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The Minister for Civil Society (Mr Rob Wilson)
I am very grateful to my hon. Friend the Member for South West Devon (Mr Streeter) for initiating the debate. He is a great champion of his constituents and of Devon, but also of the wider south-west region. This debate is evidence of that fact. I will start with general comments and then move on to the specific issues that he raised.
Changing and improving the way in which the public sector spends money on goods and services has been a Government priority since 2010. We have brought about unprecedented and comprehensive reform across all areas of procurement and will continue to do so, making Whitehall leaner and more efficient, so that Britain can compete in a global sense. Through our rigorous commercial reform programme, stripping out waste and buying more goods and services centrally, we have made the way in which we do business in central Government quicker, more competitive, more transparent, better value and far simpler than ever before. Those commercial reforms, combined with a baseline of spend in 2009-10, have created savings of £2.9 billion in 2010-11, £3 billion in 2011-12, £3.8 billion in 2012-13, and £5.4 billion in 2013-14.
To be regarded as a global competitor, Britain must ensure that the right investment is made in national infrastructure, with a focused investment in skills, technology and efficiency initiatives that help businesses to operate and expand in a global economy. The construction industry underpins the growth of this sector and facilitates future prosperity. We are reforming public construction enterprises to make them more efficient, collaborative, innovative and competitive, both at home and abroad, ensuring that the money that we spend boosts Britain’s competitiveness and delivers greater social mobility.
We are rebalancing the economy to achieve strong, lasting growth and widely shared prosperity. The Government construction strategy is about cutting waste and reforming our procurement processes, and reinvesting the savings that we make in more progressive ventures that stimulate the economy, ensuring liquidity of all businesses, big and small. It gives us a competitive advantage, underpins economic growth and generates higher-quality jobs.
We are backing the industries of the future and making Britain a great place to do business. The construction pipeline will provide more than £127 billion of strategic investment opportunities for businesses from this year onwards—a significant boost to economic growth in the sector. Government and industry are working together to create strong communities and to support local and national economies, investing in world-class, functional public buildings and spaces and inspiring businesses to grow.
Let me turn to the south-west. I can assure my hon. Friend that the Government are fully committed to a flourishing and prosperous south-west. Last month, my right hon. Friend the Chancellor of the Exchequer set out the Government’s long-term economic plan for the region. In delivering it, we will increase regional productivity, create more jobs and improve road, rail and digital communications infrastructure. My hon. Friend gave a couple of examples of where we are doing that, including the tunnel under Stonehenge and some of the rail improvements that will ensure a better rail service to the south-west in due course. The Government are therefore actively reforming procurement, encouraging construction and promoting regional growth, all of which is good news for companies in the south-west. Nevertheless, we recognise there is still a lot more we can do.
I am grateful to my hon. Friend for his three comments about the procurement activity undertaken by the EFA as part of its regional framework in the south-west, and I would like to deal briefly with each in turn. The first was about tenderers being selected on the basis of not the cheapest tender, but being closest to the average of the tenders. I understand from EFA officials that tenderers were selected on more complex price grounds than those mentioned by my hon. Friend, and I would be happy to share with him separately details of the methodologies used. I can assure him, however, that the approach adopted was meant to ensure a level playing field for suppliers by preventing larger companies from artificially deflating prices in their initial bid and then squeezing subcontractors in the supply chain. Contracts awarded under the framework follow a mini-competition to ensure that best value for money is achieved.
My hon. Friend asked about the procurement process, so let me briefly outline it for him. Public procurement rules apply to public purchases above defined thresholds and require those purchase opportunities to be advertised across Europe. In October 2013, the EFA advertised a prior information notice in the Official Journal of the European Union. Bidder days were then held to explain the tendering process to interested applicants. Interested firms were required to provide submissions by completing a pre-qualification questionnaire consistent with the Government’s publicly available specification 91 format. Following their submission, the PQQs were evaluated according to the published selection criteria. Shortlisted bidders were then invited to tender. I hope that gives my hon. Friend confidence that the proper process was followed in this case.
David Simpson
The Minister’s last comments were about as clear as mud, but I understand that that is what was on the paper he was given. I do not doubt for one minute the Government’s sincere objectives in this procurement process, but what is happening on the ground is totally different from what he has just said about procedures preventing subcontractors from being squeezed. Subcontractors are being squeezed, and that is why we need to look at what is happening down at the coal face.
Mr Wilson
I thank the hon. Gentleman for raising that issue. If what he says is the case, we will certainly look at it. The second point my hon. Friend the Member for South West Devon raised was that there are no local companies in the framework, despite there being substantial companies in the south-west.
