Monday 4th July 2022
(2 years, 5 months ago)
Grand CommitteeProcurement Act 2023 View all Procurement Act 2023 Debates Read Hansard Text Amendment Paper: HL Bill 4-II Second marshalled list for Grand Committee - (4 Jul 2022)
“Procurement and covered procurement
(1) In this Act—(a) “procurement” means the award, entry into and management of a contract;(b) “covered procurement” means the award, entry into and management of a public contract.(2) In this Act, a reference to a procurement or covered procurement includes a reference to—(a) any step taken for the purpose of awarding, entering into or managing the contract;(b) a part of the procurement;(c) termination of the procurement before award.(3) In this Act, a reference to a contracting authority carrying out a procurement is a reference to a contracting authority carrying out a procurement—(a) on its own behalf, including where it acts jointly with or through another person other than a centralised procurement authority, and(b) if the contracting authority is a centralised procurement authority—(i) for or on behalf of another contracting authority, or(ii) for the purpose of the supply of goods, services or works to another contracting authority.(4) In this Act, “centralised procurement authority” means a contracting authority that is in the business of carrying out procurement for or on behalf of, or for the purpose of the supply of goods, services or works to, other contracting authorities.”
The Minister of State, Cabinet Office (Lord True) (Con)
My Lords, in moving Amendment 1 I will speak to the first group of amendments. Before so doing, I give notice to the Committee that Amendment 528—which I discovered only this morning had been grouped with this group, but which refers to matters relating to the health service—has been degrouped, because it is logical and to the benefit of the Committee that we discuss issues relating to the NHS part of the Bill together. I will address all the other amendments in this group.
I start by acknowledging and sincerely apologising for the number of government amendments. At Second Reading, in what I thought was all candour at the time, I said that I recognised there were areas of the Bill that would need refinement in Committee. However, the volume of amendments is still regrettable. I assure noble Lords that many of the amendments in this group and others are narrowly focused and technical in nature. We are putting them forward now only to ensure that the Bill functions properly and effectively.
We have issued a Keeling schedule setting out where the range of government amendments will fit in if your Lordships are pleased, eventually, to accept them. The bulk of the amendments in this group and others do not change the general policy intent of the Bill. Indeed, some of them serve to reflect more fully the original policy objectives as set out in the Government’s Green Paper and subsequent responses to it. I know from discussions at Second Reading and in the engagement I have already had with many of your Lordships—which I undertake to continue, not only between Committee and Report but, in the light of concerns that have been expressed, during Committee to clarify anything that is concerning noble Lords—that many noble Lords wish to get closer to the original policy objectives. That is evident from the number of non-government amendments that have been proposed, which we will be discussing. That is not an indication necessarily that we will have a meeting of minds on those, but some of them flow from that.
In many cases the need for amendments has been highlighted by external organisations. We are grateful for their scrutiny and input into improving the Bill. The interconnected nature of the Bill inevitably means that a single small amendment to a definition in one clause leads to multiple amendments to reflect the same definition where it features in later clauses to ensure coherence and consistency. Obviously, that frequently happens in the passage of legislation.
I repeat that I accept with all sincerity that the number of government amendments is not welcome and is undesirable. However, their end effect, when your Lordships have had the opportunity to reflect on them fully, of providing greater legal clarity will be beneficial to the Bill as a whole and to the large procurement community that will use it for many years to come.
The first group contains some of the Government’s amendments with the most general effect on provisions in the Bill, though these remain technical in focus. Amendments in this group relate to the introduction of the concept of “covered procurement” and to the devolved Administrations.
The proposed new clause before Clause 1 includes technical amendments to the definition of procurement and, as I just said, the introduction of the term “covered procurement” to distinguish between the categories of contract subject to different obligations under the Bill. “Covered procurement” refers to those contracts fully regulated by the Bill’s provisions; “procurement” refers to those contracts that are less regulated but none the less catered for to an extent, such as the below-threshold contracts and international organisation procurement. These changes recognise obligations under various trade agreements. The group also contains a number of consequential amendments to reflect this amended definition throughout the Bill.
Other amendments in this group did not originate from the Government but were requested by the devolved Administrations to amend how the legislation applies in Wales or Northern Ireland. As I said at Second Reading, we have been very grateful for discussions with and input from colleagues in Wales and Northern Ireland. These amendments include a small number of derogations from particular provisions in the Bill where they do not align with those Administrations’ policy goals. We have listened to the concerns of the devolved Administrations, and I hope noble Lords will agree that it is sensible to make these changes at an early stage to ensure that we have legislation that works for all contracting authorities in England, Wales and Northern Ireland.
Lord Wigley (PC)
I realise it is unusual to intervene on the opening speech, but it may be for the convenience of the Committee to understand the changes with regard to the devolved Administrations. Can the Minister confirm that these have all been agreed with the Welsh Government, in the case of Wales, and, where they relate to Northern Ireland, in Northern Ireland, or are there some here that, because of the time pressure, there has been no opportunity to discuss with the devolved Administrations?
