Grand Committee
Procurement Bill [HL]
Monday 24th October 2022
(2 years, 1 month ago)
Grand CommitteeRead Full debate Procurement Act 2023 View all Procurement Act 2023 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 4-VII Seventh marshalled list for Grand Committee - (24 Oct 2022)
The Deputy Chairman of Committees (Baroness Watkins of Tavistock)
If there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.
Clause 30: Excluding suppliers for improper behaviour
Amendment 177
Lord Hunt of Kings Heath
“(aa) failing, in the case of a supplier with two or more enterprises that are resident for tax purposes in two different jurisdictions with a group turnover of more than €750m, to provide a copy of a tax report which meets the requirements of the Global Reporting Initiative Tax Standard;(ab) failing, in the case of a supplier that is currently under investigation for tax offences in the United Kingdom or abroad, or where the company has reached a settlement with a tax authority following an investigation for a tax offence, to disclose details of the investigation;(ac) failing, in the case of a supplier which has a group turnover of less than €750m, to disclose that the supplier—(i) is based in a tax haven, or(ii) is a subsidiary of a person based in a tax haven, or(iii) has a subsidiary based in a tax haven.”Member’s explanatory statement
This amendment seeks to ensure that a supplier must be treated as an excluded supplier if it does not: report its economic activities in each country where they operate and the taxes paid in each country; report details of any tax investigations; and report where it is based in a tax haven or is a subsidiary of a person based in a tax haven.
Lord Hunt of Kings Heath (Lab)
My Lords, I shall speak also to Amendment 180. It seems a long time since we were in Grand Committee debating the Bill: quite a lot of things have happened since. I am sure the Committee would wish me to welcome the noble Baroness, Lady Neville-Rolfe, to her position. I wish her a degree of permanence—at least until the next election. Of course, she still has some amendments in her name to come. I know we may have debated them, but it is her opportunity to re-educate her department and come back with rather more robust responses than she received from the noble Lord, Lord True, although I express my thanks to the noble Lord for his stewardship of the Bill and his willingness to engage in debate with your Lordships on this important legislation.
I move on to my amendment. A few months ago, the Centre for International Corporate Tax Responsibility and Research and TaxWatch published a report on Amazon’s most profitable segment, its cloud computing business, which they argue is increasingly indirectly supported by taxpayers through hundreds of billions of dollars and pounds in government contracts around the world. In the UK, it said that Amazon’s cloud computing business won almost £600 million in government contracts between 2018 and 2021. It also highlighted that in 2020 Amazon signed a master agreement which allows it to treat all UK central government agencies as one client, which will further increase the volume of its UK contracts.
Despite Amazon collecting public money through large and rapidly growing government IT contracts, the tax payments of this company remain opaque. Indeed, a 2021 research report into Amazon’s tax practice shows that only a fraction of the company’s UK sales are accounted for in its UK accounts. Sales in the UK and elsewhere appear to be channelled through subsidiaries in Luxembourg and, although Amazon says that UK revenues recognised in Luxembourg are reported to HMRC, there is no public accountability as Luxembourg accounts do not disclose how much tax, if any, the company is paying in the UK. Amazon’s practices are replicated by many multinational companies, and the aim of my amendment is to press the Government to use the Bill to start to take some action. The Bill offers a chance to ensure an increase in transparency around the tax affairs of potential suppliers of government contracts. It also offers the opportunity to ensure the exclusion of companies that have engaged or are engaging in egregious tax abuse.
Tax non-compliance has been a potential ground for exclusion from government contracts for some time. In 2013, the Cabinet Office issued Action Note 06/13, which sought to ensure that companies bidding for government contracts declared any tax non-compliance in the procurement process, but this has had no effect whatever. Following FOIs to more than 40 government departments by the think tank TaxWatch, not a single incidence of the supplier being excluded was reported. It was also clear that very little compliance monitoring was occurring. The majority of departments responded saying that there were no incidents reported, but not every department even provided that response; some said they were unable to answer as it would take too long to respond. Will the Minister tell me why departments are so weak in holding these companies to account?
The Bill currently includes misconduct in relation to tax as a mandatory exclusion ground in Schedule 6, Part 2, but mandatory exclusion grounds do not mean that the supplier must be excluded from a procurement competition. A supplier becomes an excluded supplier only if it qualifies for a mandatory exclusion ground and
“the circumstances giving rise to the application of the exclusion ground are likely to occur again”.
The legislation also covers participation in defeated avoidance schemes. The mandatory exclusion ground covering defeated tax avoidance schemes includes instances where a tax return has been amended due to the participation of the taxpayer in a tax avoidance scheme and where the taxpayer has reached a settlement with HMRC, in which case there is no need for the person to receive an adverse judgment in a tax tribunal. When it comes to individuals and companies that have engaged in tax avoidance, the provisions of the Bill are wide-ranging but mandatory exclusion grounds apply only where there has been an assessment by HMRC. That assessment is final, meaning that any appeal rights have been exhausted.
We know that tax litigation is often complex and sometimes takes an exceptionally long time to wind its way through the justice system. When it comes to large companies, including the multinationals, it is common practice for the tax authority to settle tax disputes without penalties being charged.
We know that major companies—Amazon, Google and General Electric—have been investigated in recent years by authorities around the world for committing serious tax offences, but in each instance they have settled rather than admitting guilt and receiving full penalties. As such, none of these companies is barred from procuring government contracts and, with that, taxpayer money. The exact terms of these settlements are not always available to the public. Often settlements between major corporations and tax authorities involve an adjustment to tax liability without an admission by the company engaged in any wrongdoing; the dispute is simply characterised as a difference of opinion over a tax treatment. One way to strengthen the Bill would be to require a company to disclose whether it was currently under investigation for tax offences in the UK or abroad, or where the company had reached a settlement with a tax authority following an investigation for a tax offence.
The Global Reporting Initiative tax standard is a finance reporting standard that provides enhanced public transparency for companies and their tax payments. In particular, it provides for companies to report their economic activities in each country where they operate and the taxes paid in each country—country-by-country reporting. This is a transparency mechanism for revealing corporate tax avoidance. This often involves a company moving profits from higher-tax countries into tax havens. If a company is engaged in profit shifting, that will appear in country-by-country reporting by a company showing very high profits in low-tax countries where the company has little economic activity, and low profits in higher-tax countries where much more activity takes place. For example, Amazon does not provide a breakdown in its accounts of revenues, profits and tax payments in non-US markets by jurisdiction, making it difficult for investors, the public and tax authorities around the world to evaluate whether Amazon is engaged in responsible tax practices.
The implementation of the GRI would allow for some necessary scrutiny. A group of Amazon investors put forward a shareholder resolution at the Amazon AGM in May 2022 calling for greater transparency in the company’s tax affairs and to make disclosures in line with the GRI. That resolution was defeated but was backed by 21% of independent shareholders. Country-by-country reporting is mandatory for multinationals engaged in the extractive and logging industries under rules implemented by several legislatures around the world. Country-by-country reporting is mandatory in the banking sector under EU legislation. Numerous multinational organisations now voluntarily report using the GRI tax standard. My amendment would require all large companies bidding for government contracts to produce a copy of reporting under the GRI tax standard. In addition, the supplier should report details of any tax investigations and report where it is based in a tax haven or is a subsidiary of a person based in a tax haven.
My second amendment would provide for a Minister to lay regulations listing those jurisdictions that are considered to be providing a tax haven to suppliers. Clearly my amendments are not the whole answer to the issue of tax shifting by multinational companies, but using the Bill would be one of the stepping stones that we could take to a much fairer tax situation in this country. I hope the Government will be sympathetic. I beg to move.
Lord Fox (LD)
My Lords, I rise as a cipher for my noble friend Lord Wallace, who has tabled a number of amendments in this group. He is unable to attend this and the next day in Committee, so I will be deputising for him.
I too welcome the noble Baroness, Lady Neville-Rolfe, to her new role, and congratulate her on getting to complete this Bill, which must be regarded as the plum legislative job available—so I say “well done” to her. During a debate on the economy a couple of weeks ago, she said from the Dispatch Box that she was very keen on “simplification” and cited simplifying procurement as being in her sights—now, here she is. However, before her well-deserved promotion, on the third day in Committee on 11 July, “Back-Bench Lucy” was more strident. She said:
“The more I listen, the more I feel that this Bill in many respects strikes the wrong note. It is overregulatory and calls for a rethink, which I hope the Government will be thinking about.”—[Official Report, 11/7/22; col. GC 359.]
On those grounds, I suggest that she should exercise her new power, withdraw this poorly drafted Bill and come back with one more in keeping with simplification and with her aversion to overregulation.
In the absence of any enthusiasm from the Minister for doing that, I speak to Amendments 306, 307, 308, 320 and 328, tabled by my noble friend Lord Wallace, some of which I have signed; I do not support all of the others. I thank the noble Baroness, Lady Hayman of Ullock, and the noble Lord, Lord Hain, for their support for Amendment 320.
An effective debarment and exclusion regime protects the public purse from rogue actors and drives up corporate government standards. Exclusion and debarment from procurement are potent anti-fraud and anti-corruption tools. The issue of companies with long records of corruption winning public contracts in this country is appalling. Nearly a quarter of local councils experienced fraud or corruption in 2017-18. Fraud costs the public purse up to 5% of government spending overall. I thank Spotlight on Corruption for these numbers.
The UK’s record on excluding these types of companies from participating in public procurement is not good, at best. The list of companies either from the UK or operating here that have been shown to have engaged in serious corporate misconduct is unfortunately lengthy and well publicised; yet, under the existing debarment regime, it has been, in practice, all but impossible to apply a discretionary exclusion in the absence of a conviction. There has been very little use of exclusion in the UK to date under current EU-based rules, and the Procurement Bill is an opportunity to address the weaknesses in those rules that have prevented exclusion from being used effectively to protect the integrity of the public purse. I am sure that the Minister would approve of replacing an EU law with a better UK law—these are suggestions for how to make it better.
This Bill as formulated contains some significant issues and crucial gaps that could seriously undermine the effectiveness of the debarment register and exclusion regime. There is a risk that the register will stand empty for many years, which would undermine the reputation of the register and the UK’s anti-corruption efforts in general. It is therefore crucial to get this right at this critical stage of the Bill’s development.
Amendment 306 seeks to make criminal offences for sanctions evasion grounds for exclusion from public procurement. The Bill currently contains no references to criminal offences for sanctions evasion. Given the Government’s current policy of imposing sanctions to ensure its foreign policy goals in relation to Russia’s invasion of Ukraine, and their ambition to use sanctions to achieve important foreign policy goals to be a force for good globally, this is a major omission. Incorporating criminal offences for sanctions evasions in the Bill would make companies across the UK take their obligations to comply more seriously. This amendment redresses this omission.
Baroness Noakes (Con)
My Lords, I, too, welcome my noble friend Lady Neville-Rolfe to her new position. As she knows, she and I share many views on the Bill; indeed, we supported each other’s amendments. I fully endorse the quotation read out earlier by the noble Lord, Lord Fox; I hope that my noble friend will stick to it.
Amendment 534 is in my name; my noble friend had added her name to it, and it was debated during an earlier sitting of the Committee. It asked for a report on procurement rules, specifically around simplification and SMEs. My noble friend will be aware that, obviously, it has not yet been moved because it is low down on the list. While she has now removed her name, about which I am distraught, I hope that, when we get to that part of the Marshalled List, we might have a more favourable response from the Government Benches.
I have three amendments in this group: Amendments 323, 326 and 327. They are probing amendments relating to some of the discretionary grounds for exclusion in Schedule 7. The mandatory exclusion grounds in Schedule 6 are all based on objective facts—mainly whether various offences have been committed. The discretionary grounds in Schedule 7 are a mix of subjective and objective tests. My amendments are designed to probe this. I could have tabled more amendments to the schedule, because other paragraphs in it also use subjective tests, but I chose paragraphs 8, 9 and 11 as examples of the issue that I wished to debate.
In each of these paragraphs, the test is whether a decision-maker considers that a supplier has done something. To take the example of paragraph 8, the ground is that the decision-maker considers that the supplier or a connected person has infringed a bit of UK competition law, or an overseas equivalent. I do not understand why all these matters covered by the paragraphs cannot be dealt with by objective tests, as are used in Schedule 6. Surely an infringement of competition law can be objectively determined and ought not to be left to the opinion of a procurement official. Can the Minister explain why the Bill uses subjective tests rather than objective ones for these paragraphs?
My amendments are rather more modest than replacing these provisions with objective tests but they seek to strengthen the nature of the subjective test from “considers” to “is confident”. I chose that wording to align with what is in the Explanatory Notes, which explain the paragraphs in Schedule 7. I suggest that, if a subjective test is to be used in Schedule 7, the hurdle should be set at a fairly high level. My amendment might not be the right one but it is there to probe the language of the Bill. I am aware that Clause 55 gives some opportunity for suppliers to push back on decisions by contracting authorities but, at the end of the day, judicial review is the only real remedy available to a supplier who feels that they have been badly treated by the terms of this Bill. As we know, judicial review is a very unwieldy remedy and, frankly, is not available at all for SMEs in practical terms.
I also note that, in paragraph 15, which deals with national security, the decision-maker has to determine whether there is a threat to national security. When my noble friend winds up, would she please explain the difference between “determines”, which is used in paragraph 15, and “considers”, which is used throughout the rest of the schedule?
Baroness Bennett of Manor Castle (GP)
My Lords, I rise with great pleasure, following the noble Lords, Lord Hunt of Kings Heath and Lord Fox, and the noble Baroness, Lady Noakes, to agree with everything that all of them said. I am going to be quite brief but I have three points to make. I will speak chiefly to Amendment 177, to which I have attached my name—as have the noble Lords, Lord Hain and Lord Hendy—but I also want to comment on a couple of other amendments in this group.
I join others in welcoming the Minister to her new post. Is it not good to have some certainty in politics? At least we have the certainty that the Procurement Bill will come round again, whatever else we might be doing or facing in other parts of the Westminster system.
There is a phrase about the certainty of death and taxes, except of course we know that taxes are not a certainty for many of the companies now operating in the UK or collecting many government contracts. The noble Lord, Lord Hunt of Kings Heath, referred to one of those companies in particular—a company that I describe as the great parasite. It does not pay its workers very well, which relates to another amendment from the noble Lord, Lord Hendy—we will get to that later—and it pays little or no tax in the UK.
There is a specific point to be made here. I am sure the Government would say that they want to see government and official money being spent well. However, the Tax Justice Network has noted, in looking at definitions of tax havens, that another term for them is secrecy jurisdictions. When companies operate out of tax havens, it is extremely difficult to see what is happening with their money and how they are operating; of course, they are not paying for the facilities and services they need to run their business and make their profits. In thinking about the great parasite, the example I often give when talking to schools, colleges and community groups is this: “Imagine the road outside. Think of all the lorries that have been carrying Amazon parcels up and down it today. Who is paying for that road? All of us in this room are, but Amazon is not”. If the Government are concerned about value for money and transparency in government procurement, Amendment 177 and the associated Amendment 180 are absolutely essential additions to this Bill.
