives are potentially conflicting, and we need to know where the priority lies.

For example, to create greater opportunities for small businesses and social enterprises, which I understand and agree is one of the important elements of the Bill, there might be a higher initial cost attached. How will the Government calculate the public benefit that they get from the process of broadening the remit? What priority will they give to value for money? The impact assessment says that the highest priority is value for money. However, it also says that the Bill will be required to take into account national strategic priorities such as job-creation potential, improving supply resilience and tackling climate change. There is no help as to how these trade off, and there is no understanding of what “take into account” means. Of course, none of these is on the face of the Bill, so we do not have a definition of “public benefit” anywhere.

All the language so far completely avoids the issue of supplier ethics and human rights. I know that the noble Lord on my left and others will bring this up, and I expect to agree with them. My noble friend Lady Parminter will no doubt speak to the need for a central role for procurement in fighting climate change. I also believe that that has to be written into the Bill and I hope that the Minister will hear that from others as well.

There are other definitions in the Bill which are not helpful. The Explanatory Notes refer to “fair treatment”, so perhaps the Minister could explain what “fair” means in the context of this new process. Perhaps he will agree with me that “equal” might have been a better word. Here is an example: it is unclear how the Bill, in its present form, will replace the regulatory framework for accessibility within public procurement legislation. Therefore, can the Minister please explain how the new regime will ensure that specifications take into account accessibility criteria and design for all users? This is just one example of what is potentially dropping out.

For the Bill to be implemented, it needs to be understood. For that to happen, the Government need to differentiate what they are seeking to achieve and be very clear about the Bill’s moral, as well as economic, objectives. I am sure that we will give Ministers plenty of opportunity to do that in Committee.

One of the benefits paraded in various government publications is that the new data platform will deliver centralised data. How will the Government use that data and who will use it? On the data protection front, the UK has to date employed GDPR as its tool. However, changes in data protection law heralded by the new data reform Bill set out in the consultation Data: A New Direction call into question the level of proper oversight of that data. We already see companies from the US sweeping up and using data that is currently available; for example, within the NHS. They operate free, in effect, from proper scrutiny. Without explicit safeguards in the legislation, there will be a real opportunity for data abuse.

The Government talk of visibility and transparency in the Bill. If those are realised that will be thoroughly welcome and we encourage that process. However, if we needed an example of how the lack of visibility leads to corruption, there is the example given by the noble Baroness, Lady Hayman, and which I think my noble friend Lord Strasburger will give, of the abuses of what I might describe as a system based on Ministers’ WhatsApp rather than a transparent system. That was a scandal, and we must have a system that ensures that that sort of thing can never happen again.

How transparent is the legislation? I note that, alongside defence and security interests, the Advanced Research and Invention AgencyARIA—is exempted. Not only is ARIA carved out of the Freedom of Information Act, it is able to procure in secret. Why should we not know from whom this agency buys its electricity? Overall, much of the information the public might seek about public contracts has been or is being put beyond the reach of the Freedom of Information Act. Although the Government talk about transparency, their legislation seems to demonstrate a drift—if not a jump—in the opposite direction.

The Minister sought to defuse the treaty state supplier issue by using the NHS opt-out as an example but, of course, that is in only one sector. My noble friend Lady Brinton will be talking to that issue, but let us remember what Clause 82(1) says:

“A contracting authority may not, in carrying out a procurement, below-threshold procurement or international organisation procurement, discriminate against a treaty state supplier.”

Can the Minister confirm that if a UK contracting authority wanted specifically to buy British food from a British farmer, it would be unable to do so at the expense of a treaty state supplier such as, in future, an Australian farmer, selling a similar product at a lower price? That not only flies in the face of many social objectives, it seems to fly in the face of the Subsidy Control Act, which includes provision for purchasing under a subsidy scheme to support local businesses and certain products. Which of these two factors prevails? Is it the treaty state supplier rule or the subsidy control rule, because they do not work in the same direction?

More broadly, essentially, if the market is opened by a treaty, the contracting authority is bound to buy the product that offers the best value for money—remember, that was the number one criterion of the four set out in the government documents. I fear that that will be headline price, irrespective of what it does to local capability in future. Other countries may be looking at reshoring; the Bill delivers the opposite.

The regulation-making power in Clause 8(2) relates to common procurement vocabulary—or CPV—codes, which the Cabinet Office has explained will be used to decide which contracts benefit from the light- touch regime. Understandably, this legislation does not include the long list of what might be on that CPV list, but I feel sure that there will be some important issues here.

I would like to ask the Minister what “light touch” actually means. If it means service contracts of the sort that the Minister hinted at, then far from “light touch”, “rigorous oversight” might be more appropriate. I give the example of the children’s homes issue, which is currently live. Perhaps the Minister can help us before we get to Committee by publishing either a draft or an indicative list of what the Government expect to be in the statutory instrument that will bring the CPV codes to your Lordship’s House.

I am also in the dark about how this Bill, the Sewel convention, the Trade Act and the UK Internal Market Act intersect. For example, if a Scottish-based public authority seeks to purchase a product from a treaty state supplier, does the Minister agree that it is up to the Scottish Government whether the regulations in Scotland need to be the same as those in the rest of the United Kingdom?

Secondly, can the Minister please explain what happens if that Scottish public authority offer then extends to the rest of the United Kingdom—for example, across the border to England? The Procurement Bill seems to say that once it crosses the border and there is a difference, Westminster regulations need to be applied, not Edinburgh’s. However, I suggest that the non-discrimination parts of the UK Internal Market Act mandate the exact opposite, and I think an interpretation of the Sewel convention is a moot point. Further, there is the common frameworks process, which is still live. Can the Minister please reconcile all these issues for your Lordships’ House?

As I reach the end, I turn to implementation, which will not be trivial. We know that the Government are very challenged when it comes to digital projects. In its report, The Challenges in Implementing Digital Change, the National Audit Office reviewed the implementation of digital programmes by government, going back, I think, over 25 years.

Its comments are extremely apposite. It said:

“Initiating digital change involves taking a difficult set of decisions about risk and opportunity, but these decisions often do not reflect the reality of the legacy environment and do not fit comfortably into government’s standard mechanisms for approval, procurement, funding and assurance.”

The report also found that digital leaders

“often struggle to get the attention, understanding and support they need from senior decision-makers” who lack sufficient digital expertise. It will be important to remember that as this project progresses. We know from past government IT disasters that delivery is always harder than it is portrayed when launched at the Dispatch Box.

As far as I can tell from the impact assessment, the estimated cost of launching this platform is £36 million, which seems ambitious to say the least, given the Government’s 25 years of underperformance on digital projects. In Whitehall alone, this involves a lot of people. The Cabinet Office Civil Service statistics for 2021 say there were 12,340 civil servants in the procurement commercial function that year. Of course, as we have heard, there are many more people in local authorities and public utilities being brought into this system.

For some of the Whitehall departments, these numbers are huge. In the Ministry of Defence, including agencies, more than 2,000 employees are involved in procurement. In the Minister’s own Cabinet Office, again including agencies, it is more than 1,700 employees. I know from experience of working in the private sector that when a large enterprise implements a cross-business digital programme, the systems analysts always meet the same response. They go into a department, which says, “Yes, I agree that this is a very good idea, but you have to understand that we are different”.

There are two ways of dealing with this response. One is to instigate local variations to comply with all the perceived differences; the other is to use this digital platform to lead cultural change. In my experience— I have helped on a number of company-wide ERP implementations, and in a way this is a much bigger version of that—if you choose the variation route, it is a road to confusion and cost. But the second one, invoking real cultural change, is still a challenge. These departments are supertankers of departmental culture that will take years of sustained activity to turn around. A couple of days’ training here or there will not do it; these people have to own this system, believe in it and want it to succeed.

Any Bill that seeks to do what this Bill seeks to do is ambitious. It is a long Bill and covers all sorts of different departments. The process we are about to embark on will be long and detailed. There is a lot of work to do before the Bill is fit to be enacted, but we will work very hard with the Minister and Her Majesty’s loyal Opposition to help that to happen.

Photo of Lord Stevens of Birmingham Lord Stevens of Birmingham Crossbench 4:46 pm, 25th May 2022

My Lords, I may be a relatively new Member of your Lordships’ House, but I suspect that the Second Reading of the Procurement Bill may not capture the public’s imagination today in quite the way that certain other events and reports taking place in Westminster will. But that should not in any way detract from the importance of the measures before us, because the Bill represents an important advance on a number of the predecessor EU procurement regimes that we have been subject to and generally moves us in the right direction. As the Minister said, it has the potential to simplify and accelerate public procurement and to deal with some of the lessons, both positive and negative, that have arisen during the coronavirus pandemic.

I will briefly mention three avenues that may be worth considering further as the Bill progresses through your Lordships’ House. The first is the connection between the procurement regime and supply chain resilience for the UK. No doubt we will discuss multiple times this afternoon the experience that arose as the UK Government and the Department of Health and Social Care sought to procure PPE and testing for the National Health Service during the pandemic and, as was the case with many other European countries, faced a supply crunch as Chinese factories closed down. The problem has been sustained as China pursues its zero Covid policy, now overlaid with Ukrainian disruptions as a result of the war.

The question is not simply: what are the procurement mechanisms that the Government use in spot markets at times of crisis? It is: what strategic assessment have the Government made of which aspects of our supply chains need onshoring? The orthodoxy for many years has been that just-in-time logistics are the most efficient way—until you get a shock such as the pandemic, in which case it becomes blatantly obvious that they are not. At that point you wish you had stockpiles or onshore capability. In the same way that, for example, Sir John Parker’s national shipbuilding review looked at what the supply chain might look like for naval vessel procurement, I wonder whether the Minister can tell us how he thinks a similar approach will be taken to supply chain resilience for other aspects of what the public service will need in the future.

Secondly, I suspect that your Lordships will be looking for greater clarity, as this Bill proceeds, on aspects of these proposals which at the moment are remitted to regulation or guidance. Only a few short weeks ago, Royal Assent was given to the Health and Care Act 2022. Many noble Lords participated in the extensive discussions around what the procurement regime that was set out in that Act should be as it applies to the National Health Service. On the Health and Care Act 2022, the Cabinet Office memo of 11 May to the Delegated Powers and Regulatory Reform Committee says:

“It has not been possible to set out on the face of that Act the scope of procurement Regulations made under it, so this Bill”— the Procurement Bill—

“needs to be able to make provision to manage the overlap.”

Therefore, Clause 108 would grant Ministers the power to “disapply” provisions in relation to

“services or goods to which health procurement rules apply”.

I suspect that your Lordships will want much greater clarity on the circumstances under which those will or will not be disapplied.

Frankly, that will go in both directions: there will be some services where, having had the debate as part of the Health and Care Act, we will be clear that they should not be subject to competitive market principles; and there will be other areas where they must be, even where industry partners will sometimes try to exclude them from that scope. An example of this is the importance of using competitive procurement mechanisms for the purchase of medicines, where in some cases, I am afraid, some of our life sciences partners would rather that market mechanisms were not used to drive value for taxpayers and for patients. Indeed, when the National Health Service was seeking to procure medicines for hepatitis C so that we could eliminate that virus and save hundreds of millions of pounds in the process, it was sued for daring to use procurement mechanisms in those circumstances.

So we must be quite precise as to the circumstances under which we will and will not do this. Simply leaving it to regulatory guidance is not good enough, because some of us—I say this gently—have buyer’s remorse about some aspects of the Health and Care Act, including aspects which were left to regulation or ministerial discretion. I am thinking particularly of the debate we had around childhood obesity just a few short weeks ago, where we were promised that we would indeed be cutting out junk food advertising on TV aimed at kids. Days later, however, that commitment was ditched—actually, the noble Lord, Lord Kamall, said that it was not a backtrack but a delay. I read elsewhere that this is part of scraping the barnacles off the boat. Most of us do not regard children’s health as a barnacle to be scraped off the broadcasting boat. Therefore, we will want more clarity on some of these distinctions, rather than leaving them purely to regulation and future ministerial fiat.

Thirdly and finally, as we think about the application of these new procurement rules to infrastructure and big capital projects, we should have the humility to recognise that, by themselves, the rules will not speed up delivery. To will the end is to will the means. Frankly, the root cause of stalled and delayed infra- structure—be it energy, defence or health—is more often not the procurement rulebook per se but the absence of multiyear capital allocations funded at the correct level, the result of delayed business case approval and the result of a lack of constancy in political direction on the results we seek to achieve.

We have seen that in the defence sector: the House of Commons Defence Committee made the point in respect of naval procurement in its memorably named report published before Christmas, We’re Going to Need a Bigger Navy. I am afraid that we are seeing that right now in connection with the proposed building of 40 new hospitals. This is going to be a major piece of procurement for the Government and the National Health Service. It was a very welcome commitment that the Prime Minister made in the run-up to the 2019 general election on a visit to North Manchester General Hospital. As I pointed out at the time, that hospital was opened in 1876 when the then Prime Minister was Benjamin Disraeli. So there is a need to get on with it, but the fact is that we have only a three- year capital allocation—£3.7 billion—and that does not buy you 40 hospitals. Matt Hancock, the then Secretary of State, said back in 2019 that the first eight of them hospitals were “ready to go”, but we now see in the latest Department of Health and Social Care publication that their planned start date is “TBC”.

So the fact is that the procurement processes will help but by themselves they will not get us the result. We need greater clarity on how the totality of the Government’s effort can help advance these important goals, we need greater clarity on the circumstances under which these rules will or will not apply in the health sector and elsewhere, and—that is not my phone, by the way—we need greater clarity in respect of the way in which other social goals will be advanced.

Finally, no doubt we will hear a certain amount this afternoon about the net-zero agenda and how that could be incorporated. A friendly suggestion would be that the Government could follow their own precedent in very wisely incorporating a set of amendments in the Health and Care Act. All we really need is for the amendments the Government accepted there to be incorporated in this Bill and perhaps we will be 9/10ths of the way home and dry.

Photo of Lord Lansley Lord Lansley Conservative 4:55 pm, 25th May 2022

My Lords, I am very glad to follow the noble Lord, Lord Stevens. He very helpfully reminded us that we might legislate but it is the Government’s job to execute. The ability with which the execution of policy is carried out is a fundamental part of this. I might also say that, as the noble Lord unfortunately discovered in the particular respect he mentioned, we can legislate but if we leave loopholes we allow the Government to drive coaches and horses through them from time to time. That is why we sometimes have to look very hard at Bills to make sure they very clearly express Parliament’s intentions. Important and detailed as this Bill is—the way my noble friend Lord True very clearly set out the Bill’s intentions was most helpful —as the noble Baroness, Lady Hayman, said, we want constructively now to engage with that and to seek to improve the Bill before we send it to the other place.

In terms of interests, I am a director and adviser to LOW Associates, which is a beneficiary of procurement contracts with the European Union. I have looked quite carefully: we have a number of contracts with the European Commission and we advise on European procurement. Although that gives me experience in this respect, I do not think it gives rise to any direct conflict of interest—but I make the declaration in case anybody wants to check it out.

The noble Lord, Lord Stevens, is absolutely right. Where the NHS is concerned, “light touch” should not mean without proper transparency, processes and the ability to understand what is being bought and why. Indeed, there has been some activity in the NHS that should be paralleled across government. Procurement is increasingly seen as an essential part of the quality of management. That is happening through things such as Getting It Right First Time and the benefit of the report from the noble Lord, Lord Carter of Coles, on procurement in the NHS, which included building a procurement profession inside the NHS, which hardly existed. Right across government, we need chief procurement officers to be seen as often as important as chief financial officers in getting the quality of service and value right.

Because this is Second Reading and time is necessarily short, I will mention just two things—there will be further detail on the Bill—that I want to raise in this debate and that I hope to follow up in Committee and on Report. The Chancellor the Exchequer, in his Spring Statement in March, said that

“over the last 50 years, innovation drove around half the UK’s productivity growth, but since the financial crisis, the rate of increase has slowed more than in other countries. Our lower rate of innovation explains almost all our productivity gap with the United States.”—[Official Report, Commons, 23/3/22; col. 341.]

It is clear from the research that innovation and procurement are intimately related in an economy. Procurement, as a mechanism for fostering innovation in an economy, is probably more important than the grant-led systems that we often focus on. We often operate on the supply side, saying, “We must have more scientists, start-ups and grants for innovation”, but actually we need to remember that the demand side may have at least equal impact, because demand pulls through innovation. The home market—the UK market—in particular can be of additional and significant importance to innovative suppliers, enabling them to establish and bring forward innovation in an economy. Innovation needs to be an essential part of our procurement process.

I acknowledge that the objective of procurement is not innovation but to secure quality and value in public services and to do so in a transparent and fair way. But the consequences of procurement to society are terrifically important. What the noble Baroness and the noble Lord, Lord Fox, were saying about social value is terrifically important. We should acknowledge and understand the externalities of procurement, and, through the legislation, we should tell the public contracting authorities that they should take account of them. There was an interesting exchange on this.

The Government’s national procurement policy statement, published in June 2021, acknowledged that the national priority is social value. In that context, “social value” was defined as

“new businesses, new jobs and new skills; tackling climate change and reducing waste, and improving supplier diversity, innovation and resilience.”

This relates to the point that the noble Lord, Lord Stevens, was making, and to my own point about innovation. These things are all in there, but they are not in the Bill, because the day after the Bill comes into force, the Government could write a new national procurement policy statement.

My initial submission at Second Reading is that government should be very clear that the procurement objectives include not only public benefit but social value, and the latter must be defined in the national procurement policy statement in the ways that we specify in the Bill. I hope to include all those points, including the issues relating to climate change, supply chain resilience and the importance, from my point of view, of procurement-led innovation in the economy.

I will make one other point about treaty state suppliers—this is not the point that was previously made. The International Agreements Committee, of which I am a member, is scrutinising the Australia and New Zealand free trade agreements, which are the first of their kind. The Trade (Australia and New Zealand) Bill has been introduced in the other place, and the purpose of this legislation will be to repeal that when the time comes. So, at the same moment, we have a Bill at each end, with one repealing the other—why is that the case? Looking at the Explanatory Notes to the Bill in the other place, I see that it is clearly because the Government expect that Bill to pass rapidly and this one to pass slowly. Therefore, the consequence is that they need that legislation quickly but will subsequently repeal it using this legislation. This is the way that such legislative matters proceed.

My problem is that Schedule 12 to this Bill simply repeals that legislation. So, if we were to amend the Trade (Australia and New Zealand) Bill at any point in the future, it could—or, in fact, would—be repealed by government by virtue of Schedule 12, so any debate on the Trade (Australia and New Zealand) Bill is pointless. I hope that we make sure that that does not happen. We must therefore have a serious debate about whether we are happy for future free trade agreements with procurement chapters to be implemented solely by secondary, rather than primary, legislation. We had this debate on the Trade Act, and I think that we will need to come back to it.

Overall, this is an important Bill, very well introduced by my noble friend—

Photo of Lord Lansley Lord Lansley Conservative

Forgive me—it was actually added to Schedule 9. But I am referring to paragraph 3 in Schedule 11, on repeals. None the less, I welcome the Bill and look forward to our debates on it.

Photo of Lord Mendelsohn Lord Mendelsohn Labour 5:05 pm, 25th May 2022

My Lords, I thank the Minister for his very impressive introduction. This is an important new framework, representing some progress and some decent measures of reform. Of course, as ever, language overstates the problems and usually the benefits, but ambition is no bad thing in this area. We saw from the excellent speeches of my noble friend Lady Hayman of Ullock and the noble Lord, Lord Fox, that there are a lot of issues here which will lead to a very interesting and useful debate.

The Minister said that this would deliver an effective and efficient regime. As we heard from the last speakers, a variety of things not inherently in the Bill would lead to an effective and efficient regime. We must give due regard to those and ensure that we have the right skills, the right capacity, and the right objectives. A few areas are not present which I would be keen for the Minister or this House to give a view on, to ensure that we get them right.

I am concerned that the Minister gave a clean bill of health to the Covid procurement process. In my experience in business, it is untenable to say that there were rigorous evaluations. If you were procuring based on selecting people who did not have one moment’s experience in being able to source effectively, and if you do not know how to do quality control or logistics, then it is untenable. The number of companies in that list that got it shows that it was not done properly. I am concerned that we do not have the mechanisms reflected in this Bill to ensure that those things which are important once you have a framework are there.

