Wednesday 26th October 2022
(2 years, 1 month ago)
Grand CommitteeProcurement Act 2023 View all Procurement Act 2023 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 4-VII(a) Amendment for Grand Committee (Supplementary to the Seventh Marshalled List) - (25 Oct 2022)
The Deputy Chairman of Committees (Lord Geddes) (Con)
I advise the Grand Committee that, if there is a Division in the Chamber while we are sitting, which is likely, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.
Clause 50: Key performance indicators
Amendment 268
Lord Lansley
Lord Lansley (Con)
My Lords, this is quite a large group, led by Amendment 268, and it encompasses a number of issues all of which relate to the structure of contracts and how contracting authorities enter into agreements with their suppliers. I will not attempt to speak to anything other than my five amendments, save to say that the first, Amendment 268, originally went alongside Amendment 269, which has subsequently been withdrawn but was in the name of my noble friend Lady Neville-Rolfe. Were it still there, I would have said that I have some sympathy with what she says, as there can be circumstances in which a contract, in effect, looks for one item of delivery. Therefore, in my view, one quantified key performance indicator may be appropriate and the requirement to have at least three would be unnecessary. The point is that contracts should have key performance indicators.
My point in Amendment 268, which starts this group so I am able to move it, is to replace the reference to “key performance indicators” with “quantifiable measures”. I entirely admit that we know where we are with KPIs, everybody has them and so on. The trouble is that KPIs can be non-quantifiable and qualitative. That is not what we are looking for here. There is a risk that, if we are not precise about it, they will not be quantifiable, and quantifiable is what we are looking for. I do not think key performance indicators should be subjective; they should be objective and demonstrably proven. Suppliers have a significant benefit where that is the case.
That is Amendment 268, and it is more or less probing. Many of my amendments in this group are intended to ask my noble friend and the department whether they will take account of these points in the way they draft the national procurement policy statement in the guidance that follows.
Amendment 270 also relates to key performance indicators and is linked to a point we discussed on Monday, which is that the structure of the relationship and contract entered into with suppliers should relate to the original tender and the specifications in it. The amendment says that the key performance indicators “must relate” to the tender. Likewise, I hope that my noble friend will say that the Government understand that and that that is their intention. Otherwise, we run the risk that people will enter a competitive selection process, win that process and negotiate a contract but, suddenly, the contract asks them to do things that were not in the original specification. That should not be the case.
My third amendment in this group is Amendment 364. As one reads the Bill, one may come across something and think, “How does that work?” This relates to changes in the contract and the definition in Clause 69 of “substantial modification”. The first definition is that the term of the contract is increased or decreased
“by more than 10 per cent”.
Most contracts are expressed in terms of months and years, and 10% is an awkward measure: “10% of an 18-month contract is 1.8 months—let’s work that out in days”. Can we not write this is in a slightly simpler way? One-sixth has the benefit, in my view, of making a substantial modification slightly more than 10%— 16% or thereabouts—but the point is that it is readily transferrable into months and years, particularly months. So, if a contract for 18 months is modified by more than three months, you know where you stand; it is dead simple. The purpose of the amendment is to suggest that it could be done a little more simply.
My final two amendments are Amendments 397 and 400, which relate to the termination of a contract and to Clause 72. The clause states:
“every public contract … can, if a termination ground applies, be terminated by the contracting authority”,
and a list is then given of the termination grounds. I do not know whether this has been left out deliberately, or because it does not appear in the public contract regulations, or because it is intended to be part of general terms and conditions anyway and therefore does not need to be specified in legislation. But force majeure is, I think, a termination ground for a contract, so I am not sure why it is not mentioned. The point is that it should be mentioned—and if it is, there is a problem with it.
I declare an interest, and in doing so revert to what I was saying earlier about the European Commission. This issue arose for us—my wife’s company—during the pandemic. We were contracted to supply a number of events and when the pandemic hit, or shortly thereafter, some of them had to be cancelled. Members will not be surprised to hear that, under those circumstances, a significant amount of expenditure had been incurred, including cash expenditure on locations, suppliers, venues and so on. The term of the force majeure written into the European Commission’s standard contract was that, at the point at which force majeure is notified, payment for the services provided is required. As noble Lords can imagine, initially, they said, “Well, you haven’t provided those services. Those events haven’t happened and we won’t be having them.” I will not bore noble Lords with all the detail, but the net result was that we lost money. We did not lose as much as we had feared because we had a negotiation, but, according to the letter of the contract, they could have said, “You’ve spent tens of thousands of euros on events that will not now take place, but because they are not taking place, you’re at risk and you will meet the cost.” This a very large public authority expecting an SME to take the hit. We did discuss it and they did come round, but I do not think that that arrangement is sensible.
I cannot imagine that our experience is in any sense unusual. During the pandemic, thousands of businesses must have had exactly the same kind of force majeure complication. In public contracts, the force majeure contract should say what I suggest in the amendment: that, under those circumstances, when the termination ground is notified, there should be a requirement to meet the expenditure
“necessarily incurred in relation to the contract”
up to that point.
I will be happy if my noble friend the Minister is able to say, as with the other amendments, that these are interesting points and she will take them away and look at how the guidance or the statement might reflect them for the future. I beg to move Amendment 268.
Baroness Thornton (Lab)
My Lords, my speech is a good way of following the excellent introduction to this group of amendments by the noble Lord, Lord Lansley. I start by thanking my noble friend Lady Hayman of Ullock for putting her name to Amendment 276A and the noble Baroness, Lady Bennett, and the noble Earl, Lord Devon, for putting their names to both Amendments 269A and 276A.
As the noble Lord, Lord Lansley, said, Amendment 269A is dealing with the key performance indicators, and it adds a line that I hope the Minister will find useful:
“including at least one indicator in relation to social value.”
This would mean that all public sector contracts over £2 million would have to include a key performance indicator on social value. This would ensure that social values are included in all public sector contracts over £2 million and would send a clear signal to the private sector in particular. It would also ensure—similar to Amendment 477A, which we discussed on Monday—that contracts with social value commitments are monitored effectively and transparently.
Amendment 276A concerns transparency and “open book accounting”. It would insert a proposed new clause that I hope the Minister will see as helpful, given that she has spoken already in Committee about transparency and its importance in the spending of public funding. It says:
“All suppliers bidding for public contracts must declare the expected profit and surplus they expect to generate through the contract.”
In childcare, for example, the top 10 providers have made £300 million in profit, despite the standards of care falling and local authority budgets being under such pressure. We know this because the newspapers have reported on the conditions in which we have found cared-for children. During Covid, when we had PPE, a number of companies were making significant profits from these contracts without the need to report to the contract what margin they were prepared to make. I believe that this prevented the state adequately protecting our public money.
This amendment would mean that, on all government contracts, the supplier would have to report what profit or surplus they were expected to generate from the contract and then report back each financial year on how much profit or surplus they had generated—although I do not believe that this would solve the problem of people charging the state too much money for goods and services, and there is still a risk that companies could cost-shift artificially to reduce their declared profits. This may well leave the taxpayer in a better position to understand the true costs of contracts and would advantage providers such as social enterprises and SMEs, which are more likely to be investing the money received from contracts back into their businesses than extracting public money as profit. That is an important point because charities and social enterprises are bound by their rules to complete their accounting in two or three ways, which would include the social value of the contracts they are fulfilling.
Baroness Noakes (Con)
My Lords, I have tabled Amendment 271 in this group. At the request of my noble friend Lord Moylan, and with the leave of the Committee, I will also speak to Amendment 486 as my noble friend is unable to join us today.
This Bill is of course about the procurement process, rather than contract management, but Clause 50 wisely requires the setting and publication of performance indicators, which are a key element of contract management. I was always taught that what gets measured gets managed. I cannot envisage a situation where contracts could be managed without some form of measurement that could be converted into performance indicators. Amendment 271 in my name leaves out Clause 50(2), because that allows the contracting authority not to set performance indicators if it considers that
“performance under the contract could not appropriately be assessed by reference to key performance indicators.”
Clause 50(2) is fundamentally unsound because it is tantamount to saying that the contracting authority cannot manage its contract.
There are some kinds of contract—for example, the delivery of health and social care services—where measurement may rely on subjective judgments by the service recipient, but they too can be converted into indicators. I disagree with my noble friend Lord Lansley, who seemed not to like subjective performance indicators; I think they are a perfectly good part of any framework of contract management. Light-touch contracts are of course not covered by Clause 50, and that covers quite a lot of the contracts involving health and social care.
Lord Scriven (LD)
I shall speak to Amendment 272 in the name of my noble friend Lord Wallace, to which I have added my name. The Bill includes key objectives, which involve delivering value for money, maximising public benefit, sharing information and acting with integrity. Amendment 272 would ensure that the public benefit included explicit economic, environmental and social factor indicators as part of a list of KPIs. Following on from what the noble Baroness, Lady Noakes, has just said, I would say that the situation is slightly different—it is not just that what is monitored gets managed; what is monitored gets done. That is the issue: it sends a clear signal to those providing the service that the contracting authority sees those issues as an important and vital part of any contract that is let. Amendment 272 would add to the KPIs that anything done as part of the contract should bring about sustainable local improvements in the environmental, social and economic parts of the contract.
Lord Scriven (LD)
My Lords, as I was saying before I was so rudely interrupted by the Division Bell, the concept of Amendment 272 is to ensure that the KPIs support in more detail the public benefit test. There will be economic, social and environmental factors that provide sustainable local improvement. The reason for this is that many times when a provider goes in and provides a service—I speak as a former leader of a council and I have seen it in some of the work I do in public sector reform—the public good that happens, whether it be social or environmental, lasts only while that provider is there: that is, the jobs are dependent on that provider providing that service, or are adjacent to or an adjunct to the work it is providing. This amendment tries to ensure that when public sector contracting authorities are writing their KPIs, they have a view that they should be economic, social or environmental but also sustainable—that is, when the contract ends or the contractor leaves, the things it has put in place are sustainable, rather than being for just a limited period. That is reason behind Amendment 272.
I shall take a little time to speak to Amendment 353AA in the name of the noble Baroness, Lady Hayman of Ullock, to which my noble friend Lord Fox has added his name, which is about the public sector interest test being applied when a service is at present provided by a public sector body and is being outsourced. I want to be clear that this amendment does not stop outsourcing. I do not subscribe to the view that public is good and private is bad, or vice versa. In a mixed market you can get good and bad in both providers. This amendment stops the sometimes very narrow view of public sector contracting authorities that they will outsource without thinking about the wider implications for citizens and the economy of the area.
Let us look at some of the issues in this amendment. Paragraph (c) of subsection (2) of the proposed new clause refers to
“implications for other public services and public sector budgets”.
I have seen outsourcing in social services that has no assessment of what it will mean for working with the NHS. A contract that is purely for one part of what the citizen goes through could fragment the citizen journey or the service.
The other issue is the effect on employment conditions. If, for example, the contract is on lowest price, particularly in a deprived area, it could have the disastrous result, which I have seen, of reducing wage rates, which works against the wider public benefit of increasing prosperity and having better jobs in the area.
While the amendment would not preclude outsourcing, it is important for the wider public benefit test and for ensuring that services, which in many cases join up with another part of the organisation or a different organisation, think through the implications for that service and the citizen’s journey through the service being provided, whether by a public provider or private provider, if part of it is going to be outsourced. I therefore commend this amendment, which, if accepted, would not preclude outsourcing. It would simply get public sector bodies to think more widely about why outsourcing needs to take place.
Baroness McIntosh of Pickering (Con)
My Lords, Amendments 370ZA and 370ZB are tabled my name and I thank the noble Baroness, Lady Hayman of Ullock, and the noble Lord, Lord Coaker, for their support which is much appreciated.
The thinking behind these amendments relates to the plight of the wholesale sector, which supplies food and drink to critical public service infrastructure on which we all depend, including schools, hospitals and care homes. According to the briefing I have received from the Federation of Wholesale Distributors, wholesalers are struggling to fulfil these contracts due to unfavourable contractual terms, which are resulting in these businesses making significant losses. That does not bode well for the future viability of the sector. They are facing rising costs and food inflation, which we know has hit 15.1% as of August 2022— this week it looked as though it could be higher still. It leaves the wholesalers unable to negotiate any price increases; or the smaller price increases they have negotiated on certain contracts have been well below inflation. This is an unsustainable circumstance going forward.
Given the situation where price reviews occur only every six months or, in some cases, only once a year, this gives wholesalers very little room for manoeuvre to negotiate price increases. This means that wholesalers are not making a profit on the product and service they provide to their customers. This is affecting the quality of the products they are able to serve to children and the most vulnerable, and the viability of providing catering services in the long term. They would argue that the quality of catering services is of paramount importance, as we have seen with Jamie Oliver’s campaign in hospitals and during the pandemic.
I support the fact that the Government’s food strategy is seeking to drive up standards of public sector food by requiring caterers to use more organic and locally sourced foods. This is not sustainable, however, without funding that matches inflation—it is just not viable going forward. In the federation’s view, small and medium-sized enterprises will be the most affected of all businesses. Without quarterly price reviews, the trend will continue towards market consolidation and homogenisation, driving standardisation not the localisation of publicly produced foods.
I expressed my disappointment previously that the public procurement contracts we signed up to under the European Union conditions have been replaced by the GPA; this is something we need to look at on an ongoing basis. Of course, it is right that the Procurement Bill aims effectively to open up public procurement to new entrants such as small businesses and social enterprises, so that they can compete for and win more public contracts. It is just the case that SMEs are more acutely affected by price increases. They are smaller in scale, less resilient and need to pass the increases on in real time. They do not have the capacity to absorb those increases and, as such, are more vulnerable to these pressures if price increases are not passed on. We can therefore envisage a situation where SMEs are either closing down or being sold to larger national conglomerates. If these conditions continue, the sector believes that this will undo competition and the diverse market that brings a number of benefits to the public sector.
To ensure that the targets in the Procurement Bill are met, to encourage more SMEs to supply contracts and to ensure the continued supply of public sector food—which I think the Committee would sign up to—I ask my noble friend the Minister to consider publishing guidance to instate quarterly price reviews to allow contract price increases more regularly than once a year or every six months, and only if a certain threshold is met—for example, inflation over 5%. This is what I have set out in Amendment 370ZA to Clause 69 and in Amendment 370B to Schedule 8, regarding a review when inflation is 5% or more.
The quarterly price reviews would allow contract price increases more regularly, as I have stated, than either once a year or once every six months, if the threshold is met. I propose that that threshold should be over 5%. I remind the Committee that we have seen record increases in the price of staple goods such as milk, dairy, bread and even pasta, and some of the cheaper products that these public sector wholesalers would seek to provide in the context of the contracts we are discussing this afternoon.