Baroness Hayman of Ullock (Lab)
My Lords, I also start by welcoming the Minister to her new role. I thank her and her officials for having a useful meeting with us ahead of today. Let me say how pleased we are to have a Minister who is genuinely interested in this Bill. The noble Lord, Lord Fox, talked about the Minister’s previous involvement; I am sure that her knowledge and interest will lead us into a better place.
I will start with the two amendments in the name of my noble friend Lord Hunt of Kings Heath, Amendments 177 and 180, to which we offer our strong support. Clearly, all of us should embrace anything we can do to tackle tax abuse and tax avoidance. I hope the new Government—we are looking forward to hearing what they have to say—will prioritise this area.
My noble friend talked about Amazon, the lack of accountability and the kind of poor practice that is replicated by many companies, and gave a thorough explanation of why the legislation in front of us could be used to make a difference to cases of tax avoidance and abuse. I hope the Minister listened to those concerns seriously and considers whether this Bill is an appropriate vehicle to address them.
The noble Lord, Lord Fox, introduced a number of amendments in the name of the noble Lord, Lord Wallace, to which I have added my name. I will not go into them in detail, only to say that we support incorporating evasion of criminal sanctions into the Bill. The failure to prevent bribery offences has been incredibly disappointing, and the Bill could be used to tighten that up and make more progress. Also clearly disappointing are the very few convictions there have been under the Proceeds of Crime Act. How can we use this Bill to make a difference in these areas where there is still concern? I am sure all noble Lords agree that we need to ensure proper and effective enforcement to curb any serious wrongdoings in these areas.
Briefly on Amendments 323, 326 and 327, in the name of the noble Baroness, Lady Noakes, she clearly introduced something that I had not really considered until I read these amendments. Again, “considered” is the important word here. She is absolutely right that you need to think about the strength of a subjective test and how it would be interpreted. I completely agree with her; we need to understand this better. I would be interested to hear from the Minister on this, because the noble Baroness, Lady Noakes, is correct that judicial review is simply not a practical option for SMEs; it just is not. How will this be interpreted and managed through the Bill? I look forward to the Minister’s responses.
The Minister of State, Cabinet Office (Baroness Neville-Rolfe) (Con)
My Lords, I thank all noble Lords for their kind welcome on my appointment as Minister of State at the Cabinet Office. I echo the words of the noble Lord, Lord Hunt, about my predecessor, my noble friend Lord True, and his willingness to engage—a model I will try to follow. I am very much in listening mode today, as we are still in Committee, working on the Bill.
I am poacher turned gamekeeper, and that can be a good qualification. As noble Lords know, I have consistently taken a keen interest in the Bill, although from a slightly different perspective. I will not delay you with a long introduction, but I am pleased that the Bill consolidates 350 EU regulations. That is simplification at a stroke: it streamlines public procurement and reduces burdens on business, and it turns EU-based law into UK law, which is why we can be confident of its progress.
In particular, it will benefit SMEs, for which we must do our best to offer a level playing field, so that they can increase their share of the £300 billion spent by public authorities each year. I think the noble Baroness, Lady Bennett, will agree with that. I am also looking forward, if I get the chance, to rolling out training on the Bill—simple, clear, comprehensive training in central and local government, and elsewhere. That will answer some of the concerns that I and others across the House have had on the Bill.
I thank noble Lords for their contributions on the grounds for financial exclusion and will try to respond constructively. I begin with Amendments 177 and 180 tabled by the noble Lords, Lord Hunt and Lord Hain. These seek to ensure that the suppliers who fail to provide contracting authorities with various details in relation to their tax affairs when bidding for contracts must be excluded from procurements. I should start by making it quite clear that the Government expect businesses to take all necessary steps to comply with their tax obligations.
However, noble Lords will know that the basis on which contracts must be awarded under the Bill is by reference to award criteria that relate to the contract being tendered, not to other matters such as where a supplier pays tax. This is the right principle to deliver value for money for the taxpayer and ensures that suppliers are not required to provide swathes of information that is irrelevant to the contract. This principle is also a feature of the UK’s international obligations, notably under the WTO government procurement agreement. It is for His Majesty’s Revenue and Customs to enforce the law on tax and, indeed, UK-based multinational enterprises are required to make an annual country-by-country report to HMRC. I note what was said by the noble Lord, Lord Hunt, about Amazon.
The grounds for exclusion in the Bill focus on criminal convictions and other serious misconduct that raises a risk to public contracts, including, importantly, in relation to tax. But investigation does not mean guilt in this country. Exclusion is not a substitute for a judicial process. It is important to let due process run its course before subjecting suppliers to mandatory exclusions.
However, we have broadened the scope of the current regime with the mandatory exclusion grounds related to tax in Schedule 6, which cover all tax evasion offences and involvement in abusive tax arrangements. This is a significant broadening from the current regime, which is limited to where there has been a breach of tax obligations and lets suppliers off where they have repaid or committed to repay unpaid tax. I am confident that these grounds are sufficient to protect contracting authorities and taxpayers.
Lord Fox (LD)
During that spirited defence of the need to keep things open for international companies to be able to bid, the Minister used the phrase “value for money”. Can she define the Government’s view of how they calculate value for money?
Baroness Neville-Rolfe (Con)
If I may, I will think about the answer, make some progress, and come back to that on a future occasion.
Baroness Neville-Rolfe (Con)
Well, I think that “value for money” is a clear term, but I am listening seriously to the point that the noble Lord is making in this context. Value for money is about quality and quantity; indeed, it is about many things, as I know, having been on the buyer side in real life as well as on the selling side. As for what the definitions are in the Bill, I am not sure.
I come back to the important points from the noble Lord, Lord Hunt, on the subject of tax. It was clear from feedback on the Green Paper that the existing tax exclusion ground is one that many authorities are struggling to apply. By reframing the ground in terms of UK offences and regulatory decisions, we believe that it should be easier for UK contracting authorities to apply this. I also add—because I remember it well from the time that I served in David Cameron’s Government—that the UK has tried to lead the way internationally in making sure that multinational companies pay their share. Strong HMRC compliance action has secured and protected over £250 billion for public services since 2010 that would otherwise have gone unpaid, including £3 billion from those trying to hide money abroad. This is work that goes on—and work to which HMRC is devoted, as I remember well.
The noble Lord also raised tax havens. The Bill will deliver unprecedented levels of transparency in procurement, including—this point needs to be made—with respect to the beneficial ownership of suppliers. All suppliers will be expected to declare their beneficial owners when bidding for contracts. Failure to provide accurate details of beneficial ownership when asked will now be a mandatory ground for exclusion.
Baroness Neville-Rolfe (Con)
I try to wake up early, as noble Lords know. Value for money is not defined in Clause 11(1)(a), to leave a degree of flexibility for future refinement. In practice, we will use the HMT definition, which is currently,
“the optimal whole-life blend of economy, efficiency and effectiveness that achieves the intended outcome of the business case.”
It is quite a nice mixture—economy, efficiency and effectiveness.
Lord Fox (LD)
I thank the Minister, but the question I was rather clumsily trying to ask was whether we extract from the cost the amount of money we expect to take in tax or merely use the cost as a flat sum. In other words, with a British company paying full British tax versus one of the companies described by the noble Lord, Lord Hunt, which pays no tax, does the overall cost of that service become less for the one paying tax? It seems the Minister’s answer is that the tax take is not included in the calculation of value for money.
Baroness Neville-Rolfe (Con)
I think we have made a bit of progress; I will not go down that rabbit hole or we will not make enough progress.
If I might, I turn to Amendments 306, 307, 308 and 320 tabled by the noble Lords, Lord Wallace, Lord Fox and Lord Hain. They would introduce new mandatory exclusion grounds in relation to offences of sanctions evasion, money laundering and failure to prevent bribery, and new discretionary exclusion grounds in relation to various financial and economic misconduct when the contracting authority has sufficient evidence in the absence of a conviction.
The mandatory grounds for exclusion cover the types of misconduct which raise only the most serious risks for contracting authorities. We have already strengthened the mandatory grounds significantly in comparison to the EU regime, but they cannot and should not cover every offence. On sanctions, the types of freezing orders referred to in the amendment are unlikely to be relevant to public contracts. On bribery and money laundering, we have included a range of mandatory exclusion grounds covering the most serious offences. This expands the scope of the offences covered in the EU regime to cover blackmail as well as bribery. However, I reassure noble Lords that the offences in question which are not listed as mandatory exclusion grounds are likely to be subject to discretionary exclusion, under the ground of professional misconduct. This will depend on the circumstances, but if the ground is met, contracting authorities could exclude the supplier.
As to the amendment to include financial and economic misconduct as a new discretionary exclusion ground, we have already explained to this Committee that the exclusion regime is not a substitute for a judicial process. I am not prepared to require contracting authorities to weigh up complex evidence of financial and economic misconduct in which they have no relevant experience. That is a key issue with the ambitious proposals described by the noble Lord, Lord Fox.
Amendments 323, 326 and 327, tabled by my noble friend Lady Noakes, concern the discretionary exclusion grounds for potential competition infringements and the test for when these apply. These exclusion grounds recognise that there may sometimes be evidence of competition infringements in the absence of a regulatory decision or ruling. It is critical that suppliers known to have been involved in collusion, bid-rigging and anti-competitive behaviour are held to account, given the fundamental importance of fair and open competition to procurement.
However, I reassure the Committee that these grounds should not be used to exclude suppliers merely because they are under investigation by the CMA or another regulator; there must be sufficient evidence that a breach of competition rules has occurred. I think my noble friend pointed out that the language used in the Explanatory Notes differs from that in the Bill. I am advised that this does not reflect a difference of policy or meaning. Authorities must “consider” that the conduct specified has occurred before determining that the exclusion ground applies. She went on to ask about why there were subjective tests in the discretionary grounds. I have to say that I had some difficulty in exactly following her logic in all this, and we may need to discuss these points further after Committee. The answer is because exclusion is a risk-based measure and a last resort, and suppliers are protected by a right to challenge the exclusion decisions because of the nature of those decisions.
Baroness Noakes (Con)
A moment ago my noble friend said, in respect of the amendment by the noble Lord, Lord Fox, that she did not want decision- makers trying to weigh up complex financial matters, but she somehow seems quite happy to have decision-makers weighing up equally complex matters scattered throughout Schedule 7 and in the discretionary exclusion grounds. I struggle to see the intellectual cohesion in the Government’s position.
Baroness Neville-Rolfe (Con)
I thank my noble friend for her further comments, which I will consider carefully. I myself feel strongly, as someone who has witnessed small construction companies being investigated by a competition authority that at the end of the day have been found completely innocent, that it would be difficult if they were not able to continue to engage in procurement during a long period of investigation. However, as she explained, we need to get right how we deal with the discretionary grounds and ensure that there is enough certainty so that authorities do not spend too much time going round in circles. We need to reflect further on the points that she has made. I think I slightly misunderstood the purport of her original amendment, so I look forward to discussing that with her. I thank the noble Lord, Lord Fox, for his intervention.
Lord Fox (LD)
I thank the Minister for her response. The notion of, in a sense, using professional misconduct as the catch-all for everything else is something that we could pursue after Committee. It may be something that requires some definition or clarification, either within the legislation or from the Dispatch Box on Report. If that is going to be the way that the Bill operates, some clearer idea as to how it would work would help to ameliorate some of the fears that have been expressed around the Bill.
Baroness Neville-Rolfe (Con)
We have to get the right result but we also have to avoid a chilling effect. That is my basic approach to this.
Baroness Neville-Rolfe (Con)
A chilling effect on corruption is obviously positive but a chilling effect on people being prepared to engage in government procurement is not, particularly smaller suppliers, which might be put off by some of these rules. That is why we brought in Schedule 6, which will bring a certain clarity. There may be some further discussions to be had on Schedule 7 and exactly how it works.
Lord Purvis of Tweed (LD)
I too welcome the Minister to her position. My question relates to a later group in which I have an amendment. Given that the Bill will allow for there to be no discrimination against any treaty-state supplier, how will a contracting body or procurement body operate under Schedule 7 for any of the suppliers from any of the countries with which we have a trade agreement? This comes back to the point made by the noble Baroness, Lady Noakes. It is not simply the case that businesses are going to have to work through Schedule 7 to satisfy all the grounds for this; they are going to have to do it with every single country with which we have an FTA for the suppliers coming from them. How is that making the job easier?
Baroness Neville-Rolfe (Con)
As the noble Lord said, we will come on to discuss those aspects, and I will try to answer that question when we get there. I have probably said enough on that.
Amendment 328 in the names of the noble Lords, Lord Wallace and Lord Fox, provides for a new discretionary exclusion ground in relation to deferred prosecution agreements. This issue was explored in the Green Paper. Due consideration was given to feedback from the public consultation, as well as discussions with the Serious Fraud Office and the Crown Prosecution Service. The Government’s response to the Green Paper set out the rationale for their decision not to include a separate exclusion ground on deferred prosecution agreements. In brief, the actions taken and commitments made by suppliers as part of the DPA typically constitute good evidence of self-cleaning. Reaching a DPA requires a supplier to accept culpability for the offence, co-operate with the relevant authorities and make reparations. Prosecuting authorities typically will not consider a DPA appropriate unless the supplier has already made reforms, such as proactive changes to corporate structures or the replacement of personnel.
DPAs will involve judicially approved terms that the supplier must commit to—for example, on actions to improve compliance and audit functions within the company, and external reviews to test those improvements to ensure that further misconduct does not occur. Non-compliance with a DPA is unlikely to be something that contracting authorities are equipped to assess. I hope that the noble Lord, Lord Fox, will understand and accept that.
Compliance is for either the Serious Fraud Office or the Crown Prosecution Service to assess, depending on which is the owner of the DPA in question. If a supplier fails to comply with a DPA, there are a number of options open to the enforcing body, including the prosecution of the supplier for the original criminal misconduct, but that cannot be part of procurement law, or for enforcement by the many differently sized authorities engaged in buying goods or services in the public sector.
Finally, Amendment 443 tabled by the noble Lord, Lord Wallace, seeks to remove
“a British Overseas Territory or a Crown Dependency”
from the definition of a UK supplier. The Bill confers rights on UK suppliers in a number of places, including, in Clauses 18 and 19, an entitlement to be considered as part of a competitive tender, or, in Clause 89, to access remedies. They are also used as the basis for an assessment of no less favourable treatment in the non-discrimination provisions, in Clause 82(2). This amendment would remove this guaranteed access to the UK’s procurement markets from suppliers from Gibraltar, which is the only overseas territory or Crown dependency whose suppliers currently enjoy access under the existing procurement regime.
Although overseas territories and Crown dependencies are not part of the UK constitutionally, they do not become party to treaties in their own right. The UK must extend the territorial scope of its ratification of treaties to include them. As such, overseas territories and Crown dependencies are unable to secure rights to markets in the United Kingdom in the same way as other states. That is a long way of saying that in view of the special nature of the trading relationship between the UK and overseas territories and Crown dependencies, it is right to include them in the definition of a UK supplier.
This discussion has been useful and illuminating to me. I respectfully request that the amendment be withdrawn.
