Wednesday 26th October 2022
(1 year, 6 months ago)
Grand CommitteeProcurement Act 2023 View all Procurement Act 2023 Debates Read Hansard Text Amendment Paper: HL Bill 4-VII(a) Amendment for Grand Committee (Supplementary to the Seventh Marshalled List) - (25 Oct 2022)
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.
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“The contract being awarded is being awarded by reference to suppliers’ membership of a dynamic market | 10 days” |
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“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.”
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“(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.”
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“unless the modification is a permitted modification under paragraph 9 of Schedule 8 (novation or assignment on corporate restructuring).”
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“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).”
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
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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
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
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“(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.”
Baroness Neville-Rolfe
““section 97 recommendation” has the meaning given in section 97”
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Baroness Neville-Rolfe
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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” |