I put on record that public sector caterers are struggling to meet the food standards, being forced to reduce portion sizes and using less UK-grown and produced product, which is against both my better judgment and the Government’s aims. I would like to see the quality of the food used to service public sector contracts improve, under the amendments I have spoken to. Without these amendments, standards will continue to decline to mitigate the rising costs if the Government do not step in to support the industry. A number of wholesalers rely on profitable contracts subsidising loss-making contracts at the moment. However, with the ever-decreasing level of profitable contracts, the balance is tipping towards overall loss-making, which is unsustainable in the long term.
Other advantages of these amendments are that they would enable meeting the government targets which would otherwise not be met in the current climate, and would enable those in this sector to bid for more contracts, which would impact the supply of food and drink to public service infrastructure. Some 95% of wholesalers have said that the current climate and rising costs mean they are unlikely to bid for new contracts, especially ones with unfavourable terms, such as the long pricing review.
I ask my noble friend to respond to these issues to help SMEs and secure more bids for future contracts, in particular by a three-monthly review and a 5% review of inflation. The level of food inflation is pushing up the level of inflation across the piece. We are woefully short on food self-sufficiency, particularly fruit and vegetables. I hold the Minister’s feet to the fire, because we heard from her colleague the Minister for Agriculture in this place, my noble friend Lord Benyon, that the Government are seeking to do something to help produce more fruit and vegetables locally, even to increase production such that we can export. Nowhere is that more important than in the delivery of public sector contracts.
I really regret that we are going backwards, having left the European Union, and are relying on more imported and more expensive food. We should be sourcing more food, whether it is meat, bread or dairy—milk and butter—as all these staples have been hugely impacted by inflation. I urge my noble friend to look favourably on these two amendments.
Lord Mendelsohn (Lab)
My Lords, this is my first opportunity to welcome the Minister back to her place and to say what a pleasure it is to see her here. We who have experienced time with her have always been impressed by her courtesy and the seriousness with which she takes these deliberations. I am returning to a theme we first discussed during the Small Business, Enterprise and Employment Bill in 2014. As they say, some songs are so good, they may be old but are worth repeating. I hope she will forgive me for coming back to some of the issues we had then, of which, during her time on the Back Benches, she has been a doughty supporter. I am conscious that there is an awful lot to respond to in this group of varying themes. I look forward to seeing her do so with aplomb.
When I saw the amendments tabled here, I had a moment of undiluted joy when I noticed that Amendment 356A in my name suddenly had the addition of “g” before it. I initially thought that, in the chaos of the last few months, I had been called into government service unbeknown to me and without the benefit of a phone call. Having realised that that was probably not the case, I then thought that I had won the lottery—that, for once, one of my amendments was so good that the Government had finally adopted it and were prepared to champion it. Of course, it is a printing error.
I return to some of the things we talked about before, such as how we can align this Bill with the Prompt Payment Code and the Late Payment of Commercial Debts Regulations, for example. Genuine progress has been made in trying to deal with the curse of late payments, which affects small, medium and even large businesses, to try to improve their payment terms and to make sure that the Government play their part where they can, both as an agency of regulation and a procurer.
Lord Aberdare (CB)
My Lords, after that introduction I am not sure that I need to say much at all, but I will speak to Amendment 361A, in my name, and briefly in support of the amendments in the name of the noble Lord, Lord Mendelsohn, to which I have added my name, and to his Amendment 356A.
Amendment 361A is another of my probing amendments seeking to reinforce SME involvement in public procurement. It would give the public sector contracting authority the specific right to make a payment directly to a subcontractor when payment from a tier 1 contractor to that subcontractor for an undisputed invoice takes more than 30 days. The contracting authority would also have the right to offset any such payment it has made from moneys owed to, or already paid to, the tier 1 supplier. The aim is to provide the contracting authority with the flexibility to support the financial viability of the supply chain while avoiding unnecessary delays. The amendment creates a right, not an obligation, so the subcontractor cannot insist on such a direct payment. A previously existing and regularly used right would be restored.
During the 1970s and 1980s, when the UK economy last experienced high levels of inflation, public sector clients would often name a specific subcontractor to be used when tier 1 contractors were choosing subcontractors. They also had the right, when the subcontractor was not paid, to step in and pay the subcontractor directly to ensure that the delivery of the contract was not compromised and value for money was preserved. This was accompanied by a corresponding right to reclaim any such payment from the tier 1 main contractor. It was widely used in construction, where the public sector accounted for some 40% of demand in both construction and maintenance of public assets. Of course, this option is particularly important to encourage more SMEs to participate in public procurements. The fact that they can be paid directly by the client if there are problems or delays in payment by the main contractor can significantly boost their confidence in engaging in the procurement process.
There was a similar right introduced by the European Union through article 71.7 of EU directive 2014/24 on public procurement. I do not know why this directive was not transposed into UK law, nor why this direct payment practice, which the UK Government had, after all, pioneered and used themselves for decades, has not been readopted. Now, more than ever, with a volatile economic environment and high rates of insolvency among construction subcontractors, such a right could play an important part in building trust and liquidity in the SME supply chain. There is nothing stopping a client, whether public sector or commercial, from using direct payment, if this is allowed by the contract, but nor is there anything encouraging or motivating them to do so. This amendment would make clear the ability for direct payment to be used where necessary and would drive a fairer payment culture and greater transparency across the supply chain. I hope that the Minister will consider accepting the amendment, or at least undertaking some work to assess the impact of spelling out the possibility of direct payment as an option.
I have also added my name to Amendments 353B, 370A and 430A, tabled by the noble Lord, Lord Mendelsohn, which would represent another valuable step towards improving payment terms and practices for public contracts. I have very little to add to what he has so powerfully said. I understand that the role of the Small Business Commissioner as currently set out in legislation might make it difficult for her to be given the additional responsibilities implied by these amendments. However, I understand that the public procurement review service within the Cabinet Office operates a similar function in relation to public bodies, so perhaps an alternative approach for the Minister to consider would be to require unresolved payment disputes to be referred to them. If the Minister can come up with a better approach to resolving payment disputes in a timely way and ensuring that smaller suppliers receive the funds due to them, I would welcome that with enthusiasm equal to that which I have for the noble Lord’s amendments.
The noble Lord, Lord Mendelsohn, has also tabled Amendment 356A, relating to the BEIS payment performance reporting scheme, which I had not spotted to add my name to. It seems extraordinary that, whereas several thousand of the largest private contractors report every six months to their suppliers on a public database, public sector contracting authorities also report but only on their own individual website. There is no single place where individual small suppliers can understand the rather unimpressive payment behaviour that the noble Lord described of public sector clients, without going through an unbelievable search of numerous databases. I hope that the Minister will support the idea of bringing all this information together in one location and looking at some sort of enforcement mechanism for this reporting, along the lines of the “what get measured gets managed” quote that we have heard a number of times.
Most of the amendments that I have tabled or spoken to in Committee have related to achieving the Bill’s aim of increasing the number of small businesses participating in the public procurement process, particularly in the construction sector. During earlier sessions in Committee, Ministers told us several times that there will be meetings before Report to discuss what more the Government can do to promote the involvement of SMEs and of the voluntary and community sector. Indeed, the offer of such meetings was welcomed by the noble Baroness who is now herself the Minister. Can she confirm that such meetings are still planned and when they are expected to take place? We have heard a great deal in Committee about the need to increase the involvement of SMEs in public procurement. It would be good to review the overall approach that the Bill takes and how it will seek and indeed achieve this worthy result.
Lord Fox (LD)
My Lords, as the noble Lord, Lord Mendelsohn, pointed out, this is a wide range of varying amendments on a scale that, I suggest, is suboptimal for the proper scrutiny of this Bill. Frankly, it is symptomatic of the whole nature of this Bill and the way in which we are expected to scrutinise it. That said, because there are so many different things in here, there is a danger of some of the gems getting buried. I am going to burnish just a few of them but I hope that the Minister will be able to look back through the Marshalled List and Hansard to make sure that they are not overlooked, even if she is unable to comment fully on the whole range of amendments.
Those of us who can remember the beginning of this group will remember that we were talking about KPIs. The noble Lord, Lord Lansley, the noble Baroness, Lady Noakes, and my noble friend Lord Scriven, talked about them, as will I when I speak to Amendments 275A and 276ZA—I have never seen a “ZA” before—in my name.
Amendment 275A would remove the power granted by the Bill to the appropriate authority—otherwise known as the Secretary of State, as far as I understand it—to change the threshold at which KPIs may be published. At the moment, the threshold is set at £2 million. If my noble friend Lord Scriven, the noble Baroness, Lady Noakes, and the noble Lord, Lord Lansley, were successful in changing the KPI regime and making it rigorous, the Secretary of State could at a stroke remove a large proportion, if not all, of public procurement from that KPI obligation simply by arbitrarily lifting the threshold. This is a process that should not be left to the Secretary of State alone; that is what Amendment 275A refers to.
Furthermore, Amendment 276ZA would ensure that the regulations could be used only to reduce the threshold, not increase it. I must say, it is ingenious; I would not have thought of it on my own account. These are well-worded and reasoned amendments. I am sure that, if the Minister were not at the Dispatch Box, the Back-Bench version of her would have been making this speech because these amendments are of course hers. When she was promoted, she swiftly withdrew them. Because I agree with them and think that they are good amendments—I did not do this simply to have some fun; these are important issues—I put them back in for your Lordships to consider. The threshold at which the KPIs are published is absolutely central to whether we have a KPI system that works. It is important that Parliament is left with the right to do that.
I shall speak to another gem: Amendment 272 in the names of my noble friends Lord Wallace and Lord Scriven and the noble Baroness, Lady Bennett. I will not speak at length. In previous debates, Ministers have argued against adding principles and things to this Bill, but central to the Green Paper was a section on the principles of public procurement. The Government accept that there should be principles here and have advanced some, so putting into the Bill the principle that procurement should help local communities with the deployment of sustainable local improvement would seem to be central to what this Government want to do, especially given their stated aim of bringing local communities and the quality of life in them up.
I also associate myself with my noble friend Lord Scriven’s speech on Amendment 353AA; it sounds more like a battery than an amendment. I look forward to his further speech on that.
Finally, I want to say a word in favour of the amendments in the name of the noble Lords, Lord Mendelsohn and Lord Aberdare, which seek to address further the pernicious practice of late payment. This is the Procurement Bill and it is about public procurement. It is unthinkable to me that this Bill and the Act that will follow do not have something to say about late payment and something to improve this activity. Whether it will be along the lines of the noble Lords’ proposal, I do not know, but these are important points. This seems to be a genuine opportunity for the Minister. This is a cross-party concern. I am sure that the Minister, working with others, can come back on Report with something that will further stiffen the process. I suggest that the process of publishing, as set out by the noble Lord, Lord Mendelsohn, would be a very good way of starting so that we can at least see where the poor behaviour lies.
I hope that, in the post-Committee quiet, the Minister can scrutinise where we are with all these amendments and come forward on Report with some sensible improvements based on them.
Baroness Hayman of Ullock (Lab)
My Lords, this has been an interesting debate that I hope has been helpful to the Minister. I have three amendments in this group. Amendment 273 requires that one KPI is compliant with the carbon-reduction plan. Tied into that is Amendment 274, which requires that, where public contracts in scope of the KPIs fall below the threshold for mandatory carbon-reduction plans, at least one KPI should assess the supplier’s performance against climate or environmental considerations.
As I said on Monday, the transparency requirements are very welcome. We believe they could provide the opportunity for contracting authorities and their suppliers to demonstrate that they are having regard to climate change and are managing the risks through regular environmental reporting as a KPI. However, those requirements are not set out in the Bill but will be left to secondary legislation. For example, they do not impose requirements in relation to the environmental commitments made by the supplier awarded the contract or for the regular reporting on whether the commitments have actually been met. We feel that that needs to be strengthened, which is why we have tabled the two amendments on this area.
My Amendment 353AA would create the process to ensure that contracting authorities safeguard the public interest. I thank the noble Lord, Lord Fox, for his support. The noble Lord, Lord Scriven, gave a detailed explanation of the importance of this, so there is no need for me to go into any further detail. Looking at the public interest and the wider potential impacts of any contracts that are supplied is something that we need to be extremely aware of and cautious about.
I turn to other amendments in this group. The noble Lord, Lord Lansley, made some important points here; we are very sympathetic to them and I would be interested to hear the Minister’s thoughts. These seem to be straightforward areas where the Bill could be improved. In particular, the noble Lord explained how the time modifications, going from one-10th to one-sixth, made sense and would make life a lot easier for people. Again, these are sensible amendments so it would be interesting to hear the Minister’s response.
My noble friend Lady Thornton has tabled some amendments around KPIs and social value, and we strongly support both of them. I am sure the Committee is aware that social value is included in the national procurement policy statement, but there is no reference to social value in the Bill itself, as has been said on a number of occasions when we have debated this in Committee. We have been told by officials—and by previous Ministers before the noble Baroness—that social value is integrated into the concept of public benefit, but we believe that “public benefit” is just too vague a concept and it is just not clear where social value sits within this framework. My noble friend raises an important point with her amendments, and I hope the Government will start to take this issue more seriously.
As usual, the noble Baroness, Lady Noakes, put her finger on an area that needs proper clarification. I am sure the Minister will have listened very carefully to everything she said.
The noble Lord, Lord Scriven, introduced some of the Liberal Democrat amendments by talking about the importance of sustainable local improvements and, again, the wider public benefit: what is this, what does it mean and what will we get out of it in the Bill? Again, a lot of what he was saying—and what the amendments from the Liberal Democrats are doing—is very similar to, and ties in with, the amendments we have put down: they look at the environmental and social value impacts and how we can build these into the Bill to make important improvements.
The noble Baroness, Lady McIntosh of Pickering, made some important and specific points with her amendments, and I was happy to add my name to them. They draw attention to a really important issue, which has been missed out and is extremely pertinent at the moment when we consider current concerns over inflation—particularly food price inflation, as she mentioned—and the rise in prices more generally. Public sector catering businesses were really badly hit during the pandemic and are still struggling, so we need to pay proper attention to her amendments. If we are genuine about supporting SMEs, this is an area where they really need some strong support from the Government at the moment.
I commend my noble friend Lord Mendelsohn for his work on tackling the issue of late payment. His dogged approach to this has achieved much, but there is still much more to achieve. His amendments are very important and helpful; again, they are about helping SMEs, something the Minister has said time and again she wants to do.
As the noble Lord, Lord Fox, asked, why is there nothing on late payments, or the issues he raised in particular, in the Bill? This is a real opportunity to do that. The noble Lord, Lord Aberdare, raised similar issues around small and medium-sized businesses and the kind of support they need for procurement if they are to be able to make the most of the contracts that are out there for them. I totally agree with him on the issues around SMEs and the construction sector: it can be very difficult for SMEs to break into that sector, and very difficult for them to manage their cash flows if they start having issues around late payment, which unfortunately happens all too often. In addition, we would strongly support his request for picking up the meeting idea to see whether we can make some progress on this matter between Committee and Report.