Lord Hunt of Kings Heath (Lab)
My Lords, I am very grateful to the Minister. I particularly welcomed her comments on SMEs and training rollout. I really agree about the importance of investment in training as the Bill is enacted. However, I remain concerned about the Government’s approach, which seems supine in many respects when dealing with these multinational companies.
Only this afternoon at Oral Questions, we had a fascinating exchange about the remarkable decision to award Fujitsu a £48 million contract to upgrade the police national computer, given the role of that company in developing Horizon software for the Post Office. We were told by a Minister that in effect, there was no alternative because of the continuing arrangements with that company. Listening to the comments made by the noble Lord, Lord Fox, and the noble Baroness, Lady Bennett, about performance issues, corruption, competition infringements, which were added to by my noble friend, and the issues on tax, essentially the Minister has an ideological objection to the use of contracts to further government policy outside the narrow procurement interest. This is where I fundamentally disagree with her.
It is not good enough simply to say that it is down to HMRC. Procurement can be used to enhance policy in a number of areas. Many of these multinational companies are taking this country for a ride. We need to see tougher action. Having said that, I hope that we can continue to debate this important issue. I beg leave to withdraw my amendment.
Baroness Neville-Rolfe
Baroness Neville-Rolfe
(a) treat the supplier as an excluded supplier for the purpose of assessing tenders under section 18, and(b) exclude the supplier from participating in, or progressing as part of, any competitive tendering procedure.”
Lord Hunt of Kings Heath
“Excluding supplier for involvement in forced organ harvesting
(1) Subsection (2) applies if a contracting authority determines that a supplier is located in a country categorised by a Minister of the Crown as at high risk of forced organ harvesting.(2) The contracting authority must treat the supplier as an excluded supplier in relation to the award of a public contract involving— (a) any device or equipment intended for use in organ transplant medicine or activities relating to human tissue, or(b) any service or goods relating to organ transplant medicine or activities involving human tissue.(3) A Minister of the Crown must by regulations made by statutory instrument make provision for the listing of countries considered to be at high risk of forced organ harvesting.(4) A country is at high risk where—(a) the country has high levels, or is suspected of having high levels, of forced organ harvesting or trafficking in persons for purposes of the removal of organs; or(b) the government of the country is directly or indirectly seen as supporting or indirectly supporting forced organ harvesting or trafficking in persons for purposes of the removal of organs.”Member’s explanatory statement
The amendment is designed to exclude suppliers located in a country at high risk of forced organ harvesting from being awarded a public contract involving any device or equipment intended for use in organ transplant medicine or activities relating to human tissue or any service or goods relating to organ transplant medicine or activities involving human tissue.
Lord Hunt of Kings Heath (Lab)
My Lords, in a sense, this amendment is very different from my first two. None the less, we are seeking here to use procurement legislation to advance government policy in relation to the awful practice of forced organ harvesting from prisoners of conscience in China. The practice was found by the China Tribunal—as advised by Edward Fitzgerald KC, who provided expert legal opinion to it—to be a crime against humanity and part of a possible genocide against Falun Gong.
Forced organ harvesting in China involves the removal of organs from a living prisoner of conscience for the purpose of transportation, killing the victim in the process. It is state sanctioned and widespread throughout China, with the Chinese Communist Party targeting individuals because of their religious and spiritual beliefs or ethnicity. The victims are known primarily to be Falun Gong practitioners, but more recent evidence indicates that Uighur Muslims are also targeted on a massive scale. Further to that, there are several lines of evidence showing that Tibetan and house Christians are likely victims of forced organ harvesting.
Regarding Uighurs and other minorities, the Office of the UN High Commissioner for Human Rights published its report on Xinjiang in August, stating:
“Allegations of patterns of torture or ill-treatment, including forced medical treatment and adverse conditions of detention, are credible, as are allegations of individual incidents of sexual and gender-based violence.”
It also stated that the treatment of Uighurs and others in Xinjiang by the Chinese Communist Party
“may constitute international crimes, in particular crimes against humanity.”
That is a most important and profound statement, made only three months ago.
Both Uighur and Falun Gong practitioners are arbitrarily arrested, detained in camps and tortured. They face sexual violence, disappear while in detention and are murdered for their organs, on a vast scale. A study published in April this year in the American Journal of Transplantation investigated whether Chinese transplant surgeons established first that the prisoners are dead, before procuring their hearts and lungs, or whether the cause of death was the organ procurement itself. The study was based on the dead donor rule—the most fundamental ethical rule in organ transplantation. It states that organ procurement must not commence until the donor is formally pronounced dead; the procurement of organs must not cause the donor’s death.
The paper, entitled Execution by Organ Procurement: Breaching the Dead Donor Rule in China, was written by Matthew Robertson and Dr Jacob Lavee. Dr Lavee is a transplant surgeon and the founder and a former director of the heart surgery unit at the Sheba Medical Center in Israel. In 2005, a patient told him that his insurance company had scheduled a heart transplant operation for him that would take place in two weeks. The patient flew to China and received the heart as arranged. That would be impossible unless the time of death of the donor was known in advance. Following this incident, Dr Lavee spearheaded the organ transplantation law in Israel, the first of its kind in the world, which prevented insurance companies from reimbursing expenses associated with illicitly obtained organs. Along with a range of reforms encouraging domestic donation, this stopped the China-to-Israel organ-trafficking pipeline in its tracks.
During this recent research, Robertson and Lavee found, in 71 different Chinese medical studies published between 1980 and 2015, sourced from 56 hospitals in 33 cities, that brain death could not properly have been declared. Therefore, the removal of the heart during organ procurement must have been the cause of the donor’s death. The authors state in a recent article in the Tablet,
“the act of execution was joined with the act of heart removal, and was carried out by surgeons on the operating table.”
Just think of that.
My amendment is designed to exclude suppliers located in a country at high risk of forced organ harvesting from being awarded a public contract involving any device or equipment intended for use in organ transplant medicine or activities relating to human tissue or any service or goods relating to organ transplant medicine or activities involving human tissue. Essentially, it would prevent any service or goods that may have been involved in or developed off the back of the forced organ harvesting trade from entering the UK. This includes organ transplant training, such as the training of Chinese organ transplant services, related education and research, as well as organ transplantation equipment.
I have been very encouraged by the Government’s recent willingness to legislate on this issue, such as through my amendment to the Medicines and Medical Devices Bill last year, which included consent provisions for imported human tissue for use in medicines; and the amendments to the Health and Care Bill in April this year, prohibiting the commercialisation of organ tourism. The noble Lord, Lord Alton, and the noble Baroness, Lady Northover, have been huge supporters of this approach and I am glad to see them here today.
These legislative steps have set a good precedent, both in our country and as a signal globally. I emphasise to the Minister that passing amendments such as this into British law is significant internationally. Other countries observe what is happening, and we are part of a global movement to try to get action to stop this reprehensible behaviour.
I am grateful to the Government for their sympathy for our approach, but I want to go further. In April this year, it was stated in a ground-breaking business and human rights legal advisory, written by international law firm Global Rights Compliance, entitled Do No Harm: Mitigating Human Rights Risks when Interacting with International Medical Institutions & Professionals in Transplantation Medicine, that
“medical professionals and institutions who have collaborations with Chinese medical institutions involved in forced organ harvesting face a risk of being charged with complicity in international crimes, including crimes against humanity.”
It goes on to explain that
“aiding and abetting ‘consists of practical assistance, encouragement, or moral support which has a substantial effect on the perpetration of the crime’.”
Prestigious medical institutions, such as the International Society for Heart and Lung Transplantation, are now taking action. In April this year, the society issued a policy that it would no longer accept submissions to its journal or for presentations at its conference related to transplantation and involving either organs or tissue from human donors in the People’s Republic of China. My forced organ harvesting amendment to the Procurement Bill is critical to protect our UK medical professionals and institutions from complicity. I beg to move.
Lord Alton of Liverpool (CB)
My Lords, it is a great privilege to follow the noble Lord, Lord Hunt of Kings Heath, in what was a powerful, disturbing and very thoughtful speech. I think all of us who are privileged to be in the Committee today are indebted to him for that and the way he introduced this group of amendments, to which I am a signatory, along with the noble Baroness, Lady Northover, and my noble friend Lady Finlay of Llandaff. She sends her apologies for not being able to be physically present today, but she strongly supports the amendment, as does the noble Lord, Lord Ribeiro. It is worth bearing in mind that both of those noble Lords have held very high office in the medical institutions in this country and it is good that their names are attached either to the amendment or to the arguments that go with it.
I declare interests as vice-chairman of the All-Party Parliamentary Group on Uyghurs, who the noble Lord referred to, and on Hong Kong, as patron of Hong Kong Watch and as a member of the Inter-Parliamentary Alliance on China. This amendment deals with a gruesome and barbaric lethal practice that has been prevalent in China. Last Thursday, here in the Moses Room, a debate was held on the International Relations and Defence Select Committee report on China, trade and security. The noble Viscount, Lord Younger of Leckie, was present throughout proceedings and the noble Lord, Lord Purvis, was present and contributed to those proceedings, during the course of which a number of us referred to the levels of trade and, inter alia, the level of procurement that is carried out with China by the United Kingdom.
The noble Lord, Lord Purvis, pointed out that we have a £40 billion deficit in trade with the People’s Republic of China. That would be reason enough for considering, in the context of resilience and dependency, why procurement policies with a country designated by the Government as recently as last month as “a threat” to the United Kingdom should be radically readdressed. During the debate last Thursday in the Moses Room, I referred to earlier debates in this Committee on the Bill specifically about Hikvision. It is worth recalling that the noble Lord, Lord True, was gracious enough to have several meetings in his office to discuss this, as well as dealing with it at that stage. I know the noble Baroness, Lady Neville-Rolfe, well enough—I congratulate her, as others have done, on her appointment as Minister—to know that she will take this as seriously as he did.
The company Hikvision is responsible for the surveillance cameras in Xinjiang referred to by the noble Lord, Lord Hunt. But these cameras were purchased through our procurement policies by great departments of state and are used in local government and by public authorities up and down the length and breadth of this country. These cameras are used to impose the surveillance state on the Uighur Muslims referred to by the noble Lord, Lord Hunt.
At the conclusion of our debate last Thursday, the noble Lord, Lord Goldsmith of Richmond Park, promised he would write to me in response to my question specifically about whether, during the next set of proceedings on the Bill—therefore, on Report—the amendments that many of us argued for at earlier stages will be agreed by the Government. I hope that the noble Baroness’s officials will talk to his officials before he writes that letter, so that we genuinely get joined-up government on this.
I hope they will also look at the Biden Administration’s legislation on goods made by slave labour, something that the noble Lord, Lord Coaker, and I have raised in other legislation and that we both, as well as other members of the Committee, feel very strongly about. They should also look at legislation the Biden Administration introduced called the CHIPS Act and the Inflation Reduction Act, which draw together the prioritisations of investing in domestic industry, tackling climate change and reducing dependency on authoritarian regimes. All those things should be done in the context of this Bill.
In parentheses, I remind the Committee that we bought 1 billion—not 1 million, but 1 billion—lateral flow tests from the People’s Republic of China and 24 billion items of personal protective equipment where China was recorded as the country of origin. The cost to the United Kingdom was a staggering £10.9 billion—about the equivalent of our now reduced overseas aid and development budget. This is British taxpayers’ money pouring through our procurements into the pockets of a country that stands accused of the appalling barbarism identified in Amendment 185, and indeed of genocide.
Baroness Northover (LD)
My Lords, I am a co-signatory on this amendment and, from the Lib Dem Benches, we strongly support the noble Lord, Lord Hunt, in his endeavours to combat the appalling issue of forced organ transplantation. He has made a strong and comprehensive case, as did the noble Lord, Lord Alton—as ever. Like them, I am glad that Ministers have been responsive over the past few years in relation to these appalling practices. I hope that this continues. As the noble Lord, Lord Hunt, said, the amendment is designed to exclude suppliers located in a country
“at high risk of forced organ harvesting”
from being awarded a public contract involving
“any device or equipment intended for use in organ transplant medicine”
or in related regard—for example, research.
As the Minister will know, this House has a very well-informed and cross-party approach to combating forced organ transplantation. She will be aware of the significance of such obvious and lengthy cross-party working. I assume that this might rightly be in red on the risk register for the Bill. I have noticed that that might be the case.
I recall a few years ago that a Peer, who is a current government Minister, was praising the Chinese for the speed and apparent efficiency of their transplant programme. I am certain that they would not have expressed that view had they known what we know now. That is surely thanks to the assiduous work of the noble Lords, Lord Hunt and Lord Alton, and others. They, in turn, have been supported by the meticulous examination of the evidence by the China and the Uighur tribunals, both headed by Sir Geoffrey Nice, former prosecutor in the Balkans war-crimes tribunals. They shone a light on the terrible practice of forced organ harvesting. I noted that they found—as others have noted—that victims in China were targeted because of their religion, beliefs or ethnicity.
As the noble Lord, Lord Alton, has just said, the China tribunal concluded that forced organ harvesting has been committed for years throughout China on a significant scale; and that commission of crimes against humanity against the Falun Gong and the Uighurs have been proved beyond reasonable doubt. Noble Lords have also heard the view from the United Nations; securing that was very difficult to achieve. The noble Lord, Lord Alton, as ever, calls some of the individuals concerned into our view, so we cannot say that we did not know.
The medical profession has been accused in the past of turning a blind eye to such practices. The BMJ criticised the transplant community for failing to implement high ethical standards. I note, however, that, in the BMA’s briefing for the Bill, it states that,
“upholding ethical procurement standards is essential.”
It refers to the procurement of medical equipment, including PPE, from the regions in which labour abuses have been alleged. It states that it would support
“any amendments to strengthen the legislation to help ensure ethical procurement and transparency throughout the supply chains of health-related goods.”
That would certainly apply to this amendment. In addition, as we have heard, the UK enjoys a global reputation for high-quality medical research. It is something that the Government emphasise as being key to the United Kingdom’s future. As the noble Lord, Lord Hunt, has indicated, it is thus vital that we protect medical researchers from inadvertent involvement.
During the summer, in the then Conservative leadership debates, Rishi Sunak was asked about dealings with China. It is good that he acknowledged the potential human rights challenge. However, he also said that he sought to have a constructive engagement. This amendment would close a loophole, given that he has now been chosen by the Conservatives to be the country’s newest Prime Minister. It will help to ensure that the Government do indeed properly pay attention to human rights, which the new Prime Minister said was an aim of his.
In regard to the issue raised by the noble Lord, Lord Alton, in relation to the hospital in China, will the Minister say whether UK Export Finance funds were given in this case? If she cannot tell me now, can she write to me? In summary, I commend this amendment to the Committee, and I hope that we will see progress and engagement with the Government.
Lord Coaker (Lab)
My Lords, I apologise; I will see how long my voice lasts—not long, I imagine some people hope, but we will see how it goes.
I too congratulate the Minister on her promotion. She has already learned some of the tricks of the ministerial trade: she has gone through what she has previously said and asked her civil servants to have a look and see what she could say back if anyone raised it, which relates to what she opened with about simplification.
The serious point is that the fact that she has questioned the Bill will make her a very good Minister. That does not mean undermining the Bill, but you have to have a Minister who challenges it and listens to what people say, otherwise the whole process is pointless. From that point of view, we are all reassured by her appointment.