I also think we must consider one of the things that is not there, and which has led to many unsuccessful procurements: late changes being made to the system. Whether that is mending or meddling—I hope that it is more the first than the latter—these are significant areas which affect the capacity of procurement and its success. We must work out how those can be done better, not least with the changes to parcelling to allow for small businesses to be part of it.

I reinforce the point so excellently expressed by the noble Lord, Lord Stevens, that our supply chain resilience is an important part of this. The noble Lord, Lord Lansley, talked about innovation, but the general use of market-making, not as a central mechanism but as an important function of £300 billion-worth of expenditure, and the way that has been so successfully used by many other countries to improve their capacity to deal with cybersecurity, regional variations, or other things—that resilience—is really important.

Notwithstanding that, I greatly congratulate the Government. I am very heartened by the increased focus on small businesses and on late payment and payment terms. This is to be warmly applauded and welcomed, and I am very grateful to the Government for making these changes. I can see a wry smile from a previous Minister because I am banging the same drum, but I will carry on doing so.

In Part 4, Clauses 63 and 64 set a maximum 30 days for payment, so there is no real change for government. However, if my interpretation of Schedule 2 is correct, this is all-encompassing, and this deals with supply chains and utility companies—a major step forward, so again I greatly congratulate the Government on doing that. I hope that this means that they will amend the late payment of commercial debts Act by setting maximum payment terms of 30 days for all suppliers, bringing the procurement Act, the Prompt Payment Code and the Late Payment of Commercial Debts Regulations into alignment.

I would also be very keen for the Minister to guarantee that after the Government have defined supply chains, they will have also dealt with the increasing practice of putting in a financial service company between the main contractors, with whom they contract and where there is an obligation for 30 days in the supply chain, to offset the supplier to a contract with another party which gives them 90 days. That is a way in which that mechanism has been subverted. I hope that the Government can be consistent in ensuring that this is applied throughout. It would be of great benefit to small businesses.

In Clause 65, there are strong provisions on information about payments under public contracts. Again, this appears to require public bodies to submit information along the lines of the duty to report. It would be sensible for the Government to use the existing mechanism available under duty to report, which gives a single point of reference for businesses to review public and private payment performance, and it would be a helpful addition.

In Part 8, Clauses 85(2)(a) and 85(2)(b) concern some potential exclusions to the duties to publish and provide information, and it talks about prejudicing interests. I would be grateful if the Minister could ensure that payment terms are never part of those exclusions, to make sure that that information continues to flow consistently.

The Bill provides for a contracting authority’s duty to comply with Parts 1 to 5, 7 and 8, saying that only enforceable and civil proceedings are covered under this part. The Government really need to recognise the litigation costs required. Lord Justice Jackson’s review of civil litigation costs found that the claimant’s costs for cases in the £50,000 to £110,000 region are likely to exceed £110,000, while the defendant can expect costs in excess of £129,000. It is unrealistic to expect small businesses that are trying to break into this market to be able to rely on that as a protection. I therefore suggest that, as an alternative, small businesses be able to report abuses to the Small Business Commissioner so that it can investigate them. I further suggest that the Small Business Commissioner be given both the budget and autonomy to act independently on such claims.

In Part 10, Clause 96(1) and Part 13, Clause 111(1)(a), an appropriate authority may investigate compliance under the Act. The appropriate authority is, of course, a Minister of the Crown. I remind the House that the Small Business Commissioner is already well versed in matters pertaining to late payments and, with that in mind, I strongly suggest that it could also be called upon to perform that duty.

Finally, in Schedule 2 there is one area of concern on which it would be useful if the Government expanded during Committee: how far do the 30-day terms extend? Is it just government purchases—for example, the petrol for ambulances—or does it fully affect the whole supply chain of a utility company’s expenditure on, for example, branding, refit costs and so on? If it is the latter, this is even more excellent news and a first step in reducing all contracts to a maximum of 30 days, and it is to be warmly welcomed.

Although there are many wider issues, which I look forward to examining, I welcome the provisions on small businesses and hope that the Minister and his department will take extra care to make sure that they remain consistent, and that the advances they have developed to the benefit of small businesses are carried through the entirety of the Bill.

Photo of Baroness Smith of Newnham Baroness Smith of Newnham Liberal Democrat Spokesperson (Defence) 5:12 pm, 25th May 2022

My Lords, speaking on defence matters, I am not used to having detailed legislative scrutiny. We rarely have legislation, and when it comes forward it is often like the Armed Forces Act (Continuation) Order, which is on half a side of A4, and the Explanatory Notes are equally short and, in most cases, rather unnecessary. The message is essentially: “We need this legislation in order to carry on having the Armed Forces”.

On this occasion, I rise to speak with some trepidation on the Procurement Bill, because as the noble Lord, Lord True, pointed out in his opening remarks, it is a very detailed Bill and not one to which I would normally put my name. On this occasion, therefore, I am extremely grateful for the Explanatory Notes. I will speak to the core part of the Bill that I welcome: the fact that if we are to have a single procurement regime, it should include defence. However much we might endorse Her Majesty’s Armed Forces and welcome what they do, it is very rare for anybody to stand up and say that the defence procurement regime works incredibly well and cannot be improved. So in that sense, this is a welcome Bill.

By way of preamble, I would very much like to welcome the comments of the noble Lord, Lord True, in introducing the Bill and in his response to a previous question from the noble Baroness, Lady Sugg—that this Bill could have relevance to genocide and modern slavery. I assume that my noble friend Lord Alton will raise this issue in his contribution. The opportunity for us to raise questions about values in procurement is hugely welcome. That the Government were willing to make some amendments to the then Health and Care Bill was also very welcome in this regard. If a single procurement regime were to lead to best practice, ensuring that contracts which could be seen as corrupt were not let, or that people’s What’s App groups were not relevant to procurement, this would all be very welcome.

The noble Lord, Lord Mendelsohn, has just pointed out that procurement is sometimes about trying to change the spec—maybe mending or meddling. In defence procurement, contracts regularly run over length and over budget. Many civilians, many of whom are not interested in defence, may not have noticed, for example, questions about the A400M or Ajax armoured vehicles. It is a bit similar to Crossrail, now welcomed as the Elizabeth line, being four years over time and over budget. In a whole series of reports, most recently in November 2021, the House of Commons Public Accounts Committee has pointed out some of the problems with defence procurement. Cumulatively, various pieces of defence equipment are running 21 years behind schedule—although one assumes that no single item is 21 years overdue.

The noble Lord, Lord West of Spithead—he is not in his place today, although he may appear at some later point in proceedings on the Bill—has on many occasions asked questions of the noble Baroness, Lady Goldie, about the number of ships and the procurement process, including when a certain class of ship will come on stream. We keep being told that this may be in the mid or late-2020s. Delay is a perennial problem in defence procurement. If this legislation is to offer a single approach to procurement, of which defence is part, that sounds very welcome.

As my noble friend Lord Fox pointed out, there are a number of exemptions in the legislation. A whole clause lists various exemptions, chief among them being those relating to defence. I would be grateful if the Minister, either today or in writing, or the noble Baroness, Lady Goldie, when preparing for the Bill Committee, could indicate to your Lordships the Government’s thinking on exemptions, particularly those linked to defence. Some would appear straightforward. If a tank or armoured vehicle is in another country, it would not necessarily be brought back to the United Kingdom to be repaired. If there are larger procurement issues to do with repairs, maybe we need to think about not exempting these provisions. What is Her Majesty’s Government’s thinking on exemptions?

As is so often the case, there are some weasel words in the schedules about national security, which is mentioned twice as an exclusion and as an exemption. Procurement might be exempted from this regime if there are national security reasons to do so. Who determines whether something is a matter of national security? Is it the National Security Council? Is it the Home Office if it is a domestic matter? Will it be the organisation seeking to procure—whether that be the MoD, the Home Office or some other body—who say: “This is a matter of national security, and therefore it should be exempt”? Is the legislation sufficiently clear on that? If not, then that is an area where perhaps we need to bring some amendments to tighten the legislation. Those who advocated Brexit would say that this new approach to procurement legislation gives us more control over procurement and allows this House and the other place to scrutinise legislation so we should be doing it properly. Exemptions in terms of national security are a concern.

There will also be exclusions on the basis of national security. That clearly sounds very sensible on the face of it. You would not seek to procure equipment—particularly defence equipment—from a provider which might jeopardise British security. That seems a no-brainer. But again, who is making that decision about providers potentially jeopardising national security? Will there be a register? Will companies be on a list of providers that cannot be used because they jeopardise national security? That might be an area where there could be some probing amendments.

In terms of defence, having some improved procurement mechanisms might be very welcome. In its November report, the Public Accounts Committee argued that:

“To meet the aspirations of the Integrated Review, the Department’s— that is, the MoD’s—

“broken system for acquiring military equipment needs an urgent rethink, led by HM Treasury and the Cabinet Office.”

Is this Bill the Cabinet Office’s response to the need for the MoD to improve its behaviour and its procurement provisions? Personally, I think it would be quite good to keep Her Majesty’s Treasury out of these things because, while we might want value for money in defence procurement, we also need to ensure that we are procuring the right things, and the Treasury’s approach to the bottom line might not be the right way forward.

In defence procurement in particular, having the right legislation will matter, but so will scrutiny of the actual contracts that are being let. It will be vital not just to get this legislation right but to ensure that, in major complex procurements in the future, we do not allow the politicisation of procurement to allow Ministers and officials to keep going back asking, “Could we just amend this contract? Could we add a few more bells and whistles?” Every time that happens, the cost of a contract goes up and the overruns go on longer.

This legislation offers some opportunities, but it will still be incumbent on your Lordships’ House and the other place to ensure that, in defence procurement, we really scrutinise everything that the MoD is doing.

Photo of Lord Alton of Liverpool Lord Alton of Liverpool Crossbench 5:23 pm, 25th May 2022

My Lords, with his customary thoroughness in opening today’s debate, the noble Lord, Lord True, outlined the purpose of this Procurement Bill with its 13 parts, 116 clauses and 11 schedules. We have just heard a very incisive speech from my good friend the noble Baroness, Lady Smith of Newnham, about defence procurement. I will not follow her on that particular line of argument today—I certainly will be interested in amendments later on—but I simply draw to her attention, and that of the noble Baroness, Lady Goldie, and the noble Lord, Lord True, the evidence given this morning by Sir Nick Carter, former Chief of the Defence Staff, and expert witnesses on procurement by the Royal Navy to the International Relations and Defence Select Committee, which I think will have a bearing on what the noble Baroness has just said to the House.

At the very outset, I thank the noble Lord, Lord True, for setting aside time to meet on two occasions to discuss the Government’s policy in connection with the procurement of goods made in states credibly accused of genocide and states using slave labour. I particularly welcome what he said at the very outset of the debate, following that Urgent Question earlier on about John Sudworth’s harrowing documentary, which was broadcast by the BBC, documenting the terrible excesses taking place in Xinjiang. He, and the noble Lord, Lord Fox, are right that work is being done across both Houses already to bring forward amendments to tackle ethical procurement, slave labour and national resilience. So, although I welcome this Bill, and the intentions which lie behind it—not least the ambition outlined in the Green Paper and in the Explanatory Notes that value for money must always be conditioned by the public good, transparency, integrity, equal treatment and non-discrimination—I would add to that list, as the noble Lord, Lord Lansley, added in his remarks, words like “ethical” and “resilience”.

In drawing attention to my non-financial interests in the register, I think the House will not be surprised to learn that, as the Bill proceeds, I would like to return to the purchase of products made by slave labour in terrible conditions by Uighurs in the genocidal state of Xinjiang, which I have pursued as an issue with others, including the noble Baroness, Lady Smith, and the noble Lord, Lord Fox, during the passage of recent legislation. I see the noble Lord, Lord Coaker, is in his place, and it has been a pleasure to work with him too on the Health and Care Bill, the Nationality and Borders Bill, the telecommunications Bills and the Trade Bill, in bringing in amendments on this theme.

The very welcome decision of Parliament to insist that the eradication of slavery is a lodestar for the National Health Service procurement is a curtain-raiser for this Bill, and I congratulate the Government on that. Some of these issues are addressed in the—still undebated—report of the International Relations and Defence Committee, published in September last, on China, trade and security, which we subtitled A Strategic Void. This Bill offers an opportunity to fill some of that void, and I would commend the report to the noble Lord, Lord True, as a very good background document to these specific issues.

Essentially, procurement should strengthen national resilience. It should reduce dependency on states which pose risks to our national security. It should protect British manufacturing from competitors that use slave labour, or grossly exploited labour, and send a signal to the private sector that it is simply unethical to buy cheap goods from states where citizens are being subjected to appalling inhumanity, including genocide. After all—this is not hyperbole or some piece of sloganeering or virtue signalling—it is the Foreign Secretary, Elizabeth Truss, who has said that a genocide is under way.

A third of all UK public expenditure, around £300 billion a year, is earmarked for public procurement. This is a staggering amount of money, which—as the noble Baroness, Lady Hayman, was quite right to say —can be used to achieve a great deal of public good. I know the noble Lord well enough to know that he is not lighting a bonfire of 350 regulations simply to create a fertile ground for anarchy. It is a perfectly reasonable public policy objective to try and accelerate and simplify public procurement, but we must use this opportunity to do more than that. I know that the noble Lord shares my strongly held belief that we should tackle the strategic void, the incoherence, and in some quarters the unwillingness to squarely face the threat posed by rising authoritarianism. I am certain that this Bill provides an admirable opportunity to put flesh on the bones.

When it comes to challenging authoritarianism and ridding companies and actors that do their bidding from our procurement supply chain, we are streets behind our Five Eyes partners, like Australia and the bipartisan approach now being evidenced in the United States. We must better co-ordinate procurement policies with our allies. Let me give just two examples. Two years ago, the US Government blacklisted Hikvision and Dahua Technology from their procurement supply chain and, alongside Australia, has actively been removing Chinese cameras and technology from sensitive government buildings.

Since January 2020, on 25 occasions in speeches and questions in this House, I have raised the UK’s decision to procure 1 million Hikvision cameras. Yet we continue to use them in government departments, local authorities, NHS trusts and schools. I am told that they may even be bought and placed alongside the entire length of HS2—perhaps the Minister could tell us if that is indeed the case. A negligent procurement policy means that we will ultimately end up stripping them out, as we did with Huawei, at huge public cost.

Last week, IPVM, the world’s leading video surveillance information source, released a 32-page white paper on Hikvision. It noted that the company has been

“contracted to design, implement, and directly operate Xinjiang surveillance” as part of the network of concentration camps where over a million Uighur Muslims are detained until 2040. Hikvision even actively collaborates with the Chinese Government as a co-author of national and provincial standards of surveillance and the development of cameras that target Uighurs. More than 42% of Hikvision is owned by the Chinese state. During the first half of 2021, the company received RMB 223 million in state subsidies, and its chairman, Chen Zongnian, is a member of the National People’s Congress.

I believe the Government privately recognise the threat posed by Hikvision and Dahua Technology, and I welcome the steps taken by the Secretary of State for Health and Social Care, Sajid Javid, who acted recently to remove their cameras and technology from his department. What is needed is a cross-departmental strategy to remove cameras not only from government departments but from the UK procurement supply chains as a whole. In a letter to the Cabinet Secretary dated 21 April, Professor Fraser Sampson, the Biometrics and Surveillance Camera Commissioner, said he was

“encouraged to see reports … that the Secretary of State for Health and Social Care has now prohibited any further procurement of Hikvision surveillance technology by his department”.

Will the Minister undertake to share his own department’s response to that letter from Professor Sampson, and will he explain why, if this is the right thing to do in one department, is it not right to do it across government? It cannot be right that the domestic surveillance market is dominated by a Chinese company which is complicit in genocide and has been blacklisted by our closest partner, and yet is able to use state subsidies to undercut its competitors.

On 2 February, in a debate on a Motion to Regret, I set out at length the arguments about Hikvision, and pointed out:

“In the 1940s, we did not allow the widespread use of IBM’s machines, or other tools of genocide used in Nazi Germany and manufactured by slave labour in factories and concentration camps, to be sold in the United Kingdom”.—[Official Report, 2/2/22; col. 987.]

This Procurement Bill should set a bar as high as that. Mass surveillance systems have always been the handmaiden of fascism. The Government should come forward with a timetable to remove these cameras and technology from the public sector supply chain, and campaign to encourage and support businesses in the private sector to do the same. We simply cannot allow the tools of genocide to continue to be used so readily in our daily lives.

My second and very brief point concerns resilience and dependency. I have regularly raised my concerns about the potential sale of Newport Wafer Fab, the country’s biggest producer of semiconductors and microchips, to a company with links to China and, inevitably, the CCP. We will always be purchasers of microchips and semiconductors; perhaps the Minister can tell us how many contracts it has had over the past 10 years with the Ministry of Defence, and their worth —and it is particularly helpful that the noble Baroness, Lady Goldie, is in her place to help him with that response. What is more, there is an urgent need for a strategic, joined-up and coherent approach.

To conclude, I hope the Minister will consider amending Part 2 of the Bill to include a duty to have regard to national resilience, and to reduce dependency on states with interests that are hostile to those of the United Kingdom. Like my noble friend Lord Stevens of Birmingham and the noble Lord, Lord Mendelsohn, I have pointed regularly to the £10 billion we have spent with China on 1 billion items of PPE. That amount is about the size of our entire reduced budget for our overseas aid programme. A duty to have regard to national resilience might be a good way of challenging this.

I thank Minister for his courtesy and his time in meeting to discuss these issues and I look forward to participating during the passage of this important and timely Bill.

Photo of Lord Maude of Horsham Lord Maude of Horsham Conservative 5:34 pm, 25th May 2022

My Lords, it is a pleasure to follow the noble Lord, Lord Alton. I start by drawing attention to my entry in the register of interests, particularly my majority shareholding in FMA, a company that supports the implementation of reforms for Governments outside—I stress “outside”—the United Kingdom; this includes supporting them on the reform and operation of their procurement systems. I should also draw attention to the 2020 review that I conducted pro bono for the Government, the Cabinet Office and the Treasury on cross-cutting functions across the British Government, including the commercial and procurement functions.

There are not many people for whom public procurement is a subject that sets the pulse racing, but they are all here in the Chamber. For those of us who have lived and breathed this subject, it is a pleasure to speak on it and welcome the Bill that my noble friend the Minister has introduced.

A number of contributions so far have pointed to things that noble Lords would like to see in the Bill but are not in the Bill. My concern is slightly in the other direction. I would prefer the Bill not to be too constraining and restrictive because I have observed that it is possible to have perfect procurement law and terrible procurement outcomes, and really bad procurement law and much better procurement outcomes.

The legacy regime includes the EU’s public procurement directives, the first iteration of which I was involved in negotiating way back in the 1980s. They became somewhat more convoluted subsequently, it is fair to say, but they were not terrible. Yet, in 2010, when the coalition Government were formed—the noble Lord, Lord Wallace of Saltaire, will remember this—we discovered a horrendous legacy of dreadful contracts that the Government had entered into right across the piece. Our task, which was to drive out cost from the overhead running costs of government, involved us renegotiating many of those contracts and making substantial savings very quickly. However, it was not the fault of the law, which was not bad at all; it was all about the way in which the laws were being operated. Through the efficiency drive we led at that time, with enormous support from our coalition partners in the Liberal Democrat party—particularly Danny Alexander, the then Chief Secretary, and the noble Lord, Lord Wallace—we made savings, cumulatively over five years, of some £52 billion, essentially from the running costs of government.

So the law is not the most important part of government procurement. I urge your Lordships, as this Bill goes through its time, to resist the temptation that there will certainly be—we have heard some of this so far—to add things to it. At the end of it, procurement is primarily, although not exclusively, about buying goods and services that are needed to serve our security and citizens in the most effective way. That is about quality and cost and requires good practices; the practices have not always been good.

When we came into government in 2010, I discovered that the time taken for formal tender processes to be completed was double what it was in Germany. The rules were followed properly yet the time taken was, on average, twice as long. We made changes and cut the time for British procurements to half of Germany’s average time, all without making any changes to the law—that is, just by reforming practices. Suppliers would tell me that it cost them four times as much to bid for public sector contracts as it did for private sector contracts.

