‘(1) If a relevant authority proposes to procure or make arrangements for procuring the provision of services, or the provision of services together with the purchase or hire of goods or the carrying out of works, by—
(a) entering into a public services contract that is not a contract based on a framework agreement, or
(b) concluding a framework agreement as regards which public services contracts are likely to constitute the greater part by value of the contracts based on the agreement, it must comply with the requirements in subsections (2), (3) and (4) before starting the process of procurement.
(1A) The authority is to be treated for the purposes of subsection (1) as having started the process of procurement as regards what is proposed to be procured as soon as it takes whichever of the following steps is the first to occur—
(a) sending a notice to the Official Journal of the European Union for the purpose of inviting tenders, requests to be selected to tender or to negotiate or requests to participate in relation to a public services contract or framework agreement relating to what is proposed to be procured;
(b) publishing an advertisement seeking offers or expressions of interest in relation to such a contract or framework agreement;
(c) contacting a person in order to seek an offer or expression of interest in relation to such a contract or framework agreement;
(d) contacting a person in order to respond to an unsolicited offer or expression of interest in relation to such a contract or framework agreement;
(e) entering into such a contract or concluding such a framework agreement.’.
As the Bill’s sponsor, my hon. Friend the Member for Warwick and Leamington, flagged up, amendment 3 will limit the Bill’s scope to include only public services, thereby removing contracts for goods and contracts for work from its scope. It will also limit its scope to the pre-procurement stage of the commissioning process where—this is the critical point—we believe there is most scope for taking account of those issues. Again, we are trying to focus on where we think it can make most difference. For example, we believe that in a contract for care services for the elderly, consideration of the full social, environmental and economic value through consultation with service users and the market would lead to better specification, which in turn should lead to better value for money through more tailored services. The amendment would also clarify how framework agreements should be treated in relation to the Bill.
By focusing on services, the legislation rightly focuses on the types of contract with the greatest direct impact on individuals and communities, and consequently where wider value is likely to be most relevant. I stress that it is not the Government’s intention to suggest that there would not be benefits in considering wider value in other forms of contract, but we do not believe that they warrant legislation at this time.
Again, I believe that this issue significantly dilutes the Bill’s original intention, which is to try to maximise social value. Limiting contracts to services will miss out on the whole range of public contracts covering purchasing goods. All the evidence that we have drawn out is that spending money locally provides seven times the impact of spending it in other areas, so the purchase of goods by public authorities can have a tremendous effect on the local supply chain and local economies. Why is the Minister deliberately removing an opportunity to enhance local economies through purchasing goods?
I take the right hon. Lady’s point, and return to the point that I tried to establish at the start of my comments about trying to strike a proper balance between our objective to encourage more commissioners to think about wider values, such as social and environmental values, in their considerations, and our determination to try to streamline the process and to reduce the number of additional duties on commissioners. It is a balancing act, and this is where we have got to in terms of trying to find that balance. We do not believe that we have necessarily done that in the Bill; we are focusing on where we think we can make most impact.
That leads me to my next remarks, which are designed to be helpful in relation to definitions, particularly when there is a blend of goods and services. We are not saying there would not be benefits in considering wider value in other forms of contract, and there may not be much standing in the way of commissioners who want to apply that at the moment. But in terms of definition, we propose the following approach if a contract is for services and goods, or for services and works.
If a contract is for both goods and services, it shall be considered to be a public services contract if the value for consideration attributable to those services exceeds that of the goods covered by the contract, otherwise the contract should be considered to be a contract for goods. If a contract is for both works and services, it should be considered to be a public services contract if the works element of the contract is only incidental to its principal object. Otherwise the contract will be treated as a contract for works.
I am concerned that that is simply a recipe for confusion and challenge. I used to run such organisations, so I have a real-life example. We supplied publications—published material—on the social security system. The books were clearly goods, but the information, arguably, was a service. It would have been absolutely impossible for us to disentangle the value of the books and the knowledge when we priced up the contract. Does the Minister not feel that it is a recipe for confusion and difficulty? How does he see that being resolved?