Baroness Neville-Rolfe (Con)
My Lords, Amendment 185 would require the Minister to publish in regulations a list of countries considered to be at high risk of performing forced organ harvesting. It would also require contracting authorities to exclude suppliers from those countries from certain procurements.
Clearly, I appreciate the seriousness of the issue of organ harvesting; I agree that it is a difficult matter for the Government. This is an abhorrent practice, as we heard from the noble Lord, Lord Hunt, which is all the more egregious when sponsored by the state. It is an issue that has been frequently debated in recent years; I recognise the dedication with which it has been pursued by the noble Lords, Lord Hunt and Lord Alton, and the noble Baroness, Lady Northover, with the support today of the noble Baroness, Lady Finlay, and the noble Lord, Lord Ribeiro. It is understandable that they take opportunities such as today to draw attention to the awful things that are happening and the scale of the issue.
The noble Lord, Lord Hunt, is right to record that the Government are taking action to address this issue on a number of fronts. The Health and Care Bill was amended during its passage through Parliament to prohibit commercial organ tourism and send an unambiguous signal that complicity in the abuses associated with the overseas organ trade will not be tolerated. Equally importantly, the Government continue to monitor and review evidence relating to reports of forced organ harvesting in China, and they maintain a dialogue with leading NGOs and international partners on the issue. This includes Foreign, Commonwealth and Development Office Ministers writing to the World Health Organization in Geneva to encourage it to give careful consideration to the findings of the China Tribunal on organ harvesting, published in March 2020.
Baroness Neville-Rolfe (Con)
My Lords, I was talking about the international angle and the importance of doing things internationally. I am particularly grateful for the reminder of the need to discuss these issues with my noble friend Lord Goldsmith of Richmond Park. I will also talk to the FCDO, DHSC and DIT about the UK-China hospital partnership and whether there has been any use of UK Export Finance. I have not been briefed on the issue, but I will write to the noble Lord, Lord Alton, who is not in his place, and the noble Baroness, Lady Northover, if they are content.
Turning to the main issue, I must resist this amendment on a number of counts, which I will explain. First, it treats suppliers as excluded simply for being located in a country at high risk of organ harvesting. This is guilt by association. It would undermine the principle, which runs throughout the exclusions regime, that suppliers can be excluded only where the supplier or a connected person has committed relevant misconduct. This is really important to ensure fairness and proportionality in exclusion decisions. The amendment could also have perverse effects—for example, preventing the NHS procuring life-saving devices in a country, even though they have nothing to do with organ harvesting or people trafficking.
Finally, there is already a provision in the Bill which would allow for the exclusion of suppliers who participate in forced organ harvesting. The Bill is clear that any serious breach of ethical or professional standards applicable to the supplier would meet the discretionary exclusion ground for professional misconduct. It is almost certain that involvement in these practices by suppliers of goods or services related to transplant medicine or human tissue would constitute a breach under the detailed standards set by health sector institutions.
The exclusion ground of professional misconduct is intended precisely to cover all the particular ethical issues that arise in different industries and sectors. That is of course an exclusion we agreed earlier, which merited further discussion. The grounds for exclusion cannot and should not list every issue within a particular industry. I should repeat that the exclusion and debarment regime in the Bill represents a significant overhaul and enhancement of the EU system; we should not forget that.
Finally, to respond to the noble Lord, Lord Alton, I have already promised, in his absence, to write on the subject of the hospital, but I am also of course aware of the concerns regarding Hikvision.
Lord Alton of Liverpool (CB)
I apologise to the noble Baroness; I got trapped in the Chamber when the doors were locked at the end of the Division—it serves me right. Some people may wish it had been permanent. I am grateful to the noble Baroness and look forward to reading her reply in Hansard.
Baroness Neville-Rolfe (Con)
I look forward to getting delayed in the Lobby in the next Division.
I am aware of the concerns regarding Hikvision and other Chinese technology companies; we take these concerns extremely seriously, as the noble Lord knows. We are taking action in the Bill to introduce a new ground for exclusion, specifically to address situations where a supplier poses a threat to national security. The new exclusion ground allows a contracting authority to reject bids from suppliers that the authority considers pose a threat to the national security of the United Kingdom.
It is the long-standing policy of successive British Governments that judgment as to whether genocide has occurred is for a competent national or international court. It is not for the contracting authorities. Genocide is a crime and, like other crimes, whether it has occurred should be decided after consideration of all the evidence available in the context of a credible judicial process.
This has been an important debate. I have learned a lot but, for today, I respectfully request that this amendment be withdrawn.
Lord Purvis of Tweed (LD)
I would be grateful if the Minister could clarify a little her argument as to why organ trafficking—which is prohibited under the UK’s statute book—cannot be mentioned in Schedule 6 under the mandatory exclusion grounds. Under labour market, slavery and human trafficking offences, there is a fairly comprehensive list of UK domestic offences that are mandatory grounds. I do not see why that list cannot be added to, as I cannot see where the ethical grounds are included within Schedule 6 on the mandatory grounds.
Can the Minister also clarify why, in Schedule 7, on discretionary grounds, those offences are included for prevention orders? The Government seem to be suggesting that for a company that is subject to prevention orders for these heinous crimes—or could be subject to them, if it were a foreign supplier—this is simply discretionary. A contracting body would have to make a judgment itself as to what it considers would be the likelihood of a supplier meeting the threshold for a prevention order, rather than an offence. That does make any sense to me. I would be grateful if the Minister could address those two points.
Baroness Neville-Rolfe (Con)
I will need to take the noble Lord’s first point away and look at it. His explicit point is that there is a bit of legislation, so why do we not refer to it? His second point is tied up with how this discretionary schedule works and how we define “professional misconduct”, which, in our interpretation, includes ethical issues. I thank him for raising these issues again.
Lord Purvis of Tweed (LD)
I would be grateful if the Minister were willing to consider this. It is not about the ethical point. It comes under paragraph 1 of Schedule 7, which is headed “Labour market misconduct”. Sub-paragraphs (a) to (d) specifically refer to slavery and trafficking prevention orders and trafficking and exploitation prevention orders. If a supplier is considered to be acting in a way that would satisfy a prevention order in the UK, it would be a discretionary exclusion ground rather than what I consider it should be: a mandatory exclusion ground. I am happy for the Minister to reflect on it and write if she cannot answer today.
Baroness Neville-Rolfe (Con)
Clearly, I have learned during this debate. I will obviously have to learn a little more about how we have tackled this issue. As was said right at the beginning of the debate, there is clearly some difficulty around the principle of how much detail to include and how many things to cross-reference in the Bill but, in the light of the noble Lord’s helpful clarification, I will go away, look at the various areas and come back to him.
Lord Hunt of Kings Heath (Lab)
My Lords, this has been a very interesting debate. I am grateful to the noble Lord, Lord Alton, the noble Baroness, Lady Northover, and my noble friend Lord Coaker for their profound speeches. Of course, I also thank the noble Baroness, Lady Finlay, and the noble Lord, Lord Ribeiro, who cannot be here today.
The noble Lord, Lord Alton, put a number of pertinent questions to the Minister, not just about the UK-China hospital partnership but more generally about the principles behind our trade with China. I must say that I find government policy inconsistent and incomprehensible. The new Administration, if I can call them that, need to get a grip on what exactly our relationship with China ought to be in terms of diplomacy, trade and strategic investment. Over the past few years, it has seemed completely all over the place.
There is an argument—my noble friend Lord Coaker referred to it—about the principle of how much we should use procurement legislation for wider, desirable policy aims. I believe passionately that it is right to use a Procurement Bill to try to influence this abhorrent practice. I am grateful to the Minister because she gave a careful response and appreciated the seriousness of this abhorrent practice, which we are doing our best to help eradicate. She also acknowledged the changes made in legislation in the past few years. However, she was critical of the amendment’s wording; she has quickly taken on the mantle of ministerial office again, by finding all amendments that do not emanate from her own department technically deficient.
The Minister’s key point around what is wrong with the amendment is that it is guilt by exclusion. I understand that but I believe that the amendment is tightly drawn. It is not just about excluding suppliers
“located in a country categorised … as at high risk of forced organ harvesting.”
It would exclude only in the event of
“a public contract involving … any device or equipment intended for use in organ transplant medicine or activities relating to”
that. That is tightly drawn and entirely justifiable.
The Minister also said that these practices would be covered by the exclusion grounds in the Bill. We have now had a debate on that; I thought that the noble Lord, Lord Purvis, raised some important questions. I accept that one can look to general provisions in a Bill and say, “Well, those cover it”, but I believe that there is sometimes a strong place for explicit provision on a practice that we find abhorrent. I hope that the Minister will be prepared to discuss this with us between Committee and Report because I am convinced; I am grateful to my noble friend Lord Coaker for his pertinent comment that we will come back to this on Report. Having said that, I beg leave to withdraw the amendment.
Viscount Younger of Leckie (Con)
My Lords, we have a change of horse. By way of a health warning, my remarks do include mention of a considerable number of amendments. However, as a reassurance, and in the interests of brevity and the current buzzword—simplification—my speech is somewhat shorter now than it was at the beginning of the day.
A number of amendments are needed in Committee to ensure that the Bill functions appropriately. Clauses 34 to 39 introduce the new concept of dynamic markets and the new utilities dynamic markets. Existing dynamic purchasing systems are limited to providing commonly used goods and services that are generally available on the market, and therefore their scope is constrained. Examples of existing dynamic purchasing systems include Crown Commercial Services artificial intelligence, which enables public sector bodies to access services including machine learning and augmented decision-making. The new dynamic markets can be used for all procurements rather than just commonly used purchases. Dynamic markets will always remain open for new suppliers to join. This provides a great opportunity for all types of suppliers, including SMEs, to pre-qualify for work.
Amendments 210 to 212 and 217 to 219 would clarify that references to membership of a dynamic market in this context relate to membership of an appropriate dynamic market, or an appropriate part of such a dynamic market. This is defined in Amendment 222 as a dynamic market, or part thereof, that permits the award of the contract by the contracting authority.
Amendment 220 clarifies that a contracting authority must consider applications for membership of the dynamic market from suppliers that have asked to participate in a competition reserved for members of the dynamic market before excluding such suppliers from the competition. This is in addition to considering applications from suppliers that have submitted a tender as part of the competition.
Amendment 222 contains various definitions relevant to these amendments, including a new explanation of when a dynamic market is appropriate, as mentioned previously. It also contains the exemption from Clause 34 for concession contracts other than those that are also utilities contracts, which was previously in Clause 35.
Amendments 223 to 227, 229 to 231 and 233 are tidying-up amendments. Amendments 223, 230 and 233 would delete provisions that are now set out elsewhere.
Viscount Younger of Leckie (Con)
My Lords, as I was saying, Amendments 223 to 227, 229 to 231 and 233 are tidying-up amendments. Amendments 223, 230 and 233 delete provisions that are now set out elsewhere. Amendment 224 clarifies that only contracting authorities may award public contracts using dynamic markets, while Amendment 225 reflects the terminology of “participation in”, rather than “membership of”, a dynamic market. Amendment 226 includes a new definition of “utilities dynamic market” to make it clear that this is a subcategory of dynamic markets rather than a distinct concept. Amendment 227 deletes the previous definition of a utilities dynamic market and deletes Clause 35(3), which will not be needed if proposed new Clause 1, which was discussed on the first day of Committee, is agreed on Report. Amendment 229 is a grammatical change, and Amendment 231 ensures that the definition of “utility” applies across the whole Bill, not just to this clause.
Amendment 234 includes proposed new subsections (1A), (1B) and (1C) in Clause 36, relating to conditions for membership of a dynamic market. These provisions apply the same restrictions to these conditions as apply to conditions of participation in a competitive tendering procedure, as set out in Clause 21.
Amendment 235 clarifies that the contracting authority that established a particular dynamic market, as opposed to any other contracting authority, must publish a notice when the dynamic market ceases or changes—for example, when new suppliers are added.
Amendment 288 allows for a minimum 10-day tendering period for the submission of tenders in competitive tendering procedures for the award of contracts under dynamic markets. This shorter period is a significant efficiency offered by dynamic markets. It compares to the usual tender return of 35 days, which applies in a normal procedure unless tender documents are provided at the outset and/or tenders are accepted electronically, both of which reduce the return by five days.
Amendment 345 extends the requirement on contracting authorities to notify the relevant appropriate authority where a supplier is excluded from a dynamic market because it has fallen foul of a mandatory or discretionary exclusion ground. Amendments 346 to 348 are consequential on this amendment.
In respect of the last two amendments, Amendment 541 corrects the clause reference in the list of defined terms to align with the amendments proposed to Clause 35, while Amendment 545 includes in this list a cross-reference to the newly defined term “utilities dynamic market”.
With that, I beg to move the first of these government amendments in the name of my noble friend Lady Neville-Rolfe.
Lord Fox (LD)
My Lords, as the noble Viscount set out so speedily, this new concept of dynamic markets is so new that a lot of it did not even make it into the original Bill; it had to be brought in as amendments. Thereby hangs a concern—not with the concept of a dynamic market, which I will come to shortly, but with how this is being put together, the sum of the parts and how it will work. It is difficult to see exactly how this will work in practice from the noble Viscount’s presentation that we just heard, the Bill itself and the original White Paper. That is my concern.
It would be helpful if the noble Viscount came back to us in writing with a simple message as to how this will work. How, for example, does it welcome innovation rather than shut it out? I will give an example. Whether a dynamic is based around process rather than outcome makes a difference, so how will these rules manage dynamic markets that actually deliver constant innovation? How will they be refreshed? How will the system work so that, rather than having the power of incumbency, if you like, which is often what happens with procurement, power will be pushed around to allow innovation, new entrants and new people to work within this dynamic?
We can call something dynamic but how is it dynamic on an ongoing basis if I use this market to buy things or services on a daily basis? Essentially, that is my concern: all these amendments are tinkering around technically with process but, because of the way this has been put together in pieces, will it actually work? Can the Minister come back with some assurance as to how this is supposed to work? How will it be constantly renewed? How will he ensure that it is open to new entrants throughout the life of that dynamic? How will individuals know that they are able to keep entering that market? Tenders will not be going out, so what is the process? If I have a small or medium-sized business, how do I find out about dynamic markets that might suit my product or service set? I am concerned about those kinds of mechanisms and processes.
Lord Lansley (Con)
I had not intended to intervene but I am getting a bit confused here. In the Public Contracts Regulations 2015, Regulation 34 describes a dynamic purchasing system. First, I am trying to understand the difference between the dynamic purchasing system that existed in the regulations we are replacing and this apparently entirely new dynamic market; I am not quite clear what it is. Secondly, the dynamic purchasing system in the regulations is an entirely electronic system. This one is not necessarily so.
Lord Lansley (Con)
I hope it is but it does not say so, whereas the 2015 regulations make it clear that it is. I wonder whether this will be an entirely electronic system.