There are two malign effects of that. One is that the extra costs involved in bidding for such contracts get put on to the price bid, and the taxpayer picks up the tab for that. The second, of course, is that the extra costs and the restrictive practices which are completely unnecessarily incorporated into so many procurements mean that smaller and younger vendors are often—generally, actually—frozen out. Just in the field of IT and digital, we found that 87% of the Government’s spend on IT was with seven vendors, all multinationals.

One of the problems with building a really successful tech sector or ecosystem in the UK was that vendors had no, or very little, opportunity to bid for and win public sector contracts due to a combination of turnover thresholds, the routine requirement for companies to show three years of audited accounts, the requirement to show that you had insurance in place to cover the cost of the bid at the time of bidding, often huge performance bonds, and excessively complicated pre-procurement questionnaires—none of which was necessary under the law. All were avoidable but they had the effect of freezing out smaller, newer, and often more dynamic and innovative, suppliers. My noble friend Lord Lansley is quite right to say that supporting innovation is not the purpose of procurement, but innovation can be incredibly important in making procurement more effective and enabling newer ideas to come to the service of the country. It is really important that that should happen.

Within the constraints of the EU procurement regulations and directives, we exceeded our aim of 25% of government procurement by value going to SMEs. Understandably, we were not allowed to discriminate in favour of UK suppliers but, of course, SMEs are much more likely to be local and UK-based, and that was a big part of supporting the supply side of the economy. There was a tendency for too many contracts to be large—huge—multi-year contracts which smaller businesses were unable to bid for.

On central procurement, I found that there were 800 people employed at the centre of government—at that stage, under the aegis of the Treasury—yet they could not tell me who the 20 biggest suppliers to government were. We had to guess at that, write to the chief executives of the companies we guessed were the biggest suppliers, and invite them to give us full transparency, or full visibility, over it. Of course, there are huge savings to be made by central procurement, for the whole of government, of commodities, goods and services. However, as the noble Lord, Lord Fox, rightly said, when you try to do that—we succeeded in making some limited progress down that path—it is amazing, with the rich vein of creativity you tap into, to hear the reasons why it cannot possibly be done. People say, “We totally agree with it in principle. It makes very good sense, but our needs are completely unique and distinctive”, and exceptionalism becomes a religion. Again, the law does not operate on that area—these are operational decisions to be made by the Government when it comes to implementing and executing this law.

This brings me to the most important part—the people who operate procurement. There are three parts in any procurement: pre-tender market engagement, the formal tender process and post-award contract management. However, in most Governments, it is the middle part of that—the formal tender process—which attracts all the attention. Just as in the world of defence and security there is a class of public servants we affectionately know as “securocrats”, I came to know the people—often many people—who work in procurement, and I fondly refer to them as “procurocrats”. They are people for whom process is king, and for whom process will always trump the outcome. They thought that if they could say that they followed the process, even if it arrived at a stupid outcome with poor value for money, no one could criticise them.

You need to have commercial DNA injected into public procurement so that the pre-tender market engagement can be done in a confident and knowledgeable way, and therefore to frame the procurement tender in much more effectively. The process of tenders is often embarked on too early, without real knowledge of what you are trying to achieve or what it is possible to achieve, and then of course you get into endless alterations and changes to the procurement, which is where the suppliers make their money. Some suppliers told me that changes in the operation of a contract could deliver them a rate of return of 40%. Then there is post-award contract management, which we discovered was weak across the Government. Again, that is where the suppliers were too often making too much money.

It is that lack of experienced, confident, commercial operators inside government that often leads to these problems. I would sometimes hear procurement people in government saying, “But, Minister, we’re not allowed to exercise judgment”. What? Surely that is what we pay them for. The danger of excessively prescriptive procurement processes is that the focus is all on just buying what looks like it is cheapest so that no one can criticise you; it is just about the maths. If you have not allowed innovative vendors to look at new and different ways of delivering the goods or services, it just boils down to whatever is cheapest—and that is a bad outcome for the Government and the taxpayer.

The National Audit Office and the Public Accounts Committee fulfil an important function but cast a long shadow, and officials can become nervous of exercising judgment and not going for what looks like the cheapest option, for fear that they will subsequently be taken to task. That is one reason why the role of departmental boards can be so important. Strong and experienced commercial non-execs on those boards can support officials in exercising judgments effectively.

I submit that the professionalisation of the procurement function is more important than the precise letter of the law that we are debating today. I believe that a full assessment of the commercial function is now nearly complete, with accreditation of those professionals and support for those who fail to meet the standards to meet them subsequently.

On the Bill itself, I urge the House not to make the mistake of thinking that the law is the only thing that matters. Of course, it is important and necessary to replace the EU regime, but I urge us not to import into it more and more changes that make the Government a prisoner of the process. Some changes were made under the law to require pre-procurement questionnaires to be much more standardised and unified, supporting smaller companies to be able to bid for and win these contracts. I support the single digital platform, which builds on the Contracts Finder website that was created, and the transparency.

The noble Baroness from the Opposition Front Bench talked about the absence of references to social value in the Bill. Unless I am mistaken—perhaps the Minister can deal with this when he closes the debate—the social value Act of 2012 has not been repealed and is still in existence. It allows social value to be incorporated in procurements on a permissive basis.

The debarment register is welcome. It is important for procurement-contracting authorities to be able to look across the piece at the track record of suppliers, not just at what has been done with that particular contracting authority. We sometimes found ourselves obliged to give contracts to companies that were suing the Government, and I know of no other commercial organisation where that would be regarded as remotely accessible.

So I commend the Minister for the elegant way in which he has recommended this Bill and I look forward to discussing it in the course of its passage through the House.

Photo of Lord Whitty Lord Whitty Labour 5:50 pm, 25th May 2022

My Lords, like others, I thank the Minister for his meticulous introduction to this Bill. It is also a great pleasure to follow the noble Lord, Lord Maude. His vast experience as a Minister and an adviser to successive Governments in the public procurement area is important to us, as is his contention that it is not just the law that is important. However, the law does set the context, and that is what we are debating today.

As has been explained, this Bill is supposed to be part of the Brexit dividend, replacing a complex and allegedly heavy-handed EU system and the four sets of regulations transposed into British law into one single place. I am not sure that a Bill of 115 clauses, 11 sections and umpteen possibilities of secondary legislation is quite the simplification that is sometimes claimed.

Together with the Subsidies Control Act, which we passed a few weeks ago, the Bill, in effect, redefines the formal contractual interface between the private sector and the various aspects of the state. It is bound to be complicated; it is at least as complicated as the EU system. In some senses, it is actually more complicated. I welcome the intentions of the Bill, but I regret, as I will come to, the watering down of some of the intentions that were in the earlier consultative process.

I have a few preliminary questions about the Bill. First, in the EU, the public contracts operation was overseen and enforced by the Commission, which had a degree of independence from the wrangles on the Council of Ministers and, indeed, from the mainstream activity of the Commission itself. It was not entirely immune from that, for obvious reasons, but it had a clear authority. Who is the authority in enforcing this and in ensuring that the umpteen public authorities abide by it and that companies understand it? In the Subsidies Control Act, there is an authority for the CMA. There is no central authority so far—that I can discern—in this Bill.

Secondly, we have to accept that there is a degree to which this is more ambitious than the EU system was. The main aim of the EU system was to ensure that companies in member states had equal access to procurement in member states. It ensured that the contracting and bidding processes went through an EU-defined system, but it did not actually put an obligation on the member states that their contract content should be exactly the same and go through similar processes and similar forms. This Bill goes further in that direction, with the contracts that are going to be extended by public authorities, the devolved Administrations—importantly—and local authorities, and in the actual content of the contracts themselves. So the Bill is actually more ambitious than the EU system in some ways, and goes a long way to defining the contract form itself. It applies to all public authorities within England, Wales and Northern Ireland—but not Scotland. This in itself raises a number of questions if Scottish companies, for example, bid for English-based or Welsh-based contracts.

It also raises certain questions in Northern Ireland. I do not want to go into the morass of the protocol but, because the single market provisions apply in Northern Ireland to a degree, that complicates the system in terms of Northern Ireland adopting it.

I welcome many of the approaches in the Bill. I particularly welcome, as did my noble friend Lady Hayman, the shift away from “best economically advantageous” to simply “most advantageous”. That is an important signal, but it is not necessarily followed through. It reflects the representations of many groups that the interests in various levels and types of public sector contracts go well beyond minimising the immediate cost to the taxpayer, the ratepayer and the businesses funding the public authority. Value for money, however, is still seen as the prime objective and is defined in pretty narrow terms.

In reality, local authorities, for example, would need to consider not only the cost minimisation and the cost of delivery of what are the defined aims of a particular contract but the wider economic effects on their communities and local business, and the environmental effect on their areas and beyond. That goes beyond the normal understanding of value for money.

I mention a few of those wider social value issues—the noble Lord, Lord Maude, referred to the social value of legislation—that need to be taken into account in awarding state public authority contracts. They include overseeing the list of potential contractors, including overseas contractors—which I shall come back to. These social value issues also include an environmental dimension, I suggest—especially climate change and greenhouse gas emissions—local preference issues for local companies and local employment, human rights issues, employment rights issues, and accessibility to public services.

The Bill also needs to recognise much more explicitly some of the general points that were made in the consultation and have been made again today. For example, the transparency provisions are not particularly strong and the relationship between transparency and the proposed digital system needs to be spelled out. Accountability and probity in public office need to be emphasised and explicit. We have had a number of recent issues in which probity in public office and the appropriateness of the awarding of contracts have been seriously questioned and suggestions of cronyism made.

Public procurement accounts for roughly 15% of all carbon emissions, and the public benefit of taking into account carbon emissions in the procurement process needs to be reflected in the Bill. That means that tenders which might otherwise be attractive can be rejected if there is a negative impact on carbon emissions, and potential contractors can be excluded if their record on the carbon front is poor. To be safe, that needs to appear in statute. It appears in the national policy statement—well, the draft of it—but, of course, that is not statute.

Likewise, on local preference, it must be possible for local authorities and devolved Administrations to give a degree of preference to local companies—SMEs, start-ups and social enterprises in particular—and for the creation of local employment, and for national public bodies to give preference to UK-based companies in certain respects. In Committee on the then Subsidy Control Bill, I asked whether any such local preference would be classified as a subsidy under the post-Brexit state aid rules. I never received a clear answer and I shall ask again now in relation to this Bill. Will local or national preference be accepted as a public benefit under these new and complex post-Brexit rules?

On human rights and employment rights, I think I heard the Minister say that the Bill will allow the exclusion of potential bidders on the ground of their human rights record—but I should like him to repeat it. For example, on employment rights, would P&O, in view of its recent behaviour, now be excluded from contracts for the development of freeports?

The international dimension here is also important. As the noble Lord, Lord Alton, referred to, we exclude Chinese companies from certain security and communications-based contracts, but does that apply to individual public authorities and their contracts, and other Chinese companies, on similar grounds? Does that require a national policy or can local authorities take their own decisions?

In a more contentious area, I have noticed that the Government have told local authorities and other public bodies that they cannot, for example, ban Israeli companies from their contract lists. I make no comment on the rights and wrongs of that argument, but it indicates that there is a clear, public, national policy on the issue. How does this apply now to, for example, Qatari companies, in view of what we know about their treatment of employees and employment rights in preparation for the World Cup? Would a local authority now be penalised for deleting a Qatari company from that list on those grounds? There must be hundreds of similar examples.

I briefly mention one other point: accessibility. I hope the Minister has seen the submission from the RNIB on this issue, but it is important that the Bill reflects the need for public contracts to take account of their effect on those who are disabled. I hope that is one aspect that can be reflected. It was referred to in the consultation and now needs to be reflected in the Bill. These are a few of the issues that I hope we can explore further at later stages. I look forward to the Minister’s response.

Photo of Baroness Brinton Baroness Brinton Liberal Democrat Lords Spokesperson (Health) 6:01 pm, 25th May 2022

My Lords, I declare my interest as a vice-president of the Local Government Association. It is a pleasure to follow the noble Lord, Lord Whitty, especially his comments about social values.

Included in Section 70 of the Health and Care Act was a description of changes to the public procurement rules for health services, but most of which will be in regulation and the details of which are woefully short on the sort of information that we have in this Bill. In its 15th report, the Delegated Powers and Regulatory Reform Committee said on the relevant clauses of the Health and Care Bill that “full analysis” of the proposals,

“has not been completed and there has not been time to produce a more developed proposal.”

We asked on Report why on earth the Government would wish to bring into force legislation that they themselves admit they have not had time to analyse, let alone to produce a more developed proposal, when everyone knew that a Cabinet Office cross-departmental Bill was not just planned but heavily trailed.

Paragraphs 17 and 18 of the DPRRC report said about the Health and Care Bill:

“We do not accept that the inclusion of regulation-making powers should be a cover for inadequately developed policy” and:

“Ministers would not ordinarily propose clauses in one Bill possibly requiring imminent amendment in a subsequent Bill without expecting to face questions. The House may wish to seek further and better particulars from the Minister concerning the possible effect of any Cabinet Office procurement Bill on the Health and Care Bill, and … to press the Minister on why it was necessary to include provision, based on inadequately developed policy, in the Health and Care Bill when the Government intend to introduce a procurement Bill.”

I have to say that it was no clearer after the passage of the Health and Care Act, and I am even more bemused by the reference in a procurement Bill to only certain health services being excluded, a detail not outlined in the Health and Care Act at all.

May I ask the Minister to write to Peers to explain which elements of NHS contracts are excluded from the Bill and how we can be confident that the protections and transparency that he outlined in his opening speech will also be applied to NHS services excluded from this Bill but covered by the very brief detail in the Health and Care Act? I suspect he might have a problem in doing that, for exactly the reasons that the DPRRC made clear: there is no detail available at all on those health contracts.

Returning to this Bill, paragraphs 19 and 20 of Schedule 2 set out the preferential arrangements for procurement rules of an international organisation or set out in an international agreement. Paragraph 20 says that a contract may be awarded under international obligations even where the award rules would be different from those otherwise set out in the Act. I heard the Minister’s comments in his opening speech, but I would be grateful for confirmation that the arrangements in paragraphs 19 and 20 of Schedule 2 are as strong as those we had under the EU public procurement directive, which made it clear that, unlike non-public services, a public body based in an EU member state can accept a contract that is not the cheapest provided it fulfils the quality, continuity, accessibility and comprehensiveness of services and innovation. In the EU directive there was also no need to publish procurement advertisements cross-border. This goes to the heart of my noble friend Lord Fox’s question to the Minister about the provision of source of supply when an international treaty is in place.

Although I noticed that the Minister was somewhat scathing in his speech about the previous EU directive, it was this directive that provided a guarantee that US companies could not come in and cherry pick our NHS under the terms of the Transatlantic Trade and Investment Partnership. On 18 November 2014, the noble Lord, Lord Livingston of Parkhead, answered my question in your Lordship’s House by quoting an EU Commissioner. He said that

“Commissioner de Gucht has been very clear:

‘Public services are always exempted ... The argument is abused in your country for political reasons’.

That is pretty clear. The US has also made it entirely clear. Its chief negotiator”— on TTIP—

“said that it was not seeking for public services to be incorporated. No one on either side is seeking to have the NHS treated in a different way ... trade agreements to date have always protected public services.”—[Official Report, 18/11/14; col. 374.]

I also raised these issues in a later debate with the then Minister, the noble Lord, Lord O’Shaughnessy, who responded:

“The noble Baroness, Lady Brinton, and the noble Lord, Lord Brooke, asked about procurement. I can tell them that we have implemented our obligations under the EU directive. The Government are absolutely committed that the NHS is, and always will be, a public service … whether overseas or here. That will be in our gift and we will not put that on the table for trade partners, whatever they say they want.”—[Official Report, 29/3/18; col. 947.]

Can the Minister confirm that it is still the intention, expressed by the noble Lords, Lord O’Shaughnessy and Lord Livingston, in their ministerial roles, that those same protections will exist in the Procurement Bill, not just for the NHS but for other public services, as under the EU directive?

The equality impact assessment for the Bill says at paragraph 6:

“This is a largely technical bill regulating how public procurements are undertaken. The nature of the bill means it has limited equality impacts, whether direct or indirect.”

I echo the points made by the noble Lord, Lord Whitty, that the Royal National Institute of Blind People is very concerned that, in replacing existing regulations, the Bill overwrites requirements of particular significance to the 14 million disabled people in the UK that ensure that publicly procured goods and services are accessible to everyone. It is unclear how the Bill in its present form will replace the regulatory framework for accessibility within public procurement legislation. I ask the Minister: how will the new regime ensure that specifications take into account accessibility criteria and design for all users, including those with disabilities?

I echo the points made by the noble Lord, Lord Alton, on procurement of goods in countries where modern slavery or genocide is believed to happen. I look forward to returning to this during later stages of the Bill. I agree that more needs to be done. I also agree with his key points about surveillance equipment sourced from China.

A number of noble Lords referred to emergency contracts issued during the pandemic. Like the noble Lord, Lord Stevens, I am struggling to see how the arrangements in this Bill would work in practice. The noble Lord made critical but gentle points about the need for an emergency power, but I can be blunter than he was prepared to be. Will the arrangements for special exemptions in emergencies be strong enough to prevent the scandal of the “VIP lane” and some of the other contracts made in relation to the pandemic? Will all emergency contracts be transparent, even if publication has to be delayed for a few contracts because of the nature of whatever the emergency is, whether pandemic or war? It appears that Ministers seemed to believe that many of the pandemic contracts across a number of departments, not just health, would never see the light of day. Emergency should not mean secret, not rule-bound and not checked.

The UK Anti-Corruption Coalition says that, despite the warm words in the Green Paper, the Bill does not create a clear, unambiguous imperative in primary legislation for a single rulebook with full transparency. It also makes the point, which I and others have made, that too much is left for secondary legislation—again. The Minister is now hearing that argument across your Lordships’ House: there is real concern about far too much not being in primary legislation.

Photo of Lord Aberdare Lord Aberdare Crossbench 6:10 pm, 25th May 2022

My Lords, my interest in this large and complex Bill relates to how it will affect the ability of small businesses, particularly in sectors such as construction and engineering services, to access public procurement opportunities. Of course, this is one of the Bill’s stated policy objectives.

The six principles on which the Bill is based are welcomed by small businesses in these sectors. However, as ever, the proof of the pudding will be in the eating—will the Bill deliver what it sets out to do, and will it foster the sorts of good practices and professionalism that the noble Lord, Lord Maude, tellingly emphasised from his deep experience? I was also struck by a phrase used by the noble Baroness, Lady Brinton, asking how the arrangements in the Bill will actually work “in practice”; that will be the nub of the Bill’s success. Many of the measures required to create the new public procurement culture envisaged in the Transforming Public Procurement Green Paper do not feature in the Bill itself; presumably, they will be introduced in subsequent secondary legislation.

The importance of procurement in bringing about needed culture change in the construction sector is recognised in the levelling-up department’s recent Guidance on Collaborative Procurement for Design and Construction to Support Building Safety and in the Cabinet Office’s Construction Playbook. One of my concerns during the passage of the Building Safety Bill was about how such guidance would be put into practice, so I hope to hear from the Minister what regulation, oversight and monitoring mechanisms are planned to ensure that this Procurement Bill achieves its policy goals. The Green Paper speaks of a “Procurement Review Unit”; I wonder what role that will play and why it does not appear in the Bill.

The new system proposed in the Green Paper and embodied in the Bill introduces many new approaches and terminologies that small businesses already finding it difficult to access public procurement may find it hard to get to grips with. The Green Paper also speaks of a

“programme of learning and development to meet the varying needs of stakeholders” during the six-month lead-in period. Can the Minister confirm that this will include access to relevant training and support for small businesses seeking to learn the rules of the game in order to access public contracts? What plans are there to promote the early engagement of contractors and their supply chains in the tendering process? What plans are there for the pre-market engagement of civil servants so that they can gain an understanding of emerging trends and technologies before going to tender? Clause 17’s requirement for contracting authorities to consider dividing procurements into “lots” is welcome for small businesses, but what are the levers to ensure that this actually happens, and what are the remedies if it does not?