To summarise, the Bill needs to ensure that it specifies that KPIs are flexible, proportionate, realistic, agreed properly with the provider and informed by engagement with the people accessing any services. These are helpful amendments, seeking to achieve many of these aims. I hope that the Minister is sympathetic to much that has been proposed and I look forward to her response.
The Minister of State, Cabinet Office (Baroness Neville-Rolfe) (Con)
My Lords, I am glad to be debating this group, which deals with prompt payment of suppliers throughout the supply chain, an important innovation in the Bill to deal with a long-standing problem. I am slightly perplexed by the words of the noble Lord, Lord Fox, because one of the advantages of the Bill is that we are making progress on prompt payment and adding rules in relation to the indirect suppliers, which is a considerable breakthrough.
There are a number of government amendments. Amendments 354 and 434 confirm the start of the period during which payment must be made following receipt of an invoice. Amendment 361 signposts the reader to an electronic invoicing provision in Clause 63. Amendments 360, 362, 363, 431 and 432 align wording with equivalent provisions elsewhere. Amendment 433 corrects the territorial application of this regulation-making power in Clause 80.
I now turn to government amendments to Clauses 69 and 70 and Schedule 8 on contract modification. Amendments 365 to 371 to Clause 69, “Modifying a public contract”, have been made to correct technical errors and make the clause clearer. Many of the amendments to Clause 70—I reference Amendments 390, 391 and 392A—arise as a consequence of the decision to divide this clause to make it simpler for contracting authorities to understand their publishing obligations.
Amendment 372 has been made to ensure that contract change notices are published when a contract is transferred to a new third party under paragraph 9 of Schedule 8. Amendments 373 and 374 clarify the anti-avoidance provisions. Amendment 375 creates a new paragraph (b), which reduces the burden of publication. Amendment 376 sets out certain contracts that are exempt from the obligation to publish contract change notices. Amendments 377, 381 and 385 are consequential. Amendments 378, 380 and 383 have been made to ensure that the clause will work effectively for Wales and Northern Ireland. Amendment 384 and 389 provide that certain other contracts are exempt from the requirement to publish details of a qualifying modification.
Baroness Neville-Rolfe (Con)
Amendment 392 makes it clear that the power to change the percentage thresholds in Clause 70 applies to Welsh Ministers as well as a Minister of the Crown.
I apologise in advance for the length of my reply to the substantive points in this important group. I turn first to key performance indicators in Clause 50. My noble friend Lord Lansley’s first amendment would require contracting authorities to set at least three KPIs that are “quantifiable measures” as well as
“such further factors and measures as the contracting authority considers justified in relation to the requirements and value of the contract”.
The very nature of a KPI means that it has to be quantifiable; otherwise, performance cannot be effectively measured. In addition, the Bill already requires contracting authorities to set “at least three” KPIs, but they can set more where they consider it justified. His second amendment relates to where the KPIs are derived from. It proposes that they be tied to the specifications of the tender rather than to the contract itself. Forcing KPIs to be tied to the specifications of the tender means performance is not measured effectively. They need to relate to the final agreement, not to a previous document that may have been changed during the competitive tendering procedure. However, I can assure my noble friend that further regulation and guidance will describe the best way to set and monitor KPIs.
Amendment 269A, tabled by the noble Baroness, Lady Thornton, Amendment 272, tabled by the noble Lords, Lord Wallace and Lord Scriven, and Amendments 273 and 274, tabled by the noble Baronesses, Lady Hayman and Lady Bennett, and the noble Lord, Lord Coaker, would require KPIs to relate to wider policy matters, such as social value, carbon reduction and, as I think the noble Lord, Lord Scriven, mentioned in his intervention, sustainable local improvement. As stated a number of times in Committee already, and for good reason, procurement policy is not fixed and evolves as new strategic priorities emerge, such as our action to address climate change in procurement in recent years. Policy matters such as these should therefore not be included in the Bill and are better addressed in the national procurement policy statement.
Amendment 271, proposed by my noble friend Lady Noakes, suggests that Clause 50(2) should be removed. This provision confers a discretion on the contracting authority not to publish KPIs if the contract in question could not be appropriately assessed by reference to KPIs. Subsection (2) serves a vital purpose. It is not appropriate to measure all contracts by reference to KPIs—for example, a goods contract for an order of IT hardware or office furniture. We therefore need to confer a discretion on contracting authorities, rather than create a legal obligation that cannot be met in every case and which, in some instances, would add legal and administrative burdens with limited additional benefit that would be hard to justify. Moreover, the discretion in subsection (2) not to publish KPIs can be exercised only when appropriate. The transparency obligation in Clause 51 should, I believe, help to prevent any abuse of the provision. In addition, the Freedom of Information Act, which was mentioned in the discussion, allows stakeholders to exercise scrutiny over the form of KPIs that contracting authorities write into their contracts. It is not in their interest to avoid these requirements as the information will become public in any event.
I thank the noble Lord, Lord Fox, for his Amendments 275A and 276ZA and his thinking on KPIs, although I must confess to having a sense of déjà vu. The balance of benefit against burden is an important matter that we must look at in this Bill, and one that merits investigation by us all. I am therefore grateful for the opportunity to set out our position on this.
The power in Clause 50(4) allows amendment of the £2 million threshold in subsection (1) above which KPIs must be set and reported on. The two proposed amendments probe that power in different ways. The first amendment seeks to remove the ability to amend the threshold in its entirety and the second limits the power to reducing the threshold.
Lord Scriven (LD)
I am confused by that answer; I do not understand, in practice, what the Minister has just said. There could be at least two public bodies involved in an individual’s care, through social care and the NHS. Can the Minister clarify a little better how the public interest is served when one public body decides to outsource, having an impact on another public body which has no control or say over the contract that has been let, when the client the contract could serve impacts on both bodies?
Baroness Neville-Rolfe (Con)
I was trying to make sure that the noble Lord knew that I had listened to his point. There is a point about what is covered by the Bill and what is not, so perhaps I will reflect a little further on how we achieve the best outcome in the sort of circumstances he describes.
Moving on, I thank the noble Lord, Lord Mendelsohn, for his kind words. I look back with great pleasure on the work we did together on those Bills. I very much agree with the noble Baroness, Lady Hayman of Ullock, that he has made a huge contribution in this area. To some extent, his dogged determination has been rewarded with this Bill, which, I think, as I said right at the beginning, makes something of a breakthrough. That is why I am glad now to be the Minister and to make sure that that breakthrough is reflected in a larger share of procurement for SMEs, with payment being more consistently speedy. It is clear that, in a lot of areas, payment is quite good.
The noble Lords, Lord Aberdare and Lord Mendelsohn, have tabled Amendments 353B, 370A and 430A. They would create a process for resolving payment disputes that would mandate escalation to the Small Business Commissioner, who we remember so well, for arbitration and resolution. Going back, I think that the noble Lord, Lord Mendelsohn, wanted me to be the commissioner, but it never happened. The amendments would also require the automatic payment of late payment interest in the event of a contracting authority being found to be in violation of the payment provisions of this Bill.
I believe that this Bill represents a big step forward in tackling late payment, as I have said. However, I believe that these amendments could introduce unwelcome complexity into the system for government suppliers and remove the parties’ ability to be flexible in matters of dispute resolution by tailoring dispute resolution and escalation procedures to particular contracts. There are now—this is an important point—a range of existing mechanisms in place to deal with late payment. Suppliers, including those in public sector supply chains, can raise payment delays with the Public Procurement Review Service, which the noble Lord, Lord Aberdare, kindly drew to our attention and which will work to unblock any overdue payments. It is a well-established service. It has been successful in releasing more than £9 million of late payments to date and has grown in confidence since we passed the Small Business, Enterprise and Employment Act 2015. I assure noble Lords that the PPRS will continue to carry out this function under the new regime to unlock contract-specific instances of late payment.
Lord Mendelsohn (Lab)
I have just two things to say very briefly. First, I did say that I thought the noble Baroness would be a brilliant Small Business Commissioner, but I think that she is a brilliant Minister.
I did not put the Public Procurement Review Service in my speech because I have issues with it. It has unlocked £9.4 million. When I first read its work in 2020, it said £8 million. I thought that meant £8 million in that year, but £9.4 million is the entire sum that it has unlocked since it was set up in the Small Business, Enterprise and Employment Act 2015. Last year, its achievement was £1.4 million. It has dealt with 400 cases and has, it says, been 100% successful. However, it is also reported elsewhere that it has dealt with more than 1,900 cases, most of which involved suppliers that gave up on it during the course of its process. Let me retell the numbers: 23,000 invoices in one local authority alone. The Minister can tell me that 400 cases over an eight-year performance is good, but I am not so sure. I appreciate that there is a vehicle—again, I am not picky about which one it is—but one cannot say that that performance is making any meaningful impact. That is why I would be grateful if the Minister could look at that in more detail.
Baroness Neville-Rolfe (Con)
I will certainly look at the figures, which I am very interested in, but this Bill obviously represents something of a step change. The key thing is how we can make it work effectively. I also highlight that suppliers already have the ability to claim interest on late payment under the Late Payment of Commercial Debts (Interest) Act 1998, which has been referenced. A reference to it in our Bill therefore seems unnecessary.
The proposed amendment would also significantly alter the remit of the Small Business Commissioner. Under current legislation, a small business may complain only about a large business. As such, it would not be appropriate to reference the Small Business Commissioner in this context; it is a slightly different type of system.
The noble Lord, Lord Mendelsohn, has also tabled Amendment 356A, which would place a duty on contracting authorities to report payment performance under regulations made under Section 3 of the Small Business, Enterprise and Employment Act 2015. These regulations currently place a duty on the UK’s largest companies to report on a half-yearly basis on their payment practices, policies and performance. We are thinking about what we can do to open up more contractual opportunities to SMEs and will come back to that on Report. We recognise the need for alignment with the private sector so that we can have a bit more comparison of performance.
However, we do not, for example, want to constrain the Government in the future from pursuing the reporting of higher payment standards for the public sector should we wish to do that, nor can we add new requirements to the private sector without some form of consultation, especially at this difficult time. I am happy to look at the possibilities on publishing payment performance information for private companies alongside those in the public sector and at trying to make the results more easily comparable. It may take a little time, but I hope that noble Lords will find that assurance helpful. We will see what we can do.
Turning to Amendment 361A, tabled by the noble Lord, Lord Aberdare, this amendment would enable contracting authorities to pay subcontractors in their supply chain directly where a prime contractor does not pay within agreed terms. The contracting authority would then be able to reclaim the outstanding amounts from the prime contractor, either by discounting the sum owed or by reclaiming the money as a debt. This amendment would, of course, utilise public money as a method of resolving such disputes. Where insufficient money remained, this would introduce risk and liquidity pressure to public sector accounts, with financial implications that are extremely difficult to countenance, especially in current circumstances.
The noble Lord, Lord Aberdare, asked whether we could introduce the “step-in” right, as suggested by Amendment 361A, as a right rather than an obligation. This could lead to confusion for contracting authorities about when they should step in. It would also expose them to unnecessary challenge when they decided not to step in. However, suppliers in public sector supply chains can, as we have noted, use the Public Procurement Review Service to help unlock late payments where existing contractual routes fail. Further, there are some other mechanisms available, for example, project bank accounts, which may work in some cases and allow protected sums to be distributed to those in the supply chain.
Turning to contract modifications, my noble friend Lord Lansley has tabled Amendment 364 to substitute a 10% term threshold with a threshold of one-sixth of the contract term. Noble Lords will wish to note that the Bill does not say that contracting authorities cannot extend a contract’s duration by more than 10%. They can do so, but they must use other grounds within the contract modification rules. They are set out in Clause 69 and Schedule 8. These other grounds, in the majority of cases, will oblige them to publish a contract change notice, which will set out why they are making that modification.
We do not think that contracting authorities should be given greater leeway by increasing the 10% to one-sixth. Under the current regime, we have seen contracting authorities extend contracts by substantial periods time and time again without the public or the market being aware of the situation and therefore able to challenge it. We hope Clause 69(3)(a) will change that behaviour.
Amendment 370ZA, tabled by my noble friend Lady McIntosh, the noble Baroness, Lady Hayman, and the noble Lord, Lord Coaker, proposes that we insert a provision in the Bill that contract reviews should be held by both parties every three months. The Procurement Bill covers a huge variety of contracts—that is one of the challenges—and suppliers and contracting authorities are in frequent contact. A legal obligation that contract reviews must be held every three months is overly prescriptive. Contracts are kept under review by contracting authorities and suppliers as appropriate. One size does not fit all.
I see from Amendment 370B that the proposition that contract reviews should be held every three months has arisen from current concerns over inflation. Prices may be index-linked, and contracts may contain review clauses related to inflation. In those circumstances, modifications under the ground of Schedule 8(1) are already permitted.
My noble friend Lady McIntosh raised an important point relating to the context of rising food prices, caused, ultimately, by the situation in Ukraine. Complex public contracts, including large outsourcing contracts which cover food provision for public bodies, generally do account for inflation. Obviously, coming from a farming and retail background, I understand some of the issues that my noble friend described. I particularly agree about the importance of SMEs, as we all say again and again, and trying to get them a bigger share of procurement. However, her approach is too prescriptive and could lead to yet more inflation, and would put costs on the public sector at a particularly difficult time.
Baroness Noakes (Con)
I feel obliged to pursue this issue just a little further. When I spoke to the amendment, I referenced the imbalance of power between contracting authorities and small and medium-sized enterprises, which was its focus. I understand the points that my noble friend is making about when there are parties on either side of the transaction with equal bargaining power, but it does not work like that when there is unequal bargaining power. I am not suggesting that Amendment 486 is a perfect answer to that, but I do not think my noble friend has addressed the point as it applies to SMEs. I know that is a theme that has run throughout our consideration of the Bill, but I want to record that I do not regard her response to my amendment as really getting to the heart of the problem.
Baroness Neville-Rolfe (Con)
I thank my noble friend for her intervention. I agree that we need to try to get at the issue of the balance of power; indeed, we were discussing it at my briefing meeting. I think it may be worth having a further discussion with the Government Office for Technology Transfer, because it needs to understand the importance of these small companies to innovation and how the kinds of decisions that they make on rights and intellectual property can make an important difference. I am grateful to her for raising that further point.
Baroness McIntosh of Pickering (Con)
I listened very carefully to what the Minister said to our noble friend and to her response to my two little amendments. I am struggling to understand how she believes that Amendments 370ZA and 370B would transfer cost to the public sector. I know from her time on the Back Benches how much my noble friend likes impact assessments, so I refer to page 44 of the impact assessment, which states strongly that this is to encourage SMEs. I hoped that I had made the case—as did a number of others, including my noble friend Lady Noakes—for how SMEs should be benefiting from this, but, in two specific areas that I set out, SMEs are actually being handicapped by the current provisions under the Bill.