Lord True (Con)
My Lords, I will have to be advised on that. I have been advised that they are the result of discussions. If that is not the case, I will set the position clearly and straightly when I come to wind up the debate. I have been led to believe, and know from my own involvement in the matter, that there has been a good deal of agreement between the United Kingdom Government and the Government of Wales. I will certainly confirm that in winding up.
The group also contains a number of technical amendments which are required to ensure that provisions relating to the Bill’s application in the devolved Administrations function properly.
To repeat what I said at Second Reading, I regret that the Scottish Government have opted not to join the Bill. They will retain their own procurement regulations in respect of devolved Scottish authorities. I am sure we would all welcome our Scottish friends if they wished to join the new system proposed by the Bill. Taxpayers and public services alike across the whole United Kingdom would benefit from that. However, at this juncture I am able to lay only those matters requested by the devolved Administrations in Wales and Northern Ireland. I beg to move.
Lord Fox (LD)
My Lords, I thank the Minister for his apology at the beginning, which I believe to be sincere and heartfelt. I also thank him, I think, for his introduction of the first of these 50 amendments; it was relatively short, given that they come with little explanation. It is said that there is a productivity crisis in this country—not so in the Cabinet Office amendment-generation department. The Minister can be proud of its performance.
More seriously, I commend the Bill team and the Government Whips’ Office, who have been wrestling with this leviathan of amendments, not least over the weekend. I thank them for their hard work. I will return to the process we are facing after making a few comments on the amendments, particularly around the covered procurement element.
Amendment 1 and several others seek to clarify things by defining covered procurement. I remain confused about where this phrase comes from and why it was necessary. There was no sense from the Minister’s introduction as to why it was necessary to come back after Second Reading with a new phrase. Can he say where this term comes from? Is it employed elsewhere in legislation? I think it is in contract law but it was difficult to find other manifestations of it. I should remind the Minister that, every time a new term like this arrives in legislation, it proliferates a great deal of other legislation because each new word or term will be tested to the limit in the law. If we start bringing in new terms such as this, the Bill will be a lawyers’ enrichment fund—I can see the lawyer opposite nodding in agreement—and that is not a good thing for the country or for government.
In his discussions, the Minister said that many of these new amendments came from consultation that was subsequent to Second Reading. Avoiding the obvious question as to why Her Majesty’s Government did not consult more beforehand, I would like to know which organisations and individuals put forward the need for this change. My guess is that it was not an external force but an internal one, and possibly that the Cabinet Office, having used one lawyer, decided to use a different one who had a whole set of different opinions on the legal nature of the Bill, and that is where the vast majority of these amendments have come from. Far be it from me to say what the benefits are of changing a horse half way across a stream, but we are, I suspect, reaping the consequences. If I am wrong, I am happy for the Minister to tell us so or to publish the consultation that happened subsequent to Second Reading. I will be happy to admit that that was not the truth.
As we noted at Second Reading this is an important Bill, dealing as it does with the technical process for managing a considerable amount of money spent on behalf of the British people by public institutions. We support this process. We noted that it needs to be in the public interest, as well as providing value for money. The objective of this Committee process should be, and should remain, to have a proper debate around how such issues are brought to the fore in this legislation. However, because of the sheer incompetence of the Cabinet Office—a Cabinet Office that, I note, recently published its guide to improving the quality of the legislative process—we are instead pulled into a debate around process.
During Second Reading, there seemed to be a measure of good will. My noble friend Lord Wallace spoke about the need for a co-operative process and the Minister seemed to agree. Subsequently, as the Minister has pointed out, with fewer than four days before the first day in Grand Committee, we were confronted with 350 government amendments. That could have been managed in a co-operative way, but that did not happen. Even if we had to have the amendments, to drop them with no warning so near to the process was an inappropriate way of being co-operative.
Then, at 8.56 am on Sunday, which I remind everybody was yesterday, we all received an updated grouping of amendments. In this, there were 77 changes from the document we had received on Friday—I repeat, 77 changes—with the shape of the groups radically changed. For Members to be presented with so many changes, and then for those changes to keep on moving, right up to the wire, is unacceptable. I stress again that this is not the fault of the Government Whips’ Office, which I suspect was kept at work all weekend thanks to this process and the Minister’s insistence that we plough on with the Bill in the way that was originally planned.
Lord Hope of Craighead (CB)
My Lords, I want to raise a question about the wording of the definition in Amendment 1. I am troubled by the word “covered”. It does not spring off the page as an explanation in itself as to why there is a distinction between procurement pure and simple and this other procurement, described as “covered”. Having looked at the language in paragraphs (a) and (b), I think the obvious word to choose in paragraph (b) is “public” procurement. However, having listened to the analysis of the noble Lord, Lord Lansley, I am doubtful as to whether that distinction is what the definition seeks to describe. But if it is not doing that, and the word “public” would be wrong, is it not possible to find a more obvious word than “covered”?