Small businesses often need to use commercial framework providers to access public procurement. This can add significant costs, often 10% or more, to their market prices, and these costs are not entirely visible to them. So how do the Government plan to ensure transparency in the fees charged by such providers? Will the

“central register of commercial tools” mentioned in the Green Paper require publication of these fees and charges so that SMEs that use such tools can understand the true costs of doing so? How will the Bill help to deliver the gold standard recommendations of Professor David Mosey’s review of public sector construction frameworks?

As the noble Lord, Lord Mendelsohn, mentioned earlier, onerous and unfair contract terms and payment practices are another significant barrier to small businesses accessing public sector contracts. The Green Paper included proposals to give small businesses at all levels in the supply chain

“better access to contracting authorities to expose payment delays.”

It also proposed that public bodies look at the payment performance of any supplier in a public sector contract supply chain.

The Government’s response confirmed their intention to introduce these proposals into legislation, as does the Bill’s impact assessment. Can the Minister confirm that this is still the plan and how it will be implemented? Like the noble Lord, Lord Mendelsohn, I welcome the clauses in the Bill which apparently extend 30-day payment terms right down the supply chain. However, prompt payment initiatives have a history of ineffectiveness, so I would like to know how the Minister plans to ensure that this does not happen this time and what sanctions may be imposed on late payers.

SMEs are often pioneers in their sector: innovating, training and providing real social value impact. As we have heard, social value is another important aspect of the Green Paper which has not surfaced in the Bill. I am glad to say that Wales is leading the way with its Draft Social Partnership and Public Procurement (Wales) Bill. SMEs may be precluded from such innovation if they are not engaged until after tenders have been awarded at the upper tiers of the supply chain. The Bill’s emphasis on a value-led, rather than a price-led, approach to procurement—MAT rather than MEAT—is welcome, as long as it becomes more than a neat new acronym. Public sector contracting authorities need to move to awarding contracts at the price that maximises innovation, investment and training, thereby avoiding the scenarios of paying twice or squeezing the margins of suppliers, which ultimately result in behaviours highlighted by the building safety crisis, whereby lowest cost has been prioritised over quality and safety outcomes.

Much of what I have said relates to measures not specifically covered in the Bill as it stands, so I hope that the Minister will tell us what plans he has to publish draft regulations which address some of these areas in the course of the Bill’s passage. I welcome the Bill and I hope that the Minister will be able to give some reassurance that the proposed new system will include the necessary regulation, oversight and monitoring mechanisms, not just to enable small businesses to play a much larger and more valuable part in future contracts, including in construction, but to ensure that they do.

Photo of Baroness Noakes Baroness Noakes Conservative 6:17 pm, 25th May 2022

My Lords, there is a lot to like in this Bill and, like my noble friend Lord Maude of Horsham, I do not think that it will be improved by adding a lot of extra things to it.

My favourite kind of Bills are the ones which repeal EU-derived legislation and replace it with legislation designed for the UK. As such, my favourite clause in this Bill is Clause 107, and my favourite schedule is Schedule 11. Unfortunately, some of the new rules still seem to be written in EU-speak. In particular, I have in mind the description of a “public contract” in Clause 2 which uses the term “for pecuniary interest”, which I have failed to find in any UK-based legal usage in this context. I am sure we can explore that in Committee.

I have one main problem with the Bill: the public procurement rules are still very complicated. Creating the new procurement system requires over 110 pages of primary legislation in this Bill, and who knows how much more in the secondary legislation. I acknowledge that we must remain compliant with the WTO’s Agreement on Government Procurement, and I also pay tribute to the extensive consultation the Government have carried out before bringing this Bill forward. Of course, the Government have made significant changes, reducing seven procurement categories to three, and having a single set of procedures for most public procurement. I will say in passing that I regret that there is a power in the Bill to allow the NHS to go its own way; it would have been very much more satisfactory if a single code had applied across all public procurement. The NHS, in particular, needs to be exposed to more competitive procurement, not protected from it. I would really like to see Clause 108 removed. However, I am a political realist when it comes to the quasi-religion of the NHS, and I accept that I may not achieve that ambition.

My challenge to my noble friend the Minister is whether more simplification could have been achieved. Could the procurement code be even more streamlined and even more principles-based?

My personal knowledge of public procurement is limited to being engaged in a number of public procurements as both a seller and a buyer over the years, and therefore I claim no specialist knowledge of public procurement and I cannot point to a better way to draft it. However, I am aware that there is a whole army of public procurement specialists out there. A number of noble Lords have already referred to the sorts of numbers of people in various parts of the public sector who are handling public procurement. I have a feeling that we should have a way to liberate more of them so that they can be more productively employed in the economy.

My noble friend the Minister will also be aware that the UK’s reputation for gold-plating regulations is well known and that we often went voluntarily much further even than we were required to by the EU. Can my noble friend tell the House how the Government satisfied themselves that gold-plating does not live on in this Bill? It would be terrible if we allowed the UK to be dragged down by the kind of bureaucratic groupthink that we really ought to have left behind.

I said earlier that there is a lot to like about the Bill, and, like other noble Lords, I particularly like the way in which the Government have shaped the basis of contract award, shifting from the “most economically advantageous tender” to the “most advantageous tender”. The previous formulation had a tendency to drive contracts towards lowest-cost tender and left little scope for longer-term strategic considerations or for innovation, which other noble Lords have spoken about. Although it was entirely possible under the EU system not to award contracts to the lowest bidder, the new formulation makes it clear that a narrow economic evaluation is a part of, but not the heart of, public procurement—and that is good.

Turning to SMEs, which other noble Lords have already covered, we know that they have traditionally found the public procurement processes intimidating and inaccessible. With its emphasis on proportionality, the Bill may well help to open up public procurement to more SMEs. The 30-day payment term throughout the supply chain will certainly be welcomed by SMEs if it is actually delivered. The noble Lord, Lord Mendelsohn, who is no longer in his place, made some important points about that.

The Government will be aware that SMEs may still perceive that significant barriers will be associated with engaging with public sector procurement, despite the improvements made in the Bill. What will the Government do to promote SME involvement in public sector procurement and to demystify the new regime and help them to access it?

My final point relates to light-touch contracts, which are allowed under Clause 8. I rather liked the Government’s initial proposal in their consultation to subsume light-touch contracts into the mainstream, especially given the reformulation of contract classifications and the articulation of procurement objectives. However, the Government have given in to pressure to keep the light-touch regime going. I do not challenge that, but I hope that the Government will keep it under review.

The extraordinarily wide power to designate light-touch contracts under Clause 8 has already been mentioned, in particular by the noble Lord, Lord Fox. Although there are matters to which the Government must have regard for specifying services as light-touch, there is no actual restriction on what the Government could put in this category. The regulation-making power is the affirmative procedure, which is of course better than the negative procedure, but not by much in practical terms. I hope that my noble friend can explain why the Government have chosen to make the light-touch regime so open-ended, otherwise we may need to look at that very carefully in Committee.

I look forward to scrutinising the Bill in Committee, but also hope that we can get it on to the statute book as quickly as possible so that its benefits can be realised. That hope may well be unrealistic given the evident enthusiasm from other noble Lords for an extensive Committee stage, but I can but hope.

Photo of Baroness Young of Old Scone Baroness Young of Old Scone Labour 6:24 pm, 25th May 2022

My Lords, I declare my interests, as listed in the register, as a chair, vice-president or commissioner of a range of environmental and conservation NGOs.

I declare today Groundhog Day for two reasons. First, I am following the noble Baroness, Lady Noakes, for the second day in a row. I am pleased to do so; and it proves that the Whips’ Office has a sense of humour since I revealed yesterday that I have disagreed with the noble Baroness consistently for the past 44 years.

Photo of Baroness Noakes Baroness Noakes Conservative

I think it is actually 34 years.

Photo of Baroness Young of Old Scone Baroness Young of Old Scone Labour

I take the noble Baroness’s challenge: I will do the maths shortly and pass her a note, although I did look up her CV yesterday to check the date. It was 1988; the rest of your Lordships can now do the maths.

The second Groundhog Day phenomenon is that, yesterday, I and many other noble Lords pressed the Government on the lack of climate change, environment and biodiversity objectives in the UK Infrastructure Bank Bill. We asked why the Government were missing an opportunity to ensure the delivery of their target to halt species decline by 2030 through the mechanisms of that investment vehicle.

Today, we have a similar—even bigger—real opportunity in the Procurement Bill. Many of the opportunities on the environment and climate change were outlined by my noble friend Lady Hayman of Ullock. The Minister told us that public procurement is big: it was worth £357 billion in the past year, makes up a third of all public expenditure, represents 13% of GDP and is estimated to account for 15% of climate-changing emissions. Public procurement on this scale has the capacity to be a huge influencer for good in terms of the climate change and environmental performance of the whole of the public supply chain. This influence could go even further because public procurement shapes the performance not only of the suppliers of goods and services that are publicly procured but of the wider markets to which the same suppliers also sell. Basically, my message is that it can influence a big slug of the economy.

The twin crises of climate change and biodiversity decline are allegedly two of the Government’s highest priorities. We boasted about this on the world stage at COP 26 in Glasgow only a few months ago. Yet when the Minister, the noble Lord, Lord True, signed off the Bill’s formal statement under the Environment Act 2021, he never spoke a truer word—if I can pun—when he said that this Bill cannot be construed as environmental legislation. He was absolutely right because it cannot, although it may talk about “maximising public benefit” as a key objective. The Green Paper on which the Government consulted referred to public benefit as including

“the delivery of strategic national priorities”,

including those relating to the environment, yet we have no formal definition of “public benefit” in the Bill. Your Lordships’ House is being asked to pass the Bill when some key elements of public benefit, climate change and performance in support of targets in the Government’s 25-year environment plan are relegated to the National Procurement Policy Statement and a set of policy notes.

The current version of the National Procurement Policy Statement is pretty flabby. It says:

“All contracting authorities should consider the following national priority outcomes”,

which include climate change, the environment and biodiversity. The phrase “should consider” is a bit weak, is it not? It is not “must deliver” or “must adhere to”; it is just “should consider”. That is not good enough. We are at a “Thelma & Louise” moment; for those noble Lords who are not cinema buffs, let me explain. We in the world are currently living it up beyond our means and driving madly towards a cliff edge. We need action to meet the Government’s urgent environment and climate change targets as an objective of public procurement in the Bill and we need it to be a requirement, not simply a consideration.

Can I also ask the Minister whether we can have sight of whatever upgrade to the national procurement policy statement the Government are planning to issue? It is so important to this Bill—otherwise, we are considering a bit of a pig in a poke. Will the Minister also consider whether the process of changing the NPPS could be improved? Currently, it is subject to a procedure equivalent to the negative procedure. Does the Minister think that this is sufficient parliamentary scrutiny of such an important document?

I turn to two further elements of the Bill. The Government are touting the exclusions section as progressive and praiseworthy. That has some merit. The Bill says that the conviction of an offence involving

“significant harm to the environment” constitutes discretionary guidance for excluding suppliers from procurement—but only “discretionary”. The exclusion provisions must be much tougher than that, to give a clear signal that only operators who consistently meet high environmental standards will be considered.

Secondly, though the transparency requirements are very welcome, they depend on secondary legislation and do not currently impose requirements for suppliers to report publicly on environmental commitments, either in the NPPS or in individual contracts. The Government’s record on tracking performance is not great. The National Audit Office has repeatedly raised concerns about the lack of data and monitoring of compliance with the current government buying standards. It is interesting to see that the Ministry of Justice, the Department for Transport and the Ministry of Defence simply stopped collecting the data because it was so embarrassing to have to report. The Environmental Audit Committee at the other end concluded that it appears impossible to know whether departments have improved their sustainable procurement performance. So should the Minister not consider including reporting environmental commitments in the transparency framework that the Government are proposing to establish, and saying so in the Bill?

Somebody once told me that football would be a terrible game if you did not keep the score. I actually think that football is a terrible game—but let us at least keep a proper, transparent score on how public procurement is delivering these important public benefits.

Along with many other noble Lords, I look forward to returning to these issues at subsequent stages of the Bill, to make sure that this terrific opportunity to use procurement as a powerful lever for improving the performance of the Government’s climate change and environmental targets is not lost. We are drinking in the last chance saloon, and if we do not use all the levers at our disposal, we will not meet the climate change and biodiversity decline challenges—and I am amazed that the Government have not recognised how much of an own goal this would be.

Photo of Baroness Parminter Baroness Parminter Chair, Environment and Climate Change Committee, Chair, Environment and Climate Change Committee 6:33 pm, 25th May 2022

My Lords, I will speak briefly. I associate myself entirely with the remarks of my noble friend Lady Young. I welcome the fact that the Government have set very clear net-zero targets. I hope that they will do similarly for nature targets in the near future, as the Environment Act requires. As my noble friend said, it would be an own goal if the Government were not to take the opportunities in this Bill to create market incentives to ensure that businesses move their supply chains to a more sustainable model. The Government can spend all they want on putting money into green energy and stopping harmful subsidies going into agriculture, but they will be missing a major opportunity if they do not address the opportunities in procurement.

Colleagues around the House have talked about the huge sums of money and the opportunities to do this. The noble Lord, Lord Stevens, talked about the money spent in the NHS and the opportunities, highlighted in the Health and Care Act, to decarbonise procurement. My noble friend Lady Smith of Newnham talked about the massive sums of money in defence. In recent weeks, our own Environment and Climate Change Committee has been looking at the opportunities in the area of food procurement to deliver many benefits by reducing greenhouse gas emissions, at the same time as tackling the growing obesity crisis among our children.

So there are massive opportunities, and when I looked at this Bill I was concerned. The words “net zero”, “nature”, “biodiversity”, “weight loss” and “waste reduction” are not in the Bill, the Explanatory Notes or the impact assessment—and indeed, in his opening remarks, the noble Lord, Lord True, did not mention net zero or the environment at all.

I will be brief. I add my weight to the calls already made by the noble Baroness, Lady Hayman, the noble Lord, Lord Stevens, and others for there to be a mechanism to put our concern for net zero and environmental goals in the Bill. The obvious way is to put it into Clause 11 under the procurement objectives; that would be the clearest way. Otherwise, there is a danger, as the noble Lord, Lord Maude, memorably said, that it will always be just about the money.

Equally, it could be that the Government choose to define in the Bill what they mean by public benefit. The Green Paper is very clear what public benefit means. As the noble Lord, Lord Lansley, who is not in his place, said, the Green Paper explicitly includes the environmental and net-zero goals. If that were in the Bill, that would be another way to do it. Or, as the noble Lord, Lord Stevens, suggested, another way would be to transpose some of the mechanisms put into the Health and Care Act by the Government. So there are plenty of suggestions from around this House, but there is a growing consensus that the Government have to do it.

Secondly, we need to make sure that the national procurement policy statement is as robust as it can be. Clearly, it will help if we get the objectives for the procurements correct. From looking at what was printed in the Cabinet Office procurement notes produced last year, there has been concern that, yes, it talks about meeting net-zero goals, addressing circular waste, reducing the amount of waste and tackling nature, but the carbon reduction plans apply only to central government, as the noble Baroness, Lady Hayman, rightly said. Why? Why are we asking only people who are taking services from central government to produce carbon reduction plans to 2050? Why not all public authorities? We need to make sure that future public procurement statements are as strong as they need to be.

For me, that issue is strongly allied to scrutiny by this House of what that national procurement policy statement would be. The noble Baroness, Lady Young, raised a point about procedure in the House: it looks to be almost equivalent to a negative instrument. It may be that the Delegated Powers Committee has said that, because this policy statement does not have the ability to insist that someone does something and can only guide, it has to be a negative instrument. I find that quite amazing, given how powerful this statement could be, and I am sure that we as a House would want to be clear on the reasons for the proposed scrutiny.

Even if it is to be a negative instrument, we in this House have the power to change the period of time we have to scrutinise it. It says here that it is 40 days, but I worked out that, if you take out Fridays, Saturdays and Sundays, it is effectively about three weeks. The reason I feel really quite strongly on this—I think we all feel strongly about parliamentary scrutiny—is that this will be the first document that will control so much of public procurement post Brexit and post the rules we had before.

We have just had a parallel policy statement, the environmental principles policy statement, which was meant to drive environmental protection across the heart of all government, and we in this House were given 21 days to scrutinise it. That is what we allowed for in the Environment Act. I sat through the passage of the Environment Act and I missed it. It is an own goal, and I am refusing to allow us to make the same mistake. I say this as a committee chair—the noble Baroness, Lady Andrews, is also in the Chamber—because, given the difficulty of getting some Ministers to come before us so that we can scrutinise issues, and the need to then bring it back to the House and table a regret Motion or a take-note Motion, 21 days is not enough. This is a really important policy statement, so if the Government do come back and say, “Yes, it’s got to be a negative instrument”, we would of course accept it if that was legally what we had to accept—but I serve notice now that we will not accept 40-day scrutiny by this House of the national procurement policy statement.

Photo of Lord Thomas of Cwmgiedd Lord Thomas of Cwmgiedd Chair, Consolidation, &c., Bills (Joint Committee), Chair, Consolidation, &c., Bills (Joint Committee) 6:39 pm, 25th May 2022

My Lords, I too welcome the Bill but I want to make five short points. First, as a victim of bad government procurement and as someone who has had to look at the law quite carefully, I cannot but emphasise the importance of the remarks of the noble Lord, Lord Maude, that in considering the Bill what matters, as in most legislation, is the delivery and the three stages he described. I shall not weary noble Lords with more stories about it but, believe me, my whole experience is that that is far more important than the law.

Secondly, however, we must get the law right. Therefore, I warmly welcome what was suggested by the noble Baroness, Lady Hayman of Ullock: the Bill should contain principles. It is plain that this was thought of. One can tell from the table of contents and the headings that someone forgot to take the word “principles” out because there are no principles. There is a principle, which I think is self-evident, that you have to procure in accordance with the Bill. There is no point in having a clause to say that, so the draftsman may have had second thoughts. A good lawyer ought to have second, third and fourth thoughts. It would be very helpful to know what the considerations are so that the House can reach a judgment.

The reason I think there should be principles takes me to my third point. It is plain that there is a relationship between procurement and subsidy. In the discussions on the Subsidy Control Bill, it was accepted that procurement could be used to subsidise and encourage local performance. I cannot find any reference to subsidies in this Bill and it therefore seems very important to put into a principle the relationship between control of subsidies and its use to develop the local economies and procurement. It has to be grappled with and this should not be left to the courts.

Fourthly, in looking at this piece of legislation, which I hope simplifies matters, it is a great misfortune that we will end up with a regime in the United Kingdom —forgetting the Northern Ireland protocol for the moment—that applies to three of the nations but not the fourth. I really hope that the way the Government have been able to bring in Wales and Northern Ireland will influence Scotland. It is surely to its advantage that there is a single procurement regime. It must be to its economic advantage, although I can see why there are arguments that some may think it not to its political advantage.

My fifth point is about the importance of remedies. The noble Lord, Lord Mendelsohn, was quite right in the point to which he drew attention. I am afraid I do not agree with the noble Lord, Lord Whitty, about the Subsidy Control Act. That has the CMA in it but the CMA does not have many teeth and depends on private enforcement. This Bill is wholly dependent on private enforcement. I do not want to develop this point now, but when one looks at Part 9 there are terrible problems, particularly for smaller companies. If you have a dispute about the contract for the west coast line, one can see that money may not be too great an objection, but when you have a much smaller one—and much of this is concerned with smaller sums of money and encouraging SMEs—you must have an enforcement process that is economic.

One resort might be that suggested by the noble Lord, Lord Mendelsohn, which is recourse to an outside body other than the courts. But I very much urge the Minister to engage with the Civil Justice Council to see if a process can be devised that deals with the real problems of procurement. You want to use the power to deal with a difficult contract where the process has been in breach of the regulations by stopping that going forward, but you do not want to end up in the situation where you allow that contract to go forward, without having looked at an alternative available remedy of damages, and the local authority or the Government end up paying all over again.