Mr Streeter
Before my hon. Friend moves on, will he deal with the issue of tenders being judged on whether they are closest to the average price, rather than the lowest price, once they have got over the quality threshold? He said that I may have misunderstood the methodology, which is very complex, and that he is prepared to share it with me. However, for the purposes of the debate, will he tell me whether I am wrong about how the tenders are judged, or whether that is part of the process?
Mr Wilson
If my hon. Friend will allow me, I will come to that. To return to the previous intervention, however, where there is poor practice in the system and companies are being squeezed, we have a mystery shopper system, which will investigate cases thoroughly. [Interruption.] It is indeed called a mystery shopper system, which is probably mystifying everybody. By and large, it has yielded significant results for those who have made complaints.
As a contracting authority for the purposes of the applicable legislation—the Public Contracts Regulations 2006, which were introduced by the previous Labour Government—the EFA is bound by requirements of objectivity and non-discrimination. Those extend to a duty not to extend preferential treatment purely on the grounds of a bidder’s geographic location at the time of submitting a tender. EFA officials have assured me that robust and effective selection criteria were applied in the exercise we are discussing. They have also assured me that, in line with legal requirements, the evaluation criteria to be applied were shared openly with all the bidders.
It is important to remember that the largest part of procurement spend in the construction industry is with subcontractors, the majority of whom will be local suppliers. My hon. Friend tried to block that avenue off for me, but the evidence is that subcontractors are local in most cases. If he is telling me that local subcontractors are not being used in the south-west, I will ask my officials to look at what is happening there, but this does not seem to be the case in other areas. The French company that is one of the seven companies on the EFA’s list bought out Leadbitter, a UK company active in the south-west, although I am not sure of the full details of the purchase.
Lisa Nandy
If the Minister has any figures about subcontractors, it would be helpful to all of us to see them—perhaps at a later date, if he does not have them to hand. However, I would be grateful if he addressed my point about the power imbalance between subcontractors and contractors. Does the Cabinet Office have plans to make sure that, even where local or regional companies are not granted the primary contract, local subcontractors can still take part in the process without detriment?
Mr Wilson
As I said, where there is an imbalance, and subcontractors providing a service to the main contractor are being, for want of a better word, abused, we have the mystery shopper system, which will thoroughly investigate any abuses. Where it has investigated complaints on behalf of individual organisations and it has found problems, it has taken actions that those organisations have found very useful. Most of these concerns can, therefore, be sorted out on the ground while contracts are being supplied.
The third point made by my hon. Friend the Member for South West Devon was that the seven firms include three foreign firms, including the French one I have just mentioned. Public sector procurers are required to seek value for money through fair and open competition. Through our membership of the European Union, and because we are a signatory to international agreements, our contracting authorities are required to place suppliers from Europe and various other countries on an equal footing with UK suppliers. That is a two-way street, as it gives our suppliers access to public procurement markets overseas, maximising value for money for the UK taxpayer, while ensuring that UK companies are able to compete abroad.
The Government want UK companies to be successful in public procurement. The best way to bring that about is for those companies to offer the goods and services we need at quality levels and for whole-life costs representing value for money. To that end, the Government are seeking to ensure that their large-scale purchasing power supports the task of boosting growth and enables us actively to shape the UK market for the long term. To place a value on a bid based on the geographical origin of the bidder would be contrary to the single market.
All the same, the Government understand the importance of a long-term approach to supporting UK business and aligning activity to deliver that. As part of the work, several areas where Government action can have an early impact have been identified. They are sectors, technologies, access to finance, skills and procurement. Strategies for 11 key sectors, including construction, are being developed in partnership with business. I should also point out that use of the Education Funding Agency regional framework is not mandatory. I am aware of two other construction frameworks for the south-west. Construction Framework South West, managed by Devon county council, has 11 suppliers, nine of which are British, including Midas. South West Consultancy Framework, managed by Torbay council, has seven suppliers, of which six are British.
The Government are committed to increasing opportunities for suppliers of all sizes to bid for work successfully through the procurement reforms, which also secure value for money for the British taxpayer.
Mr Streeter
Have the Minister’s officials been able to provide him with a list of British companies that have won contracts in France when the funding has come from the French Government?
Mr Wilson
Before the debate, I had not been given any such list, but during it I have been given some information; I think it has been provided from memory, and we should do some research and send that to my hon. Friend. I understand that a company based in west Cumbria just won a £1 million contract in France. We are not quite clear about whether that was Government-funded. I think the best thing would be for me to write to my hon. Friend.