Baroness Hayman of Ullock (Lab)
I shall be extremely brief as the noble Lord, Lord Fox, has already covered a lot of the concerns that your Lordships feel. Following on from that, we need some clarification around the issue, as the noble Lord, Lord Lansley, just said, of whether it is or is not entirely electronic. How is that going to operate? What are the conditions of membership? We need some clarification on the detail of how the dynamic markets are going to work. Perhaps the Ministers opposite could write to the Committee with some clarification about the operation of the system ahead of Report. That would be very helpful.
Viscount Younger of Leckie (Con)
My Lords, I appreciate the comments made by the three Peers who have spoken. It might be appropriate for me to write a letter to clarify the detail, which I appreciate came across as rather technical—though not too rushed, I hope. I appreciate the questions asked by the noble Lord, Lord Fox, my noble friend Lord Lansley and the noble Baroness, Lady Hayman; I will attempt to answer some of them.
Let me start by saying that the expression “dynamic market” is not just a name change. The dynamic market will have a wider remit than the current dynamic purchasing systems. Importantly, dynamic markets can be used for all procurements rather than just commonly used goods and services. That is the first change. The Bill also provides much greater clarity on how dynamic markets can be established and contracts awarded to suppliers—this is on-the-ground information—and on how contracts can be awarded to suppliers that are members of the dynamic market, as well as increased transparency over their operation. I hope that helps to some extent.
I shall go further in answer to the questions asked by the noble Lord, Lord Fox. The benefit of frameworks is that, once set up, they can be a fast, efficient, compliant and easy-to-use procurement route for both the contracting authority and the suppliers. Again, once the framework is set up, there is a significant reduction in the procurement timescale from six to nine months to as little as four to six weeks, leading to reduced procurement costs. Obviously, that is beneficial for both the public sector and the suppliers.
With this, there are pre-agreed terms and conditions, meaning that contracting authorities can simply call off the framework to meet their requirements. They are usually set up with ceiling prices that can be further reduced by competition at the call-off stage. So the benefit of the dynamic market is that it remains open to all suppliers, which benefits SMEs in particular as they will not be locked out for long periods of time.
On how dynamic markets actually help companies—let us say SMEs, which I think was the gist of the noble Lord’s question—it may be that I need to provide more information, but here we are. The new dynamic markets will be open to new suppliers joining throughout their life, ensuring that no one is locked out from the market for long stretches of time. That will be beneficial to SMEs in particular, which can decide to apply to a dynamic market at any time via a process that will be much simpler and quicker than tendering for a framework.
I believe it will be best if I set out all this information and more in a letter. With that, I hope that the noble Lord will be prepared to withdraw his amendment. Actually, these are government amendments, are they not?
“(6) A dynamic market or part of a dynamic market is “appropriate” for the purposes of this section if its terms permit the award of the contract by the contracting authority.(7) This section does not apply in relation to the award of a concession contract, unless the concession contract is also a utilities contract.(8) In this Act—“dynamic market” means arrangements established under section 35(1);references to a contract being awarded by reference to suppliers’ membership of a dynamic market are references to a contract being awarded in reliance on this section;references to suppliers’ membership of a dynamic market are references to suppliers’ participation in arrangements established under section 35(1).”
“(1A) In this Act a “utilities dynamic market” means a dynamic market established only for the purpose of the award of utilities contracts by utilities.”
“(1A) A condition set under subsection (1)(b) may relate to suppliers’ qualifications, experience or technical ability, but may not—(a) require suppliers to have been awarded a contract by a particular contracting authority,(b) break the rules on technical specifications in section 24, or(c) require particular qualifications without allowing for their equivalents.(1B) When considering whether a condition is proportionate for the purposes of subsection (1) a contracting authority must have regard to the nature, complexity and cost of contracts to be awarded by reference to suppliers’ membership of the market.(1C) A condition of membership may require the provision of evidence that is verifiable by a person other than the supplier.”
Lord Clement-Jones
“(c) if the contract is not included in a framework agreement.”
Lord Clement-Jones (LD)
My Lords, I would be very happy if the Minister introduced my amendment, but in moving it I will also speak to Amendment 243A and Clause 40 stand part. My noble friend Lord Fox will speak to other Liberal Democrat amendments in this group that are in the names of my noble friends Lord Wallace and Lady Brinton. I know that my noble friend Lord Fox has congratulated the Minister already but it is the first time that I have spoken since I saw her on the Back Benches in our previous proceedings. I must congratulate her on her seamless move to the Front Bench—again.
Given the controversy surrounding these direct contracts, the removal of Clause 40 on direct awards would, pending greater transparency and equity for SMEs, be the preferable course. But these are specific amendments to Clauses 40 and 42, which would prevent direct awards being used within framework agreements and instead open all such awards to competition. This issue is seen all the time within the G-cloud framework; it prevents proper competition from British SMEs and simply reinforces the dominance of certain key foreign players in the market. These amendments would provide the opportunity to redress the balance and help support UK SMEs.
We will debate the role of frameworks later, but these amendments seek to highlight the blurring of direct award rules by smuggling in large, uncontested contracts within framework agreements. The notion that there is a ceiling above which such awards must be competed for, and below which they can be awarded directly, is theoretically sound if it is rigorously adhered to. We on these Benches would argue that the threshold of £250,000 is too high and that a figure of £100,000 would be more appropriate. I seek the Minister’s view on thresholds and how they are arrived at. However, thresholds are pointless if they are ignored or bypassed, which is what seems to be happening.
One very good example of where this system has completely gone off the rails is cloud computing. This important service is central to the Government’s digital plans. It seems that rarely is the ongoing cloud service bid seen as a separate service; rather, it is wrapped in a package being competed for through a framework agreement by the consulting giants. These consultants always seem to partner with one or other of the dominant, non-UK cloud services companies.
This has gradually led to a disproportionate level of awards to these companies. For example, in 2012-17, one company, Amazon Web Services, was awarded £25.5 million-worth of contracts from a total market worth £381.7 million—a market share of 7%. By 2018-22, its market share had ballooned to just a shade under 40%. In the current financial year alone, 2022-23, AWS has seen £87.7 million-worth of contracts from a total market of £137.6 million—a market share of 64%. The US federal Government estimate that the UK public cloud market was worth $12 billion in 2020 and growing, so AWS can expect a healthy $5 billion-plus, with Microsoft Azure not far behind. Almost none of this would have been opened up to competition.
Of course, in the UK, a company is deemed to have monopoly power if it holds more than 25% of the market. At the same time, the SME share of the market has fallen from more than 50% to just 20% in the last five years, and barely 10% this year. It simply reinforces the dominance of certain key foreign “hyperscalers” in this market. To be clear, it seems that these services are available from UK-based suppliers. We are not asking for preferential access for these UK suppliers, just that they are not locked out by the use of framework agreements in this way and the awards of direct contracts under them.
The Government talk about building a UK digital future, yet they systematically underwrite the development of non-UK businesses by ignoring their own rules. The Procurement Bill is supposedly designed, according to the Queen’s Speech, so that
“Public sector procurement will be simplified to provide new opportunities for small businesses.”
On top of this, the Crown Commercial Service’s own guidance on direct awards suggests that the procedure is suitable only for low-value, low-volume commodity products. In the case of AWS, some of the contracts, such as the Home Office contract, top £100 million in value, so they cannot be considered low-volume or low-value, nor can cloud hosting be considered a commodity, given the proprietary nature of the service and the consequences of that.
If the Government are true to their word, they will accept these amendments to ensure that the balance is redressed and UK SMEs are given a chance to compete on a level playing field. I beg to move.
Baroness Noakes (Con)
My Lords, I have Amendment 236 in this group. It probes the relationship between direct contract awards and framework contracts.
Direct awards are allowed under Clause 40 if they satisfy one of the justifications in Schedule 5, paragraph 8 of which allows them if they are similar to existing contracts for goods and services that have been entered into in the previous five years and in which the initial tender set out the intention to use the direct award justification. My amendment would change those five years to four years, specifically to probe the differences between a repeat direct award under Clause 40 and an award under a framework contract, as covered in Chapter 4 of Part 3.
Clause 45 says that a framework contract has a maximum duration of four years other than for defence and utilities contracts. Doubtless this is my ignorance speaking but I hope that my noble friend the Minister can explain to me the rationale for allowing five years for direct awards under Chapter 3 as opposed to four years for framework contracts under Chapter 4. My question is pretty simple: is there a substantive distinction between direct awards and awards under framework contracts, where the justification for the direct award is in paragraph 8 of Schedule 5?
It seems to me that this is another example of how the designers of this new procurement system have lost sight of simplicity and underlying principles in designing the system. However, there may be a good reason for that, of course; I look forward to my noble friend the Minister explaining it.
Baroness Bennett of Manor Castle (GP)
My Lords, I rise to speak briefly on Amendment 240 in particular, to which I would have attached my name had I noticed it in time. It is a pleasure to follow the noble Lord, Lord Clement-Jones. What he set out in terms of the problems of framework agreements are the kind of things we often encounter in the pages of Private Eye; it really is time that we saw some action on this issue.
Amendment 240
“is intended to prevent the future use of ‘VIP lanes’ for public contracts.”
I rather suspect that the nation out there, which is exhausted by politics, is probably not glued to your Lordships’ Grand Committee on the Procurement Bill this evening. I looked up the schedule: people are probably watching either “The Simpsons” or “Britain’s Parking Hell”. However, I know from what I get in my mailbag and what I see on social media that what happened during Covid with VIP lanes is a huge, continuing concern among large numbers of the British public. It was only last month that the Government were forced to admit that 50 firms had been put into the priority lane for test and trace contracts, worth billions. They included Immensa, a firm that was subsequently at the heart of more than 43,000 false negative results and had been incorporated only in May 2020. This came after the Good Law Project successfully challenged the Government’s VIP lane for personal protective equipment contracts.
So we have a situation where people are now looking at politics and saying, “We want to see things done differently”. This small, modest amendment would set a marker for achieving that; I feel that it deserves more attention both in this Room and outside it.
Baroness Hayman of Ullock (Lab)
My Lords, I have a few amendments in this group. The first is Amendment 235A, which was brought forward as a probing amendment so that we could consider the direct award of contracts in special circumstances. It is important that the Government both put on the record why there is a need for direct awards and explain properly the limited circumstances in which they can be used, so that things are completely clear. I also point out that, in certain scenarios, a contracting authority might be able to make a modification to an existing contract without following a competitive tendering procedure; in reality, that would have the effect of making a direct award. We need a bit of clarification around some of these issues.
The Bill introduces some changes that we would support in this area, including, for example, that the contracting authority would be obliged to publish a transparency notice in advance of making a direct award. We would very much support that. It is also interesting that Ministers will be empowered to designate specific contracts or categories of contracts that can be awarded directly in certain identified areas, such as in protecting life and for public security. It is good that we have a bit more meat on the bone in this area and on the issue around transparency.
Lord Fox (LD)
My Lords, as we have heard, Clause 41 covers the very important issue of direct awards that may be awarded to protect life.
The Covid pandemic tested our current systems but, in one particular area, the Government have now admitted that they created a VIP lane, under which at least 50 contracts for test and trace were expedited. Many other contracts for PPE and other core Covid contracts also circumvented the usual public procurement routes in the VIP lane, as the noble Baronesses, Lady Bennett and Lady Hayman, mentioned. That is why my noble friends Lord Wallace and Lady Brinton have tabled Amendments 238 to 241. I have already explained that my noble friend Lord Wallace cannot be here, and my noble friend Lady Brinton is participating in the Chamber.
These amendments say that regardless of the emergency, the principles of transparency, integrity, fairness and non-discrimination must be at the heart of any contract process. These are the diagnostics of a good, well-managed company. If these are not pursued, it is very unlikely that quality and delivery will be good; and that is what we have found—delivery was poor. The VIP lane was a particularly egregious mechanism that the Government used to encourage contractors to come forward to supply goods at short notice, irrespective of those qualities that I have just listed. Billions of pounds of taxpayers’ money was used to provide contracts, including, as we have heard, to firms that had no experience of test and trace or the provision of PPE. This is not just a waste of money: one test and trace firm’s testing kits gave many thousands of erroneous false-negative results, which meant that people believed that they did not have Covid and went around the country infecting people accidentally, causing illness and possibly death. We do not know how many or how much.
PPE kit worth billions has already been and is being incinerated by the NHS, because it did not meet the required safety standards. It could not meet the quality standard, because it did not have the management controls and processes, nor the integrity, to meet it; it was not checked, because of the fast-track process. One common element is that it was parliamentarians—virtually all Conservatives—who introduced the companies that received this preferential treatment over and above existing, experienced suppliers and experts. There are many examples of this. Worse, the BMA reports that thousands of doctors ended up buying their own PPE, because they knew that the stuff that the Government were providing them with was substandard.
From our Front Benches and in private meetings with Ministers, despite repeated questioning, it was almost impossible to get answers about these appalling processes. Two years later, the truth is really beginning to emerge. Friends of Conservative parliamentarians were given unfair advantage in obtaining contracts, as we just heard from the noble Baroness, Lady Hayman. That is bad enough, but the waste from those contracts is a stain on this Government’s procurement activities. It must never happen again.
Amendment 240 makes it plain that provision must not confer any preferential treatment on suppliers connected to or recommended by Members of the House of Commons or House of Lords. If the Minister resists this amendment, these Benches will also oppose that Clause 41 stands part of the Bill. As currently written, it does not prevent the procurement processes from this debacle happening again.
Can the Minister answer the following questions? Does she believe that Clause 41, in its current form, protects against abuse of a future emergency process similar to the VIP lane that this Government used, which has proven to be untransparent and to favour colleagues of parliamentarians? In other words, does Clause 41 stop this happening again? Does she recognise that now is the time to say that this must never happen again? And does she recognise that these amendments are a mechanism to ensure that we do not get a repeat of this?
Baroness Neville-Rolfe (Con)
My Lords, this is a rather confusing group, so I will start by speaking to the two government amendments. Amendment 237 removes duplication of the direct award ground, which is adequately covered in Clause 41; and Amendment 245 requires appropriate assessment prior to the direct award of whether a supplier previously submitted an unsuitable tender.
Looking at the group in the round, the noble Baroness, Lady Hayman, and the noble Lord, Lord Coaker, raised Amendment 235A, so that we could rightly debate the direct award of contracts; and the noble Lord, Lord Wallace, in his absence, gave notice of his intention to object to Clauses 40 and 41—I think because he wants to understand what is happening and wants answers to some of the questions that have been put by the noble Lord, Lord Fox.
Clause 40 permits a direct award to a supplier, other than an excluded supplier, if a justification in Schedule 5 is met. This is based on the World Trade Organization’s Agreement on Government Procurement grounds for limited tendering and is similar to the current law. We have been commended by external stakeholders for bringing clarity to the justifications and reducing the risk of unintended use of these provisions. As the noble Baroness said, publication of transparency notices is an extremely important development.
Just to let noble Lords know, I will deal with standstill provisions in the next group so, in the interests of time, will not cover them in this group. But I will deal here, a little later, with sunset clauses, which the noble Baroness also raised.
I was very interested to hear the explanation for Amendments 235ZA and 243A from the noble Lord, Lord Clement-Jones. He made a lot of points that I was not aware of, which I will study, in relation to the important areas of cloud computing and UK businesses. But I make clear that existing frameworks allow contracting authorities to buy cloud-based services separately, rather than in a package. In this way, SMEs are encouraged to provide services directly to the public sector, which is something that we are keen that they do.