Baroness Neville-Rolfe (Con)
I will certainly look carefully at Hansard. I think my noble friend was basically talking about an inflation adjustment.
Baroness McIntosh of Pickering (Con)
Five per cent, plus the three-month review.
Baroness Neville-Rolfe (Con)
And a three-month review. The point about inflation is that if you build it in—this is a wider economic point—and then it goes up further, you can get an inflationary spiral. We have to try to find a way for people to come together and think about how we can best handle that, and I think the current system does that well. That is certainly my own experience, having been involved in procurement on both sides of the divide.
You can write in three-monthly reviews, but the difficulty is that this is an all-embracing Act and putting that into the Bill could lead to a lot of extra meetings and reviews that might not fit in with simplicity. But obviously this is Committee and we will be reflecting further on the right thing to do. I thank my noble friend for, as always, pursuing her point with such clarity and doggedness.
Finally, this is not in my script but I would like to confirm that I and the team are looking back at the undertakings made on earlier days in Committee to make sure that balls are not dropped. I confirm that we will be arranging meetings on the SME angle, even though I am not able to champion them. I have already had a round table with SMEs and the official team to see what can be done. I do not want to overpromise, but we want to do our best. I respectfully request that the various non-government amendments be respectively withdrawn or not moved.
Lord Lansley (Con)
Thank you. That was a long group so the reply was necessarily substantial, and we are most grateful for that. I was happy to have the confirmation that KPIs must be quantifiable. I am still slightly uncertain whether 10% works very easily—maybe it would have been easier to express it as one month in a year or something like that to deal with time—but still I am grateful.
If the question of force majeure is taken up through the general terms and conditions, I just ask that it requires the system, as it were, to say that we have standard terms and conditions and, as a result of some of the debates on the Bill, we also need to look at our general terms and conditions, and how things are to be expressed in future. As far as Amendment 268 is concerned, I was grateful for the Minister’s response and I beg leave to withdraw the amendment.
Baroness Neville-Rolfe
“(a) if the contract is a light touch contract, before the end of the period of 180 days beginning with the day on which the contract is entered into;(b) otherwise, before the end of the period of 90 days beginning with the day on which the contract is entered into.”
Baroness Neville-Rolfe
“The contract being awarded is being awarded by reference to suppliers’ membership of a dynamic market | 10 days” |
Baroness Neville-Rolfe
Baroness Neville-Rolfe
Baroness Neville-Rolfe
Baroness Neville-Rolfe
Baroness Neville-Rolfe
Baroness Neville-Rolfe
“4A_ An offence at common law of conspiracy to defraud.”
“8A_ An offence under Article 172 or 172A of the Road Traffic (Northern Ireland) Order 1981 (S.I. 1981/154 (N.I. 1)) (taking vehicle without authority etc).”
Baroness Neville-Rolfe
“28(1) An offence under the law of any part of the United Kingdom consisting of being knowingly concerned in, or in taking steps with a view to, the fraudulent evasion of a tax.(2) In this paragraph,“tax” means a tax imposed under the law of any part of the United Kingdom, including national insurance contributions under—(a) Part 1 of the Social Security Contributions and Benefits Act 1992, or(b) Part 1 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992.”
Baroness Neville-Rolfe
(2) In this paragraph—“defeat” means that—(a) Condition A in paragraph 5 of Schedule 16 to the Finance (No. 2) Act 2017, or(b) Condition B in paragraph 6 of that Schedule,is met in respect of the arrangements (where “T” in those paragraphs is taken to mean the supplier or connected person entering into the arrangements);“notifiable tax arrangements” means tax arrangements in respect of which a reference number—(a) has been notified to the supplier or connected person under section 311A, 312 or 312ZA of the Finance Act 2004 (disclosure of tax avoidance schemes) or paragraph 22A, 23 or 23A of Schedule 17 to the Finance (No. 2) Act 2017 (disclosure of tax avoidance schemes: VAT and other indirect taxes), and(b) has not been withdrawn;“tax arrangements” has the meaning given in paragraph 3(1) of Schedule 16 to the Finance (No. 2) Act 2017.”
Baroness Neville-Rolfe
Baroness Neville-Rolfe
Baroness Neville-Rolfe
Baroness Neville-Rolfe
Baroness Neville-Rolfe
Baroness Neville-Rolfe
“(iv) has rejected an application from a supplier for membership of a dynamic market on the basis that the supplier is an excluded or excludable supplier (see section 36), or(v) has removed an excluded or excludable supplier from a dynamic market under section 37, and”
“(aa) if the contracting authority is a transferred Northern Ireland authority, the Northern Ireland department that the contracting authority considers it most appropriate to notify;”
Baroness Neville-Rolfe
Baroness Neville-Rolfe
“(b) a reference to a contracting authority receiving an invoice includes a reference to an invoice being delivered to an address specified in the contract for the purpose.”
Baroness Neville-Rolfe
Baroness Neville-Rolfe
Baroness Neville-Rolfe
Baroness Neville-Rolfe
Baroness Neville-Rolfe
Baroness Neville-Rolfe
“(4A) In this section, a reference to a modification changing the scope of a contract is a reference to a modification providing for the supply of goods, services or works of a kind not already provided for in the contract.”
Baroness Neville-Rolfe
Baroness Neville-Rolfe
“unless the modification is a permitted modification under paragraph 9 of Schedule 8 (novation or assignment on corporate restructuring).”
(b) the modification.”
“(za) is a defence and security contract,(zb) is a light touch contract,(zc) was awarded by a private utility,”
Baroness Neville-Rolfe
Baroness Neville-Rolfe
“(za) is a defence and security contract,(zb) is a light touch contract,(zc) was awarded by a private utility,”
Baroness Neville-Rolfe
“(12) A Minister of the Crown or the Welsh Ministers may by regulations amend this section for the purpose of changing the percentage thresholds.”
Baroness Neville-Rolfe
Baroness Neville-Rolfe
“(2) A voluntary standstill period may not be less than a period of eight working days beginning with the day on which the contract change notice is published.”
Baroness Neville-Rolfe
Baroness Neville-Rolfe
“(b) subsection (3A), (3B) or (3C) applies.(3A) This subsection applies if, before awarding the public contract, the contracting authority did not know the supplier intended to sub-contract the performance of all or part of the contract.(3B) This subsection applies if—(a) the sub-contractor is an excluded or excludable supplier under section 54(1)(b) or (2)(b) (the debarment list), and(b) before awarding the contract the contracting authority—(i) sought to determine whether that was the case in accordance with section 28(A1)(b), but(ii) did not know that it was.(3C) This subsection applies if—(a) the sub-contractor is an excluded or excludable supplier under section 54(1)(a) or (2)(a),(b) the contracting authority requested information about the sub- contractor under section 28(1), and(c) before awarding the contract, the contracting authority did not know that the sub-contractor was an excluded or excludable supplier.”
Baroness Neville-Rolfe
Baroness Neville-Rolfe
“Terminating public contracts: national security
A contracting authority may not terminate a contract by reference to the implied term in section 72 on the basis of the discretionary exclusion ground in paragraph 15 of Schedule 7 (threat to national security) unless—(a) the authority has notified a Minister of the Crown of its intention, and(b) the Minister considers that—(i) the supplier or sub-contractor is an excludable supplier by reference to paragraph 15 of Schedule 7 , and(ii) the contract should be terminated.”
Baroness Neville-Rolfe
(b) in relation to a contract awarded under section 40 by reference to paragraph 16 of Schedule 5 (direct award: user choice contracts).”
The Deputy Chairman of Committees (Baroness Pitkeathley) (Lab)
Finally, we come to Amendment 404.
Lord Scriven
Member’s explanatory statement
This amendment is intended to probe what actions a contracting authority must take about, and to what extent they must investigate, conflicts of interest and potential conflicts of interest.
Lord Scriven (LD)
My Lords, I have never heard such a reception before speaking. I congratulate the Deputy Chairman of Committees on the professionalism with which she handled that. Many noble Lords will know that we sometimes get through less business in a dinner hour, so well done. On a serious note, when we canter through a Bill in that way on the seventh day in Committee, it shows the lack of scrutiny it is getting.
I speak on behalf of my noble friend Lord Wallace on Amendment 404, and in moving that amendment I will also speak to Amendments 407, 409, 410, 412, 413, 421, 422 and 423. This group deals with conflicts of interest in public procurement, and getting the process and the management of those conflicts correct is absolutely vital to upholding the public’s trust in the use of their taxes when contracts are being laid. It has to be said that the new conflicts of interest provisions in Part 5 are a step forward. They impose some positive obligations on authorities to identify conflicts and give them a duty to mitigate them, including by conducting a conflict assessment. The provisions also ensure that conflicts can pertain to Ministers, not just officials taking procurement decisions. This is especially important given the issues with the VIP lane during the Covid procurement.
However, these new provisions do not go anywhere near as far as did the review by Sir Nigel Boardman, which the Government asked for and which was published in May 2021, in that they do not require a centralised register of conflicts that authorities can consult. Nor does the Bill contain sanctions for non-compliance with these measures. A central plank of the Boardman proposals, that suppliers should also be required to make conflict of interest declarations themselves, is also not included in the Bill. Boardman recommended that when there are direct awards with no competition, additional disclosure of conflicts at a more senior level should be required. Again, that is missing from the Bill.
The Boardman review gave 12 recommendations on conflicts of interest and bias. The amendments I referred to earlier try to put in the Bill the recommendations that the Boardman review gave. What is the point of doing the most detailed review asked for by government about conflicts of interest, based on recent history, if it is totally ignored when a Bill on procurement is written and when Part 5, on conflicts of interest, seems to ignore them altogether?
I will not go through all 12 recommendations, but some of them are quite important. Recommendation 18 says:
“Cabinet Office should strengthen its model for the management of actual and perceived conflicts of interest in procurements, following the ‘identify, prevent, rectify’ sequence.”
That is completely missing from the Bill. The Minister may say that some guidance will come out on that from the Cabinet Office. The difference is that this is primary legislation. If an expert has recommended that this should be the prescribed way that the Government do things on procurement to improve it around conflicts of interest, why is the “identify, prevent, rectify” sequence not identified in the Bill?
Recommendation 20 indicates:
“Declarations of interests should be recorded and logged alongside the departmental gift register and, where appropriate, this and other, relevant information should be made available to those responsible for procurement and contract management.”
I ask the Minister where, or if, a central register of conflicts of interest will be made available so that all public sector bodies that are procuring can have access to it. Remember, it is not just government departments at Whitehall that we are talking about: the Bill relates to all public sector bodies apart from the NHS which, even if it is procuring outside this, should have access to conflicts of interest on a central register.
The Boardman review also goes on to suggest the types of people who should be required to declare conflicts of interest; it goes much wider than the Bill. Recommendation 23 says:
“All guidance should make it clear that the requirement to declare and record actual or perceived conflicts of interest applies to all officials or those working on behalf of Cabinet Office equally, including civil servants, contractors, consultants, special advisers, and other political appointees.”
Where do they sit in the Bill? It is not just individuals whose job it is to procure; there are others who will have potential conflicts of interest that need to be made public, and people need to be aware of them.
Recommendation 24 says:
“There should be a clear process for managing risk regarding conflicts of interest.”
Where in the Bill are the process for managing conflicts of interest and the sanctions? What are the sanctions? Will they be left to each individual contracting body, or is there a central view of what the sanctions for dealing with conflicts of interest should be?
Recommendation 28 of the Boardman review says:
“Suppliers should be required to follow similar processes regarding declarations of actual or perceived conflicts of interest at the outset of a procurement, with appropriate sanctions for non-compliance.”
Where in the Bill is such provision? How will the conflicts, or potential conflicts, of interest of those looking to supply be dealt with?
I wish to speak to other amendments in this group that talk about not just direct employees. For example, Amendment 423 says that people who have left public service but are then employed or subcontracted by or give paid advice to a company should not be allowed to do so for a period of six months. That is not just for government but for all public sector bodies. If that is not in the Bill, it will be left to individual councils or individual procurement bodies to make their own rules and there will not be a uniform approach across the public sector. Is it the Government’s view that there should not be a uniform approach across the public sector for conflicts of interest for people who leave the public sector and are going to be employed, subcontracted or paid to give advice, or should it be down to each individual contracting authority outside of government departments to make up their own view? If so, how will suppliers be able to understand that individuals are complying, based on the complexity that will require?
Amendment 422 is a probing amendment to understand how the Government anticipate managing conflicts of interest and to make sure, again, that that is standardised across the public sector, not just what happens under the procurement rules for government departments.
There are a number of issues here, and I know that my noble friend Lady Brinton will raise the NHS and Palantir, where senior officials who were working on a multimillion-pound procurement for IT left the Department of Health and subsequently went to work for a company that was bidding for that particular contract.
These are serious amendments, which, as the new Prime Minister said on the steps of Downing Street yesterday, seek to rebuild trust. Rebuilding trust to ensure that taxpayers’ money is used appropriately and no one is getting an unfair advantage means that we have to have a standardised system to deal with conflicts of interest across the public sector, for all bodies, and a system of managing those in a way that is appropriate. I hope that the Minister will be able to answer those questions. I beg to move Amendment 404.
Baroness Brinton (LD)
My Lords, it is a pleasure to follow my noble friend Lord Scriven. I have signed Amendment 423, but I support all his amendments and those of my noble friend Lord Wallace of Saltaire in this group.
My noble friend Lord Scriven has set the scene for the reason why these amendments are needed, with the background of the Boardman recommendations. I want to give one example of how the culture has allowed one particular firm to get its feet very firmly under the NHS desk over the last three years—it is now a bit more than three years—and why, had stronger conflict of interest arrangements been in place that did not permit very senior staff to go and work for someone who is about to bid for NHS contracts, in line with these amendments, we would have benefited.
In April 2020, the United States tech firm Palantir was awarded a contract for an NHS Covid datastore under the Crown Commercial Services G-Cloud 11 Framework. This meant that it did not need to be publicly tendered or the results published. During 2020, campaigning organisations Foxglove and openDemocracy, as well as a number of parliamentarians in both Houses, including my noble friend Lord Scriven and me in the Lords, raised repeated concerns about the contract. It then emerged that part of the cost-effectiveness of this contract was that Palantir bid very low in return for access to every patient’s medical and personal data held on the Covid datastore. No permission had been asked for or given by any individual about this highly confidential data, and of course it breached GDPR—that is not formally within the scope of this Bill.