It may be in the public interest in this case for there to be something short and sharp that comes to a decisive conclusion, but remedies are a key issue which we should not ignore. It requires creatives thinking. We ought not to rely on the traditional way, as the courts have done. It is very good for lawyers—they make a lot of money and will have an even better year next year—but we must do something to deal with the unique problem of ensuring that the people who breach these regulations do not go forward with a contract and that the taxpayer does not end up paying two people. Those are my five short points.

Photo of Lord Hunt of Kings Heath Lord Hunt of Kings Heath Labour 6:45 pm, 25th May 2022

My Lords, it is a great pleasure to follow the noble and learned Lord, who showed how much more interesting a debate on a procurement Bill can be than we thought when we started out on this journey. I declare an interest as president of GS1 and of the Health Care Supply Association, and I pay tribute to NHS procurement officials for the fantastic work that they did during Covid.

Like most other noble Lords,I support the intent of the Bill to make public procurement quicker, simpler and more transparent. However, there is a balance to be struck. I take on board the comments of the noble Lord, Lord Maude, that outcome is more important than process, particularly in relation to the public sector’s poor record in supporting innovation and the perennial UK problem that we are a country great at innovation but very slow to adopt it, particularly in the public sector.

We must, however, have some process and tracking of what happens. We saw with Covid what happens when you do not have it. The PAC’s report readily acknowledged the challenge faced by the Government, but the failure to be transparent about decisions, publish contracts in a timely manner and maintain proper records left them open to accusations of cronyism and waste. Somehow, the Minister, through the passage of this Bill, must convince us that in moving to a quicker and more efficient system, proper process will continue while also allowing SMEs and innovative companies to take part and win tenders. The state of our economy suggests that unless we invest in innovation, we will be in very challenging times in the years ahead.

On defence, the noble Baroness, Lady Smith, made very trenchant points. Reading the PAC’s report this month on the MoD’s worrying inability to control costs was sobering. The report said that the MoD’s reliance on billions of pounds of future cost reductions to keep within its budget looks like a lot of trouble to come. It currently has no plans to support how these might be delivered and rising inflation will make pressure on affordability worse. The Government, however, are saying that they have done sufficient to ensure that our Armed Forces are in a state of preparedness for many of the challenges to come. That does not add up. The MoD has rejected the PAC’s general point, but I know who I would trust more in relation to defence contracts.

I principally wanted to mention the NHS, which the Minister kindly mentioned in his opening speech. We have just had the passage of what is now the Health and Care Act. There was quite a debate about procurement because that Act takes out the enforced tendering of clinical services from the Health and Social Care Act 2012. There is concern that in the Act there is now an all-catching clause which effectively gives the Secretary of State power, through regulations, to change the whole NHS procurement process. This was in anticipation of this Bill.

The noble Lord was very clear in his opening speech that this Bill is not going to be used to turn the clock back and allow for the tendering out of clinical services where it is not required to do so. It would be good to get his confirmation, and also for him to spell out what Clause 108 of this Bill means, which gives the power to Ministers, through regulations, to disapply provisions of this Bill in relation to procurement by the NHS in England. I hope that the two things go together, but it would be good to get some clarification.

I support what the noble Lord, Lord Alton, said very strongly. The noble Lord, Lord Stevens of Birmingham, has also mentioned this. In the Health and Care Act, there was an insertion of Section 81, which provides that:

The Secretary of State must … make such provision … with a view to eradicating the use in the health service in England of goods or services that are tainted by slavery and human trafficking.”

Will this be replicated in this Bill? Does the Minister further accept—this was raised in the Answer on Xinjiang today—that this Bill should be amended to include at least a discretionary exclusion ground for companies closely associated with serious human rights abuses? I am sure there will be a number of amendments in this field, and past history would suggest that the Government would be advised to accept them, or at least accept the principle.

My final point, which a number of noble Lords have also made, is on the post-award contract management that the noble Lord, Lord Maude, talked about. The monitoring of public procurement contracts has been very poor. Many PFI deals were poorly procured. Many recent deals involving the use of private providers through centrally awarded contracts or frameworks have not proven to be good value for money. We seem to have in the public sector a bureaucratic edifice where huge energy goes into the agreement of a contract, but once that is done, people move on to looking at a new contract. Monitoring and managing the contract is simply not done effectively. In our meeting with the noble Lord, Lord True, a week ago, which was very helpful, he talked about his department, or the Government, engaging in development and training support programmes for procurement professionals, with a particular focus on contract management. That is very welcome. I ask the noble Lord, Lord True, whether that will be extended throughout the public sector. Although we are much concerned here with central government contracts, the principles must be enunciated throughout the public sector. In terms of value for money and for our future confidence in public procurement, it is essential that we up our game in relation to contract management.

Photo of Lord Berkeley Lord Berkeley Labour 6:53 pm, 25th May 2022

My Lords, it gives me great pleasure to follow my noble friend. I agree with his views on the public procurement of particularly large projects in this country. As the noble Lord, Lord Maude, also mentioned, the costs of preparing bids are much higher here than in many other European countries, and I believe that the costs relating to HS2 involved spending £15 billion on consultants. Why do we need so much money spent on consultants? Is it because the commissioning authority is frightened of making decisions itself, or is it for some other reason? It is pretty frightening. The costs of HS2 are very high—probably double what the Government are saying at the moment—and ditto with the Ajax tanks, which the noble Baroness, Lady Smith, mentioned, and, of course, Hinkley Point, which is not strictly a government procurement project but which we will all end up paying for in the end. And dear old Crossrail was opened yesterday—a wonderful project, but it is £5 billion over budget and three years late.

One thing that links many of these projects is that they usually fall down on the IT towards the end of the project. In other words, I wonder whether the people who commission these projects—whether in the private or public sector—have realised that we need to keep up with the latest IT developments rather than keeping on making sure that the civil engineering is on programme. I am a civil engineer, and it is lovely to talk about these things, but actually it is the IT which causes many problems and I think we have to learn some lessons from that.

One further point before I get on to what I really want to talk about, which is local authority procurement, is the issue of Scotland not being part of this Bill at the moment. I would like to ask the Minister: if the new HS2 trains that are going to run to Glasgow and Edinburgh are procured in England, will they be allowed to travel into Scotland, or will there be some need for financial or technical approval? It would be very stupid if there was any cost or anything else—and the vice versa would equally apply—but I think it is something we need to think about when we start to scrutinise the Bill. I hope that the Bill will improve things. I support this Bill, but, as other noble Lords have said, there is a lot of work to be done to make it fit for purpose.

I have one other question for the Minister. It may take a year or two before the Bill comes into effect, so what is the current process and rules for local authority procurement? Are we still carrying on with the European Union procurement rules, or is it a sort of free-for-all? It would be interesting to know what the present situation is.

I want to speak briefly about local authority procurement, on which the noble Lord, Lord Stevens, also made some interesting comments. I worry that the system, even as it is set out in the Bill, leaves too much control with Ministers, with very little oversight or enforcement. I think that is quite worrying. As many noble Lords have said, including my noble friend Lady Hayman and the noble Lord, Lord Fox, key principles are wonderful, but we need to get into more detail. We need clear objectives, and I am pleased that the noble Lord, Lord True, mentioned value for money, value for the customer and value for the taxpayer, and competition. But many noble Lords have mentioned— and I think these are missing in its strongest part—transparency of process, transparency of results, which includes the Freedom of Information Act, and some kind of independent scrutiny or overview, and possibly an appeals body. I would be interested also to see what exemptions are being proposed, because it is very easy for exemptions to be used as a quick shortcut to a process which may be quite difficult at the end of the day.

On local authority procurement, I have an example from the Isles of Scilly, which noble Lords may have heard me speak about before, and this week my Select Committee went to Birmingham and Coventry to look at transport—but there are many other similar examples. These things start off with the government bidding process. Local authorities are, as we all know, very short of money, and tendering costs money and time, which they do not have much of. The Government, in their localism programme for town centre improvements or whatever, offer a competition, which I am sure is welcomed by everybody, but do not actually allow the councils or the other responding authorities time to prepare a proper bid. Nor do they allow them to have the funding to do that, when you look at the rules and the amount of information that is required to produce these bids.

What it therefore needs is for the first bid to be for funding to get enough money to prepare a proper bid for the next phase. And so it goes on. We found this on several transport projects we talked about in Birmingham and the West Midlands generally. I have also found it in watching from afar—or not so far—the attempt by the local authority in the Isles of Scilly to get a new ferry through the localism bid, which would involve working with the monopoly supplier of services, for £48 million, to be given a new ferry with no competition. I can understand why it is doing it, because it does not have the money to prepare the bid.

We therefore have to be very careful that this legislation does not allow local authorities to cut corners for political or cost reasons because they cannot afford to do anything else. I could go into great detail on this but I am not going to. It is not just the Isles of Scilly, Birmingham or Coventry transport. If one reads some of the stories that come out quite regularly in Private Eye, one sees an awful lot of examples of local authorities that cut corners—and have probably been caught doing it, otherwise it would not be published—because of political expediency, because they could not afford to do anything else or because it was said to be urgent. We have to be very careful when we scrutinise the Bill that we recognise that local authorities do not have much money and that it is very tempting to cut corners politically, because it might be useful for the next election or whatever.

I hope we can allow a bit more devolution of the funding for, say, transport in the West Midlands so that local authorities have an incentive to do it properly, with oversight scrutiny but not total nitpicking of the kind that goes on at the moment. I repeat what I said before: at the moment, the Treasury requires Network Rail to apply to it for approval to paint the railings at a station. That is micromanagement just gone darn stupid.

My last comment is on the role of government in the Bill. It is as the “contracting authority”, what is called the “appropriate authority”, the compiler of debarment lists—I am sure all noble Lords know what that means—and a sort of appeal body to the Minister of the Crown in Clause 61. As the noble and learned Lord, Lord Thomas, said, there need to be some remedies that do not involve central government. I am not sure what that is—I am no lawyer—but it really is important. All these things coming together under government, with the local authorities also being subject to their political pressure, means that we could end up with a disaster. We do not want that. There is enormous potential in the Bill, but there will be quite a lot of discussion in Committee, and probably further on, about some changes that will need to be made to make sure it really works properly.

Photo of Lord Strasburger Lord Strasburger Liberal Democrat 7:04 pm, 25th May 2022

My Lords, I will focus my remarks on what went so badly wrong with the procurement of PPE and how it should inform our approach to this Bill. I will also take this opportunity to share with the House one particular PPE contract that ended in suspicious circumstances that should concern us all.

The first problem with PPE procurement was that the UK started the pandemic from a bad place. Much of our stockpile of PPE items had been neglected and allowed to fall out of date, making it unusable due to the risk that it would fail to protect its users. The stockpile was created in 2009 at a cost of £500 million, following an outbreak of swine flu. Sadly, during the eight months prior to Covid being declared a health emergency of international concern, 200 million items in our stockpile went out of date, including 80% of the respirators, and the stockpile included no gowns, visors or testing swabs. So the flying start we should have had in tackling the pandemic was lost.

The next problem was that the Government were slow to respond to this crisis. They were advised several times to build up PPE stocks, but by the time they eventually started looking for PPE, it was well and truly a seller’s market and prices had gone through the roof.

These procurement failures intensified the scale of the challenge our country faced to protect healthcare staff and other key workers. The Government scrambled to make up for lost time, and this involved abandoning all the measures designed to prevent corruption in procurement and ensure that taxpayers get value for money. Not only was competitive tendering dropped; until May 2020, the eight-point due diligence process was also suspended.

Worse still, with its secretive decision to set up the VIP lane for companies recommended by politicians and officials, the Government exposed the process to potential cronyism and corruption on a massive scale. Firms in the VIP lane had a 10 times better chance of winning a contract, but they had no special qualities that justified that priority—other than their political connections. In fact, the actual performance of the VIP lane contractors appears to be worse than that of those who had no priority. The Department of Health and Social Care estimates that overall, 53% of VIP lane suppliers delivered PPE not fit for front-line services, compared with 11% of all suppliers.

Billions of pounds-worth of orders were funnelled into the VIP lane companies run by friends and associates of Conservative politicians. For example, the noble Lord, Lord Feldman of Elstree, recommended four successful companies; the then Health Secretary, Matt Hancock, recommended four as well, including his local pub landlord; while Michael Gove referred Meller Designs, a firm run by David Meller, who has donated £60,000 to the Conservative Party, including funding for Mr Gove’s leadership bid.

I will not bore the House with the full list of generous politicians, but many successful bidders for PPE contracts were set up on the spur of the moment and had flimsy balance sheets. Many had no prior experience of supplying PPE, or had a controversial history, including tax evasion, fraud and human rights abuses. Trade Markets Direct, a dormant company run by a former bookmaker, was awarded a £3.8 million contract. Michael Saiger, a Miami-based jewellery designer, was awarded £250 million of PPE business and £108 million went to a pest control company, again with no experience of PPE.

Other unlikely companies to benefit from government largesse were a hotel carpeting business, a naval design firm, a luxury packaging company and a month-old firm owned by offshore finance specialists. Transparency International estimates that 20% of the contracts awarded between February and November 2020 contained one or more flags for possible corruption. Some £255 million- worth of contracts went to companies that did not even exist 60 days before they won the business. Meanwhile, many well-established companies with a long history of supplying PPE, but without the seemingly essential ingredient of political clout, could not get a look in. Some offered products several times but never heard back from the Government, presumably because resources had been diverted to the VIP lane.

How has all this frenetic activity turned out for taxpayers? The answer, I am afraid, is not very well. The Department of Health’s annual report for 2020-21 reveals that it spent £12.1 billion on emergency PPE and, of that, £8.7 billion—70%—has been written off because the price has fallen, the PPE is unsuitable or it is past its expiry date. This is waste on a monumental scale, brought about by the Government’s failure to maintain adequate stocks before the pandemic and their tardiness in getting into the market, despite being advised to do so before prices took off.

These serious blunders were compounded by the chaotic way procurement was managed. As Gareth Davies, head of the National Audit Office, puts it, the department’s procurement was vulnerable to fraud due to large numbers of contracts being awarded to new suppliers, many of which came through the controversial VIP lane. He also points to a lack of checks on the quality of goods received and poor inventory management. If you add the wasted £8.7 billion to the £4.3 billion lost in fraudulent Covid grants, it comes to £1 billion more than the Government expect to raise from the increase in national insurance. To put it another way, if PPE procurement and Covid grants had been properly managed, we could have avoided wasting £13 billion of taxpayers’ money—and avoided the increase in national insurance at a time when people are struggling with the cost of living crisis.

This huge scandal has passed most of our press by. With a couple of honourable exceptions, the mainstream media has been shamefully silent. The only thorough report I have seen appeared in the New York Times in December 2020, and none of our papers picked it up, with the exception of the Guardian and Byline Times. Most papers have maintained a strict omerta.

Who has carried the can for this massive scandal? Which Ministers or officials have fallen on their swords or been fired? As we all know, nobody has taken responsibility; nobody has even apologised. As is always the way with this Government, seemingly no-one is to blame—which leaves us exposed to similarly poor performance when the next crisis arrives. It also means that the relatives and friends of the NHS workers and the staff and residents of care homes who perished through lack of PPE will get no explanation or apology.

As I promised at the start, I shall now tell the fascinating and deeply worrying story of Adrian Buckley, a gentleman from Yorkshire who has been trading with China for 32 years and has a full-time sourcing manager based in China on his payroll, not merely an agent. I am recounting his experiences in the summer of 2020 as an illustration of what can go wrong when competitive tendering is abandoned and individual Ministers and officials are given too much untrammelled discretion to select contractors.

In May 2020, Mr Buckley’s company, Buckley Healthcare Ltd, fulfilled an order for 1 million surgical gowns for a hospital trust in Yorkshire. The procurement director was so satisfied that he recommended Mr Buckley’s company to the NHS procurement officer, who informed Mr Buckley that he was putting his company forward to the Cabinet Office to supply 24 million gowns nationally. Mr Buckley and his sourcing manager scoured China for a factory with the capacity and skills to handle such a large order. They also thoroughly checked that the factory had access to the necessary raw materials and that the factory and its staff could meet the required specification for the products. After some time, they found a factory that met all the requirements, which was no mean feat in the frenzied market that existed at that time.

On 4 June 2020, Mr Buckley sent full details and prices to the NHS procurement officer, who forwarded them to the Cabinet Office. After a two-week silence, the details were re-sent to the office of the noble Lord, Lord Deighton, who was managing PPE procurement for the Government from the Cabinet Office. The email included the full specification and photos and videos from inside the factory.

On 25 June, three days after the company had been told that its proposal had been sent for approval, it was informed that the contract had been placed elsewhere. The company was surprised and disappointed, but assumed that it had been outbid and accepted the outcome.

A few days later, however, the company received an agitated phone call from the owner of the Chinese factory saying that he had been contacted by an agent for a company of which he had never heard concerning an order identical to the one he had planned with Mr Buckley. From the naive questions being asked, it was clear that this new company had no experience of buying PPE. Now suspicious that his company’s extensive investigation work and detailed proposal had been passed by the Government to another company—a debutant in the market—Mr Buckley emailed the noble Lord, Lord Deighton, asking what was going on. He received a reply from a civil servant offering first one and then another phoney reason for rejecting the Buckley bid, both of which were quickly dispensed with.

On 12 September, the contract with the other company was published, 30 days later than it should have been. It revealed that the contract had been awarded to a company called Inivos, which appears to have no previous experience of PPE. But the most startling revelation in the contract details was that the price paid to Inivos was £12 million higher than Mr Buckley’s proposal. So, there is every reason to suspect that the details of Mr Buckley’s supply arrangements were passed to Inivos, and that taxpayers have been robbed of £12 million in the process.

There is a full audit trail of all communications between the Cabinet Office and Mr Buckley’s company to support his version of events. I should say, by the way, that Mr Buckley and I have totally different political outlooks. He was a strong advocate of Brexit—although his serious problems with the new Brexit bureaucracy are causing him to think again—but he and I share a strong distaste for corruption and dishonesty. Many years ago, he donated £50,000 to the Conservative Party, and we both wonder whether he would have suffered the same fate from the Cabinet Office if he had kept up his payments to the Tories.

Will the Minister initiate an independent and forensic inquiry into whether a Minister or official in the Cabinet Office behaved unethically and passed to Inivos Mr Buckley’s gold-dust information on where and how to acquire the goods? Where is the extra £12 million? Did it remain with Inivos as super-profit, or was it shared with whoever disclosed the details of Mr Buckley’s supply arrangement with the Chinese factory—if that in fact happened? We also need to audit the other PPE contracts to find any other instances of similar behaviour.

Returning to the Bill, it lacks the necessary provisions to guarantee the integrity of the Government’s procurement process, as identified by the good people at the UK Anti-Corruption Coalition. Clauses 40 and 42 appear to give the Government the opportunity to discard the checks and rules, as they did for PPE procurement with such disastrous consequences. Transparency seems to have mysteriously slipped backwards since the Green Paper. These shortfalls, and others, must be rectified as the Bill passes through this House so that we never see a repeat of the cronyism and possible corruption that happened with the PPE contracts.

Photo of Lord Wigley Lord Wigley Plaid Cymru 7:18 pm, 25th May 2022

My Lords, it is a pleasure to follow the noble Lord, Lord Strasburger, and to identify totally with the important points he raised. I hope very much that his questions—on supplies at the time of the Covid outbreak and on whether this Bill will in fact be able to tighten up on the sort of happenings during that period that we just heard most alarmingly about—have been heard by the Government. I hope his speech does not get lost in the sands of time and that there will be answers to those questions.

Touching on the comments the noble Lord, Lord Strasburger, made a moment ago, there is the question of the capacity we have within these islands to manufacture these things ourselves. That feeds through to the important speech made by my noble friend Lord Alton with regard to the policies of the Chinese regime towards its own citizens and the fact that we depend so much on Chinese manufacturing capacity to meet our needs. We have an overdependence on it, which surely leaves us immensely vulnerable to China in the general context as well as in the context we heard about from the noble Lord, Lord Strasburger, a moment ago.

I also identify with the points made by the noble Baroness, Lady Brinton, on the disability issues, and the important points made by my friend, the noble Lord, Lord Aberdare, on the needs of small businesses, particularly those in the construction sector.