I do not necessarily see that. At the end of the day, and underlying this whole legislation, is a large amount of discretion at the local level to apply this, because the legislation imposes a duty on commissioners to consider social and environmental aspects, where they consider it to be relevant and proportionate. The Bill rightly leaves a fair amount of discretion at a local level. We are trying to focus the legislation on where it will make most impact. We think that that will be on public services, rather than goods or contracts. Where there is a blend, I have given some indication of what we think is the right approach, but there will still be a fair amount of discretion at a local level to sort this out.
Perhaps I can pursue this matter a little further with the Minister. He is aware of a social enterprise in my constituency, because he has had the pleasure of meeting Aileen McDonald from B4Box. She provides construction services and refurbishments while at the same time employing people who have had a difficult employment history and perhaps have not worked for a long time. In the process of doing her construction work, she provides employment opportunities and services. My concern is that when the Minister says that there is discretion for local authorities, does that mean that they are protected if they choose to go down the social value route, even if they are a provider of goods and services? I am concerned that some authorities will feel exposed.
I am extremely grateful to the right hon. Lady for introducing me to Aileen. She is an incredible force. What she is doing is entirely right and it is very impressive how she is executing it. We want to encourage more of what she is doing and proposing. It is intelligent commissioning, which is exactly what we want to support. That she is managing to do it and creating space for herself to do it suggests that there is not necessarily a block to what she is trying to achieve. I stress that we are on a journey. We are proposing through these amendments what is achievable today in striking the right balance. Is it the end of the story? No, I do not think so.
My right hon. Friend has hit on a particular issue. I recognise that the Minister will want to press his amendments, but will he give the Committee an assurance that he will go back and look in more detail at that point and bring forward further amendments, if need be, on Report?
I am always happy to consider helpful suggestions from all parts of the Committee. The important point, which comes back to my opening remarks, is that there is a duty on us as legislators to ensure that whatever we put on the statute book is as clear and as easy to implement as possible for commissioners, who are doing an incredibly difficult job. I take on board the right hon. Lady’s point, although I do not think that it will move the Government’s position substantively on our desire to limit the scope of the Bill to include public services only, because that is where there is the most scope and the greatest direct impact on individuals.
The focus on the pre-procurement stage will mean that resulting contracts are awarded on the basis of a more thorough understanding of needs and on intelligently designed specifications that aim to maximise the value of what they achieve. The amendment is in keeping with announcements made by the Prime Minister and Cabinet Office Ministers about simplifying the procurement process and driving the use of more outcome-based specifications. The amendment also clarifies that the Bill applies to setting up the framework agreement but not to individual call-offs, because call-offs must be let in accordance with the terms of the framework agreement.
Amendments 4 to 17 clarify how the duty will work in practice. Amendment 4 provides that commissioners should consider not only improving the economic, environmental and social well-being of the service procured but how the procurement process itself may be improved. For example, pre-procurement consultation may clarify social or environmental aspects of the service that can then be reflected in the specification. I am sure Members would agree that effective consultation can lead to less bureaucratic procurement processes, which in turn will lead to responses from a greater range of suppliers and so drive value for money.
Amendment 8, which is another technical amendment, includes a provision for urgent need. It recognises that the duties in the Bill should not impede commissioning in urgent circumstances. However, proposed subsection (4B) in clause 3 will ensure that short time scales or delays caused by the contracting authority do not count towards urgent need, which means that foreseeable delays are not covered.
Amendment 12 clarifies the application of the Bill in relation to Wales.
I will give way to the hon. Gentleman if he is happy to let me finish my remarks first.
After much—I stress, much—discussion with the Welsh Assembly Government, it was agreed that the Bill will apply only to the non-devolved functions exercised by Welsh contracting authorities. Amendment 12 clarifies that authorities in Wales that exercise wholly or mainly devolved functions are excluded from the Bill. That more pragmatic approach for Welsh authorities will ensure that individual commissioning authorities do not have to consider, case by case, whether the Bill applies to them.
The fundamental point is that Welsh bodies can basically ignore the Bill. We have had long discussions with the Welsh authorities, and we have reached a decent position. I am happy to write to the hon. Gentleman with a fuller explanation, but we have got to a sensible place with the Welsh Assembly.
The other amendments are mainly technical. Amendments 19 and 20, which provide technical points of clarification, are necessary to ensure that the commencement of the Bill gives authorities an appropriate lead-in time to implement its provisions.