The choice of language is crucial in a definition clause. It ought to be possible for the reader to take from the definition an immediate explanation as to why there is a distinction between the types of procurement in paragraphs (a) and (b). If it is necessary to go through the hoops that the noble Lord, Lord Lansley, did, I wonder whether it is possible to achieve anything sensible by ordinary language—which is a reason to say it might be better not to have the definition at all. However, if the definition is thought to be necessary, please could a better word than “covered” be found, so that the definition helps us, at the beginning of this complex Bill, to truly understand the distinction between paragraphs (a) and (b)?
Lord True (Con)
My Lords, I am grateful to all those who have spoken, although I cannot say it always made for the easiest listening. I have been in opposition, and will be again one day, so I fully understand where those noble Lords who expressed concerns are coming from. I have also been on the Back Benches on my side, and will be again one day, so I fully understand where my colleagues are coming from as well.
It is unsatisfactory that so many amendments have been laid. I apologised for that. It is not, in any of your Lordships’ submission, sufficient. I could tell a few tales out of school, but I am a believer in the old concept that the Minister at the Dispatch Box takes full and personal responsibility for the criticisms that are made. I accept that. The amendments should have been brought forward in a more informative—to use the word from the very impressive speech by the noble Baroness opposite, whom I look forward to working with on the Bill—and timely manner.
Lord Purvis of Tweed (LD)
My understanding is that the only way this could be done better is for the Government to withdraw the amendments and bring them back with explanatory statements. Explanatory statement cannot be tabled separately, so if the Minister is sincere that the Committee will not face continuing lists of government amendments without explanatory statements, the sensible course of action would be for him to withdraw them and bring them back with explanatory statements so that we can consider them properly.
Lord True (Con)
That was, in a sense, the implication of what I was saying. We are debating only Amendment 1 at this stage, but for the avoidance of doubt, if it helps the noble Lord, at the end of these remarks I will beg leave to withdraw Amendment 1. Your Lordships could indeed obstruct these matters, but I will withdraw the amendment and see that we fulfil the undertaking that I have given.
More generally, important questions were asked about definitions. I must say to the noble and learned Lord that, until relatively recently—I use that word because I do not want to define it more narrowly—I was not familiar with the concept of “covered”. However, it has come forward after careful reflection by the Cabinet Office and the Bill and legal teams. It is intended to make the concepts in the Bill clearer to use and understand. I mentioned “covered procurement” in my opening remarks. “Covered” was intended to refer to those contracts that are fully regulated by the Bill’s provisions, whereas “procurement” refers to those contracts that are less regulated but none the less catered for, such as below-threshold contracts and, as the noble Lord, Lord Purvis of Tweed, said, international organisation procurement.
Lord Hope of Craighead (CB)
I think the problem may be in the language of paragraph (b), because it does not fulfil what the Minister has been saying is the intention of “covered”. You could keep “covered” but reword paragraph (b) so that it explains more fully what “covered” means, which is what I think the Minister is attempting to do. As it stands, it is very confusing. A confusing definition is a bad way to start a Bill.
Lord True (Con)
My Lords, I listened carefully to the noble and learned Lord’s remarks. We will take them away. I have said that I will withdraw the amendment.
My noble friend Lord Lansley was accurate in divining the Government’s intention with this. The intent is to distinguish between the fully regulated—I will not use the word “covered”—and the less regulated.
Lord Lansley (Con)
I am sorry to interrupt my noble friend, but I am glad that I was not misdirecting myself.
On the noble and learned Lord’s point, I understood what it meant only when I looked at what “public contract”, as defined by Clause 2, means. Once one looks at Clause 2, it becomes very straightforward to check it. I looked at Clause 1 and realised that it is not a national covered procurement policy statement but a national procurement policy statement. None of the amendments change that bit, which told me that what we are dealing with here is the Government proposing that there should be a mechanism for talking about procurement in its broadest sense, while intending to regulate procurement in a slightly narrower sense by regulating everything above the value threshold. This did not seem intrinsically confusing to me once I understood what it is we are trying to do here.
Lord True (Con)
I do not think that, in public remarks that will be recorded for all eternity in Hansard, Ministers should ever agree to the idea that anyone might be confused by the crystalline words that come before the Committee, but I must say that I did not, at first blush, understand these proposals when they were put forward and laid. I understand the objective, and think that both the noble and learned Lord and my noble friend have understood and divined it. We believe that it meets the requirement but, in the light of what your Lordships have said, I am sure that we can reflect on that. I will withdraw this amendment so that we can come back to it.
My advice from legal advisers is that this amendment adequately achieves the objective we sought. As to the elegance of it, I am not going to go into a disquisition of other circumstances in which “covered”—
Lord Purvis of Tweed (LD)
While the Minister is reflecting, might he be able to comment today on the legal advice that he has clearly received? He kindly referred to my reference to international obligations, including the TCA. In the legal text of the TCA, “covered procurement” is stated as the area where the TCA and the UK have an agreement. It is unclear whether the definition, and what the Government are seeking to do in this Bill, will have the same meaning as “covered procurement” in the TCA. Can the Minister clarify that point?