During the last Session, I was very much involved in debating the subsidy Bill, which the noble and learned Lord, Lord Thomas, implied is a first cousin of the Bill that we have today. At that time, I described the way in which successive Welsh Governments had succeeded in using public sector procurement as a tool to stimulate the Welsh economy, within the framework of the European single market. So successful was that policy that, over two decades, the proportion of goods and services secured by the Welsh Government in Wales increased from 35% to 55%. This meant that we were securing work for employees, more trade for businesses in Wales and, often, far lower product miles, which helps our carbon footprint.

This is surely all to the good, provided that it is done in a manner that does not deliver inferior goods or services, does not significantly increase the price of procurement, does not lead to appreciable market distortion and does not prevent companies from outside Wales setting up in Wales to tender for such work. It is worth noting that, after this policy had reached a stable level, it contributed to a significant fall in unemployment levels in Wales, which, before the impact of Covid, had dropped to a level below the UK average for the first time in three generations. What this Welsh policy did not achieve was to raise significantly the average GDP per head in Wales; that is another issue that might be worthy of debate on another day. These factors are relevant background to our consideration of the Bill.

I welcome the fact that the Government have acknowledged, in Clause 13, that Welsh Ministers may publish their own strategic priorities in relation to procurement. In relation to the fact that Scotland is not in this agreement, I say to the noble and learned Lord, Lord Thomas of Cwmgiedd, that uniformity of regulation across the nations is valid only if circumstances and aspiration are similar in each. We will need a mechanism that allows for flexibility between the nations of these islands as well as the advantages that come from having markets that are as open as they can be.

I understand that the wording of Clause 13 has been agreed with the Welsh Government, as the Minister suggested. Assuming that to be the case, it is a much-needed positive step forward in the relationship between Westminster and Cardiff Bay—I welcome this. However, it is far from clear how the application of a different approach to procurement in Wales will be rolled out in practice within this new regime. The Bill is silent on that key question, perhaps understandably, because I believe that discussions are ongoing on that matter.

If procurement policy in Wales, as underpinned in law, is identical to the provisions of the Bill—in which case the provisions of Clause 13 are purely declaratory—in practice, the provisions of the Bill will apply in their entirety to Wales, whether or not they chime in with the procurement policy of the Welsh Government. If that is the case, Clause 13 will be little more than window dressing. Alternatively—and I believe that this is more likely—Clause 13 is a vehicle whereby different procurement laws may be implemented in Wales, and the Welsh Government have been planning to bring forward their own Bill within their devolved legislative competence. I certainly hope that that is the case. I assume that the Senedd has devolved competence in all the relevant areas within the Bill. But, if it is not so, some legislative mechanism should be built into the Bill to give the Senedd the power to fine-tune legislation in these matters. Equally, there must be a lever whereby the provisions of parts of the Bill are disapplied in Wales, if circumstances dictate that. This can be agreed by the UK and Welsh Governments.

The Minister touched on these matters when opening the debate, and I hope that he can further clarify in the wind-up. It is, after all, totally inappropriate that statements are written into the UK statute book which could transpire to be meaningless. The Welsh Government have essentially used their procurement policy, working within the European framework which applied to these matters, to support disadvantaged communities by helping to maximise job opportunities in Wales. The EU allowed us to do this. It appears, however, depending on the interpretation of Clause 13, that in some circumstances the UK Government could in practice debar the Welsh Government from doing so. This goes to the heart of the approach that we take to disadvantaged people and the duty of government to safeguard them.

Against that background, it is revealing to consider the wording used in Clause 32 of this Bill, which, rightly, makes provision for contracts to support disadvantaged individuals. However, it does nothing to provide for disadvantaged communities, which is essentially the policy followed by the Welsh Government and which was endorsed by the EU. It is here that we see the reality of Brexit staring us in the face. If that is acknowledged by the UK Government, and if they wish to address the adverse implications for Wales, they should either give real teeth to Clause 13 and allow Wales to develop its own policy, underpinned in law, or, if they maintain that this distorts the UK single market, they should amend the Bill to ensure that public procurement policy throughout the UK can help address disadvantaged communities wherever they may be.

I know that the Welsh Government have greater ambitions in this field which they wish to progress. We shall look forward, in due course, to a Welsh legislative measure being introduced in the Senedd to facilitate this. One such ambition may be to help start-ups in Wales and help micro-companies to grow. Enabling them to bid for public sector contracts is one way of facilitating that growth. For a small business, the bureaucracy of bidding for such contracts can be daunting, and I know that a report on this will be published next week by the Coalition for a Digital Economy, or Coadec. I hope that the UK and Welsh Governments will pay attention to its analysis and representations. In the meantime, if the Welsh Government wanted to change their procurement rules in order to assist such small companies, can the Government give an assurance that they will be free to do so, either through Clause 13, suitably stiffened up to be fit for purpose, or by other legislative means?

Clause 11 of the Bill spells out what the Government see as their four procurement objectives: value for money, public benefit, transparent procurement policies, and acting with integrity. No one would argue with these four, though one might quibble about the order in which they are placed. To my mind, public benefit and value for money should be regarded as equally significant and worthy of equal weight when assessed for any contract. In other words, if government pays a penny more for a widget but by doing so helps secure a dozen jobs in an area of high unemployment, then it is a compromise which earns its place.

Perhaps I may raise a question in relation to the definition of “a devolved Welsh authority”, which arises in several places in the Bill. It is a term which constrains the powers exercised by the Welsh Ministers, as specified in Clause 99. That defines devolved Welsh authorities as ones falling into the definition of Section 157A of the Government of Wales Act 2006. That section relates to powers exercisable only in relation to Wales. Where does that leave Welsh Water, a not-for-profit utility some of whose responsibilities straddle the Wales- England border?

There are other aspects of this Bill which we undoubtedly will need to examine in Committee. Those include the need for transparency and for the public sector to appreciate the challenges facing small businesses when they try to secure public sector tenders. There is, in particular, a need for the public, and especially businesses which find the challenges of tendering successfully to be daunting, to be assured that the allocation of public sector contracts is totally fair and above board and that there is no room for the “old pals act” to secure business for companies that happen to be well connected.

I think that I have flagged up enough issues to which we should apply ourselves in Committee. I look forward to following these up at that time, and to hearing tonight the Minister’s response to the points which I have raised.

Photo of Lord Moylan Lord Moylan Conservative 7:29 pm, 25th May 2022

My Lords, it is a privilege to follow the noble Lord. With 28 years of experience in local government, and eight years on the board of Transport for London, I have long had a very strong interest in procurement. I am delighted that so many noble Lords have an equally strong interest in procurement. However, it is somewhat dispiriting that so many Members have strayed off into using this Bill as yet another opportunity to roll out a number of anti-capitalist themes and proposals which will no doubt reappear in Committee and then be duly taken out by a sensible Government when it returns to another place.

My question is rather more radical than those raised by most noble Lords so far: whether we actually need this Bill at all. Of course, we need to scrap the EU regulations, but do we need to replace them at all? In large parts of Europe—I say this without specifying any particular parts—there was a history of municipal corruption in the award of contracts in a non-transparent and corrupt way, and it was right that we should tackle that as a single European Community while we were a member of it. It was also the case that the European Union saw these regulations as a means of forcing the development of a single market. As we are no longer a member of the single market, that consideration is not relevant to us.

When it comes to municipal corruption, I will be so bold as to say that, in this country, we have been remarkably free of it. In my lifetime, there have been a few very significant cases—but only very, very few. We are very fortunate; we have an enviable record of a lack of corruption in public bodies. I was expecting at this point to be jeered at in the wake of the remarks by the noble Lord, Lord Strasburger. Yet, even if the allegations made and hinted at by the noble Lord were all vindicated, the remedy for them would lie in the criminal law and not in this Bill. This is because we have a full panoply of criminal law dealing with municipal and public body corruption, against the taking of bribes and against misconduct in public office. This is where we should look for remedies to the sort of corruption with which these regulations were originally intended to deal, rather than this Bill, which in my view is almost irrelevant. Indeed, the weakness of the Bill in relation to remedies has already been pointed out by other noble Lords, particularly the noble and learned Lord, Lord Thomas of Cwmgiedd.

I ask myself—and my noble friend the Minister can explain this later—why we do not simply scrap the existing regulations, rely on the criminal law as we used to before we joined the European Union, and then perhaps an esteemed body, such as the Chartered Institute of Public Finance and Accountancy, could issue a good practice note on how local authorities should comply with our international obligations. Is anything more than that actually needed?

The bureaucratisation of honesty—which is what we are actually discussing here—has led, over recent years, to the creation of what I call a high priesthood of procurement. By that, I mean people who are dedicated to the process—because this is a process Bill—of honesty rather than to its substance. Having got the grip of the process of procurement, they often refuse to let it go, even though everyone can see—even themselves quite often—that the procurement process is leading to a disaster. I hope that this Bill would at least be drafted in such a way as to avoid the pitfalls of the current system. I know that there have been some war stories, but I will take the opportunity to illustrate what I am saying with some of my own.

Very fortunately for me, back in the 1990s a very wise council officer said to me, “Do you know, I can get any result I want out of a procurement process? The secret, Councillor Moylan, is in how you set up the conditions by which the final decision will be made.” The whole system rests on what conditions you set up. I will give just a few examples. I know of one public procurement project, for services, which allocated 40% of the points to what was called “project compatibility”. When I said, “What does that mean?”, they said, “It means that we can choose whoever it is we want to work with, because they will be compatible with us.”

On another occasion, I was brought in to sit on an architectural panel; I was not involved early on, so I did not have a chance to shape the conditions. It was an architectural procurement—not a construction procurement—for a major public building. Having interviewed the various architects and seen their proposals, when we decided which one we wanted we were told by local government officers, who had brought their own lawyers to control us, that we could not have it because it did not meet the criteria. We asked what criteria it was not meeting, and the answer was financial stability—35% of the points had been given, without anyone being consulted, to the financial stability. Financial stability is important in some contracts, but if you choose a one-man architecture practice to build something for you and he goes bankrupt, you just rehire him; there is no consideration of financial stability when it comes to procuring services such as that. But we ended up with the architect we did not want because we had left it all too late.

I will now come to the question of the new, iconic bus shelter for London. Noble Lords will notice that there is no such thing as a new, iconic bus shelter for London. I engaged with TfL on this before I joined the board, and I said, “We should have a new, iconic bus shelter for London, because they are dreadful—absolutely appalling.” Peter Hendy, who was then commissioner of Transport for London, was good enough to agree that something should be done. I was representing London Councils at the time, so we set up jointly a process in which we invited architects to submit proposals for this wonderful thing. TfL officers ran it as a procurement process.

A large number of wonderful designs were put to us—20 appeared—some of which were so extravagant that they could never have been used. A design panel was put in place to make the architectural judgments, only for us to discover at the end of the presentations that we were not allowed to take design into account because the TfL officers had used the branch of the procurement process that you would use if you were buying a piece of air-conditioning plant. So it was to be judged entirely on the specification of whether it kept the rain out and things such as that. The entire purpose of the exercise was defeated through a misapplication of the procurement process, and we all agreed, exhausted by that point, that basically we would abandon it and come back to it. But we never did, so London still has a wide variability and a high level of ugliness in its bus shelters.

These revelations may shock noble Lords—I do not know—but they would not have shocked anybody engaged in public procurement in most other European Union countries, because they are perfectly aware that most European Union legislation is written with a high degree of rigidity as far as the words are concerned, and a high degree of flexibility as far as the application is concerned. Reference was made earlier to our gold-plating things. It is not that we gold-plate them; it is that we take them seriously in a way that other countries do not.

I say to my noble friend that my worry is simply this. We are quite rightly getting rid of a set of regulations that do not work for us and were designed for circumstances that do not apply to us, but instead of taking the radical approach of asking what the point of them was in the first place and whether we need them, we are in great danger of replicating them but with an English touch—sorry, I should not say English, because I am speaking just after the noble Lord, Lord Wigley, and I should have said earlier how delighted we all are that Wales has joined in this great corporate endeavour. My worry is that we simply put a local—a national—touch on them, but we end up with the same problems. We will still be doing obeisance to the high priesthood of procurement, and we will find that we are no further forward and will certainly not be dealing with allegations of corruption because, as I said, those will effectively still be dealt with under the criminal law.

Photo of Lord Davies of Brixton Lord Davies of Brixton Labour 7:40 pm, 25th May 2022

My Lords, it has been an interesting, wide-ranging debate. I will base the bulk of my speech on the Government’s Green Paper, Transforming Public Procurement, published in December 2020. My interest is in what has been described as contract compliance by public authorities. It must be understood that public authorities, those covered by this legislation, have a range of objectives that come into play when they procure goods and services. Obtaining the goods or services at the lowest possible price is only one of a range of objectives they could follow.

Another objective—an overriding objective, I argue—is to encourage and secure a range of government policies through the contracts into which they enter. The Government’s support for this understanding of the role of procurement was clear in the Green Paper, which said:

“By improving public procurement, the Government can not only save the taxpayer money but drive social, environmental and economic benefits across every region of the country.”

I repeat: government policy is about not just price but achieving

“social, environmental and economic benefits across … the country.”

There is no indication of an order of priority of these different objectives.

The Green Paper states that

“we want to send a clear message that public sector commercial teams do not have to select the lowest price bid, and that in setting the procurement strategy, drafting the contract terms and evaluating tenders they can and should take a broad view of value for money that includes social value … We propose allowing buyers to include criteria that go beyond the subject matter of the contract and encourage suppliers to operate in a way that contributes to economic, social and environmental outcomes on the basis of the ‘most advantageous tender’.”

I anticipate that my noble friend Lord Hendy will not talk about bus shelters but emphasise how this approach can support improvements in employment standards.

Simply as another example, I emphasise how contract compliance, operated as part of procurement policies, can lead to improvements in environmental standards both in the UK and abroad. It is no exaggeration to say that this is a crucial element in what the Government need to do to achieve their goals for arresting climate change. It would be absurd if public authorities did not assess the impact on the climate of their procurement policies.

My concern is therefore that the Government’s position as set out in the Bill is now less clear-cut than it was in the Green Paper. For example, in paragraph 3 of the Explanatory Notes there is the statement of different goals, but paragraph 4 then goes on to talk only about

“value for money for taxpayers.”

We already have a national procurement policy statement, which was issued last year and is a sort of progenitor of the statutory statement we can anticipate later this year, I assume. Again, it sets out the range of objectives but then, in a separate paragraph, identifies and gives precedence to value for money. I am concerned that value for money is in some way seen as the key objective and the others as subsidiary. Do the Government still adhere to the approach set out in the Green Paper? This is obviously a key issue to consider in Committee, so will the Minister make the position clear: does the policy in the Green Paper still apply? In the explanatory statement and the statement of principles—the policy statement—it appears that at one stage there was a paragraph setting out the range of objectives, but then, unfortunately, someone read it and said, “This won’t do; we need an additional statement to emphasise money.” I really want clarity on that.

What role will there be within the national procurement policy statement for local policy objectives, even local objectives not fully in line with national objectives? The useful report, as ever, from the Library tells us that the Cabinet Office set out that the intention of the NPPS was not to impose the Government’s political priorities on bodies normally outside of their control, but rather to influence them. As you read through the paragraph however, it is clear that it is expecting its own democratically elected separate bodies to adopt the Government’s core principles. Will the Government make it clear that local authorities, which have their own democratic mandate, will not be dragooned by central government?

Finally, people may be surprised to know, a point about pensions. There is nothing in the Bill directly relating to pension schemes, but some schemes will end up being classed as contracting authorities and will be required to undertake procurement in the same way as government departments and local authorities. The Government say that attempts to introduce flexibility to simplify public procurement processes could impact on this sort of organisation. Great stress has been placed on the importance of simplicity in the process. I am not sure that simplicity is a good objective on its own. Clarity is an important objective, but simplicity can lead to confusion and difficulties for those organisations not regularly working through this process.

I am not expecting the Minister to respond on the impact on pension schemes at this stage, but it is an issue to which I think we need to return—smaller organisations caught within the remit. The Bill already includes provision for some exemptions, and we will need to look at whether waivers are required for some specific organisations.

Photo of Lord Best Lord Best Crossbench 7:48 pm, 25th May 2022

My Lords, my contribution relates to the Bill’s impact on registered providers of social housing—bodies involved in contract procurement worth billions of pounds each year. The sector is a key contributor to easing the housing crisis by building tens of thousands of new homes, helping to fix the building safety disaster and undertaking day-to-day works to ensure residents in social housing have decent homes, while addressing the climate crisis and seeking to implement an ambitious decarbonisation strategy.

I want to raise one factual question, one issue of principle and one point of practical detail. First, am I right in assuming that the definition of public authorities, which clearly covers the non-profit registered providers of housing—housing associations, in common parlance—also covers the new breed of for-profit registered providers? The latter can obtain government grants and are subject to regulation by the Regulator of Social Housing. Indeed, their profit-making ethos may demand increased regulatory attention, compared with the non-profit providers, but are they classified for the purposes of this Bill as public authorities?

Secondly, my overarching point of principle concerns one way in which the procurement process can determine the success or failure of a contract. I have received excellent briefings from the specialist law firm Trowers & Hamlins. The view of experts in this field is that the use of current relative price models drives a race to the bottom. As many noble Lords have pointed out, a key objective of the Bill is to maximise the public benefit of contracts. But the current process actually leads to a narrow interpretation of best value which translates into awarding the highest marks to the tender with the lowest price and downplays the real benefits of other, more expensive but more advantageous bids. Even if the weighting split between quality and price favours quality, the evaluation model gives preference to the lowest price. In effect, the public sector asks bidders to guess the lowest price to win—not the actual price they think is necessary to perform the contract properly. Such an approach can undermine the relationship between client and contractor. From day one, the contractor must look to cut costs and retrieve its profit margin. This leads to conflict and loss of quality, innovation, investment, apprenticeships and safety.

The UK Construction Playbook already acknowledges the harm caused by such pricing models. This acknowledgement needs to flow into the Procurement Bill and its associated guidance. The Bill already requires scoring methodologies to be described in the tender documents. I suggest that this obligation incorporates provision to prevent these unhelpful “relative price models” from being used by public authorities when procuring contracts that should prioritise safety, quality and value.

My third and final point is about a grey area in the world of public procurement to which my noble friend Lord Aberdare has drawn attention. This relates to the fees charged by procurement consortia that offer a service to bodies such as housing associations that are not confident of their compliance with all the statutory regulations governing procurement. These organisations make sure that all the necessary requirements are met—for which they charge a fee that can add anything from 3% to 10% to the cost of the contract. While larger housing providers such as Places for People—which has explained the position to me—have in-house expertise to perform this role, smaller operators are spending millions of pounds hiring these intermediary bodies.

The practical point I want to leave with the Minister is that these procurement consortia should not be operating—as some are—under a cloak of commercial secrecy. Since taxpayers’ money is involved, surely the Bill should require these transactions to be fully disclosed, proportionate and used solely in the public interest.

In conclusion, are for-profit registered providers covered by the Bill? Can unintended preference for price over social value—currently built into most evaluation models—be prevented through this legislation for those contracts which have quality, safety and value at their core? Will the Minister look at mandatory transparency for the fees charged by procurement consortia to ensure that they are used solely in the public interest?

Photo of Baroness Bennett of Manor Castle Baroness Bennett of Manor Castle Green 7:54 pm, 25th May 2022

My Lords, it is a great pleasure to follow the noble Lord, Lord Best. As always, he was extremely incisive and clear about our all too often tragically awful housing and general building sector. I very much wish to associate myself with his remarks about transparency. We need to ensure and extend that, and not allow commercial confidentiality to overcome it. This extends far beyond the housing sector.

I declare my position as a vice-president of the Local Government Association. As second-last of the Back-Bench speakers, it is a great challenge not to repeat anything. I will seek not to do that, so I begin by associating myself entirely with the comments of the noble Baronesses, Lady Young of Old Scone and Lady Parminter, who covered many of the issues that your Lordships’ House might expect me, as a Green, to cover. Perhaps it is fortunate that I land at this particular spot on the list, because mine might be described, in chunks at least, as a balancing speech to that of the noble Lord, Lord Moylan.

As we look at the Bill we have to start by looking at the disastrous history of the outsourcing of government services over the past decades. I am not being specifically party-political or looking at only one side of your Lordships’ House here. There was some acknowledgement of this in a government press release on 6 December 2021, which said that the Government would seek to exclude

“companies with a track record of poor delivery, fraud or corruption” from winning public contracts.