The new clause, which is also a technical clarification, will ensure that, in the unlikely event of there being any overlap with the Local Government Act 1988, the Bill will take precedence. That would happen if, for instance, under the 1988 Act, local authorities were precluded from considering non-commercial aspects, such as the provision of training in a service contract. In such a case of conflict, the Bill will take precedence over such restrictions to ensure that, as intended, local authorities can consider the full economic, social and environmental value.
Amendment 22 is another technical clarification to ensure that the long title is in line with the amended content of the Bill.
I rise not to oppose the amendments, but to reflect on the debate. I urge the Minister to reconsider the deletion of goods, and I say gently to him that he has not defined for the Committee how he arrived at the balance in his mind on that issue. Perhaps he will provide more clarity on the Government’s thought process by letter if he does not want to do so in his response. The last thing that Opposition Members—and Government Members, too, I suspect—want to see is confusion. That would lead to bureaucratic delays, and legal bills would be incurred by social enterprises and, in these financial times, by public procurement authorities, too. More clarity would be helpful.
This intervention is designed to be helpful. It is important to clarify how the Bill interacts with the best value duty placed on local authorities by the Secretary of State for Communities and Local Government, which relates to an earlier intervention. That duty, as the hon. Gentleman well knows, requires local authorities to consider value, including social value, on all contracts, services, goods and works throughout the procurement process on contracts of any value.
The Bill places a duty on all commissioners in all contracting authorities to consider how to improve social, economic and environmental well-being in services-only contracts that are at the pre-procurement stage, with contract values only above the EU procurement threshold. I want to help by placing on record how the Bill sits with the very important best value guidance delivered to local authorities by the Secretary of State.
I am grateful for the Minister’s intervention. As I have said, we will reflect on the comments that he has made, and I hope that he will continue to consider the concerns of my right hon. Friend the Member for Salford and Eccles and her neighbour, my hon. Friend the Member for Stretford and Urmston.
Will the Minister clarify how the changes to clause 3 might resolve some of the difficulties that have been thrown up by the Work programme’s procurement process? He will know about the concerns that the National Council for Voluntary Organisations has articulated, having had a considerable consultation process with a series of civil society organisations that wanted to get involved in the Work programme. People feel that the prime—framework—contract has, with one or two exceptions, gone to private sector rather than civil society organisations. The key concern is that the size, complexity and model of financing have excluded many CSOs from bidding.
The NCVO made a striking comment about a further barrier. Some of the subcontractors are prevented from entering the Work programme because of the overly bureaucratic processes adopted by primes—private sector organisations, in the main—which cannot be good. One assumes that such organisations had not intended for that to be the situation. When CSOs have had to fill in documentation of more than 140 pages, in some cases, and still have not gained any contracts as a result, one wonders whether the Work programme needs substantial reform. If the Minister thinks that the clause will have no impact on improving the Work programme, can he tell the Committee what will do so? Such improvement is needed so that CSOs can have a strong role in that process, as was the Government’s intent.
Order. Before I call the next speaker, it might be helpful if I tell hon. Members that I hope to complete the Committee’s business by 11.25 am. I have discretion to extend that if necessary, after which, if business is still not completed, we will have to adjourn and reconvene on another day, which the Committee might not be enthusiastic about.
I think that we are all keen to make progress with the Bill and get on with it.
I have a few questions for the Minister. The area of procurement has been fraught with difficulty and confusion. Many very good local authorities have faced legal challenge from a range of competing contractors because they have not had full confidence in the procurement process. I want to ensure that the Minister’s amendments send out a clear message to local government that they are entitled to take into account issues other than the lowest price and that they can look at social, economic and environmental well-being, as the Bill intends.
Many of us will know that the European rules have often been cited as the reason why it is not possible to take into account anything other than the lowest tender. Yet other European countries, as I am afraid is often the case with regulations, have not felt as constrained by such regulations and have therefore awarded contracts to local suppliers and companies, and have been able to get the benefit of massive procurement, whereas in this country, because we always play by the rules—or what we think are the rules—we have often missed out on getting that local supply chain, and local labour and investment, which can really help our local economies to thrive.