The first contract, from April 2020, was for three months, and the value of that contract in return for the data was £1—not £1 million but £1. A further continuation contract for a further four months was for £1 million, and in December 2020, a two-year contract was issued, again under the same arrangements, for £23 million. As details started to emerge, and after the public outcry, the contract was ceased in April 2021—not least because Foxglove and openDemocracy had initiated a court case against the Department of Health and Social Care.
What has emerged is that, in 2019, a number of private meetings were held between senior NHS managers and senior managers of Palantir, described by the NHS managers as very positive—I bet they were. A November 2021 National Audit Office report on government contracts during the Covid pandemic found that a lack of transparency and adequate documentation was very evident.
During 2020, Palantir did not just have contracts with the NHS, it had contracts worth £46 million with UK government or public bodies. Palantir, which in conjunction with Cambridge Analytica provided data support for Donald Trump’s 2016 presidential election campaign and for the Vote Leave campaign, is known for working below the radar. I am very mindful of the comments that the noble Lord, Lord Mendelsohn, made earlier about people gaming the system.
Baroness Noakes (Con)
My Lords, I have Amendments 415 and 419 in this group. In addition, I will speak to Amendment 417, which is in the name of my noble friend Lord Moylan but originated as an amendment tabled by my noble friend the Minister.
Amendments 415 and 419 are somewhat narrower than the other amendments in the group, which the noble Lord, Lord Scriven, has spoken to. They simply probe how the Bill has been drafted in relation to the term “conflict of interest”. Under Clause 75 contracting authorities have a duty to mitigate conflicts of interest, and under Clause 76 they are required to carry out conflict assessments. In each case, the clauses define the term “conflict of interest” by reference to Clause 74. Under Clause 74(2), a conflict of interest exists if someone has a conflict of interest—hence the Bill basically says that the definition of a conflict of interest is that it is a conflict of interest, which is not entirely helpful.
While “interest” is defined in Clause 74, “conflict” is not. Clause 74 says who might have a conflict but not what a conflict actually is. Is it an objective test or can conflicts include subjective perception? Does it have to be an actual conflict or just a possible one? Clause 74 is no help whatever. Clauses 75 and 76 have tried to define “conflict of interest” by reference to Clause 74, but in doing so they have merely highlighted that there is no definition in that clause. I have not attempted to define the term myself as my amendments today are obviously probing ones, but some attention needs to be paid to the drafting.
Amendment 417 would delete Clause 76(4), which deals with conflict of interest assessments. Subsection (4) takes the contracting authorities into the realms of fantasy. They have to think about what they know that might cause “a reasonable person” wrongly to think that there are actual or potential conflicts of interest. It is often hard enough to identify the range of potential conflicts of interest; getting into the territory of trying to work out what a so-called “reasonable person” might wrongly think is a potential conflict of interest is mind-blowing.
Having worked out what this reasonable person wrongly thinks, the contracting authority must take steps to demonstrate that the imagined wrong thought by the imagined reasonable person does not in fact exist. This is beyond parody. For good measure, there is no definition of “reasonable person”. We do not know whether this reasonable person is assumed to have any knowledge of public procurement or the workings of contracting authorities. Those of us who live in the world of politics know that otherwise reasonable people often believe extraordinary things and their capacity for thinking extraordinary things wrongly is infinite.
I very much look forward to hearing how my noble friend the Minister will defend subsection (4).
Baroness Bennett of Manor Castle (GP)
My Lords, it is a great pleasure to follow the noble Baroness, Lady Noakes, and congratulate her on the first half of her contribution, which clearly identified a crucial problem that has undoubtedly been missed by numerous other eyes.
However, I entirely disagree with the second part of her contribution, which referred to Clause 76(4). I do not often find myself in the position of defending what is potentially the Government’s position—perhaps I am about to pre-empt entirely what the Minister is about to say—but subsection (4) says:
“If a contracting authority is aware of circumstances”.
It does not say, “We expect the contracting authority to be clairvoyant and know of every single circumstance where a reasonable person might”. We all know this. Think about local councils. Having been a local journalist on another continent, I think of a case where a large city authority kept commissioning a certain architect to do a whole series of projects. That ended up raising considerable public concern. If that is happening, noble Lords can see why it would make sense to pre-empt the explanation of why there is no conflict of interest and therefore no problem here. It is also worth pointing out that the amendment tabled by the noble Lord, Lord Moylan, said that this was a subjective judgment that would affect the letting of the contract. In fact, it would not; it just says that there must be details of the steps included. So I would defend Clause 76(4), if the Government feel that it needs to be defended.
Before I get to what I chiefly want to say, I want to apologise briefly. I attached my name to a number of amendments in the previous group; I meant to be here to speak to them but events unfortunately intervened and I could not be. I still stand behind them.
Coming to this group, I have attached my name to a number of amendments in various combinations of the names of the noble Lords, Lord Wallace of Saltaire and Lord Scriven, and the noble Baroness, Lady Brinton. As the noble Lord, Lord Scriven, clearly outlined—I will not go over the same ground—the Boardman review reported in May 2021, which has allowed plenty of time for this issue to be included in this Bill, despite all the hurry and rush that we know there has been around it. I would also point out something that the noble Lord did not say: when the Boardman report came out, the Government said, “We accept all of these recommendations”. If the Government have accepted them, they should surely be incorporated in this Bill.
I want to pick up on one amendment that I did not sign, although I would have had I noticed it: Amendment 413 in the name of the noble Lord, Lord Wallace of Saltaire, that
“a donation or loan of more than £7,500 to any political party in a calendar year”
should be declared. We are talking about transparency and trust. This is obviously a practical, simple step that would not be very hard to implement and would be well worth while.
Amendments 421 to 423 are about preventing undue influence. Like the noble Baroness, Lady Brinton, I shall concentrate on Amendment 423. There is huge public concern about the revolving door, and I note that my honourable friend in the other place, Caroline Lucas, has done a huge amount of work, dating back in Hansard to at least 2013, on the revolving door in the defence and energy sectors.
That concern is not restricted to the Green Party. I was just looking through some of the reports. In 2011, Transparency International UK issued a press release headed
“Revolving door between Government and business is ‘spinning out of control’”.
If it was spinning out of control in 2011, we are at jet engine speeds by this stage. In 2016, the Centre for Crime and Justice Studies, in a report entitled Redefining Corruption, said that the public want a ban on the revolving door. This amendment provides much less than a ban; it is a modest six months, and I am not altogether sure that it should not be longer, but there is certainly great public concern about this. In 2017, the Committee on Standards in Public Life expressed concern about the revolving door.
The noble Baroness, Lady Brinton, set out one disturbing case. Here is another. In 2020, We Own It highlighted the interaction between Serco and NHS Test and Trace, and the degree to which there has been a revolving door between Serco and the senior Civil Service, to the point where a former head of public affairs of Serco became a Health Minister—I am not sure how many Health Ministers back, but at some point, anyway.
Finally, we should not forget the Greensill scandal. Just look at the mess that arose in part because of a revolving door—indeed, in some cases people were stuck in the same door at the same time, apparently representing both private interests and public, government interests. The Advisory Committee on Business Appointments noted that there were thousands of potential cases, but initially looked at only 108. There is lots of discussion about limits to that committee’s power; it cannot possibly cover this issue. We must start from the other side of the contracts.
Lord Coaker (Lab)
My Lords, I will be relatively brief, because I sense that some of the drive and energy has gone out of the Committee.
Lord Coaker (Lab)
Noble Lords have more energy than me, then.
Having said that, we are discussing incredibly important issues. In his opening remarks about Part 5, the noble Lord, Lord Scriven, was absolutely right. To be fair to the Government, Part 5 is undoubtedly a step forward and an improvement. For that reason, they are to be commended.
The amendments before us seek to improve what the Government have done and take it forward, and to provide clarity where it is lacking, as the noble Baroness, Lady Noakes, has done. These amendments are particularly good in challenging the Government to go further in achieving their objectives, but also asking whether they are sure they have defined things as well as they might have done.
Baroness Neville-Rolfe (Con)
My Lords, we come to Part 5 of the Bill on conflicts of interest, where the Government have sought to give greater clarity on these obligations, partly in the light of the difficult experience during Covid-19.
On the one hand, it is critical that the public and businesses trust our approach in procurement. They must trust that we are acting with integrity—an important word today—spending public money responsibly and that suppliers will be treated fairly. The Bill is a step forward, as the noble Lord, Lord Coaker, has been kind enough to acknowledge. On the other hand, we must not have a process which overall has a chilling effect because good honest suppliers who do not understand the arrangements are needlessly put off participating in procurement.
I turn to the various amendments tabled by the noble Lord, Lord Wallace, and spoken to with great passion by the noble Lord, Lord Scriven: Amendments 404, 407, 409, 410, 412, 413, 421, 422 and 423.
The Cabinet Office commissioned Sir Nigel Boardman to review communications procurement in the department. His first report was published in December 2020 and focused on Covid-19 and the difficulties then. A major public inquiry is now on the way, and of course we need to learn the lessons of that. However, his recommendations in that report have been substantially implemented by the department. For example, Procurement Policy Note 04/21 includes comprehensive guidance for authorities on how to ensure that conflicts are managed appropriately.
Before I comment on the individual amendments, I will try to reply to the comments made by the noble Lord, Lord Scriven. I emphasise that the Boardman recommendations have not been ignored. The Cabinet Office has implemented them in its commercial operations. It is not appropriate to put every recommendation into legislation, which of course applies for many different types of contracting authority and procurement —large and small. Our provisions allow for a framework in which authorities can implement best practice in accordance with their governance structures.
The noble Lord raised the subject of sanctions. Boardman’s recommendation 26 highlighted that there needed to be sanctions and that these should be made clear in policy and guidance. The Procurement Bill is not the place to detail every possible sanction for every breach. Disciplinary action should be for each authority to enforce as well. If a supplier believes there to be a breach, the Bill provides appropriate remedies in Part 9.
The noble Lord, Lord Scriven, also questioned the recommendations on direct award. As mentioned on Monday, we have introduced a new requirement that contracting authorities must now publish a transparency note before they award a direct award contract. This obviously did not happen during Covid and is a major safeguard.
Amendment 404 would require contracting authorities to take all steps to identify conflicts. This risks creating an impossible threshold for authorities to meet. It could always be argued that more steps should have been taken.
On Amendments 407 and 409, we agree that the Bill’s current scope of those “acting in relation” to the procurement is the right one. We have set out more detail on different groups of individuals involved in commercial guidance, as obviously there are broader groups now involved, in the Procurement Policy Note 04/21, which is the right place for that information. Amendment 410 would add obligations on suppliers relating to conflicts. Suppliers of course also have a role in mitigating conflicts, and this can be seen in Clause 75(2).
The Bill has generally sought to avoid regulatory obligations on suppliers, and such prescriptions are better placed in guidance than in legislation. This ensures that a proportionate approach can be applied by both smaller local councils and large central government departments. The purpose of Amendment 412 is to broaden the evaluation of conflicts. We do not think that this is needed, as the Bill already includes the principle of integrity, in Clause 11.
Amendment 413 requires that suppliers declare, during the procurement process, whether they have given a donation or loan of more than £7,500 to a political party in a calendar year. This was mentioned by the noble Baroness, Lady Bennett. UK electoral law already sets out a stringent regime of donation controls, which I am very familiar with. Donations from the same source that amount to over £7,500 in one calendar year are included. Donation reports are published online by the Electoral Commission for public scrutiny, providing an appropriate level of transparency. We do not see the need to add this to the Bill.
Amendments 421 and 423 concern former Ministers and civil servants. We certainly want to avoid the risks of individuals leaving the public sector and exploiting privileged access to contacts in government or sensitive information. To mitigate these risks, the Civil Service Management Code includes business appointment rules, which apply to all civil servants who intend to take up an appointment after leaving the Civil Service. They replace requirements on former civil servants which include standing aside from involvement in certain activities: for example, commercial dealings with their former department or involvement in particular areas of their new employer’s business.
Baroness Brinton (LD)
I am grateful to the Minister for allowing me to intervene. I absolutely accept the point about the change to civil servants’ arrangements. The example that I gave is outside the Civil Service, as would be many other contracts issued through this Bill when it becomes an Act. Can she assure me that every member of staff in any body or agency would be covered in the same way?
Lord Scriven (LD)
Before the Minister answers that, a number of times in my intervention I highlighted that there must be a standardisation not only for the Civil Service. Billions of pounds of procurement is carried out by non-central government departments. The rules need to be clear and uniform across the procurement process for the whole public sector, not just for government departments. That is a key issue and why many of these provisions need to be in the Bill, so that they are applicable to all public sector procurement bodies.
Baroness Neville-Rolfe (Con)
I thank the noble Baroness, Lady Brinton, and the noble Lord, Lord Scriven. I will not continue with the Advisory Committee on Business Appointments, as it sounds as though the Committee is familiar with that. Having experienced it, I would say that it is quite effective.
Baroness Bennett of Manor Castle (GP)
To take us back 30 seconds, to Amendment 413, about political donations over £7,500, I take the Minister’s point that yes, that register exists, but this amendment requires the supplier to take reasonable steps to make the declaration. If the supplier is not required to do that in their bid application, does that mean that every commissioning authority must add to their list of things to do, “Go and check the donations register every quarter to see what is happening”? Would not structuring it in this way make it much easier for the commissioning body?
Baroness Neville-Rolfe (Con)
I will start by trying to answer the point that the Civil Service has rules and this Bill is far wider in its application, which we accept. If we are too prescriptive in listing every relevant person in legislation, we may miss persons who should be considered. We think guidance provides a comprehensive list; Peers should see the guidance for commercial professionals in PPN 04/21, for example. As we have discussed in relation to other parts of the Bill, we have to have a combination of the Bill and guidance.
Lord Scriven (LD)
But this is the whole point of the Boardman review. By not having clear legislation and rules which are applicable across the public sector, we end up with things happening because they fall through the gaps. People in local government, for example, may not be aware of some of the guidance given to departments by central government, because it is not given to local government. It may be given to the ministry, but it does not necessarily filter down.
That is why we should have a standardised approach—which is not chilling. Then, regardless of whether you are in a local authority, the NHS, a central government body or an arm’s-length body, these are the rules on dealing with conflicts of interest. All that these amendments seek to put on the face the Bill is consistency across procurement in the public sector.
Baroness Neville-Rolfe (Con)
To come back to how you do it, you can do things in guidance as well as in the Bill. I take the noble Lord’s point that consistency would be helpful, but I have explained that there can be difficulties. I will just add that transparency will be a fundamental pillar of the new regime, which I think we all support. Extended transparency requirements, a single digital platform and so on will mean that decisions and processes can be much more closely monitored in future.
Baroness Noakes (Con)
Could my noble friend help me on the legal effect of the Civil Service management rules? It is my understanding that they cannot actually be enforced in a court of law because it would act as a restraint on the individual’s ability to earn a living. So the rules might exist and there might be advisory bodies et cetera, but it has always been my understanding that they cannot actually be enforced in a court of law. I am not trying to speak for the amendment, but the advantage of it is that it creates a statutory basis for it to have legal effect.