To pick a few of the worst offenders more or less at random—if you want a wider selection, pick up any Private Eye and you will find many more—let us start with Serco, which was fined £22.9 million in a settlement with the Serious Fraud Office over its electronic tagging contract. That was a deal through which it dodged criminal charges. Capita, with a £1.3 billion contract for Army recruitment, missed every target for recruiting both regulars and reserves, in some years by 45% and never in a decade by less than 21%.

Arguably the worst offender of all is G4S, which advertises itself as

“the leading global, integrated security company”,

with more than half a million mostly low-paid employees around the world and a human rights record to rival a failed state. It was profiting from running Birmingham jail until it spectacularly lost control—due, the independent monitoring board suggested, to insufficient staffing levels and quality. One job ad put out by G4S said that

“no specific previous qualifications or experience” were required to be a prison custody officer. The state’s highly trained officers had to come to the rescue when G4S lost control. It also had the contract for Medway Secure Training Centre, which houses some of the most vulnerable children in the country, as well as for Rainsbrook Secure Training Centre. Both contracts had to be taken off it in consequence of its absolute failure.

So it is very clear that this Bill is to be welcomed. Indeed, we have heard welcomes for the Bill from all around the House—except perhaps from the noble Lord, Lord Moylan. However, it is worth going back to something that lots of people said. In his introduction, the Minister claimed that this was part of the famed and much-celebrated Brexit dividend, although of course, as I will come back to, many other members of the European Union seem to have managed without the continual stream of outsourcing disasters involving multinational companies that we have had under exactly the same set of EU rules.

However, let us start from where we are now and make the Bill as good as possible. For that, we really need some clarity. It is really important to stress that Clause 18, which talks about the “most advantageous tender” in a competitive tendering process, is not actually new. It is already possible under current regulations and guidance. Bringing in something that already exists will not change culture and practice. Many noble Lords have expressed the concern that value for money equals lowest unit cost. There has to be focus on social, environmental and economic value, particularly in our disadvantaged communities.

There has to be an opening up to small and medium-sized enterprises—which the Government say they wish to achieve—and away from these disastrous failed multinationals, which are great at being cash cows and terrible at delivering services. On that point, I associate myself in particular with the comments of the noble Lord, Lord Mendelsohn, and the noble and learned Lord, Lord Thomas of Cwmgiedd, that the idea that a small or medium-sized enterprise, in dealing with a big organisation on a contract that has gone wrong, can use civil remedies and take it to court is clearly utterly impractical. We need something else. We also need to look very closely at the way the 30-day payment regime is expressed in the Bill and whether it is strong enough.

I note the useful briefing from the Local Government Association, which notes, as the Green Party often does, that so many apparently cheap things have been costing us dear in this low-wage economy, such as the lack of investment in training and skills and the environmental damage. However, I think I would acknowledge as a Green that there is something of a philosophical problem here in that this is trying to set some rules from Westminster that apply around England and Wales, at least. Green philosophy shows a way forward here. In this Bill we need to have a foundation of basic standards while allowing freedom for councils and other commissioning bodies to choose higher employment, environmental and service standards. I note the call from the Local Government Association for national funding for the upskilling of council procurement officers. We all know how stretched local government is, so I have a specific question for the Minister. Do the Government intend to provide resources to local councils to ensure that they are able to work with the significant change that the Government outline in the Bill?

I note also in passing a number of useful briefings that have stressed very much the importance of getting away from the multinationals. They are from Social Enterprise UK, Coadec—the Coalition for a Digital Economy—the National Council for Voluntary Organisations and the National Association for Voluntary and Community Action. I note also a very useful briefing from UNISON, which says that what we need are inclusive, high-quality sustainable public services. Those are not just about procurement; they are also, of course, about decent funding.

I should like to make a couple of specific points about the detail. I suggest that Schedules 6 and 7 need to be combined. Schedule 6 has the mandatory exclusion grounds, which include conviction for corporate manslaughter or corporate homicide, fraud, bribery, slavery and human trafficking, organised crime and tax offences. I am glad they are regarded as exclusions. That is a good place to start, but I think we have to look at some of the contracts set over recent years to see that that does not seem to have been applied.

Schedule 7 lists the discretionary exclusion grounds. These include labour market misconduct, environmental misconduct, competition infringements and professional misconduct. Surely these grounds should also exclude bidders. If that means that all the bidders are excluded—perhaps not unlikely, given the tale of woe with which I started—maybe we need to get to a contract specification that caters for a different sort of bidder, such as a social enterprise or indeed a public body constituted for the purpose of delivering that service or goods.

Here, I cycle back to where I started and warn noble Lords that this is where I get to my most controversial bit. I note that all my case studies—perhaps they were not entirely randomly selected—are about the exercise of the coercive power of the state. I would say that whether in prisons, courts, policing or the military, the exercise of those grave responsibilities—the literal power, in the worst cases, over life and death, and certainly the power over individual liberty—should not come from contracts for which the Government hand over responsibility. It should remain in government hands. I will be talking to the Public Bill Office to see whether there is a way to bring that into the Bill.

I have been mostly negative but I always like to be hopeful so I shall circle back to the points raised by the noble Baronesses, Lady Young and Lady Parminter, and indeed the noble Lord, Lord Maude, who said: can we get the heart racing about public procurement? Absolutely I can and I can point to the fact that, back in October 2019, the first Written Questions I put down in your Lordships’ House as a new baby Peer—of a few days, I think—were about public procurement. I asked the Government how much organic and local food was being bought for schools, hospitals and prisons. I think noble Lords who have been round a lot longer than I will probably know the answer I got to each of those Questions. Exactly right—the Government do not know.

I come to a point on which, for the second day in a row, the noble Baroness, Lady Noakes, and I can perhaps agree: impact assessment. Reading all the pages of this long and complex Bill, I cannot see—I am not a legal expert—where we have an impact assessment of what the Bill does in, say, two years’ time. How will it have changed public procurement to improve public health, the economic situation of disadvantaged areas and the state of our environment and natural world by cutting carbon emissions? I leave your Lordships’ House with this question: how will we see the Bill’s impacts?

Photo of Lord Hendy Lord Hendy Labour 8:05 pm, 25th May 2022

My Lords, it is a great pleasure to follow the noble Baroness, Lady Bennett. I will not speak about the bus shelters of the noble Lord, Lord Moylan, or my brother, but I support what was said by my noble friends Lady Hayman and Lady Young, the noble Baronesses, Lady Parminter and Lady Bennett, and others about the use of public procurement as an instrument to advance environmental objectives.

Public procurement is also a very efficient way by which government and public authorities can require high standards from, and provide a good example to, employers. This is an important aspect of fulfilling the second objective in Clause 11(1)—“maximising public benefit”—because, of course, every public contract to which the Bill will apply requires workers to execute it. The United Kingdom has long recognised public procurement as a particularly apt tool to protect and enhance wages and working conditions. The fair wages resolutions of the House of Commons date back to 1891. Their final form was the fair wages resolution of 1946, introduced by Labour and supported by the Conservatives. In his speech in support, Harold Macmillan said of the Government:

“in placing their buying power—and this is the story behind this Resolution—they should see that they do so only with the best employers and that they do not use their contracting power to do down the better employer and to get better prices from the bad employer.”—[Official Report, Commons, 14/10/1946; col. 632.]

At that stage, the fair wages resolution had been elaborated from 1891 so that, in 1946, it had two main components. First, government contractors and subcontractors were required, as a condition of their contracts, to observe those terms and conditions of employment that had been established for the trade or industry in the relevant district by joint negotiating machinery or by arbitration. Secondly, in the absence of such established terms, contractors had to observe terms no less favourable than the general level observed by other employers whose general circumstances in the relevant trade or industry were similar. Questions arising under the resolution were first referred to the Advisory, Conciliation and Arbitration Service for conciliation and, if unsuccessful, to the Central Arbitration Committee for decision. These provisions were generally duplicated by public authorities, public bodies and the nationalised industries. In this way, wages, terms and conditions were driven up and good employers were not undercut by bad employers.

The resolution was rescinded by the Thatcher Government in 1983. To do so, it was first necessary for the United Kingdom to denounce, in 1982, International Labour Organization Convention 94, the Labour Clauses (Public Contracts) Convention 1949, which had adopted much of its text from the fair wages resolution.

Industrial relations have of course changed a great deal since 1983. Then, over 80% of British workers still had terms and conditions of employment set by collective agreements negotiated between employers and trade unions. Most of that coverage was by national agreements in various sectors. So the abolition of the fair wages resolution did not immediately have a great impact, but the policy and legislation of successive Governments have now reduced collective bargaining coverage to something below 25% of the workforce. Indeed, less than 13% of workers in the private sector, where public contracts will be placed, have the benefit of collectively agreed terms and conditions.

Consequently, today, the vast majority of the workforce are at the mercy of the labour market and employer diktat to set the terms and conditions on which they have to work. The national minimum wage is intended to protect the lowest hourly rate, but it cannot, of course, create the “high-wage, high-productivity economy” to which this Government aspire. So, reversion to negotiated terms and conditions, as elsewhere in western Europe, and as advocated by both the ILO and the OECD—see successive employment outlooks from 2017 onwards—and, as proposed by the fair wages Bill now before the New Zealand Parliament, might well redress the falling value of real wages in this country, wages which are already lower in value now than they were 12 years ago, particularly in the lowest three quarters of the wage distribution, with the exception of the very lowest paid.

This Bill presents the opportunity to revert to the 1891 and 1946 precedents as a simple and powerful mechanism to drive up wages, terms and conditions and to prevent bad employers from undercutting good ones. I will propose an amendment to that effect, if the Government are unwilling to move their own, and would be happy to consider with colleagues how these principles might apply to overseas suppliers, which we have heard about this evening. The Bill also provides the opportunity to deal with any number of other workplace abuses. Here is the chance to make public contracts dependent on not behaving as P&O Ferries did, as my noble friend Lord Whitty pointed out. Here is a chance to put an end to the noxious practice of “fire and rehire”, at least by public bodies. If it be thought that public bodies do not resort to such tactics, Richmond upon Thames College is an example of such a body, which has threatened 127 lecturers with that very ploy. Again, if the Government do not move such amendments, and in the absence of an employment Bill, I would wish to do so.

There are a number of other good practices to encourage and bad practices to discourage which this Bill could achieve by way of conditionality for the grant of public contracts, but I will not take time now to go through them. I have just one further point. The public procurement regulations which are to be displaced by the current Bill do not do any of the things that I have mentioned. But one thing that those regulations did do—in Regulation 56(2) of the Public Contracts Regulations 2015, for example—was allow public authority contractors to refuse tenderers which failed to comply with the various environmental, social and labour law provisions listed in Annex X to the EU public contracts directive of 2014. Amongst other things, that annexe lists ILO Convention 87 on the right to organise and ILO Convention 98 on the right to bargain collectively. These provisions have been excised from the current Bill. Schedule 7 does not include such international standards as grounds for discretionary exclusion of tenderers, and the list of international agreements in Schedule 9 does not include any ILO conventions or, indeed, any human rights instruments at all.

The UK was the first country to ratify Conventions 87 and 98, in 1948 and 1949 respectively. They became the most fundamental and are now the most ratified of all the conventions of the ILO. The present Government might harbour the desire to denounce those conventions, as they did 40 years ago with Convention 94, given that the UK has been found to be continuously in breach of them since at least 1989. However, they cannot denounce them because they have recently committed to

“respecting, promoting and effectively implementing the internationally recognised core labour standards, as defined in the fundamental ILO Conventions, which are: … (a) freedom of association and the effective recognition of the right to collective bargaining”—

I will not read the rest, but I am quoting from Article 399 of the EU-UK trade and co-operation agreement of last year. That article also reiterates that the Government

“commits to implementing all the ILO Conventions that the United Kingdom and the Member States have respectively ratified”.

In light of that, I ask the Minister: how can the exclusion in this Bill of references to ILO Conventions 87 and 98 as a potential basis of refusing tenderers be justified?

In conclusion, I wonder if the Minister would be prepared to meet to discuss whether and to what extent labour standards might be made conditions for public contracts.

Photo of Lord Wallace of Saltaire Lord Wallace of Saltaire Liberal Democrat Lords Spokesperson (Cabinet Office) 8:16 pm, 25th May 2022

My Lords, the noble Lord, Lord Maude, remarked that this is a dull subject and implied that we are all rather nerdish to be here. It has been, I think, a constructively nerdish debate. I admit that I have learned quite a lot about the problems of public procurement from working with the noble Lord, Lord Maude. I disagreed strongly with some of his ideas, but I agreed very strongly with some of them as well. I also shared his frustration that some of his best ideas were blocked by the departmentalism of Whitehall and the argument that each department made, as others do, of “We’re different from the others —besides, I’m the Accountable Officer to Parliament”, and that a number of opportunities for reasonable reform were therefore missed. Procurement is a very dull subject most of the time, but one punctuated by scandals when they hit the Daily Mail.

As a revising Chamber, if we are able to work together, our aim in this Bill should be to provide a framework which can outlast the present Government and to provide a stable, long-term environment for contracting between different parts of government and outside suppliers. The Minister will recognise that I say that with particular passion, having survived the Elections Act, as it now is, which was a deeply partisan and deeply unsatisfactory Bill which will have to be rewritten by whichever party comes into office after the next election. Let us do this one differently, please.

There is an awful lot of windy Brexiteer rhetoric about “taking back control” and replacing

“the current bureaucratic and process-driven EU regime for public procurement”— but here we have an unavoidably bureaucratic and process-driven Bill to replace the EU regime. The Bill does not entirely “take back control” because, as we will have to discuss, the UK will still be governed by various international standards and limited by the commitments given in the various trade agreements we are signing with other countries.

What we must focus on is getting the framework and the requisite elements of parliamentary oversight right. I think we all recognise that we cannot do much more than that. The problems of implementation cannot be dealt with very easily in law. The training of national and local civil servants to manage procurement is clearly very important; outside the Bill, I would like to ask the Minister whether we can have some more information about what sort of training is being laid on to improve the quality of procurement at all levels.

There is clearly an excessively complicated contracts process which enables outsourcing companies like Serco and Capita, and the sad Carillion, to write contracts which they therefore win but which they do not actually execute quite as well as others might have done. We are dependent on the success of the digital platform, which we will have to discuss, but its actual execution is clearly out of the hands of anyone in this Chamber, although the noble Lord, Lord Clement-Jones, on our Benches, will want to discuss that a little more.

On parliamentary oversight, there is some very imprecise language, as always, in this Bill: “an appropriate authority” may do this, that and the other. Every time I read that, I thought of the noble Lord, Lord Hodgson, and his committee, and how much he will pounce on the idea that tertiary legislation will be provided by some sort of authority somewhere around or near Whitehall. Clause 12, on the national procurement policy statement, which we have discussed in some detail, states that

“a Minister … must … carry out such consultation as the Minister considers appropriate” and the statement can be amended or replaced whenever a Minister considers it necessary. Since 2015, Ministers have changed, on average, every 15 months. We have had five or six Cabinet Ministers in various offices since 2015. That is an appalling rate of turnover. It also means that continuity is very hard to get and that parliamentary oversight questioning a Minister, asking why he or she wants to change the policy statement or whatever it may be, is an important part of trying to maintain continuity. We all know that in many areas of procurement, continuity and a long-term perspective are extremely important.

Many of the most attractive reforming ideas in the Green Paper, Transforming Public Procurement, appear only weakly in the Bill. The Green Paper proposes, for example,

“a new flexible procedure that gives buyers freedom to negotiate and innovate to get the best from the private, charity and social enterprise sectors”,

but the charity and social enterprise sectors have almost entirely disappeared from the Bill. The Minister’s letter at the time of First Reading stated that the reforms to the procurement regime would be based on value for money, competition and objective criteria in decision-making, whatever those objective criteria may be. The briefing on Bills in the Queen’s Speech goes further, claiming that the Bill enshrines the principles of public procurement, with value for money first and foremost. We have heard from others in this debate that even the concept of value for money depends on whether you are saying value of money over one year, over five years or, as the manager of Crossrail said on television yesterday, over 60 years. It changes your calculations considerably. However, Clause 11 balances all this by adding as an objective “maximising public benefit”, and Clause 18 refers to the “most advantageous tender”, deliberately changed from previously, when it was the “most economically advantageous tender”—again without spelling out what criteria should come into play.

We will wish to put back in the Bill the language of the Green Paper, which states, for example, in paragraph 89:

“A more sophisticated understanding of different types of value—including social value … wider public policy delivery and whole-life value” and refers in paragraph 100 to delivering

“greater value through a contract in broader qualitative (including social and environmental) terms”.

In paragraph 39, the Green Paper calls for

“a proportionate delivery model assessment before deciding whether to outsource, insource or re-procure a service thorough evidenced based analysis”.

That is wonderful but, again, why is not the option of insourcing confirmed in the Bill? We are all aware of the failure of water privatisation, for example, to deliver the promise that it would bring a surge of additional investment into the sector to clean up England’s rivers and coastlines. It did not lead to that; it generated high profits for its investors instead.

The Bill is very soft on private utilities, in view of their very mixed record in several sectors. It aims, as Minister told us, to reduce the regulatory burden on private utilities and to reduce transparency requirements to “the minimum required” by international trade agreements. The Bill contains a mechanism to exempt utilities in some sectors, such as ports, from procurement regulation. Even Dominic Raab has now discovered that ports are an important part of our national resilience and security structure. I am therefore not sure that exempting them from that level of supervision is desirable.

The Minister is a good populist. I draw his attention to the Survation poll of voters in the red wall seats captured by the Conservatives in 2019, which showed an overwhelming preference for some form of public ownership and management of water, energy supply, public transport, health and social care services. The Government are not giving their voters what they want.

The case for not automatically assuming that private service companies will provide the best outcome is strongest in the provision of personal services and social care, as the MacAlister report has just shown. The report states bluntly:

“Providing care for children should not be based on profit.”

The horrifying stories in today’s Times about the excessive profits made by convicted criminals through managing social care for children reinforce all of that case. Local authorities may often be the most appropriate provider. One of the most absurd and damaging central government decisions on outsourcing was, at the beginning of the pandemic, to put out the test and trace scheme to two large service companies, one of them based in Florida, which had no idea of local geography or conditions, when local public health officers already had the knowledge and contacts to provide a faster and more effective response. The Minister has a distinguished record in local government. I am sure that he does not share the view of some of his ministerial colleagues that central government should always have the main control of everything that goes on.

Briefings on the Bill all refer to ensuring “greater transparency of data”. We have all learned to be sceptical of government promises of transparency, freedom of information, and so on. Here, too, we shall want to ensure that there is active parliamentary oversight.

The briefings we have received from the Local Government Association and the National Council for Voluntary Organisations contain a number of reasoned criticisms and proposals for amendments which I hope the Government will accept to improve the Bill. I particularly noted the NCVO’s reference to the role that some strategic suppliers play in adding SMEs and charities to their promised supply chains but then not following through by giving them contracts—using charities and SMEs as “bid candy”, as I gather is the phrase. A more critical approach to companies that are skilled in drafting sophisticated contracts but not good at delivery is clearly needed but, again, that is more a matter of changing the negotiation of contracts and improving monitoring than of drafting in the Bill.

There are issues of corruption and of preventing undue political influence, which are touched on in Part 5—Clauses 74 to 76—which we will also need to discuss, despite the remarks of the noble Lord, Lord Moylan. I am not entirely sure that I yet understand the concept of dynamic markets, and I should welcome a further briefing on that.

I end where I began: I hope that, as a group of nerds, we can agree to a considerable degree on what needs to be done, that we can manage to put into the Bill a coherent framework for the future of public procurement, and that the Minister will co-operate with us—I thank him very much for the briefings we have already had and look forward to more—in achieving that objective.

Photo of Lord Coaker Lord Coaker Shadow Spokesperson (Defence), Shadow Spokesperson (Home Affairs), Opposition Whip (Lords) 8:30 pm, 25th May 2022

My Lords, I start by thanking the noble Lord, Lord Wallace. It is a privilege to follow him and say that I agree with much of what he had to say and the way he said it. I also thank the Minister for the customary way in which he introduced the Bill and tried to explain the various parts of it—I think the whole House was grateful to him for doing that. The thrust of the debate has shown that most noble Lords are basically in favour of much of the Bill and the direction in which it is going. However, we seek to improve and develop it, and to test what the Government really mean in certain aspects of it. I hope that the Minister will take my remarks in that context.