Frameworks are of course created following a competition and they create a period of uncertainty on contractual terms, albeit they allow a closed list for contracts to be awarded, so it makes sense that they are for a limited duration—I think that is what the noble Lord was asking about. This should not lock out competitors for too long. Directly awarded contracts have a shorter duration for a different rationale: they allow contracting authorities to put alternative arrangements in place. That is the rationale, and we worry that the amendments put forward by the noble Lord, Lord Clement-Jones, would add more time as an unnecessary burden on contracting authorities by mandating them to check for and use available framework agreements, even where these might not be appropriate. Requiring them to keep within existing arrangements can actually stifle innovation and new entrants, particularly where the prototype in development ground is being used. The framework formalities, which may include a requirement for competitive process, may be impractical in cases such as those of extreme urgency.
Lord Fox (LD)
My Lords, before the Minister finishes, I have two points. On the big question, I asked whether she thought that Clause 41 would prevent the VIP lane problems resurfacing or coming back. It would be good to get an answer to that, either now or later. In the Minister’s response on Amendment 239, I thought I heard her say that provisions in other parts of the Bill around operating ethically are, in spirit, reflected in Clause 41. “In spirit” is a very difficult concept to understand in law. I hope we can find a way of perhaps stiffening the spirit and making it actual. If there is a read-across, we need to find a way—either at the Dispatch Box, in some Pepper v Hart way, or within the words—to ensure that what the Minister says, which I take to be in good faith, is usable in the outside world once the Bill becomes an Act.
Baroness Hayman of Ullock (Lab)
Perhaps I might add that what the Minister said makes a lot of sense and is helpful, but one of the problems we have is that we do not know how effective it is going to be and whether it would work until we get into that situation again. Is there any ability to build in a review once the system has been tested, perhaps against a major public problem like we had with Covid-19?
Baroness Neville-Rolfe (Con)
I think our intention is to try to get rid of the VIP lanes. I will take the point away but there is a committee sitting—it will unfortunately sit for a long time, no doubt—that is looking at a lot of these important issues, and at some of these lessons. It is doing things in phases, so hopefully we will begin to get some output soon. We have had the Boardman review and, as the Committee can hear, we have tried in this Bill to learn from that and not to have a preferential system. The point about non-discrimination and such things is in the same spirit. I will take away the point about spirit and what we are doing here, but we have some good things in the Bill. I have listened to what the Committee has said but also tried to convince your Lordships about what we are trying to do.
I am advised that Clause 41 would prevent VIP lanes, as regulators will set out in advance what direct awards are permitted and Parliament would not approve anything too wide-ranging—I am sure that is true. The other point is that the Bill’s provisions on conflicts, which I am sure we will come on to debate further, also help against VIP lanes. We have quite a lot of things going on here; obviously, I am worried about piling it on. Everybody is concerned, so they all come in with different suggestions for trying to improve things. But if you pile those one on the other, you end up with rules that are too burdensome and do not work too well.
On the issue of a review, I think my noble friend Lady Noakes referred to some sort of review clause at an earlier juncture. “Review” is something that one tends to write into Bills where you have a problem. Perhaps we can discuss this further before Report to see whether a review is the right thing or whether enough is going on to try to ensure that we are in a good place on the Covid front. I respectfully request that the various amendments are withdrawn, and I would like to move the government amendments in my name.
The Deputy Chairman of Committees (Baroness Fookes) (Con)
My Lords, I remind the Committee that, where amendments are grouped, only the first amendment is moved. The others must be moved or not moved as they are reached on the Marshalled List.
Lord Clement-Jones (LD)
My Lords, it falls to me as the mover of the lead amendment to respond to the Minister. Clearly, there was quite a lot in what she said and we will need to brood over Hansard when the time comes because there are a large number of issues here. I recognise the Minister’s track record on SMEs but I am somewhat amazed that the Government have been commended on bringing greater clarity, as she put it, because our intention was to provide much greater clarity—and, indeed, equity—in all of this for SMEs. In terms of the addition of more time, burden and so on, I believe the Minister would normally think that we should go the extra mile for SMEs in these circumstances.
Baroness Neville-Rolfe (Con)
Certainly. We have discussed SMEs before; we have gone away to have a look at that issue. I recently held a round table with SMEs. Basically, they were positive about the Bill. Clearly, we have to see through and teach them about the new proposals. The basic point is that there are fewer different ways forward. I was quite surprised that that was the case but clearly there is complexity, and we have got to make sure that the Bill is in the right form.
Lord Clement-Jones (LD)
My Lords, I think it partly depends on the market that is covered by particular SMEs. I could probably produce a range of SMEs that are not quite as pleased with their lot. Of course, that is partly the theme that the noble Baroness, Lady Hayman, and I have been talking about in terms of the UK cloud market.
I appreciate the fact that—stop press—it appears that the intention of Clause 41 is to prevent VIP lanes, because, let us face it, that is lesson number one from Covid. I hope that that is correct, but no doubt we will read carefully how and in what respect it gets rid of VIP lanes.
More broadly, virtually everyone who contributed to this debate wants to see a much clearer set of underlying principles—the noble Baroness, Lady Noakes, was clear on this—around how direct awards relate to framework agreements. I do not believe that we have seen that yet. Assurance from a Minister is one thing but seeing it in black and white in the legislation is another. I thought that the phrase “safe from challenge”, used by the noble Baroness, Lady Hayman, was exactly right. We have seen only too clearly what happens when there is no clarity; the Randox contract was an absolutely classic example of that. All of us hope that that will not happen again and hope to see a competitive market for our SMEs. However, I think we will probably have to return to this issue on Report.
In the meantime, I beg leave to withdraw the amendment.
Baroness Neville-Rolfe
Baroness Neville-Rolfe
(b) submitted an unsuitable tender or request in response to the invitation referred to in subsection (1)(a).”
Lord Aberdare
“(2) A “framework” is a contract between one or more contracting authorities and one or more suppliers that provides for the future award of contracts by a contracting authority to the supplier or suppliers, including through a multi-party framework alliance.”Member’s explanatory statement
This amendment clarifies that sections 44, 45, 46 and 47 governing ‘Award under Frameworks’ include the practices of leading public sector framework providers such as Crown Commercial Service whose framework contracts for goods, services and works include multi-party instruments known as ‘framework alliances’ that are entered into by multiple contracting authorities.
Lord Aberdare (CB)
My Lords, I start by joining the chorus of welcome to the noble Baroness, Lady Neville-Rolfe, in her new ministerial post. It brings back happy memories since it was almost exactly seven years ago in this Room that I proposed an amendment to the then Enterprise Bill concerning the pernicious practice of cash retentions, to which the noble Baroness gave a positive commitment in response. I am delighted to be trying my luck again today.
Amendment 245A would simply extend the scope of Clauses 44 to 47 to cater for framework alliances. These are multiparty framework contracts entered into by multiple contracting authorities, which are increasingly being used by leading framework providers such as the Crown Commercial Service. Framework alliances are recognised and supported by the Construction Playbook, as well as by Constructing the Gold Standard: An Independent Review of Public Sector Construction Frameworks by Professor David Mosey, published by the Cabinet Office last December, whose recommendations are strongly endorsed in the 2022 version of the Construction Playbook.
The use of UK public sector framework alliances has been shown to deliver greater value, reduce risks and other improved outcomes as well as enhanced opportunities for small businesses. They have been adopted for UK public sector procurements of goods, services and works worth a total of more than £90 billion. They include important joint systems of supply chain collaboration and joint risk management that are well in advance of those adopted in jurisdictions outside the UK.
Amendment 245A would merely adjust the wording of Clause 44(2) to ensure that the definition of frameworks includes such multiparty framework alliances. I hope that the Minister will be able to assure us that these alliances will be covered by the provisions of this chapter of the Bill, even if not in the exact form of my amendment. I beg to move.
Lord Lansley (Con)
My Lords, I will speak to my Amendments 247, 248 and 249 in this group. This is my first chance to make what I regard as a substantive contribution and to welcome my noble friend to her Front-Bench responsibilities. Speaking as a poacher these several years, our loss is the Government’s gain—and hopefully the Committee’s gain, too; as the noble Baroness, Lady Hayman, quite rightly said, the fact that my noble friend has already evidenced interest in the Bill is a positive signal to start off with.
I will not go on at great length. I declare an interest in that my wife’s company, with which I work, has been involved in a number of framework contracts. They are all in Brussels and nothing to do with the UK Government. They relate to the European Commission, to NATO and so on.
Without going on at length about framework contracts, everybody can see why they might be a useful thing for contracting authorities to use. They enable them to establish a group of suppliers who have the necessary credentials, capacity and so on, and they are then able to call them off at relatively short notice for these purposes. Everybody can understand that. The problem is that this is not always how they are used. What often happens is that you end up with something that is a speculative framework; we have experienced a number of occasions where no subsequent work has been offered under that framework, so all the original work in relation to that framework was nugatory. Sometimes, the frameworks need subsequent further competitions and a range of suppliers that have all been included in the framework. The subsequent competitions are, frankly, no less onerous than the original competition would have been, the only difference often being that they are done at much shorter notice than the original tenders were required to be. That can impose all kinds of difficulties, especially on SMEs. I declare an interest: our company is an SME in the European procurement context.
So why these amendments? My amendments—particularly, for this purpose, Amendments 247 and 248 —are about at least trying to intrude the idea that the original framework competition ought to rank suppliers. Then, the suppliers who are ranked have some idea of how this is going to work. I have seen the positive benefit of that since, from time to time, we have engaged in this and it has become clear that the contracting authority is going to have what it describes as a cascade. A cascade outcome for a framework competition leaves suppliers in a much clearer position as to their future potential work because you learn that, if a requirement is likely to come forward, it is going to be offered to the number one supplier first. If they do not want to take it, it will cascade down, so you do not have to engage in a lot of additional activity.
I saw no evidence that this description of frameworks entertains cascade-style framework competitions. I thought it should so I tried to write something that did not mandate a cascade, but at least allowed for that possibility. Happily, one of the things that I also thought that cascade help you to do is focus more on the original framework competition as a basis for the subsequent selection of suppliers. That is why, when my noble friend comes to introduce Amendment 246, I will be particularly glad to see proposed new subsection (3G), which says that the competitive selection process that might be undertaken subsequent to the framework for the selection of suppliers should be
“only be by reference to one or more of the award criteria against which tenders were assessed in awarding the framework.”
It therefore entrenches the original framework competition in terms of the way in which subsequent contracts are to be offered.
The point of my Amendment 247 is to introduce that concept of the ranking of suppliers for the cascade. It would therefore move the reference to an objective mechanism for supplier selection under Amendment 248 into the subsequent subsection. Amendment 248 would also address another concern I had: when a contracting authority is making an award of a contract using a framework, it often has a wider range of potential suppliers with different capacities and so on. If there is going to be a supplier selection, it should always give suppliers an opportunity at least to tell the contracting authority what their credentials, capacity, quality and potential value may be. It may exclude value if they say they can only use the price that has already been supplied, for example for staff and so on, but none the less, credentials and capacity to meet a specific requirement should always be something that suppliers are given an opportunity to show. I am not sure that, without this measure, an objective mechanism for supplier selection actually means that. I do not know what “objective mechanism” means in this context. I am hoping that Amendment 246 gets us to a much better place. If it entails any kind of competition, that has to be done by reference to the original award criteria.
Lord Scriven (LD)
I apologise to the Committee for being late; I have literally just got off an aeroplane. Like others, I welcome the Minister to her place. I will welcome some of the acrobatics she may have to do on Report now that she is sitting there rather than next to the noble Baroness, Lady Noakes, as she was earlier in these Committee proceedings.
The noble Lord, Lord Lansley, has just spoken a lot of sense. I declare my interest as someone who advises a company that works with frameworks. I have seen some games played with frameworks, though not by the company I advise, with frameworks used for a number of purposes completely alien to why the original contract framework was set. It debars competition and innovation, particularly when the public body decides that it wants something completely tangential to the original framework contract and the original purpose, and allows a company to continue building its commercial relationship with that public sector body without necessarily having the core competences required. It then goes into a lot of partnerships with adjunct companies that have no relationship back to the original company when the framework was initially set.
I support the noble Lord, Lord Lansley, in trying to work out, in his Amendment 249, what the fee purpose is in terms of companies going around the framework. I particularly agree with him on the issue of small and medium-sized enterprises. I think this would be a block in that field for SMEs in particular. Could the Minister explain a little more about the reason for the fee, how it will allow competition and how it will not debar SMEs in particular from this type of framework agreement if it is to continue?
Lord Coaker (Lab)
My Lords, we are getting into some detail now. That is the purpose of Committee and it is very constructive and informative. I very much agreed with the points made by the noble Lord, Lord Aberdare, about framework alliances and whether Clauses 44 to 47 include such alliances. If they do not, why not? The noble Lord’s point requires a simple answer: yes, they do, or no, they do not. He has asked an important question about the inclusion of framework alliances.
Similarly, I thought the points of the noble Lord, Lord Lansley, were really well made. Amendments 247, 248 and 249 have been put down specifically to ask the Minister whether the Government’s new subsection (3G) answers some of those points. That is the sort of detail we need to get into, as the cascade principle is really important. I think the noble Lord, Lord Scriven, also supported that.
I have a couple of specific points on the importance of transparency and openness, which we are all striving for. The noble Lord, Lord Fox, asked the Minister about what “value for money” means; that could almost be taken as a trick remark but it is crucial, as these sorts of definitions are really important. Therefore, can the Minister say what “proportionate” means in government Amendment 246? One person’s “proportionate” would be to allow people to get through without proper checks. However, without “proportionate”, the burden on some businesses and suppliers would be completely unacceptable—just too much and unrealistic. It would be helpful for the Committee to understand the use of “proportionate” in new subsections (3A) and (3D) and “may not” in new subsection (3C).
Government Amendment 246 talks about proportionate means of ensuring that suppliers have the relevant
“qualifications, experience or technical ability”
to perform a contract. It would be helpful if the Minister said a bit more about what that means.
More generally, since we are discussing Clauses 44 to 47, can the Minister explain why so many respondents to the Government’s consultation opposed open frameworks? Some 27% of the respondents did so. Is that a high negative response? I am not sure whether it is high or low, but it struck me as quite a lot. The Government did not agree with that view and ploughed on with Clause 47.
On Clause 45(3), can the Minister explain what sort of reasons there could be for a framework to exceed the normal eight years for a defence and security contract and four years for other frameworks? The Government seem to believe there might be a necessity to clarify that through their own Amendment 251, which seeks to clarify some of that but also reflects a concern about the number of years that could apply to a contract. That would be helpful.
Our limited discussion on the use of frameworks has been very important; it has sought to get into some of the details, which are what mean they do or do not work well—sometimes on the basis of what a particular word means. Like many noble Lords, I read the assessment in preparing for this Committee; you can see the point the noble Lord, Lord Fox, made in our earlier debate about a cry for clarity on what the Government are seeking to achieve. What different words mean is crucial. Building on the noble Lord’s plea to know what “value for money” means, a little more about what “proportionate”, et cetera, means in the context of government Amendment 246 would be helpful. The Minister may need a little more time to reflect on that but, if you are seeking a contract under a framework, the word “proportionate” will mean everything—or nothing. It would be very helpful if the Minister could clarify that.