I want the Minister’s robust reassurance that if local authorities go down the route of prioritising within their framework agreements and contracting process the companies that provide social value—as in the example I cited earlier, taking on unemployed people, giving them a chance to work, getting them in a position where they are paying taxes and national insurance rather than receiving unemployment benefit—that could be a legitimate consideration in awarding contracts for goods and services. Unless there is a positive, robust message that goes out, we will end up being back where we started, with local authorities feeling afraid to use the muscle of their procurement process to get the transformational effect that the hon. Member for Warwick and Leamington wants. I would welcome the Minister’s confirmation that it is legitimate to prioritise organisations that can evidence social, economic and environmental well-being.
The Bill states that the factors taken into account by local authorities must be relevant and proportionate to the goods and services being procured. Perhaps the Minister could give, on the record, examples of the kind of things that can be taken into account—not and exhaustive and exclusive list—because it would be helpful to people reading the transcript of proceedings to know the strength of the Government’s intent and that we are not fiddling round the edges and tweaking a little bit of regulation, but are genuinely embarked on a transformational effect in the procurement process.
I also want to ask how we evidence the social value that we are trying to procure. Like social enterprise, it is an evolving field and there are many different ways of measuring social value. There is social return on investment, which is a transactional, numerical way of measuring and does not necessarily get to the heart of real change. There is an organisation in Manchester—also working in Salford—called Connectives, in which two young women accountants who have specialised in social accounting are now beginning to evaluate the accounts of social enterprises. It is an in-depth assessment process and one of the best I have seen. It actually gets under the skin of what social value really is.
The idea of simply having a numerical analysis will not achieve what the Minister wants to achieve, which is a much more textural analysis of the impact on jobs, but also of the well-being element of the Bill. It can be a nebulous concept, and there is a lot of work to be done on what tools we are going to give local authorities to help them with intelligent commissioning. Some authorities are well developed. We have the co-op councils and Councillor Steve Reed in Lambeth and all his colleagues in Rochdale. There are 50 authorities now in the co-operative network that are exploring this. Manchester City council has recently recommissioned the whole of its youth service—very intelligent commissioning—from the bottom up. At Salford council, we have a range of social enterprises in the health and employment sector. Some councils are really good, but the Minister must acknowledge that some councils will be starting from scratch. They need to be given real tools— not meaningless strategies—to be able to do the job, and sufficient reassurance that they will not be exposed to a legal claim from an unsuccessful bidder because they have taken into account things other than price, quality, time and the bottom line. The Minister owes it to us to put some flesh on the bones in this debate so that it is not a purely transactional process but people understand the commitment that is behind it.
I echo the point that my hon. Friend the Member for Harrow West has made that we are talking about local authorities, because Government and other quasi-public organisations carry out a huge amount of public procurement. In my constituency, for example, the BBC’s MediaCityUK has done a fabulous job of getting local labour. It has worked tremendously hard with the local authority and local companies, and twice as much local labour as we had for the Olympics has been involved in building MediaCityUK, which has had a tremendous effect on our local economy. That BBC money is public money, but unfortunately it will not be covered under the terms of the Bill. We are missing out by constraining ourselves so much when we could have had more of an impact.
The Work programme is a huge problem. In Greater Manchester the three big Work programme contracts have gone to organisations in Newcastle, Leeds and Birmingham, and the small organisations, which I strongly hoped would be involved, have been squeezed out of the process. They say that by the time the money comes out of the main contractors there is nothing left to trickle down to small social enterprises, which are often best placed to get people into work. Such enterprises will send people to go and knock on doors on the estate; they are not big private sector organisations.
There is a danger that the principle to which we are all signed up, which we are passionate about, will be undermined unless there is a sufficient push. I recognise the Minister’s difficulties across Government, with the practicalities and with the economic situation, but if the Government are committed to their coalition statement that they want to develop this sector they will have to be more robust in giving a lead to public sector organisations. Such organisations look to Government for a lead and for legislation that drives transformational change.
I would welcome the Minister’s confirmation on the points that I have raised. I would also welcome a sense that he is not simply fighting a lone battle in the Cabinet Office. The proposal does not have a strategy and it does not have any levers across Government; where will the Minister get the power, which will be shared by all his Whitehall partners, to make this happen?