To the noble Lord, Lord Moylan, I say that I support the Government’s endeavour. I guess that makes the Minister a semi-capitalist, whereas I am a full-blown anti-capitalist in what I am going to say, so I apologise to the noble Lord in advance for that. I hope he will manage to stay in his seat and not get too upset by some of the things I am going to say. It appears to me that, so far as he is concerned, his own Government are treading down a dangerous path—whereas, for me, they are very much treading down a welcome path.

My noble friend Lord Whitty hit the nail on the head when he said that the importance of all this is that law sets the context, the priorities for a Government and the way in which you would wish a Government to act. This is the importance of the Bill before us. As my noble friend Lady Hayman pointed out in her excellent opening speech, this is the opportunity for us as a country—but also for this Government, pushed and supported in many ways by many of us in this House—to actually change direction. I think that is what the country wants. Coming out of the pandemic, the country does not want a return to things as they were and to business as usual. I believe that that is why the Government have done this. Of course, they have been consulting on it, but they mentioned it in the last Queen’s Speech in 2021 and did not do anything. Now they have mentioned it in 2022 and come forward with it—so I think they themselves recognise that there is a need to act. The public want something better, we want something better, and now is the time for us all to move forward.

On the £300 billion-worth of public spending, I would be interested to learn what the actual figure is with the exemptions. If the Minister cannot give it to us now, can he write to us with the actual figure: is it £300 billion or will it be less than that with the exemptions and so on that are included in the Bill? If we accept that figure, £300 billion-worth of public spending can be used to drive forward the sort of country and businesses we want. As many noble Lords in this debate have said, this is the way we can move forward and the direction we can take. Whether it be on labour, climate, levelling up, anti-poverty or anything else, this is a real opportunity for us to change direction. That is what is at the heart of this Second Reading debate: have the Government gone far enough, could they go further and what other steps could they take in order to move forward?

The Government set out six principles in their Green Paper

“the public good, value for money, transparency, integrity, fair treatment of suppliers and non-discrimination”— so it is somewhat disappointing to find that, when we come to the actual Bill, we have four factors and no principles. I think it was the noble and learned Lord, Lord Thomas, who mentioned the importance of Clauses 11 and 12 taken together, where there are objectives but no principles. What we mean by that will be a subject for debate by all of us in Committee. Clause 11 is fundamental to the whole operation of the Bill. What are we going to require businesses to do? What are we going to expect of them? What will the public procurement push them to do?

At some point the Minister will also need to clarify Clause 12 and what the national procurement policy statement will be. My understanding is that the existing one will go and a new one will be produced following the passage of the Bill. I think we need to know what is said on that.

Many noble Lords mentioned the need for us to consider things such as social, environmental and labour clauses. That is why Clause 18 is really important. As the noble Baronesses, Lady Bennett and Lady Parminter, and very powerfully my noble friend Lady Young pointed out, the move from having the most economically advantageous tender to taking out the reference to “economic” and having in its place the “most advantageous tender” gives us the opportunity to include social and environmental issues. As my noble friends Lord Davies and Lord Hendy pointed out, we can look at labour proposals with respect to that and demand certain things of businesses, because that is the sort of model and the sort of change we want.

My noble friend Lord Mendelsohn, from his experience as a businessman, and others pointed out the importance of this for small businesses. What will it mean for them? How will it help them? As the noble Lord, Lord Fox, asked, how will the new digital portal work in a way that gives business access to the sorts of things the Government want? What about the late-payment provisions in the Bill? How will they help? How will it work? There are all sorts of questions to be answered, and obviously we can discuss the details in Committee.

Transparency is everything. You cannot do anything without transparency—without knowing what is happening and what is going on. As my noble friend Lady Young pointed out, we need the data to be able to do that. Otherwise, it will be like the analogy with football—not liking football and not even knowing the result because nobody has given it to you, so you cannot tell who has won or lost.

One of the really important things is how all this will be enforced. In the Green Paper there was a procurement review unit, which has now been downgraded to an “appropriate authority”, with no clarity on what that means. As far as I can understand from reading Part 10, the appropriate authority will be able to make recommendations and conduct an investigation, but there is no way that those recommendations, as a result of any investigation, will be binding. The Minister will correct me if I have this wrong, but if they are not binding, what difference does it make? How will the new appropriate authority that will enforce all these regulations work in practice and ensure that what we intend and want from the Bill actually happens?

How will we ensure that the benefits outlined in the Procurement Bill spill over into defence? Clause 105 deals with single-source contracts, which are worth approaching £10 billion. How will that work? As I understand it, there will be new secondary legislation to deal with that. All the Bill does is to introduce primary legislation to allow changes to be made to secondary legislation, which will deal with the single-source contracts that the Ministry of Defence operates in certain circumstances. I do not understand what difference that will make, and at some point we will need to understand that.

There is a huge problem with defence spending, which has bedevilled the department for a number of years. The noble Baroness, Lady Smith, and my noble friend Lord Hunt spoke about that. To take one example, 29 Ajax vehicles have been delivered to the Government at a cost of £3.5 billion so far. There are more on the way. We are supposed to have 569, which were supposed to have been delivered four or five years ago, so there is a huge problem around this. We need to know how the Procurement Bill will improve defence procurement and all that.

Secondary legislation is a huge problem. Large numbers of regulations are set out in Clause 110, so while we have the principle that we will debate and discuss, much of this will be done by secondary legislation. That will be a real problem because the devil will be in the detail. Indeed, the noble Lord, Lord Stevens, mentioned some of the problems with secondary legislation in respect of this Bill, including how it will interrelate and cross over with the Health and Care Act. He was right to point that out for the benefit of noble Lords.

I want to talk a little about Part 7. The noble Lords, Lord Alton and Lord Wigley, and the noble Baroness, Lady Brinton, all mentioned the importance of procurement in the context of our international obligations. I do not believe that the British public, or the vast majority of decent people, would want anybody to be procuring from companies or countries where there are huge human rights violations. We are all realistic about this. We all know that it is very difficult, but it cannot be right that, where we are absolutely certain that there are human rights violations, it is business as usual. I hope that when we discuss Part 7 with the Minister in Committee, it will become clearer that the requirement for our international obligations to have a greater human rights dimension—in who we procure from and what we procure—is a really important part of the Bill.

In conclusion, we have approximately £300 billion of public expenditure. The days of the lowest-cost rules must be over. That is the demand from the citizens of this country. Other factors can be, and should be, taken into account. The Bill is a huge opportunity and the Government have grasped it, but many of us are going to push them further for a change to how procurement works—to rework it and remake it in a way that reflects modern business practice, the modern economy and the modern society that people want. It is an opportunity that we have to take.

Photo of Lord True Lord True Chair, Intergenerational Fairness and Provision Committee, Minister of State (Cabinet Office), Chair, Intergenerational Fairness and Provision Committee 8:42 pm, 25th May 2022

My Lords, I thank very much all those who have taken part in the debate. Myriad points have been raised from all sides of the House. I never know what the usual channels are deciding, but it is probably a good thing that, as I understand it, we are not going into Committee for some time because I can feel a compendious letter to your Lordships coming on, which might be as long as the Explanatory Notes.

Your Lordships will forgive me if I do not deal with every detailed point; I will try to address some of the main themes of the debate, which were expressed very well by the noble Baroness, Lady Hayman, when she opened and the noble Lords, Lord Coaker and Lord Wallace, in summing up. We will not agree on all these things. Certainly, in some of the speeches from the other side, there was a yearning to impose policies on the private sector—on people outside government. The high-water mark was the speech of the noble Lord, Lord Hendy, which I guess was the counterpoint to the low-water mark—I am not sure there was any water in it at all—of the speech of my noble friend Lord Moylan. To impose your political objectives on a nation, you have to win an election and form a Government. What we need to do—there was great support and great consensus across the House on this—is put together a framework that we could all work with to provide clarity, simplicity and, yes, transparency, which I will come on to, for those seeking to provide to public procurers.

An important speech on defence was made by the noble Baroness, Lady Smith, and the subject was also alluded to by the noble Lord, Lord Coaker. My noble friend Lady Goldie will respond in writing on the points made but, obviously, when we get into Committee, we will be able to address the points.

Points were raised about control, management and remedies. The noble and learned Lord, Lord Thomas, put forward some ideas. We will reflect on those but, basically, the law of the land is the framework; my noble friend was right.

Many noble Lords alluded to Covid-19 procurement. I understand that but we need to look forward. While the debate was going on, I looked this up on my machine and saw that in April 2020 the leader of the Liberal Democrats was calling for all red tape to be swept aside to get PPE. People in other parties were saying the same. Yes, mistakes were made, but when you make mistakes you must learn from them. We are putting together a regime that will deliver more comprehensive transparency requirements, clear requirements on identification, management of conflicts of interest and so on. It is right that we should address those things, but the priority of the Government—indeed, of all of us in all parties—as the pandemic we knew so little about arose, was to save lives. I acknowledge that there are lessons, but I hope that when we look at how the Bill is structured, we will see that we have an improved framework for addressing all aspects of procurement.

The noble Lord, Lord Alton of Liverpool, and others rightly addressed the issue of human rights. We will discuss this in Committee. I had the pleasure of discussing it with the noble Lord before, as he was kind enough to say. Certainly, modern slavery has no place in government supply chains; I affirm that strongly. I accept that the current rules on excluding suppliers linked to modern slavery are too weak. For example, they require the supplier to have been convicted, or for there to have been a breach of international treaties. These rules are not capable of dealing with some of the issues that we see.

We are making explicit provision in the Bill to disregard bids from suppliers known to use forced labour or to perpetuate modern slavery in their supply chain. Authorities will be able to exclude them where there is sufficient evidence; they do not need to have a conviction. We are seeking to respond in this area and no doubt we will be probed further.

One issue raised right from the start by the noble Baroness, Lady Hayman, was that of principles. A lot of people have said that this was in the Green Paper but is not in this Bill. A Green Paper is a basis for consultation and reflection. A Bill is the proposition that the Government put before Parliament and this is the proposition that we are putting before Parliament. The Bill splits the procurement principles into a group of objectives and rules to help contracting parties understand what they are obliged to do. The rules on equal treatment, now termed “same treatment”, in Clause 11(2) and (3) are obligations that set minimum standards in plain English that contracting authorities must follow on treating suppliers in the same way to create a level playing field. Non-discrimination, in the context of the Bill, means discrimination against treaty state suppliers on the grounds of nationality, which is a concept different from non-discrimination in the UK market. The national rules on non-discrimination in the Bill can be found in Clauses 81 to 83.

There were a number of changes to the principles. For example, the procedural transparency obligations in the Bill are complemented by a new information-sharing objective in Clause 11(1)(c), which will provide clarity to contracting authorities on exactly what they need to publish. There is also no need for an objective to maximise competition in procurement processes under the Bill, as procedural obligations start with the use of open and fair competition, unless there are legitimate grounds to dispense with or narrow competition. The most obvious of those would be special cases for direct award.

I acknowledge that transparency has been a key ask for the House. The House expects that transparency will be improved. We believe that the Bill does this. We are extending the scope of publication requirements to include planning and contract performance, in addition to current requirements to publish contract opportunities and contract awards. By implementing the open contracting data standard we will publish data across the public sector so that it can be analysed at contract and category level, and compared internationally. The new regime will also establish obligations on contracting authorities to capture potential conflicts of interest for individuals working on procurement additionally, or mandate the publication of a transparency notice whenever a decision is made to award a contract using a procedure as a direct award. This will all be supplemented by a comprehensive training programme that will be available to contracting authorities, which I will come back to later.

We remain committed to our aim to embed transparency by default through the commercial life cycle. We recognise and make no apology that this new regime seeks to do that. The new central digital platform will be designed to make complying with the new transparency requirements automated and low cost. We intend to make data analysis tools available to contracting authorities, which will ensure that they can use the data available to drive value for money.

Taxpayers have a right to see how public money is spent. There is abundant evidence of public engagement with contracting information, and it increases as the data improves. Because the data will be more comprehensive it will be more valuable and, we believe, better used. I have no doubt that we will be tested on that, but I assure the noble Baroness opposite that it is something we are extremely determined to achieve.

On social objectives, I was asked by a number of noble Lords how the Bill will help with achieving net zero. I accept that the Bill does not include any specific provisions on the Government’s target to achieve net-zero carbon emissions by 2050, but it will require contracting authorities to have regard to national and local priorities as set out in a national procurement policy statement to be published by the Government, and the Wales procurement policy statement to be published by Welsh Ministers. Many noble Lords have given notice that they will want to return to examination of the national procurement policy statement, how it will operate and how it will go forward, but there are statements in there.

Public sector buyers are able to structure their procurements so as to give more weight to bids that create jobs and opportunities for our communities, where this is relevant to the contract being procured. This is absolutely in line with the concept of value for money. Social value in procurement is not about a large corporate’s environmental, social and governance policies but about how the contract can be delivered in such a way that it delivers additional outcomes, such as upskilling prison leavers, which I think someone referred to.

Delivering value for taxpayers should certainly be the key driver behind any decision to award contracts to companies using public money, but again, public sector buyers will have to have regard to the national policy statement. The Bill will take forward a change from “most economically advantageous” to “most advantageous” to reinforce the message that they should take a comprehensive assessment of value for money, including the wider value of benefits, in the evaluation of tenders.

I know that many of your Lordships want to see and have asked for buying British. Public sector procurers are required to determine the most advantageous offer through fair and open competition. We confirmed in December 2020 that below-threshold contracts can now be reserved for UK suppliers and for small suppliers where it is good value for money. This applies to contracts—in those strange figures in the Bill that arise from international treaty—with a value below £138,760 for goods and services, and £5.336 million for construction in central government.

Above those thresholds, we need to act in line with our international obligations. A blanket “Buy British” policy would conflict with the UK’s international obligations to treat suppliers from other countries on an equal footing. The requirement for fair and open competition is a two-way street because it gives UK firms access to other markets. Within the UK, on average, just over 2% of UK contracts by value were awarded directly to foreign suppliers between—

Photo of Lord Fox Lord Fox Liberal Democrat Lords Spokesperson (Business, Energy and Industrial Strategy)

I thank the Minister for giving way. I am confused and I am sure he can help me. Clause 82(1) specifically says:

“A contracting authority may not, in carrying out a procurement, below-threshold procurement or international organisation procurement, discriminate against a treaty state supplier.”

The Minister just said the opposite of that in the case of below-threshold procurement. The Bill is very clear that a below-threshold procurement does not let off the contracting authority from having to give the contract to a treaty state supplier.

Photo of Lord True Lord True Chair, Intergenerational Fairness and Provision Committee, Minister of State (Cabinet Office), Chair, Intergenerational Fairness and Provision Committee

My Lords, I was hoping to make progress and I know that your Lordships would like to conclude these matters. As the noble Lord says, those clauses refer to international treaty obligations. What I was saying was in reference to a contract to let; I was asked very pertinently by the noble Lord, Lord Whitty, for example, about local authorities buying locally, and I repeat what I said: below-threshold contracts can be reserved for suppliers located in a particular geographical area. If international issues arise, that is a different matter. This policy was set out in the Government’s Procurement Policy Note 11/20.

My noble friend Lord Lansley and many others, including the noble Baroness at the start, asked me about innovation. The legislation will put more emphasis on publishing pipelines of upcoming demand, procurement planning and pre-market engagement so that businesses can properly gear up to deliver and offer the best innovative solutions. It will have a new competitive tendering procedure which will enable contracting authorities to design and run procedures that suit these markets. For example, it will allow them to contract with partners to research, develop and eventually buy a new product and service in a single process. The new rules will make it clear that buying innovation does not apply only to buying something brand new but can be about developing an existing product to meet different requirements.

The noble Lord, Lord Stevens, the noble Baroness, Lady Brinton, and others asked about the health service and the relationship with the DHSC. These reforms sit alongside proposals to reform healthcare commissioning which have been enacted through the Health and Care Act. We recognise the need for integration between local authorities and the NHS, both for joint commissioning and integrated provision, and we will work closely with the Department of Health and Social Care.

I repeat: the public procurement provisions will not result in the NHS being privatised. The procurement of clinical healthcare services by NHS bodies will be governed by DHSC legislation and is separate to the proposals in the Bill. However, the non-clinical services, such as professional services or clinical consumables, will remain part of the Bill. Clause 108, which I agree is widely framed as it sits in the Bill, is needed to ensure that it neatly dovetails with any regime created under the Health and Care Act, providing clarity. Obviously, we will have that probed.

Accessibility was another theme that was raised by the noble Lords, Lord Whitty and Lord Fox. The Government remain committed to ensuring that public procurement drives value for money, and that includes better outcomes for disabled people, as it must. The Bill does not dictate how technical specifications may be drawn up, only what is actually prohibited, as set out in Clause 24. However, there is a clear expectation that when contracting authorities set technical specifications for procurement, they do so in a way that takes into account accessibility criteria for disabled persons. Clearly, this is an important matter that requires further consideration, and we commit to doing that.

Training is important, and the training package will be made available in good time for users to prepare for the new regime being implemented. That is why we have committed to six months’ notice before going live, and the training will be rolled out. The Cabinet Office will provide both funded training and written guidance and learning aids, covering the range and depth of knowledge requirements for those operating within the new system. The online learning will be free at the point of access for contracting authorities. The knowledge drops will be freely accessible for all via YouTube, and the written guidance and learnings will also be free and accessible for all via GOV.UK.

The noble Lords, Lord Mendelsohn and Lord Aberdare, asked some pertinent and specific questions about small businesses, and I will certainly make sure that they are answered. This legislation will help SMEs to win contracts for many reasons: bidders will only have to submit their core credentials to the single platform once, for example, making it easier and more efficient to bid. The single transparency platform, or single sign-on, means that suppliers will be able to see all opportunities.

The new concept of dynamic markets, which we will explore, is intended to provide greater opportunity for SMEs to join and win work in the course of a contracting period. The Bill will ensure that subcontractors in chains will also benefit from prompt payment obligations.

There are many other ways in which we intend to help SMEs. The noble Lord, Lord Wigley, asked about the great Principality of Wales. Wales will, as he knows, have the power to publish its own procurement policy statement, in which it can set out its own local priorities for communities. We have worked closely with the Welsh Government to ensure that there is continuity for Welsh contracting authorities. For the first time, Welsh Ministers will be able to regulate the procurement of some goods and services in Wales by some cross-border contracting authorities. But in our judgment, it is right that, where the scope of a procurement extends outside Wales into the rest of the UK, the UK rules should apply.

Publicly funded housing associations would be in scope of the contracting authority definition. However, I am advised that privately funded providers of social housing would not be in scope because they do not meet either the funding or the control requirements. I will write to the noble Lord further about this.

I was going to address points about data collection, but—

Photo of Lord True Lord True Chair, Intergenerational Fairness and Provision Committee, Minister of State (Cabinet Office), Chair, Intergenerational Fairness and Provision Committee

I will indeed write a letter. It is very helpful to have my noble friend write my speeches for me.

I will answer other points but, to conclude, I thank noble Lords for their extremely intelligent, thoughtful and well-considered remarks, which the Government will consider in Committee. Our proposals have been consulted on extensively and we believe that they are common sense, but we can always gain from listening to your Lordships. In that spirit, I hope that your Lordships will support these proposals as they progress through the House.

Photo of Lord Wallace of Saltaire Lord Wallace of Saltaire Liberal Democrat Lords Spokesperson (Cabinet Office)

I do not want to detain the House, but, since my noble friend Lord Strasburger made some serious points about a major contract, could the Minister possibly say that he will undertake to meet him and others to respond to some of the points he made?

Photo of Lord True Lord True Chair, Intergenerational Fairness and Provision Committee, Minister of State (Cabinet Office), Chair, Intergenerational Fairness and Provision Committee

The noble Lord made a speech that went wide of the Bill. I will look at what he said in Hansard and respond thereafter. I make no commitment at this point.

Bill read a second time and committed to a Grand Committee.