With that, I think the Government have taken some very important steps forward under these clauses.
Baroness Neville-Rolfe (Con)
My Lords, I thank the noble Lords, Lord Aberdare and Lord Scriven, and my noble friend Lord Lansley, for their kind words.
I will start with the government amendments, because even though this will not be in strict order, it will help to answer the other points that have been raised. Frameworks are a well-established commercial purchasing tool, used widely across the public sector. Having looked at some of the public responses, that percentage figure that was quoted is not worrying. Key is whether this is a sensible provision and whether we are reforming them in the correct way. The Bill makes a number of improvements to the effectiveness of frameworks, to increase flexibility, provide value for money, et cetera.
I am glad that the noble Lord referred to government Amendment 246 because it is quite a substantial and important amendment among the hundreds that I apologise for having tabled in Committee. It allows contracting authorities to set conditions of participation in a competitive selection process for the award of a contract under a framework. New subsections (3A) to (3F) impose restrictions on the use of such conditions to those which apply to conditions of participation in a competitive tendering procedure under Clause 21. These include limiting the conditions in various ways, for example, to those which are a proportionate means of ensuring that suppliers have the relevant qualifications, experience and technical ability to perform the contract, of ensuring that the conditions do not break the rules on technical specifications, and of requiring that equivalents must be allowed where particular qualifications are required. The question on proportionality is a good one. I do not have as good an answer for the noble Lord as I would like, so I will write to him on that point.
My noble friend Lord Lansley commended new subsection (3G). This restricts the basis on which proposals received as part of a competitive selection process under a framework can be assessed to all or some of the award criteria against which tenders the frameworks were assessed. This is to ensure that suppliers that have already been admitted to a framework do not have to meet entirely different criteria later. New subsection (3H) allows for the award criteria to be refined.
Government Amendments 251 to 255, and 258 to 260, relate to rules for frameworks for the future award of contracts. The remaining government amendments in this group deal variously with light-touch contracts, ensuring open frameworks work as intended, and with minor tidying-up changes.
Turning to the noble Lord, Lord Aberdare, the thing that we worked on together when I was last a Minister is still unresolved, so I feel a sense of guilt.
Baroness Neville-Rolfe (Con)
I agree with the objective behind the noble Lord’s Amendment 245A. There is a need for this Bill to ensure that multiple contracting authorities may join to award a framework. Frameworks can result in significant savings, financially and in time, and they say that time is money. This is particularly the case where they are put in place for the benefit of more than one contracting authority, for example by centralised procurement authorities.
To that end, Clause 10 provides for contracting authorities to carry out procurements jointly and for centralised procurement authorities to put in place arrangements for the benefit of other contracting authorities. This enables them to delegate their obligations to run lawful procurements to centralised procurement authorities, in their capacity as specialists, or to jointly procure with them and remain responsible, together with their procurement partners, for the award of any resulting contract. The noble Lord will wish to look carefully at that, but I do not think that his amendment is necessary.
Amendments 247 and 248, tabled by my noble friend Lord Lansley, seek to add additional requirements for the award of contracts under frameworks, without a further competitive process. The first of these, a system based on the suppliers’ ranking in the competition for the award of the framework—the noble Lord talked of a cascade; we have talked of ranking—is certainly one mechanism by which contracts can be awarded under a framework without a competition. However, this is only one selection mechanism, and there are others. They might include a “taxi rank” system, where the next supplier on the list gets the work, or the supplier chosen could simply be the cheapest for that good or service, which contracting authorities might consider to be more appropriate for their requirements on that occasion. There is nothing in the Bill preventing contracting authorities from including rankings in a framework, but there is no need to require this for all frameworks.
The second requirement is to allow for the provision of additional information by suppliers in order to make an award without a competition. In this connection, I draw noble Lords’ attention to Clause 44(6), which allows contracting authorities to ask for additional information to ensure that call off competitions are effective. Sorry, that is a bit repetitive. This seems preferable to receiving large amounts of potentially unnecessary or irrelevant information and adding burdens to the award process, which we are all keen to avoid.
Lord Aberdare (CB)
My Lords, I thank the noble Baroness for her response. I am encouraged that she agrees with the objective that framework allowances will be covered by the Bill. I will look at what she said and how she says that they will be covered, but my main objective with this rather simple amendment was to ensure that allowances were covered.
The noble Lords, Lord Lansley, Lord Scriven and Lord Coaker, raised a number of much more substantive amendments. I do not really feel able to respond on their behalf, but I was glad that the Minister said she would come back on the issue of proportionality, which is particularly important. I am sure the other noble Lords will look carefully at the issues of fees, cascading and so forth. I am happy to withdraw my amendment.
Baroness Neville-Rolfe
“(3A) A competitive selection process may provide for conditions of participation only if the contracting authority is satisfied that the conditions are a proportionate means of ensuring that suppliers party to the framework have—(a) the legal and financial capacity to perform the contract, or(b) the technical ability to perform the contract. (3B) In this section, a “condition of participation” means a condition that a supplier must satisfy in order to be awarded a public contract in accordance with the framework.(3C) A condition set under subsection (3A)(b) may relate to suppliers’ qualifications, experience or technical ability, but may not—(a) require suppliers to have been awarded a contract under the framework or by a particular contracting authority,(b) break the rules on technical specifications in section 24, or(c) require particular qualifications without allowing for their equivalents.(3D) When considering whether a condition is proportionate for the purposes of subsection (3A), a contracting authority must have regard to the nature, complexity and cost of the public contract.(3E) A condition of participation may require the provision of evidence that is verifiable by a person other than the supplier.(3F) If a supplier does not satisfy a condition of participation, the contracting authority may exclude the supplier from participating in, or progressing as part of, the competitive selection process.(3G) A competitive selection process may provide for the assessment of proposals, but only by reference to one or more of the award criteria against which tenders were assessed in awarding the framework.(3H) The award criteria may be refined for the purposes of subsection (3G).”
Baroness Neville-Rolfe
“(9) Subsections (3) to (5) do not apply to a framework that is a light touch contract (see section 8(5)).”
Baroness Neville-Rolfe
“(c) a framework that is a light touch contract (see section 8(5)).”
Baroness Neville-Rolfe
Baroness Neville-Rolfe
“(2A) An open framework may provide that, if a framework expires in accordance with subsection (2)(b) while a process for the award of a contract in accordance with the framework is ongoing, the contracting authority may continue the process and award the contract as though the framework had not expired.”
Baroness Neville-Rolfe
Baroness Neville-Rolfe
Baroness Neville-Rolfe
My Lords, this group deals with Parts 9 and 10 of the Bill. Providing suppliers with an effective remedy is not only required by the World Trade Organization’s Agreement on Government Procurement, the GPA—a very important international agreement—but a critical aspect to any well-functioning and accountable procurement regime. It gives the market confidence to invest resources participating in government procurement, knowing that public contracts will be awarded fairly and transparently.
As such, in most cases, suppliers have 30 days from the point at which a breach should have been discovered to raise a claim, and in the majority of procurements a standstill period will apply. The standstill period of eight working days is a short pause between the point when the contract award decision is notified to bidders and the final contract conclusion. It allows bidders to consider the assessment summary, which includes evaluation feedback.
If a claim is filed at court during the standstill period, an automatic suspension will apply, preventing signature of the contract until the legal claim is resolved or the suspension is lifted on application of the contracting authority. If the standstill passes without challenge, it protects against the contract being set aside after it goes live. Clearly, we do not want court proceedings to be the only way to motivate contracting authorities’ compliance with the new Act, which is why we have introduced the procurement oversight regime in Part 10, which will enable an appropriate authority to investigate non-compliance, make recommendations and issue guidance across all contracting authorities, as a result of the investigations. This will encourage the consistency and continuous improvement we all want to see.
Government Amendments 263 and 266 correct the reference to the contract award notice in Clause 49(1)(b) and (4) respectively.
Amendments 265, 267, 393 and 394 make it clear that any time a contracting authority chooses to enter into a standstill period, which is known as a voluntary standstill period in circumstances where the Bill does not mandate a standstill period, it must match the mandatory standstill period and be for a minimum of eight working days.
Amendment 461 clarifies that failure to have regard to the national or Welsh procurement policy statements is not enforceable via Part 9.
Amendments 464 to 469 make some textual amendments and make it clear that the automatic suspension applies only when a claim has been notified during the standstill period.
The structure and drafting of Clause 95 will be amended by Amendments 470 to 476 to make the intent of the clause easier to interpret.
There are various amendments related to oversight functions. Amendment 481 to Clause 96 makes a straightforward clarification to the meaning of “section 97 recommendation”. Amendments 483 and 484 reflect the principle that an appropriate authority may issue guidance to contracting authorities only in line with restrictions on relevant authorities in Clauses 99 to 101. Amendments 501 and 502 amend Clause 101 to reflect agreements with devolved authorities that, where appropriate, UK government Ministers can issue guidance under Clause 98 to all contracting authorities, including devolved and transferred authorities, to maximise joint working and efficiency.
I pause at this point so that my noble friend Lady Noakes and others can speak to their amendments.
Baroness Noakes (Con)
My Lords, I have several amendments in this group. The first is Amendment 264, a probing amendment to find out why standstill periods, which are generally required by Clause 49, are not required for light-touch contracts or those awarded in dynamic markets. My amendment would achieve this by deleting paragraphs (d) and (e) from Clause 49(3).
As my noble friend just explained, the standstill period is a short pause after the publication of the contract award notice in order to allow an agreed bidder the opportunity to complain about a contract before the contract is finalised. This is a sensible part of the framework because challenging a contract after it has commenced is much less effective and is best avoided. The purpose of my amendment is to ask my noble friend to say what public policy grounds would deprive unsuccessful bidders of the opportunity to challenge contract awards under the light-touch or dynamic market regimes. What specifically are the features of those regimes that are suitable to override the rights of unsuccessful bidders, compared with other contracts?
My next amendments, Amendments 477 to 480, would have the effect of ensuring that procurement oversight extends to all procurement covered by the Bill. Clause 96 allows for investigations into compliance with the Bill, but excludes government departments, Welsh Ministers, Northern Ireland departments and utilities from its scope. My simple question to my noble friend is: why? She cannot possibly tell me that these contracting authorities are such paragons of virtue when it comes to procurement that they would always comply with the Bill. Government departments do not have a perfect track record on procurement and, in my view, ought to be capable of being investigated.
My final amendment in this group, Amendment 482, concerns the recommendations that can be made following a Clause 96 investigation. Clause 97(3) says that these recommendations “must not relate to” how to comply with the procurement objectives set out in Clause 11; must not recommend how the contracting authority should have regard to the Section 12 national procurement policy statement; and must not say how the authority should
“exercise a discretion in relation to a particular procurement.”
I can just about understand the last one, because recommendations should not interfere with
“discretion in relation to a particular procurement”,
but I do not understand why recommendations have to steer clear of procurement objectives or the NPPS. What is the point of making recommendations if the heart of the procurement rules, to be found in Clauses 11 and 12, are off limits? For example, is value for money off limits in an investigation because it is an objective within Clause 11? I cannot understand why that should be excluded. My amendment is to delete subsection (3) on a probing basis, to give my noble friend the opportunity to explain what all this is about.
Lord Fox (LD)
My Lords, I speak in place of my noble friend Lord Wallace on Amendments 349A, 349B and 353A, all of which refer to and reflect on the procurement review unit. On page 13 of Transforming Public Procurement: Government Response to Consultation, at points 46 to 49, the Government say:
“We have revised the proposals for this new unit. It will be known as the Procurement Review Unit (PRU), sitting within the Cabinet Office and will be made up of a small team of civil servants.”
They go on to detail quite fully what the PRU is—I will come back to its role and autonomy in a minute—but where is it in the Bill? Amendment 349A seeks to replace “An appropriate authority” with the promised “Procurement Review Unit”. Amendment 349B would give a role for the procurement review unit to advise. More specifically, in Amendment 353A we seek the insertion of the nature of the procurement review unit.
All these amendments are trying to probe where the Government got to between the consultation and the drafting of this legislation, and why in effect there is no PRU in the Bill. What happened to it and who has got it? When the Minister no doubt notices and reinserts it on our behalf, what will its role and its level of autonomy be? How many teeth are the Government prepared to give this PRU, and will it essentially have those teeth drawn? Essentially, where is it?
Baroness Thornton (Lab)
My Lords, I shall speak to Amendments 477A and 486A in my name. I thank my noble friend Lady Hayman, the noble Baroness, Lady Bennett, and the noble Earl, Lord Devon, who is not able to be with us today, for their support.
The amendment addresses procurement investigations. It would add, at the end of line 28 on page 60,
“and the implementation of social value”.
It would require the new procurement investigations authority to be able to investigate the implementation of social value. There are regular reports of public bodies that have secured promised social-value outcomes from contractors—apprenticeships, jobs created, investment in local infrastructure and so on—but these are not delivered. As social value is weighted in tenders, organisations can win tenders to deliver social value but may not always deliver the social value that they have promised.
The amendment would give the new procurement investigations authority the ability to investigate whether public bodies were securing social-value commitments that had been promised and to be able to report on that to Parliament. Currently there is no part of government that is bound to collect information on the implementation of social value. Indeed, the Cabinet Office had started to do this for central government through the social value model, but that is not comprehensive. Social value is just as much value as financial value, and the new procurement investigations authority should take social value seriously. This would have the added benefit of increasing awareness of the importance of social value in the public sector.
Amendment 486A would add a new clause. Because social enterprises and small and medium-sized enterprises often complain about barriers to accessing contracts in the public sector, which this Committee has discussed at some length, the proposed new clause would seek to ensure that the new procurement investigations authority would have expertise from the social enterprise sector and the SME sector so that they could ensure that contracting authorities were carrying out procurement exercises in a way that was fair to the sector.
Despite the Government’s commitment to expanding the role of social enterprises, voluntary organisations and SMEs in winning public sector contracts, that has not taken place. Research by DCMS estimates that only 5% of contracts are being won by voluntary sector or social enterprise organisations. Only one in five pounds of public procurement, 21%, is going to SMEs despite a 33% target. The amendment would give the new procurement investigations authority the expertise to be able to investigate whether contracting authorities were doing what they could to help SMEs and social enterprises to win contracts fairly.
Lord Scriven (LD)
My Lords, I am glad to follow the noble Baroness, Lady Thornton, on the issues that she raises. When the Government and Whitehall look through the prism of public sector procurement, that tends to lead to a very centralist approach that is about value for money, not for the taxpayer but for government departments. Sometimes things are not exactly in line with each other. There are many areas up and down this country where social value could really be added to if the Government, through primary legislation, understood what social value was and therefore ensured that in the Bill, when every single public sector procurement body in the land was awarding and using criteria to judge a contract and a supplier’s tender, that became vital.