Lord True (Con)
My Lords, I was going to make a proposal. The legislation obviously reflects our existing international obligations, including the TCA, but this is not the only definitional point that has been raised. I cannot find the others in my notes but the noble Lord, Lord Berkeley, for example, asked about a centralised procurement authority. A centralised procurement authority is a body that sets up procurement or purchasing arrangements for use by other contracting authorities; examples would be the Yorkshire Purchasing Organisation or the Crown Commercial Service. That is one definitional issue. The noble Lord asked about the meaning of “state” in Amendment 440. That refers to a country with which we have an international agreement.
It is regrettable that this should happen after we have had this debate. Having heard the strength of feeling expressed by your Lordships on these amendments, especially the definitional ones such as the definition of “covered procurement”, I will ask my officials to hold a technical briefing on these matters for interested Peers. I will ask for invitations to be sent out by my office after the debate, in the hope that some of these points can be clarified. I know that is not to the greatest convenience of your Lordships because the Committee is due to come back on Wednesday, but it should help further to explain the rationale and necessity for some of these late amendments, which were advised on us by our legal advisers. I or my office will be in touch with noble Lords who are here with that offer, so that we can undertake that.
I was asked by the noble Lord, Lord Purvis of Tweed, about the impact assessment. Again, we will reflect on that point but my advice, even in the light of these amendments, is that as there has been no change to the general policy intent of the Bill, there is therefore no change to the costs and benefits of the impact assessment. I am therefore not advised that it is necessary to revise it, but I will second-guess that advice in the light of the noble Lord’s contribution. Although there are wording changes, to take up what my noble friend Lord Lansley said, the general intent of the Bill remains the same.
On the question of the devolved Administrations—obviously, there is a particular issue at the moment in the case of the Northern Ireland Executive, which is why some of these matters are ongoing—I am grateful for what the noble Baroness, Lady Humphreys, and the noble Lord, Lord Wigley, said about the sense of co-operation. I believe that is reflected in both directions. I was asked whether all these things had yet been formally agreed. As I understand it, most of these amendments have been; some have been agreed and discussed at official level but may not technically have been signed off by Ministers. It is certainly our intention and, I believe, the Welsh Government’s intention that we will reach full and constructive agreement, which will enable the proposals to be recommended to the Senedd. This has been an area of good and striking co-operation. I say publicly to the Committee again how much we appreciate that, as I did in my opening remarks.
I hope I have briefly dealt with the question of “covered”, “not covered” and some of the other definitional things. I hope that the further formal briefing I have offered can be arranged at a convenient time for most Peers tomorrow, and will go some way to answering this. I give a commitment that, when we go forward, I will not accept to lay before your Lordships and take to a vote something where there is no proper explanation of the individual amendments in the manner that the noble Baroness opposite quite rightly asked for. There should be a clear explanatory statement. I will ask for that to be done in respect of the amendments that are coming forward to explain the whys and whats in detail, and how the various groups interlock. Again, I will not tell tales out of school, but one of the issues is that there are interconnections between these different groups and how they have been sliced. I repeat that commitment.
Lord Fox (LD)
I thank the Minister for that. I do not think he answered the question my noble friend asked. Accepting that government Amendment 1 will now be withdrawn, will the government amendments in this group, from Amendment 47 to Amendment 543, be retabled for us to have a proper debate on each of them? As the noble Baroness set out, there are a lot of questions around each of them, none of which have currently been addressed. I am unclear on the mechanism by which those amendments will be retabled. Can the Minister confirm that that will happen so that we can have a proper debate on those amendments?
Lord True (Con)
I will have to take procedural advice on that. My understanding is that if I withdraw Amendment 1 it is not the case that the group has been negatived and therefore that the other amendments do not lie on the Order Paper. The Government would obviously have preferred, despite all the justified criticisms—
The Deputy Chairman of Committees (Lord Geddes) (Con)
I hate to interrupt the noble Lord in full flow, but a Division has been called in the Chamber.
Lord True (Con)
In order to finish, as I was just about say, we wish to facilitate proper discussion. Obviously, how to proceed is a matter to be discussed in the usual channels. There are matters in the amendments in this group which are technical and one or two raise definitional issues, and so on. We will work on the advice to your Lordships that I promised. In parallel—I cannot speak for usual channels—we will have discussion in the usual channels about how best to proceed in a way that does not lead to a recurrence of this undesirable situation, for which I repeat apologies. There are important, specific and thematic amendments—I like amendments to be thematic. The Government sometimes have good ideas and the Opposition have good ideas—sometimes—and the best way is if all these things are grouped thematically, which is why, when I saw that this health amendment had suddenly crept in, I said, “We should surely do that later.”
We will have usual channels discussions. I hope we can proceed, but we will find which way we can proceed that is best for your Lordships and does not result in a situation such as this. As I said, I shall not come back without explanations that are clear and timely—I cannot remember the phrase I used. We will see what we can do.
With that undertaking and that for usual channels discussions, in the light of the brief earlier discussion with the noble Lord, Lord Wallace, and the noble Baroness, Lady Hayman, I beg leave to withdraw the amendment.