There has been a lot of discussion about the Work programme, and I am not sure that this is the most appropriate place for an extensive debate on it. It is a large piece of contracting, however, and in many ways it tests some of the values and principles that we are debating. Our aims through the Work programme are entirely consistent with what the previous Administration were trying to achieve. The scheme is ambitious; it is the largest contracting on a payment-by-results basis anywhere. It involves contracting at scale, but there is an explicit desire to engage smaller providers and the not-for-profit sector in that process. It is the start of the journey.
Personally, I was delighted to see two prime contractors from the sector, and I would be more than happy to see at least 300 organisations in the supply chain. Not everyone can be winners in that process, and many organisations in my constituency are frustrated. That’s life, but the Government have made a commitment to ensure that the prime contractors in that process do not, in the words of the Minister of State, Department for Work and Pensions, my right hon. Friend the Member for Epsom and Ewell (Chris Grayling), “duff up” their supply chain. My right hon. Friend has said clearly that he is prepared to re-examine contracts where there is hard evidence of that happening. I am working closely with him to examine the evidence on the ground and working closely with strategic partners to mine that evidence to find out what is happening as people start to flow through the system. It is a little premature to make judgments on that but the Government are examining it extremely carefully, not least in the light of the commitments that they have made.
The Merlin standard was negotiated as a framework for handling relationships in such contracts, and the Government are working hard through the formation of Big Society Capital to create an environment with a growing market for social methods to make it easier for social enterprises and charities to access the working capital that they will need to compete effectively for long-term payment-by-results contracts. The Work programme is work in progress and it is too early to say conclusively that there is a major problem with it, but the Government are monitoring it extremely carefully.
With respect, and in light of the strictures of the Chair, I prefer to move on from the Work programme.
I have a lot of sympathy with the comments of the right hon. Member for Salford and Eccles. The Bill and the best value duty, the importance of which the Committee has underestimated, together send a strong signal to local commissioners about the Government’s desire to encourage consideration of wider social, economic and environment well-being when contracting. In my earlier intervention, I tried to make it clear how the best value duty and the Bill fit together to send an extremely strong signal to contracting authorities, in a way that is entirely consistent with EU procurement law. The right hon. Lady made an important point, however, about the need to support commissioners in that process—they are human beings doing an extremely difficult job in an atmosphere of a tremendous amount of change and fewer resources. She has surely spoken, as I have done, to many commissioners who are trying to do the right thing and to be imaginative leaders, and when one listens to them one realises how difficult their world is.
The shadow Minister says that that is why we need a strategy but, again, that might reflect the Labour approach to life: some document issued from central Government can, somehow, suddenly transform a situation. We are talking about a culture change, and about making people comfortable with doing things in a different way. The thought that some strategy document from central Government will change that is, frankly, for the birds. The reason why such interventions have not worked before is precisely the point made by the right hon. Lady: what is the actual human support given to commissioners who want to do things in different ways? It is not enough to write White Papers or even legislation and think, “That’s sorted”, because it is not. That was the mistake made in the past.
We are therefore looking actively at a number of issues, such as social value. Again, that is one of those phrases, but what does it mean? We are doing a lot of work with partners in the sector and having a discussion in a granular, sub-sector way on action and to ask what we mean by “social value” in the scheme. What should we be measuring? How do we make it as easy as possible to measure? How do we achieve the relevant consensus among commissioner, providers of money and the suppliers of services, so that we make it as easy as possible? What can we do to send clearer information to commissioners and to those providing services about what is possible within the law? The right hon. Lady mentioned European procurement law, which is often used as a smoke screen, and we need to puncture a few myths on that and to make it clearer about what is possible and what is not.
I talked earlier about the need to find the leadership and the best practice and to spread it. That will be at the heart of what we are doing in our new commissioner support programme, on which we are consulting. We have some resources to invest in the area because it is absolutely necessary to support those human beings and to provide them with the inspiration and information that they need.
Sitting behind all that is something that has not been mentioned at all but is to do with the signals to commissioners about the sincerity of the Government’s determination in the area: in the Localism Bill is the right to challenge, which is being defined now through a process of consulting on the regulations. The creation of a new right for local communities, social enterprises or voluntary groups to challenge existing provision, armed with much more information in a new area of transparency about what is being done in their name, is a powerful challenge to the status quo. It is radical—if we get it right.