Baroness Brinton (LD)
My Lords, if I might try to assist, employment tribunals in the private sector have taken the view that you can have fairly tight, limited terms. I am sure that one of the reasons my noble friends Lord Wallace and Lord Scriven chose six months was that that is the sort of term that is acceptable.
Baroness Neville-Rolfe (Con)
I will look into the point about the Civil Service, but certainly people are very careful about the Civil Service rules when they leave. I say that as someone who left many years ago. The rules are observed by civil servants on the whole and we try to emphasise that. As has been said, what we are trying to do here is have a regime that covers not only the Civil Service but elsewhere. However, as always, my noble friend Lady Noakes has bowled a good ball, so I will look into that.
I turn now to Amendment 422, which proposes to introduce a power specifying how conflicts of interest are to be managed on a day-to-day basis. The Bill covers the plethora of organisations which make up the public sector and gives clear obligations on all contracting authorities to identify and mitigate their conflicts. It would not be wise to start dictating the implementation of such a process for each and every authority, so we do not think the power is right.
My noble friend Lady Noakes has spoken to Amendments 415 and 419 on the definition of a conflict of interest, and the noble Baroness, Lady Bennett, came in helpfully too. I recognise that Clause 74 does not explicitly define “conflict of interest” as it does “Minister”, for example. However, Clause 74(2), combined with the definitions, does give conflict of interest a meaning, so it is correct to say elsewhere, as in Clause 75(5), that conflict of interest has the meaning given by Clause 74.
By inference, then, a conflict of interest is where a personal, professional or financial interest of a relevant person, as set out in Clause 74, could conflict with the integrity of the procurement. Essentially, this is where there is a risk that someone from the contracting authority, who is involved in the procurement, could benefit from taking a decision that might not be in the best interests of the contracting authority itself.
Finally, there is Amendment 417, which would remove Clause 76(4). I reassure my noble friend that the purpose of Clause 76(4) is to help, not hinder, contracting authorities. A perceived conflict, as provided for in Clause 76(4), is where a person might wrongly believe there to be a conflict when in fact no actual or potential conflict arises. We must obviously make sure that the public and suppliers are confident that the public sector is conducting its procurements in a fair and open way. We therefore need to consider what others may perceive about the procurement process. I have asked officials to look at the precise wording in Clause 76(4) to ensure that this is properly expressed and is not misleading. I hope that at this late hour my contributions have helped noble Lords to understand the balance that we are trying to draw and what we are trying to achieve. I respectfully request that the amendment be withdrawn.
Lord Scriven (LD)
I thank the Minister. The Committee will have to give her 10 out of 10 for trying to explain, but we might not give as high a score on being convinced that she has alleviated some of our concerns.
Many noble Lords who have spoken on this group have tried to explain that the balance seems wrong. That is the issue in terms of conflicts of interest. The puzzling thing for all of us is that the Government agreed and accepted the Boardman recommendations, and some of them need to be in the Bill. Like other noble Lords, I accept that not all of them need to be, but some do.
These clauses have been written in haste. The noble Baroness, Lady Noakes, gave a definition. Clause 75(2) states:
“Reasonable steps may include requiring a supplier to take reasonable steps.”
So a reasonable step is a reasonable step. Unless the Government come back on Report with some serious amendments to this, I think we on these Benches will want to consult His Majesty’s loyal Opposition to see how we can strengthen this. As other noble Lords have said, this is really important in terms of the public’s perception and their trust that their taxes are being used in a way where no one gets an unfair advantage. That is what these amendments are about.
Baroness Neville-Rolfe (Con)
Clearly, trust is important and we are trying to do the right thing here. We are also trying to have a balance so that the interest provisions do not have a chilling effect. I said that right at the beginning. In any event, we are planning to have further meetings between now and Report, and it is something we should add to the agenda.
Lord Scriven (LD)
I hope the Minister has heard what I said; this is about getting the balance right. Certain things probably need to change and others might be referred to in guidance. Having said that, I beg leave to withdraw the amendment.
Baroness Neville-Rolfe
(a) treat the supplier as an excluded supplier for the purpose of—(i) assessing tenders under section 18 (competitive award), or(ii) awarding a contract under section 40 or 42 (direct award), and(b) exclude the supplier from participating in, or progressing as part of, any competitive tendering procedure.”
Baroness Neville-Rolfe
Baroness Neville-Rolfe
Baroness Neville-Rolfe
“(b) a reference to a contracting authority receiving an invoice includes a reference to an invoice being delivered to an address specified in the contract for the purpose.”
Lord Lansley
“(3A) Regulations may only be made under this section in relation to international agreements which have been laid before Parliament under the Constitutional Reform and Governance Act 2010.”
Lord Lansley (Con)
The lead Amendment 436 in this small group is in my name. These three clauses are about putting into the Bill a list of who the treaty state suppliers are. They introduce Schedule 9, which sets out that long list of countries with which we have international trade agreements that give rise to access to procurement opportunities for them here and us there.
Turning to Amendment 436, I do not disagree with the Government wanting to use secondary legislation to implement international trade agreements’ procurement requirements. I think that is a perfectly reasonable thing to do, because there will be a string of them, and amendments to them; changes to the general procurement agreement; and new agreements being entered into—all of which would lead to a tedious amount of primary legislation. Therefore, having secondary instruments is perfectly reasonable. As we will see later in the Bill, that the secondary instruments are subject to the affirmative procedure is also important.
We have to understand—I speak as a member of the International Agreements Committee—that there is a relationship between these processes and the scrutiny by Parliament. Essentially, treaties are laid under the Constitutional Reform and Governance Act. We then have a period of time in which to report to the House. I think our normal expectation is that the House would have an opportunity to look at any issues raised by the International Agreements Committee, in our case, either for information or for debate, before the point at which it is likely to have to decide whether there would be any reason to object to a draft of a statutory instrument of this kind. That would not be the case if the relevant agreement were not laid under CRaG. Noble Lords might say, “Surely they all are”, and indeed the reply from the Minister might be that they all will be. That would be a very useful thing for the Minister to say—I am not trying to lead the witness in advance—because they are not always.
Lord Purvis of Tweed (LD)
My Lords, I support the noble Lord’s endeavours. He and I have debated with Ministers on many occasions the interaction between the CRaG process, our international negotiations and the regrettable times when there has been, to some extent, circumvention of that approach. Therefore, I am glad he has put forward his amendment to seek clarification, as he outlined.
I have Amendment 441 in this group, which is a probing amendment to test a little further the Government’s thinking about the interaction with treaty state suppliers. It is my understanding that the countries in the schedule are only those with which we have an agreement where there is a procurement chapter or some procurement elements. It has not entirely been spelt out; I will be grateful if the Minister can confirm that this is the case.
When I looked through those countries, I noticed that there is not a single country from Africa in any of these arrangements. It may be that none of the EPAs we have rolled over have procurement chapters. The noble Lord, Lord Lansley, asked a question, and I ask the Minister whether that is the case. For example, in the SADC agreement, we have a chapter for co-operation which may lead to formal procurement agreements. I will be grateful if the Minister can simply clarify the reasons why those countries are in Schedule 9 and others were left out. It may lead to a couple of jarring interactions on the approach, but I am sure the Minister will be able to clarify that point.
My second question relates to our debates on the interaction between the UK system now, including guidance, and treaty state supplying nations. In a debate on Monday, I asked questions relating to exclusions. For example, on human trafficking and slave labour, why is it only a discretionary ground if a supplier would have met a threshold of having a prevention order, whereas if they had met the threshold of a conviction, it would be a mandatory exclusion ground? We in the All-Party Group on Human Trafficking and Modern Slavey have lobbied hard to ensure that, where there are serious allegations of modern slavery, forced labour or human trafficking, there are mechanisms that UK purchasing bodies and supply chains can automatically trigger. This could bring in some grey areas. I do not believe that is the Government’s intention, but it could be an unintended consequence, especially when it comes to very large frameworks and supply chains within those countries.
I will give an example regarding one of the countries in this list, Colombia. We have debated the human rights situation in Colombia with regard to the agreement we have signed. The EU paused the agreement, but the UK did not. There are very few mechanisms in this Bill where we can use the rest of the text of the Colombia agreement on human rights as a triggering mechanism when we procure from organisations or state enterprises in Colombia.
This is just my ignorance, so the Minister might be able to clarify this: are state-owned enterprises in treaty state countries treated the same as private sector companies? I assume they would be, but it opens up a different area of concern for me.
The second linked area is on human rights elements. We have an agreement, and are looking for future agreements, with Israel. The Minister will know that, under the European agreement that we have rolled over, there had been a clear dividing line when it came to the illegal occupation of Palestine. As I understand the Bill, when it comes to technology companies or other companies, it will be very hard for contracting bodies in the UK to consider whether services provided will meet the equivalent criteria for goods imports for those within the Occupied Territories. I would be happy if the Minister would write to me on that specifically, rather than give me a response at this moment.
There is a wider concern regarding this Bill when it comes to how a contracting authority would consider fair competition in procurement. On the Australia agreement, we debated whether produce that came from Australia that was manufactured or reared in different ways and on industrial scales provided unfair competition for UK suppliers. Australia also uses pesticides that are banned in the UK. There is an interesting clause in the Australia agreement that allows for those contracting bodies to
“take into account environmental, social and labour considerations throughout the procurement procedure”.
My amendment lifts text from the Australia agreement and suggests that this should be uniform across all agreements, if that is what the Government consider a gold-standard agreement, as they told us it was. The Australia agreement is broadly in line with what we inherited in the European directive, which had the requirement to take into account social criteria and environmental and labour factors. We have adopted that for the TCA, but it is absent for other treaty state suppliers.
For example, our agreement with Japan has no social or labour considerations in the procurement chapter in Article 10.9. I do not know why—that is a separate issue; we have debated the Japan agreement—but I have not been able to find any consistency in any of the treaty state suppliers. I understand that this Bill will then provide that consistency, and it will either be above or below treaty obligations, which I find curious. For example, unless my amendment is accepted by the Government and the Bill is changed, our legal requirements will be less than our treaty obligations in our Australia agreement. I do not know how that is going to operate when it comes to legal challenges.
It is also potentially the case that there will be inconsistency in application. I simply do not know how contracting bodies are going to navigate their way around this, especially as the Minister says so much is going to rely on guidance. In many of the areas, when it comes to the previous group that we were debating on conflict of interest and on other requirements in the Bill, a contracting authority will have to satisfy itself that the treaty supplier meets all of the criteria in this Bill. I do not know how it will do that when it comes to taking into consideration the other ethical factors or conflicts of interest—what are they going to ask a treaty supplier from Colombia, for example, unless there is some stronger mechanism?
The Minister might also help me with something that has been puzzling me. I do not know why, when it comes to operating no discrimination in relation to treaty state suppliers, that does not apply to Scotland. For Scotland, the Bill provides only that there “may” be regulations which mean that there cannot be discrimination. With the Government’s amendment requiring consistency with the United Kingdom Internal Market Act, which means that there cannot be any internal discrimination, I do not how that is going to interact. The Bill currently allows Scottish Ministers, for example, to say that they will be able to discriminate against certain treaty state suppliers on the basis, perhaps, of the overall human rights record of that treaty state—of which Colombia or Israel may be an example. I do not know, so I am hoping that the Minister might be able to help me with that.
Finally, I am not sure how investigations will be carried out when it comes to treaty state suppliers. Of all the areas we discussed previously regarding the grounds for the investigations by the PRU, which the Minister said will be a non-statutory element that will pursue these, I do not know what powers the PRU will have to secure information from treaty state suppliers. There is no mechanism under this Bill, and unless the provision of information is provided for, as happened in the Australia agreement, I do not know how the PRU will get that information. On all those areas, I hope the Minister will be able to reassure me, because at the moment I am fearful that there is a rather high level of opaqueness.
Baroness McIntosh of Pickering (Con)
My Lords, I will speak to Amendment 443A, in my name, to Clause 83. The amendment is, very simply, to leave out
“A Minister of the Crown”,
and its purpose is to remove the power from Ministers of the Crown to make regulations under Clause 83. It may be the case, because this relates especially to the situation in Scotland, that my noble friend the Minister is not able to reply this evening, so I would be very grateful if she could write to me, and I can then share that with the Law Society of Scotland, which has raised this matter with me.
Baroness Bennett of Manor Castle (GP)
My Lords, being aware of the hour, I will be extremely brief, but I just want to express support particularly for Amendment 441, in the name of the noble Lord, Lord Purvis. I think we have to look at this in the context of, as the Committee may be aware, the current movement in relation to the Energy Charter Treaty and the way in which increasing numbers of states—most recently France but also the Netherlands, Spain, Poland and Italy—have found that this treaty that they entered into years ago has really restricted their ability to act on the kind of environmental, social and labour matters identified here. It is really important that we do not bring in new laws that create further restrictions.
On the amendment from the noble Lord, Lord Lansley, there has been lots of criticism of the CRaG process and that it was essentially designed for long ago when trade treaties were something very different from what they are today. Just to illustrate that point, this morning I was with the Commonwealth Parliamentary Association for a visit of Canadian lawmakers. We learnt then, very interestingly, that Canada had wanted to include the issue of frozen pensions—the fact that the UK does not uprate its pensions for people in Canada while it does so for people in the United States. That is the kind of way in which trade deals can become far more complicated today. Unfortunately, on the account we heard this morning, the UK Government refused to countenance this being included in the trade deal, but it is really important that we see how broad trade deals can be today and that they have the maximum democratic scrutiny. That is what I think this amendment seeks to achieve.
Baroness Brinton (LD)
My Lords, I will speak to Amendment 436, from the noble Lord, Lord Lansley, and to my noble friend’s Amendment 441. It is a pleasure to follow both of them.
I want to talk a bit about some of the problems that we face inside our own government structures and Parliament. The noble Lord, Lord Lansley, and I spent quite a bit of time earlier this year on the Health and Care Act. Indeed, there was a section in there about healthcare arrangements with other countries. But that was the end of a story, and at each stage from 2014 onwards we kept finding people trying to relax the EU directive on procurement rules, which we had to abide by then, in order to enlarge the gift that we could give under a treaty. For health, this is an extremely important matter.
The EU procurement directive, which governs all public sector procurement in member states, defines fair process and standards to ensure that all businesses, including the NHS, have fair competition for contracts. It also, incidentally, prevents conflicts of interest through robust exclusion rounds and protects against creeping privatisation. It is that latter point that is really important in particular for the NHS, but there are other sectors of the public realm where that matters too.