Lord True (Con)
My Lords, it has been an interesting and important debate, which we will reflect on as we go forward in the normal way between Committee and Report. I was asked a couple of definitional questions again, including: what is a public undertaking? Clause 1(2) defines a public undertaking as
“an undertaking that is not a public authority but … is funded wholly or mainly from public funds, or … is subject to contracting authority oversight.”
Public undertakings differ from bodies that are also funded wholly or mainly from public funds, or are subject to public authority oversight but which are considered to be public authorities, in that public undertakings do not have functions of a public nature, which means their activities may be more economic and commercial in nature—these are some of the things we have been discussing. For example, although it is no longer a public undertaking, before the Government sold their share in 2015, Eurostar International was a public undertaking. I am sure that people will examine that definition in Hansard. I will come on to some other points shortly.
On the question of what a private utility is, utilities are public sector bodies—public authorities or public undertakings—that carry out utility activities, or certain private organisations carrying out utility activities, which are the private utilities. The Bill covers private utilities only where they have been granted a “special or exclusive right” to carry out a utility activity. Rights are “special or exclusive” where they have been granted by a statutory, regulatory or administrative provision, and the granting of that right in itself substantially limits other utilities from carrying out those activities—it is a competition issue. This effectively puts them in a position of a natural monopoly and therefore they could, however unlikely it may be, engage, for example, in preferential treatment that favours their own affiliates or strategic partners and discriminates against other suppliers bidding for contracts, which could negatively impact the market and customers. That would not be good for the industry or consumers.
Furthermore, though I listened with great interest to what the noble Baroness opposite said in relation to international agreements, the UK is required by various international agreements to ensure that private utilities do not discriminate against foreign suppliers with rights under international trade agreements, known in the Bill as “treaty state suppliers”, and that they adhere to the rules we have agreed for utilities procurements. This is why the Bill regulates private utilities but only to the extent required by those international agreements and where we consider it appropriate or necessary to make the regime work.
There has been a lot of debate in relation to the extent of coverage; I will come on to that. A philosophical question was posed by the noble Earl, Lord Lytton, and the noble Lord, Lord Fox: what is in and what is out? I am sure that we will debate and discuss this in our engagement as the Bill goes forward. There was a slight difference of opinion. Behind me, I have been hearing, “Everybody out”, whereas, on the other side, the noble Lord, Lord Fox, seemed at one time to stray towards a definition of private delivery of public service. That sounds like the kind of concept that might have led Mr Benn or Mr Corbyn to say, “Let’s have them all in. They provide food, the banks and all these things”. I do not think that one would want to go that far but obviously there is a question of how far; indeed, my noble friends behind me have posed the question of “if at all”.
I was alarmed by what my noble friend Lady Neville-Rolfe said, with her immense experience both in the public sector in Europe and in business. She said that, as it is drafted, she would find the Bill a deterrent to applying for public business. That is certainly not what the Government intend at all.
I will come back to the question of coverage shortly but we have included a number of measures that will reduce the regulatory burden for private utilities. For example, the Bill contains a number of provisions unique for all types of utilities, such as the higher financial thresholds and the utilities dynamic markets, which are available only to utilities. In framework agreements, public utilities can let closed frameworks for up to eight years and there is no maximum term for frameworks entered into by private utilities. In addition, with contract amendments, there is no 50% financial cap on the value of permitted modifications.
Obviously, the Bill seeks to reduce the regulatory burden on private utilities in terms of transparency. The transparency requirements for private utilities are the minimum required by international agreements—that is, the tender notice, the transparency notice in cases of direct award and the award notice. Regarding mandatory and discretionary exclusions, the Bill retains the flexibility under the current regime where the application of mandatory exclusions is discretionary for a private utility. Private utilities are not restricted in the duration of closed frameworks, which is generally four years for non-utilities. The terms of any closed framework are their commercial decision. Private utilities will also not be subject to oversight by the procurement review unit, which we will come to discuss later in the Bill.
I was asked about broadband and drainage. I am not sure that I have an answer on drainage except to say that I always evoke the great spirit of Bazalgette. Schedule 4 sets out that the Bill covers utilities operating in the water, energy and transport sectors that are regulated in our international trade agreements to minimise the burdens on utilities. Broadband is not covered by those trade agreements so we have not chosen to regulate public or private utilities in that area.
In relation to that, I was asked about private bus companies and Transport for London. Private utilities that run transport services, such as private bus companies, are regulated as they operate services where they have special or exclusive rights to do so. That limits competition and is reflected in international trade agreements; for example, the World Trade Organization government procurement agreement specifically lists Transport for London as being covered by that agreement. The Bill exempts it under paragraph 17 of Schedule 2 as it will be regulated by Department for Transport regulations.
The noble Lord, Lord Berkeley, asked about the reasons for excluding certain utilities. I will turn to his amendments now. Schedule 4(8) includes certain utility sectors that are exempt from the regulations. As they have proved to the European Commission, they are exposed to competitive forces. Schedule 4(8) provides an exemption determination for those decisions. If other sectors can do similarly, we will be able to exempt them from procurement regulations.