I sincerely believe that through a combination of the legislation, the best value duty, the right to challenge and all our work to support at a human level the people who we want to be a little bolder and braver in doing new things, we are sending a strong signal to the system that we want change and transformation. We should not underestimate the culture change that we are talking about, nor imagine that some sort of strategy document will change it. We are on a journey, and it will take some time. On that basis, I close my remarks and recommend the amendments.
Amendments made: 4, in clause 3, page 2, line 34, leave out from ‘consider’ to end of line 36 and insert ‘—
(a) how what is proposed to be procured might improve the economic, social and environmental well-being of the relevant area, and
(b) how, in conducting the process of procurement, it might act with a view to securing that improvement.’.
Amendment 5, in clause 3, page 2, line 36, at end insert—
‘(2A) In subsection (2) “the relevant area” means the area consisting of the area or areas of the one or more relevant authorities on whose behalf a public services contract is, or contracts based on a framework agreement are, intended to be made.
(2B) For the purposes of subsection (2A) the area of a relevant authority is an area consisting of the area or areas by reference to which the authority primarily exercises its functions, disregarding any areas outside the United Kingdom.’.
Amendment 6, in clause 3, page 2, line 37, leave out from ‘subsection’ to ‘must’ in line 38 and insert
‘(2)(b) only matters that are relevant to what is proposed to be procured and, in doing so,’.
Amendment 7, in clause 3, page 2, line 41, leave out from ‘to’ to end of line 42 and insert
‘undertake any consultation as to the matters that fall to be considered under subsection (2).’.
Amendment 8, in clause 3, page 2, line 42, at end insert—
‘(4A) If an urgent need to arrange the procurement in question makes it impractical to comply with the requirements in subsections (2), (3) and (4) before the time indicated by subsection (1), a relevant authority may disregard the requirements to the extent that it is not practical to comply with them.
(4B) Subsection (4A) does not apply to the extent that the time available is reduced by undue delay on the part of the authority after this section has come into force.’.
Amendment 9, in clause 3, page 2, line 42, at end insert—
‘( ) Failure to comply with subsection (1), (2), (3) or (4) does not affect the validity of anything done in order to comply with the Regulations.’.
Amendment 10, in clause 3, page 2, line 43, leave out subsections (5) and (6).
Amendment 11, in clause 3, page 3, line 6, leave out subsection (7).
Amendment 12, in clause 3, page 3, line 10, leave out subsections (8) to (10) and insert—
‘(8A) The following are not required to comply with subsections (1), (2), (3) and (4)—
(a) the Welsh Ministers;
(b) the First Minister for Wales;
(c) the Counsel General to the Welsh Assembly Government;
(d) the National Assembly for Wales Commission;
(e) a relevant authority whose functions are wholly or mainly Welsh devolved functions.
(8B) For the purposes of subsection (8A) a function of a relevant authority is a Welsh devolved function if—
(a) provision conferring or imposing that function upon the authority is within the legislative competence of the National Assembly for Wales, or
(b) provision conferring or imposing that function upon the authority is made by the Welsh Ministers.’.
Amendment 13, in clause 3, page 3, line 32, at end insert—
‘( ) This section has effect in relation to a relevant authority’s proposed procurement or arrangements for procurement only if the public services contract or framework agreement in contemplation is such that the Regulations would have effect in relation to it.’.
Amendment 14, in clause 3, page 3, line 32, at end insert—
‘( ) If anything done before the commencement of this section would to any extent have satisfied the requirements in subsections (1), (2), (3) and (4) if done after that commencement, the requirements are to that extent to be treated as satisfied.’.
Amendment 15, in clause 3, page 3, line 33, at end insert—
‘“framework agreement” has the same meaning as in the Regulations, and a reference to a contract based on a framework agreement is a reference to a contract entered into on terms established by such an arrangement;
“public services contract” has the same meaning as in the Regulations (and includes a contract that is treated as being a public services contract by the Regulations);’.
Amendment 16, in clause 3, page 3, leave out lines 34 and 35.
Amendment 17, in clause 3, page 3, line 36, leave out from ‘(S.I. 2006/5)’ to end of line 38 and insert
‘, or any regulations replacing those regulations, as from time to time amended;’.—(Mr Hurd.)