On 18 November 2014, I asked the noble Lord, Lord Livingston of Parkhead, whether the EU procurement directive protected the NHS. He replied:
“Commissioner de Gucht has been very clear:
‘Public services are always exempted ... The argument is abused in your country for political reasons.’”
The noble Lord, Lord Livingston, went on to say:
“That is pretty clear. The US has also made it entirely clear. Its chief negotiator—
this was in relation to TTIP—
said that it was not seeking for public services to be incorporated. No one on either side is seeking to have the NHS treated in a different way … trade agreements to date have always protected public services.”—[Official Report, 18/11/14; col. 374.]
Again in 2018, I raised these points with the noble Lord, Lord O’Shaughnessy, in a debate and he said:
“I can tell them that we have implemented our obligations under the EU directive. The Government are absolutely committed that the NHS is, and always will be, a public service, free at the point of need”—
and the current Government repeat that point.
“It is not for sale to the private sector, whether overseas or here. That will be in our gift and we will not put that on the table for trade partners, whatever they say they want.”—[Official Report, 29/3/18; col. 947.]
That was very helpful because it came in advance of President Trump’s attempt to broaden what could be in a possible trade agreement, which would definitely have included health. Those of us who are concerned about these matters therefore relaxed a bit, until the Healthcare (International Arrangements) Bill came before your Lordships’ House, which was intended to replicate the reciprocal healthcare arrangements that we used to have under EHIC. The problem was that it had a clause that also gave rights under international trade agreements for health services to be part of those trade agreements, with no reference back to Parliament. It was an expedited process but, during the passage of that Bill, we managed to revert to it being just about reciprocal healthcare arrangements in the European Economic Area and Switzerland.
However, this year, we went through exactly the same process again when the Health and Care Bill was introduced, as it contained a much looser series of clauses that would have allowed health to become part of trade agreements. During the Bill’s passage, a cross-party group of Peers fought very hard and were really grateful that the Government recognised the risk that they were putting the NHS under and conceded. Now, the provisions under the Health and Care Act are the equivalent of EHIC but for other countries.
I wanted to raise these points because it seems to me that we must have Parliament’s involvement before things are signed and sealed. We also need to let those people who are negotiating our trade agreements understand where some of the clear red lines remain across Parliament—and certainly across this nation—for certain public services, including the NHS.
Baroness Hayman of Ullock (Lab)
My Lords, I shall be very brief, as time is ticking away. I start by saying that we completely support Amendment 436 in the name of the noble Lord, Lord Lansley. It is really important to get proper reassurance and clarification in this area, and I hope that the Minister will be able to give that to us today.
We also absolutely support what Amendment 441, in the name of the noble Lord, Lord Purvis, is trying to do. Environmental, social and labour conditions are incredibly important when looking at who you are procuring with. The noble Lord introduced it very thoroughly, so I will not go into any further detail, but he is absolutely right that we need clarification on this.
One thing I have found with this Bill is that different bits are cross-referenced all the way through and, on occasion, I have got somewhat confused, to say the least. This might not be important at all but I ask for some clarification. Schedule 9 is on the various parties with which we have trade agreements, and we have been talking about trafficking, slavery, exploitation and so on, which are all mentioned in Schedule 7. We welcome the fact that Schedule 7 covers all these areas, but paragraph 2 of that schedule says that engaging in conduct overseas that would result in an order specified in paragraph 1—trafficking, exploitation, modern slavery and so on—if it occurred in the UK constitutes a discretionary ground for exclusion from procurement. Does that conduct overseas, as referred to in Schedule 7, cover anything that happens with procurement coming out of a trade agreement? That is what I do not understand. If it does, it alters what we have just been talking about. If it does, how does that operate and how is it enforced? Who manages it? If it does not, how do we address that when we are negotiating trade agreements in order to achieve the outcomes that we would all like to see? It may be that the Minister does not know and needs to talk to officials, but that is something on which I would like clarification.
Baroness Neville-Rolfe (Con)
My Lords, this group seeks to deal with amendments relating to treaty state suppliers. There are three minor government amendments either to improve the drafting or to ensure the proper functioning of the clauses, Amendments 438, 440 and 442. As the time is late, I will not go into detail, but I am happy to explain them to noble Lords on another occasion if they wish.
Amendment 436, tabled by my noble friend Lord Lansley, proposes that regulations could be made only in relation to agreements that had been laid before Parliament under the Constitutional Reform and Governance Act 2010. The use of regulations in the Procurement Bill in relation to implementing international agreements is limited to two circumstances. The first is to give effect to the procurement aspects of new trade agreements. For these, the Committee will know that treaties requiring ratification follow the established domestic scrutiny process set out in the CRaG Act. However, not all agreements will necessarily require ratification, and the amendment would place the implementation of such agreements outside the scope of this power. For the agreements that fall within the Act, the Committee will be aware that the Government have previously made commitments in our response to the International Agreements Committee, of which my noble friend is a prominent member, concerning the submission of international agreements to Parliament for scrutiny.
The second set of circumstances is to give effect to any changes to trade agreements over their lifetime. These are envisaged to be small technical changes, such as updating schedules following machinery-of-government changes or modifications to market schedules. In such circumstances, those more administrative matters may not trigger the CRaG procedures and, as such, the amendment would prevent them being implemented using this power. Any such updates and modifications would therefore require new primary legislation to implement, at a huge cost in time and resources. However, I reassure noble Lords that the Government intend to keep the relevant Select Committees aware of any changes during the life cycle of a free trade agreement.
Amendment 441, tabled by the noble Lords, Lord Purvis and Lord Wallace, seeks to provide that a contracting authority does not discriminate against a treaty state supplier if it takes into account environmental, social and labour considerations and indicates in the notice of intended procurement or tender documentation how such considerations are defined. The impact of this would be that a contracting authority could, within the rules, apply environmental, social and labour considerations in a way that breached a treaty state supplier’s entitlement to no less favourable treatment, and that would risk breaching our international obligations. For example, if a contract can be delivered remotely from an overseas base, our obligations to ensure no less favourable treatment for treaty state suppliers mean that it would not be appropriate for a contracting authority to require socioeconomic or environmental criteria that could not be performed from overseas. However, I assure the Committee that the Bill as drafted allows contracting authorities to include social, environment and labour considerations when setting award criteria, as long as they are non-discriminatory.
Lord Purvis of Tweed (LD)
I am grateful for that response. I struggle with the first part of what the Minister said because I lifted the wording from Articles 16 and 17 of the Australia agreement. If we have those obligations with Australia, how are we not able to provide that with all the other treaty state suppliers in the schedule where we do not have that language? Japan is lower than that, for example. I am struggling to understand why that would be the case. If she is reassuring me that the power provided by my amendment is already within the Bill, she has basically contradicted her own argument that we are not providing that to all the other countries. I do not understand.
Baroness Neville-Rolfe (Con)
The noble Lord’s question was why social considerations are not in the Japan agreement but they are in the Australia agreement. The answer is that every trade deal is unique. The noble Lord is trying to apply one principle to all trade deals.
Lord Purvis of Tweed (LD)
That is what the Government are doing. All the other requirements in the Bill are not in the trade agreements with other countries. That is the point that I was making. The Government are introducing a whole set of requirements under the Bill that are not in treaty obligations. I am just trying to say that it would be better if this were consistent.
Baroness Neville-Rolfe (Con)
The honest truth is that we seem to have a bit of a disagreement on this; maybe a bilateral discussion would be helpful. The noble Lord, Lord Lansley, also raised a question on which we should have a further discussion; I will write to him on that on the points he was raising. We had advice from the people involved in trade agreements in preparing our response.
Lord Purvis of Tweed (LD)
I am very grateful for that offer. I am very happy for it to be multilateral rather than bilateral if that assists the Committee. If the Minister wants to make officials available for the discussion, I will be happy with that, or she may want to write to me in advance of that. It will be helpful if she is able to write to Members before we have a discussion, so that we get a bit more information from the Government first. I will then be more than happy to have the discussions with her about this before Report.
Baroness Neville-Rolfe (Con)
That would be helpful. We can certainly look at Hansard and write a letter, but we should get together in the next 10 days or so to try to sort this out, because it is complicated—that was clear from being at the briefing.
The noble Lord asked one or two questions which I can clarify. Schedule 9 lists countries, states or regions with which we have an agreement that covers procurement —obviously, that is the purpose of that schedule. All the agreements in that schedule are binding; in contrast, obviously MoUs are not legally binding. On the Colombia agreement, any human rights obligations in the Andean trade agreement will have been reviewed by the CRaG process before it came into force—I think that was probably accepted—and the procurement chapter in trade agreements must be complied with unless these agreements are breached and coverage withdrawn.
Following that agreement with the noble Lord, I move on to Amendment 443A, tabled by my noble friend Lady McIntosh, which proposes to remove the power of a Minister of the Crown to make regulations under Clause 83. Under current drafting, either a Minister of the Crown or a Scottish Minister is entitled to make regulations to ensure that treaty state suppliers are not discriminated against in Scotland in relation to devolved procurement. The use of these concurrent powers would allow either the Minister of the Crown or a Scottish Minister to legislate with respect to devolved procurements in Scotland in order to implement new and existing international trade agreements. Similarly, concurrent powers were used in Section 2 of the Trade Act 2021. Of course, the power would not prevent Scottish Ministers legislating in respect of devolved procurements. However, in the event that they chose not to do so or if they wished, perhaps for reasons of efficiency, to allow a single set of regulations to implement a new trade agreement, this power would allow a Minister of the Crown to pass the necessary legislation. I should say that we continue to engage with the Scottish Government on this and other matters; your Lordships will have seen that the new Prime Minister has indeed spoken to the First Minister since his appointment.
I think we have probably debated this as much as we can this evening.
Baroness Hayman of Ullock (Lab)
Can the Minister clarify the question around Schedule 7 or will we perhaps discuss that when we get together at the meeting?
Baroness Neville-Rolfe (Con)
I think the greatest brains behind me have not managed to answer the noble Baroness’s question—she has bowled another good ball. Perhaps we can add that to the list for our discussions.
With that, I hope that the noble Lord will withdraw his amendment.
Lord Lansley (Con)
My Lords, only 110 amendments to go, so, with the benefit of that promise of further discussions, I beg leave to withdraw Amendment 436.
Baroness Neville-Rolfe
Baroness Neville-Rolfe
“(3A) In this section, a reference to a supplier’s association with a state includes a reference to the fact that the state is the place of origin of goods, services or works supplied by the supplier.”
Baroness Neville-Rolfe
Baroness Neville-Rolfe
(b) a transferred Northern Ireland authority.”
Baroness Neville-Rolfe
“Data protection
(1) This Act does not authorise or require a disclosure of information that would contravene the data protection legislation (but in determining whether a disclosure would do so, take into account the powers conferred and the duties imposed by and under this Act).(2) In this section “the data protection legislation” has the same meaning as in the Data Protection Act 2018 (see section 3 of that Act).”
Baroness Neville-Rolfe
“(4A) A contracting authority’s duty to comply with section 12(9) or 13(8) (requirement to have regard to procurement policy statements) is not enforceable in civil proceedings under this Part.”
Baroness Neville-Rolfe
“(6) See sections 49 and 71 for provision about standstill periods.”
Baroness Neville-Rolfe
Baroness Neville-Rolfe
“(A1) A supplier must commence any specified set-aside proceedings before the earlier of—(a) the end of the period of 30 days beginning with the day on which the supplier first knew, or ought to have known, about the circumstances giving rise to the claim;(b) the end of the period of six months beginning with the day the contract was entered into or modified.”
“(a) in the case of specified set-aside proceedings, the end of the period referred to in subsection (A1)(b), and(b) in any case,”
“(7) In this section, “specified set-aside proceedings” means proceedings under section 93(2) to—(a) set aside a public contract in circumstances where the contracting authority did not publish a contract details notice in respect of the contract in accordance with section 51, or(b) set aside a modification of a contract.”
Baroness Neville-Rolfe
““section 97 recommendation” has the meaning given in section 97”
Baroness Neville-Rolfe
“(3) In subsection (2), the reference to relevant guidance is a reference to guidance that could, in light of Part 11, be addressed to the contracting authority.”
Lord Wigley
Lord Wigley (PC)
I congratulate the Deputy Chairman of Committees on that “Just a Minute” miracle. I will speak to Amendment 491 standing in my name and those of the noble Baroness, Lady Humphreys, and the noble and learned Lord, Lord Thomas of Cwmgiedd.
We return to the question of the relationship of Wales to the rest of the provisions of the Bill, which we touched on way back in May or June. It was certainly a very long time ago. A certain amount of water has gone down the river since then, but none the less, the representations made by the Welsh Government to the UK Government at that time, as well as to those of us serving on this Committee, are still matters that need to be finally aired before we move out of Committee.
I note, as it is relevant to Amendment 491, that the Government did not move Amendment 490. If I am right in my understanding of that, the content which Amendment 491 seeks to amend is not changed. Amendment 491 therefore stands in relation to the Bill as it was originally formulated. I am grateful for that clarification.
The Welsh and UK Governments have, by and large, worked very closely together on the Bill, and there has been quite a close meeting of minds and a considerable amount of harmony. However, there is one matter which the Welsh Government have raised with us. The Minister concerned is seeking an amendment to the definition of the WCAs, with a view to ensuring that the clauses work more fairly in relation to some cross-border procurements—single procurements which relate to both Wales and England. The Minister in Cardiff wrote to the Minister for Brexit Opportunities and Government Efficiency on 18 May, raising this question, and discussions thereafter took place. None the less, to the best of my knowledge, there has been no amendment to the Bill that has met the question about procurement relating solely to Wales or of whether it should read, in the words of Amendment 491, “wholly or mainly”.
We are talking about the awarding of
“a contract for the purpose of exercising a function wholly in relation to Wales”.
The question is whether we put in “wholly or mainly” relating to Wales. That amendment is needed for the Bill to work effectively. One only has to think of certain of the procurements that the Welsh Government, or an agency on their behalf, are making, which may be having an effect both in Wales and over the border. One thinks of procurement in relation to water and rivers, for example, where the river runs from Wales to England. Quite clearly, in making a procurement one cannot be absolutely certain whether the product or service that is being procured relates solely to Wales, or to Wales and England. One thinks of certain aspects of the health services along the borders where that again will arise.
It seems sensible to put in the words “or mainly” to ensure that the Welsh Government, or anyone else who is concerned with this, do not get caught in a tangle about what is covered by the Bill and what is not.
Given that there has been such a close working relationship between the Welsh and UK Governments on this matter, I am surprised that there has not been a meeting of minds. If there has been some non-legislative agreement that has covered this, that we may not know about in this Committee, I would be glad if that was pointed out. I am not speaking to the other amendments in this group because they do not seem to be dealing with the same point. I would be glad to have the Minister’s response in relation to Amendment 491. I beg to move.