Regarding the amendments tabled by the noble Lord, Lord Berkeley, Schedule 4 sets out the scope of utilities activities, largely mirroring the coverage of the existing regime domestically. I repeat: this reflects our commitments in trade agreements such as the WTO’s GPA. Amendment 25 would extend the exclusion for the supply of gas and heat produced as a consequence of carrying out a non-utility activity to all contracting authorities where this is currently available only to private utilities and public undertakings. This would breach our commitments in the WTO government procurement agreement and other international agreements where this exemption applies only to private utilities and public undertakings. It does not apply to contracting authorities that are public authorities.
Amendments 26 and 27 seek to remove from the scope of the Bill utility contracts related to public transport services and contracts associated with activities for the provision of airports and ports, as was discussed by the noble Lord, Lord Berkeley, and my noble friend Lord Moylan. Both activities are covered under the existing regime, and are required by our international commitments under the WTO GPA and other international agreements that require access to utility contracts in the transport, ports and airports sectors. The Bill therefore regulates these utility activities to comply with our international obligations.
As my noble friend Lady Neville-Rolfe said, the Bill provides for a mechanism in Schedule 4(7); this was alluded to in a different context by the noble Lord, Lord Fox. This will be developed to permit an appropriate authority to exempt utilities operating in these sectors where they are exposed to competition. This would apply to all utilities and is permissible under our international obligations.
I will reflect carefully on—
Lord Scriven (LD)
Can the Minister clarify what an appropriate authority is? Who are the appropriate authorities and what is the process for that appropriate authority to amend the private utilities provision?
Lord True (Con)
I was asked that at Second Reading. An appropriate authority is a Minister of the Crown or a Welsh Minister. Indeed, the noble Lord’s colleague, the noble Baroness, Lady Humphreys, referred to this when we discussed the earlier group of amendments. We clarified it in some of the amendments that we tabled but were not brought forward earlier. Among them was an amendment to replace “appropriate authority”, although I cannot remember with what exact words—a Minister of the Crown or a Welsh Minister, I think.
Lord Moylan (Con)
I think that my noble friend is approaching his peroration. May I ask him for a little clarity? Take the example of the bus company. Bus companies operating under a franchise—for example, those in London—appear to be covered because they have a special and exclusive right. That appears to be what my noble friend is saying; if I am wrong, please correct me. Even though they have bid competitively for that special and exclusive right, and even though it generally lasts only for a number of years—this is to justify the balance of capital investment that might be required for them to allow—then comes back into competitive tender, they appear to be covered.
Bearing in mind that I am sticking with the text of the Bill as circulated, my noble friend says that Schedule 2(17) exempts them. However, that is not what it appears to do. It exempts a contract rather than a contractor, and says:
“A contract for the provision of public passenger transport services”.
In simple terms, is my noble friend saying that, when a bus company procures a building, a new piece of plant, some equipment or even some buses, it is or is not covered by the procurement regulations, even on the assumption that it falls into the special and exclusive category?
Lord True (Con)
My noble friend has very characteristically not only picked up an onion but begun to peel it into various levels of the commitment and nature of the activity. I will look into the particular issues in relation to buses referred to by the noble Lord, Lord Berkeley, and my noble friend Lord Moylan.
What I was going to say does not really amount to a peroration. Indeed, at this time, one does not really need a great peroration. What I am here to do is to listen. A range of very interesting and important points have been raised by noble Lords on all sides in relation to the operation of the legislation on private utilities. I will look carefully at Hansard and undertake to have discussions on these matters between now and Report. I am grateful to all noble Lords who have spoken—
Lord Fox (LD)
I sense that the Minister is winding. I have a quick question, which I think is best responded to by a letter. It is regarding international agreements and particularly telecoms, which were mentioned. The Australia agreement carves out specifically kit and hardware, but not telecom services, which appear to be left in. Will the Minister write to us about what the carve-out on broadband services is in, for example, the Australia trade deal and other trade deals?
Lord True (Con)
Yes, my Lords. I have committed to write in relation to that and I will pick up other questions that have been raised, including by the noble Lord. Obviously, there are existing international agreements that are, if you like, deposited, and which we have to work with, as well as issues of how we move forward case by case, but I will certainly address in a letter the point the noble Lord asks about. It is a legitimate question. The status of international agreements was also raised from the Front Bench opposite, and I will write to the noble Lord on that matter and copy it to colleagues in the Committee.
Baroness Neville-Rolfe (Con)
My Lords, this has been a workmanlike discussion, the unpeeling of the onion—the first of many unpeelings of onions, I think. I thank my noble friend Lord Moylan for his support, and the noble Lord, Lord Berkeley, the noble Earl, Lord Lytton, and the noble Lord, Lord Fox—the philosophy of scope is a good phrase. The noble Baroness, Lady Hayman of Ullock, made a strong point about the WTO, which leads me to ask the Minister whether in his follow-up letters he will be able to give us a little more feeling about what is in and what is out for each of the utilities.
I am concerned about that because when we come on to talk about what is covered, it makes a difference—for example, doing special things for small businesses, could we have rules that are not too bureaucratic? Schedules 6 and 7 look quite burdensome through the eyes of a small company. It seems that a lot is covered and then there are executive powers to decide what is taken out and excluded, so the power is with the Minister. I would like to come back to that when we debate the amendment tabled by the noble Lord, Lord Wallace of Saltaire, on delegated powers. It is an important issue.