The second issue on that refers back to something I think my noble friend Lord Fox said earlier, although I was not in the Committee at the time. The definition of such issues regarding social value are vital, because social value means many things to many different people. It is not to put contractors into a straitjacket. They can still innovate as long as there is a definition and a framework of what social value means. It is vital that the Government understand that it needs to be there as a guide for contractors, not as a straitjacket.
Also based on what the noble Baroness, Lady Thornton, said, the voices of the third sector, or the charity sector, and small to medium-sized enterprises need to be central to how procurement and social value are aligned within the Bill and public sector procurement. I remember being leader of Sheffield City Council. The thing that amazed me was the innovation and what happened if we brought the voice of the charity sector and small to medium-sized enterprises into how we were working. We did not call it social value then; it was to improve our place. It was place-based procurement at the time. They could change the dial completely about how procurement was done. We therefore had a view across the authority about how it was done based on some of the words, concepts and ideas that charities and small to medium-sized enterprises had. Those became a policy driver for procurement. It is therefore vital that the Government think carefully about the concept of social value, and what it means in the framework in the Bill, rather than just being loose words which many people define differently, or this will end up not having the maximum value in communities up and down the land.
Lord Coaker (Lab)
My Lords, this has been another interesting debate. This group is on oversight and remedies. If you are going to have something worth legislating for, it has to have some sort of oversight and remedy. In other words, you have to see whether you are achieving what you wanted to and, if not, know what you going to do about it. It is therefore an important section, but to do that you have to have the right fundamentals in the Bill to have oversight and remedy.
I agree with my noble friend Lady Thornton’s amendment. She has been consistent throughout this Committee in trying to ensure that the Bill reflects the importance of social value. The noble Lord, Lord Scriven, supported that in his remarks. I know my noble friend will continue to argue for it, and we will support her should she wish to take it further on Report. It is really important, and I thank her for that.
As we are coming to the end of our remarks, I shall say that I agree with the point made by the noble Lord, Lord Fox, on Amendment 353A, tabled by the noble Lord, Lord Wallace, on what has happened to the procurement review unit. It was in a Green Paper and it seemed to be universally applauded—except, obviously, somewhere in government, so it was struck out. It would be interesting to know why it was struck out. Everybody supported it, except the Government, so why were they wrong and the Government right? Sometimes I find it baffling to understand why something is done. A procurement review unit seems essential to review what you are seeking to achieve. It is not a weakness but a strength. Those are my remarks about that.
I have to say this openly to the Committee: I am devastated that I did not notice the amendment from the noble Baroness, Lady Noakes: Amendment 477. Honestly, it is absolutely brilliant. The noble Lord, Lord True, has been promoted for being a socialist in charge of the Bill; the noble Baroness, Lady Neville-Rolfe, is on her way; and now we have this from the noble Baroness, Lady Noakes. Clause 96 is quite astonishing. I reread it to make sure; when I read it before, it completely passed me by. I will read it out, because people will not understand if they read Hansard without also reading this. Clause 96(1) says:
“An appropriate authority may investigate a relevant contracting authority’s compliance with requirements of this Act.”
So, we have a really important government Bill that will become law, and then, in subsection (5):
“In this section—‘procurement investigation’ means an investigation under subsection (1)”—
which I have just read out—
“‘relevant contracting authority’ means a contracting authority”,
as the noble Baroness, Lady Noakes, points out,
“other than … a Minister of the Crown or a government department”
and various others. Why would the Government set up something that is desperately important—in other words, a procurement unit—which makes purchases of hundreds of billions of pounds, but their own Bill says they will not investigate them?
Amendment 477 is brilliant and, as I say, I am devastated that I did not think of it or notice it. Fair play—I am very fair. More seriously, the amendment points out something that fundamentally seems to be a flaw in the way the Bill is drafted. Otherwise, there must be some incredible explanation or reason that I cannot think of—I do not know if anyone else on the Committee can think of any.
To finish, oversight and remedies are an extremely important part of any Bill, because that is how you ensure that what you seek to achieve is achieved and that you are held accountable. The amendments seek to answer those questions. Unless the Minister is able to respond in a way that persuades us, I think there are certainly one or two issues that we must come back to. With that I will sit down. It is a brilliant amendment, honestly.
Baroness Neville-Rolfe (Con)
I thank noble Lords for an interesting debate on these non-government amendments. I do not think that I have a perfect reply to my noble friend Lady Noakes’s three questions. We are due to meet to discuss various aspects of the Bill and I would like to explore her questions further, and then perhaps I can write to the Committee when it is clear to me what the right replies to those questions are.
I will attempt to comment on the amendment that the noble Lord, Lord Coaker, has just talked about, on why government departments do not have the same obligation to have regard to recommendations under Clause 97. It is a simple question, and our response is that it is not necessary to include government departments in Clause 96 and 97, because the appropriate authorities have sufficient influence over contracting authorities to ensure that any recommendations that result from an investigation are duly taken into consideration. To confirm, investigations, findings and progress reports may be published by the relevant authority acting as a further incentive. It is simply unnecessary to provide statutory powers in respect of government departments, whereas due to the different relationship with non-central contracting authorities, statutory powers were required to ensure appropriate engagements for these purposes. As noble Lords will know, we have quite a well-developed procurement operation now, right at the heart of Government, sitting in the Cabinet Office, which I think is an improvement. That is why it is not provided for in the Bill.
Just before I leave voluntary standstills, let me say that I will make sure we come back properly on the exchange we had earlier. We want to maintain voluntary standstills for dynamic markets—they are intended to be quick to use, agile and efficient, as we heard from my noble friend Lord Lansley—and for light-touch contracts, which are often for time-sensitive services such as the provision of health and social care. We do not want to make the light-touch contract rules stricter in this regard than current legislation, as we think that could lead to some problems.
Amendments 349A, 349B and 353A were tabled by the noble Lord, Lord Wallace of Saltaire, and others. They seek to legislate for the procurement review unit with a new clause. The procurement review unit, which is very important, is not specifically referenced in the Bill as it will be exercising statutory and non-statutory powers on behalf of Ministers. The proposed new clauses would therefore conflict with existing provisions. Furthermore, considering the importance and potential implications of the decisions the PRU will support the Minister of the day in making—the proper statutory process—we believe it would be inappropriate to delegate that ultimate responsibility to unelected officials below ministerial level.
The PRU will work on behalf of the Minister of the day in two key areas. The first area is debarments. Clauses 56 to 61 set out the process for the establishment of a debarment list of excluded and excludable suppliers; this has already been debated. Under these clauses, it is envisaged that the PRU will investigate whether a supplier is subject to an exclusion ground and whether the issues in question are likely to arise again. The PRU will issue advice to the relevant Minister, usually the Minister for the Cabinet Office, who will take the final decision whether to add the supplier to the debarment list.
The second area is improving compliance with the Bill. Clauses 96 to 98 provide the framework and statutory powers required for carrying out procurement oversight. The PRU will exercise these oversight functions on behalf of the Minister and make proposals regarding any investigations, recommendations and statutory guidance it considers appropriate for the Minister’s ultimate approval.
Baroness Neville-Rolfe (Con)
I will have a little more to say about this later on, so why not let me finish? If I do not answer the noble Lord’s questions, we will try to get at what is needed.
Amendments 477 to 480 seek to examine why government departments have been excluded from the appropriate authority’s investigatory powers. The definition of “relevant contracting authority” in Clause 96 is in recognition of existing governance. Ministers already have the authority to investigate government departments without the need for statutory powers; I think I have said that already. There are also established routes for co-operation with investigations.
Amendment 477A was tabled by the noble Baronesses, Lady Thornton—it is good to see her in the Committee—Lady Hayman of Ullock and Lady Bennett of Manor Castle, and the noble Earl, Lord Devon. Amendment 482 was tabled by the noble Baroness, Lady Noakes. These amendments would expand the scope of the statutory oversight powers beyond compliance with the Bill, straying into areas of policy. The scope of the statutory powers provided by these clauses has been carefully drafted to maintain the boundary between law, which must be adhered to, and policy, where some leeway is allowed in terms of its implementation.
Expanding Clause 96 and/or the Section 97 recommendations to include social value, as well as considering how contracting authorities have chosen to meet obligations to have regard to policy and principles, would blur that boundary and start to erode the autonomy of contracting authorities, which we recognise are best placed to make policy implementation decisions that are appropriate for their business. It would also move the statutory regime away from objective and measurable concerns into more subjective areas of debate, which could impact the effectiveness of the oversight system. We believe that the scope of Clauses 96 to 98 creates a proportionate, effective and compelling incentive for improvement. It is worth noting, however, that the drafting of Clauses 96 and 97 does not prevent the Minister from making observations regarding a contracting authority’s policy implementation. Policy guidance can indeed continue to be provided to contracting authorities.
Non-statutory procurement policy notes, which we have discussed before, are currently released to guide contracting authorities. In the new regime, under Clause 98, statutory guidance, which may be published as a result of investigations, can also address matters of policy. Contracting authorities will be required to have regard to any guidance released under Clause 98; I think this helps to deal with the social value issue. The removal of Clause 97(3) would result in the appropriate authority having the power to intervene in specific procurements.
The restriction in Clause 97(3)(c) ensures probity of the procurement by, for example, preventing a Minister of the Crown from using Section 97 to exert influence over which supplier is awarded the contract. That is an important point. To remove this restriction would be concerning to contracting authorities and suppliers alike.
Finally in this group, the noble Baronesses, Lady Thornton and Lady Hayman, and the noble Lord, Lord Coaker, tabled Amendment 486A. This seeks to stipulate that the expertise of SMEs, voluntary organisations and social enterprises is accessible to an appropriate authority that is conducting investigations under Clause 96. The PRU will be managed and delivered by a small, experienced team of civil servants based in the Cabinet Office, supported by a panel of experts, which can be consulted regarding investigations and any resultant Section 97 recommendations and guidance under Section 98. The Cabinet Office aspires to provide perspectives from procurement experts from across the Civil Service, local authorities and various types of private organisations, including SMEs and VCSEs, to benefit the oversight regime.
However, it should be recognised that having a panel which includes external procurement professionals is dependent on the availability of suitably qualified individuals and the ability to manage any potential conflicts of interest. I am therefore unwilling to make a legislative commitment of the kind proposed. However, the establishment of the panel will be transparent, and appropriate documentation will be published in due course, including on the process for appointing members. It seems to me that this is an important error, which is why I make that point.
Lord Purvis of Tweed (LD)
Can the Minister clarify whether it is the Government’s intention that the PRU will be an appropriate authority, so that panel members themselves will have legal powers under Section 96? If not, I am really confused as to what legal powers the panel will have when it comes to calling for documents, and what duty will be on other contracting authorities to provide the panel with any information at all. At the moment, it does not look as if the panel is considered to be an appropriate authority, so it will not have any other legal powers under Part 10.
Lord Fox (LD)
Following on from that, if the Secretary of State can give and the Secretary of State can take away, and we have no sense that this panel will endure past the next government reshuffle—which could be any time now—without having it in either primary or secondary legislation, what status does this have at all other than the good will of the then Secretary of State?
I refer again to the Government’s response to the consultation: the role of the PRU was very specific. It was aimed to deliver the same service as the public procurement review service—and perhaps the Minister could tell us whether that is being disbanded and folded into the PRU; will it still exist or what? The response stated that
“the PRU’s main focus will be on addressing systemic or institutional breaches of the procurement regulations”.
The Minister has narrowed that down to debarments and compliance. It seems there really has been a declawing and a removing of this body from any statutory basis. As my noble friend points out, it is not very clear which the appropriate authority would be in those circumstances.
Baroness Thornton (Lab)
I might as well intervene now too, because the question I would really like to ask the Minister—and it is very nice to see her back in her place, as she was the Minister responsible for putting equal pay on the statute book, and I hope her progressive instincts there might be followed through in this piece of legislation—is about social value. How do we deliver social value if there is absolutely no way of examining it, monitoring it and enforcing where it is not being delivered?
Lord Scriven (LD)
Following on from what the noble Baroness, Lady Thornton, has said, and from what the Minister said about how this could not be in the Bill because it is a policy initiative, the procurement objective in Clause 11(1)(b) is “maximising public benefit”, which is a policy issue. All the noble Baroness is trying to do is ensure that social value is looked at by the appropriate authorities. Actually, it is more defined and specific in law, because there is a social value Act but no public benefit Act. The Minister’s answer that it is just a policy issue really does not stack up.
Baroness Neville-Rolfe (Con)
We do have a social value Act; I think the answer is—subject to correction—that social value features in the NPPS, the policy guidance note, and that failure to have regard to the NPPS is challengeable via judicial review rather than by suppliers for breach of statutory duty under Part 9 of the Bill. That is more appropriate as the NPPS will inform procurement strategy, and failure to comply should not result in suppliers being able to seek compensation from the public purse in respect of an individual procurement. There is quite a lot of complication in that area, but that is the approach. There is a social value Act, but obviously I will listen to what has been said today.
To return to the PRU, the unit will exercise powers on behalf of an appropriate authority. The panel will consult the PRU when appropriate and, if the Government set up a panel, as Governments often do—we have various panels in different departments that I have been involved with, and in my experience they tend to endure; certainly this one will be useful—the PRU will make recommendations to the Minister, who is the appropriate authority and will make the final decisions. That seems to be the right approach constitutionally.
Lord Purvis of Tweed (LD)
I am grateful for that response. To be clear, will the panel be the investigating body?
Baroness Neville-Rolfe (Con)
No. The PRU, a Civil Service unit, will be the investigating body, which will consist of experienced people of the right kind. The panel will advise that body.
Lord Purvis of Tweed (LD)
I am grateful, but Clause 96 says the “appropriate authority may investigate”. The Minister has been referring in this short debate to “investigations” with regard to the panel. I am grateful that she has clarified that it will simply be an advisory group, not an investigatory group, and will not itself have the legal powers to seek documents. I am therefore not entirely sure what the PRU will do other than what existing civil servants do, which is to advise Ministers.
Baroness Neville-Rolfe (Con)
We have put together this whole new system of procurement, which includes various checks and balances. Panel members will be available for the procurement review unit to help regarding investigations and the unit’s work. Their reports and recommendations will help with moving forward on procurement and the complexities of this change of the law. Their advice can be published, and we will be able to reference the assistance that the panel has provided. That is the approach that we are proposing following a process of consultation. The PRU is central. I am sure we will revert to this issue.
Lord Fox (LD)
The Minister will have got the message that there is deep disquiet about how this will be structured and will operate. If the Minister has time, can she reflect on Hansard and write a letter before Report setting out how this unit will be set up and what its roles, on a statutory or non-statutory basis, will be? That would be very helpful.
Baroness Neville-Rolfe (Con)
Of course, I will write setting out how this will work. I ask the Committee to look at it constructively in the light of what we are trying to achieve across a very wide area of procurement. I go back to where we started in Committee, as this is probably the final amendment this evening, and say that there is also a process of cultural change, training and so on that will be going on, which is an important complement to the investigatory powers that we are looking at in this amendment.
I respectfully ask noble Lords not to move their amendments.
Baroness Neville-Rolfe
“(5) A voluntary standstill period may not be less than a period of eight working days beginning with the day on which the contract award notice is published.”