Lord Lansley (Con)
My Lords, these are different subjects, and before we turn to how regulations are to be agreed, I will turn to Amendment 527. It might be helpful if colleagues, if they have a moment, look at Schedule 11. Clause 107 sets out in Schedule 11 the repeals of legislation resulting from this legislation. The third item under “Primary legislation” says:
“An Act of Parliament resulting from the Trade (Australia and New Zealand) Bill that was introduced into the House of Commons on 11 May 2022.”
My amendment relates to whether it would be appropriate for the whole of that piece of legislation to be repealed if it were amended in the other place or in this House. As it stands at the moment, the Bill implements the procurement chapters of the two agreements. They will be implemented by their being added to Schedule 9. That is absolutely fine—it is not the issue. The issue is if the Trade (Australia and New Zealand) Bill is amended. It was not amended in Committee in the other place, but there is an amendment down on Report in the other place in the name of Nick Thomas-Symonds, for the Official Opposition, which adds a clause that says:
“The Secretary of State must publish an assessment of the impact of the implementation of the procurement Chapters within twelve months of the coming into force of Regulations made under section 1 of this Act and every three years thereafter.”
It probably will not be passed, but let us say for the sake of argument that an impact assessment was passed here—or an impact assessment or report on the impact was required here in relation to the Australia and New Zealand trade agreements more generally—into the Trade (Australia and New Zealand) Act. I think either House would then expect it to happen. However, it would probably not happen because the Procurement Bill will become the Procurement Act, and when it comes into force it would repeal the Trade (Australia and New Zealand) Act and all that is in it, regardless of whether it has been amended.
The point of my Amendment 527 is to repeal the provisions of the Act resulting from the Trade (Australia and New Zealand) Bill in so far as they were included in the Bill at its introduction. Therefore, if there is an amendment, it would not be repealed by virtue of this provision. That is the question. We are at the stage of having further conversations, and I would be very happy to have further conversations with my noble friends about this matter before we get to Report.
Baroness Humphreys (LD)
I will speak reasonably briefly to Amendment 491 in the name of the noble Lord, Lord Wigley, to which I have added my name. I thank the noble Lord for outlining the reasons for this amendment so clearly. I reiterate my thanks to the Cabinet Office and its civil servants, which I expressed earlier in Committee, for their constructive and positive engagements with Welsh officials. I know they have worked closely to ensure that Welsh policy objectives have been included in the Bill.
The issues that Amendment 491 highlights arise in Clause 99 and have been the subject of discussion between the two parties for some time. Like the noble Lord, Lord Wigley, I understand that the Welsh Minister for Finance and Local Government wrote to the Minister for Brexit Opportunities on 18 May to ask the UK Government to consider an amendment to the Bill to address her concerns. I hope that in the intervening five months, some agreement has been reached between the two parties.
As the noble Lord pointed out, this is a probing amendment designed to tease out, first, the problems that arise from the definition of Welsh contracting authorities and, secondly, the issue of ensuring that both clauses work more fairly in relation to some cross-border procurements. The definition of Welsh contracting authorities initially proposed by the UK Government was that of a “devolved Welsh authority”, as defined in the Government of Wales Act 2006. However, as the Welsh Government have pointed out, that does not accurately reflect all the contracting authorities in Wales that should be on the list of Welsh contracting authorities. Clauses 1 to 3 of the Bill now set out a broader definition of a devolved Welsh authority. However, there is still a concern that the breadth of contracting authorities that are not DWAs within the GoWA definition, but are to be treated as DWAs for the purpose of the Bill when they carry out a cross-border procurement, does not go far enough.
My real concern is about Clause 99(3)(b)(i), which provides for those contracting authorities that are to be treated as DWAs for the purpose of the Bill and bound by the Welsh rules where the authority is awarding a contract for the purpose of exercising a function wholly in relation to Wales—the point that the noble Lord, Lord Wigley, raised—but not for any other procurements, including cross-border ones. That word, “wholly”, means that the Welsh Government play no part in this. Ultimately, this means that, even if 90% of a cross-border procurement is for use in Wales, the English elements of the rules would apply. To me, that smacks a little of the lion wanting to take the lion’s share.
We on these Benches agree with the fairer and more pragmatic approach suggested by the Welsh Government: to follow Regulation 4 of the Public Contracts Regulations 2015 for mixed procurements. This would allow for cross-border contracts to be procured depending on the main geographical location of the contract; on which financial value was the highest; or on where the majority of the services, goods or works were being delivered. The Welsh Government have suggested that, where more than half of the procurements are to be delivered in Wales, the Welsh procurement rules should apply. They contend that, in the event of a 50/50 split, the English rules should apply. The insertion of the words “or mainly” following “wholly” in Clause 99(3)(b)(i) would achieve this end.
These proposals by the Welsh Government seem reasonable and fair. They would redress the balance between the two parties on cross-border procurement, and are supported by the Lib Dem Benches. I look forward to the Minister updating us on where officials are with these issues and hope that the spirit of positivity and co-operation that has characterised the negotiations on this Bill extends to the issues in Clause 99.
Lord Fox (LD)
Coming from Herefordshire as I do, I comment on matters Welsh with great trepidation. I commend the two previous speakers on this amendment. If the Minister could see common sense in what they have said and sort out the situation, that would leave the Welsh Government in a very comfortable place. I do not like to speak for the Welsh Government but that is my understanding of it.
Amendment 527 in the name of the noble Lord, Lord Lansley, looks as if it ought to have been in the previous group. It sounded like he was describing the special case of the problem set out by my noble friend Lord Purvis; it therefore seems to me that he should be part of that future meeting. Indeed, that special case should be covered in the Minister’s letter before we have the meeting so that we can take it forward. That would be the sensible way.
Two amendments have my name on them: Amendments 529 and 531. The Minister will be glad to hear that I am not going to speak at length on either except to say that they are on a subject she has spoken to, as I noted on Monday when I welcomed her to her new role, because the Executive taking power over the legislature is something on which she has spoken many times. I have spoken about it at length during the passage of lots of other Bills because it is something we get time and again.
Baroness Hayman of Ullock (Lab)
I will be brief. First, let me say that we absolutely support Amendment 491, tabled by the noble Lord, Lord Wigley, which raises a very real concern. It strikes me that his amendment is quite simple and practical, and would easily resolve the concerns that the Welsh Government have here. It does not seem that it would be onerous for the Government here in Westminster so I hope that there will be some real consideration of it ahead of Report.
We also support the two amendments tabled by the Liberal Democrats. Again, it seems that this is the right way to go about making legislation, and we support them.
When I was looking at Amendment 527 in the name of the noble Lord, Lord Lansley, I had a vague thought that this had been discussed before, but Second Reading seems such a long time ago now. I picked up my scribbled-on copy of the Bill and looked at the relevant bit. I had highlighted it and written, “See Lord Lansley, Second Reading”, so it clearly had an impact on me. It struck me what he said at that stage; thinking about it since, I completely understand where he was coming from and believe that he is correct in what he says. This is something that needs sorting out. Otherwise, we are going to end up in a bit of a pickle, to be honest. Again, it would be good if this could be ironed out before we get to Report.
Baroness Bloomfield of Hinton Waldrist (Con)
My Lords, I should say at the outset that it appears from the debate and earlier conversations we have had in Committee that this is rather a work in progress. Conversations with the Welsh Government continue and we appreciate the collaborative nature of those discussions. I just thought I would put that on the record before I start on the formal part of my speaking notes.
This group seeks to deal with amendments relating to regulations. First, I will briefly address the government amendments in this group. There are three of them: Amendments 496, 518 and 533, all of which are minor technical amendments to optimise precision in meaning or cross-referencing to other legislation.
Amendment 491, tabled by the noble Lord, Lord Wigley, the noble Baroness, Lady Humphreys, and the noble and learned Lord, Lord Thomas of Cwmgiedd, seeks to extend further the competence granted under the Bill to Welsh Ministers to exercise powers in respect of certain Welsh authorities. The noble Lord, Lord Wigley, mentioned the example of rivers; I note that housing associations could be another, as they may be funded by the Welsh Government but operate across borders. We are cognisant of the various issues this could give rise to.
Clause 99(3) already sets out that, in addition to the authorities whose procurement is within devolved competence under the Government of Wales Act, certain cross-border bodies exercising functions predominantly in Wales should fall under the regulatory control of the Welsh Government when—and only when—they are awarding a contract wholly in relation to Wales. This is an extension of the position in the Government of Wales Act.
This amendment would further extend regulatory control to cover cross-border bodies in respect of contracts for the purpose of exercising a function mainly in respect of Wales, as well as wholly. Noble Lords will be aware that we have worked very closely with the Welsh Government throughout the development of this Bill. The position on cross-border bodies was developed at the request of the Welsh Government to accommodate a small number of Welsh authorities which carry out limited operations in England. It is not unreasonable to provide that where a cross-border body carries out a procurement which extends across borders the rules for reserved procurements should apply. However, I reassure noble Lords that we will continue to work through all outstanding issues in discussion with the Welsh Government.
The noble Baroness, Lady Humphreys, went further on the Bill seemingly allowing English procurement rules to take precedence over Welsh laws. That is not the intention of the Bill. These are not English rules but UK rules, and it is not unreasonable, as I have said, to provide that where a procurement by a cross-border body extends across borders, reserved rules apply. In this Bill, we feel that we have gone beyond the position settled in the Government of Wales Act 2006 and reinforced in the Wales Act 2017, where competence for procurement was specifically addressed. This Bill confers greater powers on the Welsh Ministers. As I have said, conversations continue between the two Governments and I am sure that we will find a resolution.
Amendment 527 limits the repeal of the Trade (Australia and New Zealand) Bill to those provisions in the Bill at its introduction, so does not apply to any amendments made to that legislation during its parliamentary passage. My noble friend Lord Lansley has already drawn the Committee’s attention to an amendment on Report in the other place. Any amendments made by the Trade (Australia and New Zealand) Bill will be in relation to the existing procurement regulations to ensure that they are compliant with the Australia and New Zealand free trade agreements. That will allow the UK to bring those agreements into force before the regime established under this Bill comes into force.
When this Bill comes into force it will ensure our continued compliance with these and other trade agreements. At that point, the Trade (Australia and New Zealand) Act will no longer be necessary and can be repealed. This does not in any way diminish the merits of debating the Trade (Australia and New Zealand) Bill or the importance of any regulations made under it, which will ensure compliance with the procurement provisions of those free trade agreements until this Bill comes into force.
We do not believe that the amendment of this provision is currently necessary, but if amendments are adopted in the Trade (Australia and New Zealand) Bill, we will reconsider the position. We have all agreed that we will add that to the list of discussion topics with the noble Lords opposite as well.
Finally, Amendments 529 and 531, tabled by the noble Lords, Lord Wallace of Saltaire and Lord Fox, would have the effect of requiring the super-affirmative procedure to be used for the first set of regulations under Clause 110(4)(a) to 110(4)(r). The super-affirmative procedure has its place, but it must be used in appropriate and proportionate circumstances. It is not appropriate or proportionate for this exceptional procedure in this case. These regulations are uncontroversial. While I recognise that some are Henry VIII powers, they address matters that are predominantly administrative by nature. They are not sufficiently controversial or significant to merit the disproportionate use of parliamentary time inherent in the super-affirmative procedure. An example would be specifying the content of particular forms that needed to be filled out which contracting authorities must complete, and when authorities provide information to the marketplace about contractual requirements.
Finally, I remind noble Lords that the Delegated Powers and Regulatory Reform Committee did not suggest any need for the super-affirmative procedure, which should give some reassurance. I therefore respectfully request that these amendments be withdrawn.
Lord Wigley (PC)
My Lords, I am very grateful to the Minister for her response to this debate. I am sure that my Liberal Democrat friends will be happy with the assurances that they have been given of further discussion on the other amendments. On the basis of the commitment given by the Minister to seek an agreement with the Welsh Government on this matter, and that discussions are still ongoing, I beg leave to withdraw Amendment 491.
Baroness Neville-Rolfe
Baroness Neville-Rolfe
Baroness Neville-Rolfe
Baroness Neville-Rolfe
Baroness Neville-Rolfe
“(7) For the purposes of subsection (6), a part of a contract is to be treated distinctly if—(a) single source contract regulations contain provision to that effect, or(b) the parties to the contract agree that it should.”
“(ea) in new step 3, before “Any increase” insert “In specifying provisions of the contract or component, the Secretary of State must comply with any requirements imposed by the regulations, and”;”
Baroness Neville-Rolfe
Baroness Neville-Rolfe
Baroness Neville-Rolfe (Con)
My Lords, this final group deals with amendments on VAT. The Government’s Amendment 536 simply broadens the notion of amounts payable to include amounts that have already been paid, as contracting authorities may be required to take into account expected or completed payments.
I turn to Amendments 537 and 538. With the agreement of the Committee—I have agreed this with my noble friend Lady Noakes, whose amendments they are—I will reply to her later.
Baroness Noakes (Con)
My gift to the Committee is not to make an extended speech on the subject of value added tax. I know that many noble Lords would like to hear that, but we have expedited procedure and my noble friend the Minister will respond instead.
Baroness Neville-Rolfe (Con)
I am very grateful to my noble friend Lady Noakes, who, as usual, has come to the rescue. She raised the question of whether VAT should be taken into account when calculating the value of a concession contract. I confirm that, when a contracting authority values a concession contract, it should calculate the maximum amount the supplier could expect to receive. I thank my noble friend for raising whether this policy intent is adequately covered in the current drafting of Clause 111 and will give this careful consideration ahead of Report.
My noble friend Lady Noakes also asks why the formulation
“any amount referable to VAT”
has been used in Clause 111(2). Amendment 538 proposes to remove the words
“a reference to any amount referable to”.
As I understand it, the amendment does not aim to change the effect of the clause. Rather, the intent is to rationalise the drafting. I assure noble Lords that the proposed edits have been carefully considered and the existing wording is thought to be better suited to achieving the desired policy outcome.
I therefore respectfully request that these amendments be withdrawn. I will move the other government amendments in my name but, before I sit down, I thank our Deputy Chair of Committees and the Committee for their patience and good humour with the large number of government amendments. We will try to keep up our good record of government engagement and do better on the number of amendments.
Lord Fox (LD)
I would just like to congratulate the Minister on the smooth transition from Back-Bench jabs to Front-Bench defence. We look forward to seeing the reprinted version of the Bill so that we can start to track where all these amendments have gone and what they do. We also look forward to the meetings we will be having to sort these matters out.
Baroness Neville-Rolfe
Baroness Neville-Rolfe
Baroness Neville-Rolfe
requirements | section 18” |
“utilities dynamic market Utility | section 35 section 35” |
The Deputy Chairman of Committees (Baroness Newlove) (Con)
My Lords, that concludes the Committee’s proceedings on the Bill.