Can we find a way of not making things too bureaucratic? The noble Baroness, Lady Hayman, made the same point from the other side. Can we improve productivity and growth, which we all desperately want to do in the current circumstances? Can this Bill be a vehicle for that and for improving our international competitiveness? I beg leave to withdraw the amendment.
Lord True (Con)
Again, my Lords, I am very grateful to all those who have spoken. There have been some interesting speeches. Indeed, I will certainly take the final speech by the noble Lord, Lord Coaker, in which he seemed to deplore the idea that the Government should have any regulatory powers, back to my right honourable friend. We will certainly watch for that as we go forward.
On his more general point in relation to the Delegated Powers Committee and so on, I do take what he said seriously. We will have a debate on that in the next session. I will look into his specific point about secondary and primary legislation. If there is an answer that is an advance on what is already in the public domain, I will certainly have that for the next session when we will look at delegated powers.
I am not really a fan of wide-ranging groups that cover a whole range of different subjects. They seem to have become the habit of our times. When I first had experience of your Lordships’ House, we had quite short debates on relatively narrow subjects, which enabled the Minister and the House generally to concentrate. So I will endeavour to answer all the various points that have been made but some of them may have to come in writing. We will look very carefully at Hansard because there was a very broad range of questions, which started with the questions on universities.
Lord Fox (LD)
Can I just point out that the grouping comes from the Government Whips’ Office? We could have extracted all our amendments, one by one, and created a larger number of groups but, probably in deference to the will of the Government, we did not. The future of how many amendments you have in a particular group lies very much in the hands of the Government, not Her Majesty’s loyal Opposition’s or ours.
Lord True (Con)
My Lords, they are negotiated in the usual channels. Sometimes it is a fatal thing in your Lordships’ House to express an opinion, in all respect to your Lordships, of how I think things may be done. We are all imperfect—I am sure the usual channels are not perfect—but having a large group does raise challenges in terms of accountability.
I will try to address the various points raised. I apologise if they were so broad that I may miss some of them, for whatever reason. We started on universities with Amendment 3 from my noble friend Lord Lansley. His amendment would exclude universities from a definition of public undertakings within the definition of a contracting authority, and consequently from the scope of the public procurement rules. He asked about public undertakings and public authorities. Public undertakings are relevant only in the context of the utilities that we were discussing. The universities will be public authorities if they meet the public authorities test, and not caught if they do not meet it.
Universities are included in the UK’s coverage commitments under the World Trade Organization’s Agreement on Government Procurement as contracting authorities that are subject to the rules, where they are publicly funded. The existing definition of a contracting authority in the Public Contracts Regulations 2015 contains tests of the extent to which a body is publicly funded or publicly controlled. These tests are then applied by the body in question to determine whether they are caught by the definition. The definition of a contracting authority in the Bill is intended to capture the same bodies. Universities are therefore in scope of the procurement rules, but only to the extent that they are mainly publicly funded or controlled. The position is likely to vary depending on universities’ funding streams, and those that derive the majority of their revenue from commercial activities would likely be out of scope.
Amendment 4 in the name of my noble friend Lady Noakes would adjust the definition of a contracting authority in such a way that bodies would be brought into scope where they are subject to control by a board if more than half the members are “capable of being” appointed by a contracting authority. I think there was some interest in that proposition on both sides of the Committee. Our initial feeling is that it would mean a more prescriptive and potentially wider scope than the proposed definition, which brings into scope only bodies controlled by a board that has been
“appointed by a … contracting authority.”
Again, the definition of contracting authority in the Bill is intended to capture the same bodies as in the existing Public Contracts Regulations. We are not seeking to change the scope of bodies covered in any way, though some adjustments have been necessary to replace references to European concepts such as bodies governed by public law with the more relevant UK analogous concept of bodies undertaking public functions. Ensuring consistency is necessary not only for practical continuity purposes but in respect of the United Kingdom’s international market access commitments in free trade agreements, which use the existing definition as the basis of the UK’s coverage offer.
The current definition brings into scope bodies that have a board more than half of whose members are appointed
“by the State, regional or local authorities, or by other bodies governed by public law”.
The definition in the Bill is consistent with this by bringing in bodies that are subject to the management or control of
“a board more than half … of which are appointed by a … contracting authority.”
The existing definition in the Public Contracts Regulations does not contain any reference, as per the proposed amendment, to the notion of board members “capable of being” appointed by a particular contracting authority. Whether or not an authority chooses to exercise its right to appoint members to a board is not addressed, and was not intended to be addressed, within the definition. For that reason, we do not currently consider that it would be appropriate to adjust the definition in the way the amendment suggests.
However, I have listened carefully to what my noble friend has suggested. We will consider further whether it is possible to exercise control without making appointments by the threat of control. For the moment I ask my noble friend not to move the amendment, which we cannot support as it stands.
Lord True (Con)
I was actually coming on to the rest of that but, with respect, the noble Lord asked me a specific question about government communications in his utterance; therefore I was responding to it.
Going further, in line with the existing exemption under the current regime, as provided for in the GPA, partner nations will typically agree to the rules for the award of contracts in a joint project by one or more of the partners in an international agreement. We cannot expect our international contracting partners, each with different national procurement procedures in some cases, to follow the specific procedural rules in this Bill. The ability to switch off the procedural rules in the legislation where there is a clash with what was agreed with the parties to the international agreement is essential to facilitate arrangements; however, I will clarify that further for the noble Lord. Again, I ask that this amendment be withdrawn.
I turn to Amendment 42, which relates to local authorities. I apologise for the length of my speech but a number of different themes came out here. Given my life and my having been involved in setting up joint arrangements with other authorities, I understand where the noble Lord, Lord Wallace, is coming from in seeking to add to and amend Clause 10 to make it explicit that a group of local authorities forming a consortium may constitute a centralised procurement authority. As an old local government hand, I do not particularly like that phrase; on the other hand, earlier, I cited the Yorkshire procurement arrangements as the type of thing that would be permitted and would be a centralised procurement authority.
Lord Wallace of Saltaire (LD)
My Lords, I suggest looking at the definitions in Clause 112. I note that the terms “central government authority”, which clearly does not apply, and “centralised procurement authority” occur together. I suggest that, in introducing an amendment on Report, the Government may care to consider something that replaces “centralised” with “combined”? That would not have the implication of being run from Whitehall and would express much more explicitly what is intended.
Lord True (Con)
I will certainly reflect on anything that is said in Committee. “Combined authority” has a particular meaning and understanding. Local authorities can procure things together without being a combined authority; perhaps the noble Lord, being a good Liberal Democrat, might like to propose a federalised approach. I will take away the point he made. I was going to say that I agree with him and the noble Lord, Lord Scriven, that it is correct that local authorities can band together to form consortia to undertake procurements; that is something we wish to encourage. I will look into the particular case of border lands that the noble Lord—
Lord Purvis of Tweed (LD)
It is a federal question that I am asking, about states that border combined authorities.
Lord True (Con)
I am not sure that the First Minister is looking for a federation.
Where a procurement is being undertaken by one or more local authorities that are in the business of carrying out procurement for others, as when they form a consortium to undertake several procurements over a period of time, those authorities would constitute whatever we call it—a centralised procurement authority, for the purpose of the Bill—without the need for the amendment. Conversely, where a group of local authorities come together to undertake joint procurement on a one-off or ad hoc basis, they are entitled to do that as joint procurement under Clause 10(4)(a).
There are other aspects in relation to local authorities. The Government have a clarifying amendment in the megagroup that comes up next, which I hope will also give some reassurance to noble Lords opposite that we want freedom for local authorities—although they will have to have regard to the priorities and national procurement strategy, as any other body will. Ultimately, they will remain accountable to their electorates for their own procurement decisions.
I was asked about how integrated care boards fit into the Bill. I understand that we are still in discussion with the Department of Health to agree what matters are within the health and care procurement rules. This will be debated later on in the Bill; I hope to come forward with more clarification on that.
Finally, a lot of general matters were raised relating to Clause 2, not only by my noble friend but by the noble Lord, Lord Coaker, opposite. My note-taking was running out a bit but I will obviously pick up as much as I can of the remarks and write further.
Baroness McIntosh of Pickering (Con)
I was delighted that the noble Lord, Lord Coaker, was able to pursue some of things that I touched on. What concerns me most, particularly given what my noble friend the Minister said about the earlier amendments in this group, is that I am at a loss to understand why we need this Bill if so much of it is already set out in the GPA or in existing law. Can my noble friend explain the role of the thresholds, particularly in the provision of food to public authorities?
Lord True (Con)
My Lords, we need the Bill because we need a national procurement structure. I hear what my noble friend says but there has been agreement across the Front Benches and from the Liberal Democrats that we need to establish a framework that will last. People may have different views on whether it diverges enough or not at all from the arrangements we have—doubtless that will be explored—but we need to have such a framework and a body.
Clause 2, which is probed, classifies three types of contracts that are public contracts. The first category covers contracts for the supply of goods, services and works, provided that they are not subject to an exemption. I was asked about how each of those exemptions was arrived at. I cannot answer on all of them here but I can certainly provide information to the noble Lord. The second category covers frameworks—that is, contracts providing for the future award of other contracts. The third is concession contracts, which we will discuss.
I turn to the concerns around what Schedule 2 is about. It sets out the types of contracts where the contracting authority does not need to apply the rules for the contract award procedure; they are exempted from the procurement rules. The Bill needs to ensure that contracting authorities have the freedom to carry out the most appropriate procurement where the rules in the Bill might otherwise be unsuitable, for example where it is necessary to protect national security interests and the procurement is too sensitive to advertise; where the contract award procedures are governed by other legislation, as in rail services, which are currently awarded under a separate regime operated by the Department for Transport; or where it is necessary to protect the Government’s ability to make public policy interventions, such as on broadcasting content.