Procurement Bill [HL]

Baroness Brinton Excerpts

Report stage
Monday 28th November 2022 Lords Chamber

[The Minister of State, Cabinet Office (Baroness Neville-Rolfe) (Con)]

My Lords, as we begin Report, I start by thanking noble Lords for their contributions in Committee, and for the lively debate there. For those in the House coming to it fresh today, I say that this is an important Bill which follows two years of hard work and preparation, which I have the honour of taking over from my noble friend Lord True, who now leads this House.

Each year, £300 billion is spent on public procurement and we seek to make it quicker, simpler, more transparent and better able to meet the UK’s needs than the current patchwork of former EU rules, while remaining compliant with our international obligations. There will be a central Cabinet Office online platform to bring in new players, to improve value for money and to accelerate spending with SMEs. There will also be a comprehensive training programme for those involved in all the new rules and conventions—for example, on managing conflicts of interest. It is, however, a very technical Bill, and I am sorry that we had to withdraw a number of government amendments tabled in Committee to allow further discussion. This was largely successful, so we will come first to a number of amendments in my name, most of which were withdrawn on day one in Committee. As we go through, there will be further technical amendments and other amendments to respond to points made in Committee, notably to stimulate economic growth and to reduce burdens on SMEs. I thank noble Lords for their patience with the sheer number of amendments.

Amendment 1 and the amendments consequential on it introduce new technical definitions of “procurement” and “covered procurement”. I know these concepts caused some concern in Committee, so I will try to clarify matters. “Covered procurement” means those procurements that are covered by the vast majority of the provisions in the Bill. They are mostly procurements by contracting authorities, above the relevant thresholds for goods, services and works, which are not exempted from the Bill. These are the procurements which most of us will have had in mind during our deliberations in Committee.

However, the Bill also covers some aspects of procurements which go beyond this, which is why we have a wider definition of “procurement”, meaning any procurement. That allows the Bill to make some limited provision in relation to matters such as below-threshold procurements—for example, in Part 6—and notably to comply with international rules or certain treaties. I understand that the term “covered procurement” may seem unusual, but it is one included in our international procurement agreements, including the GPA—the WTO agreement on government procurement—and familiar to the procurement community.

Amendment 1, and a number of other government amendments, streamline fundamental concepts that are relied on throughout the Bill and will improve the readability and consistency of the legislation. Amendments 2, 5 and 6 recast the definition of “contracting authorities” to ensure that the right bodies are covered. We are committed to a definition that is broadly consistent in effect with both the existing regulatory scheme and with our international commitments under free trade agreements. Feedback from our ongoing dialogue with stakeholders has indicated that the effect of certain wording differences could lead to some bodies being incorrectly brought within, or excluded from, the scope of the rules. I am grateful for these views, particularly those from the Local Government Association, as they will help to ensure correct application. I am also grateful for its constructive approach to the Bill, which represents a big change for its members, and we appreciated its input.

The amended definition removes the reference to

“functions of a public nature”,

as this does not align with the existing definition. It makes clear that the notion of contracting authority oversight can include oversight by more than one authority. Lastly, it ensures that certain bodies that are publicly owned but operate commercially can operate outside the procurement regime.

Amendment 187 ensures that educational establishments are fully and appropriately excluded from the rules on below-threshold contracts, as well as those relating to implied payment terms in public contracts, payment compliance notices and reporting on payments made under public contracts. This mirrors the approach taken in the current procurement rules and ensures that burdens on low-value contracts in the education area are applied in a proportionate fashion. Amendments 98 to 102, 117, 119, 191, 193, 197, 201 and 202 are consequential.

Amendments 24, 25, 26, 27 and 28 provide direction to contracting authorities when a mixed contract involves two or more different elements which could each classify it as a “special regime” contract. We expect that such situations will be rare, but could arise occasionally. Our amendments clarify which regime will apply to their mixed contracts in such circumstances by discouraging unrelated requirements being combined in one procurement. I hope that sentence is clear. More importantly, we must also ensure that the rules concerning mixed contracts are compliant with our international trade agreement obligations.

This group also includes other minor changes, including Amendment 7, which ensures that thresholds are applied properly to frameworks, and Amendment 8, which ensures that frameworks for the future award of exempted contracts only are also exempt. Frameworks involving a mixture of elements covered by both the Bill and the forthcoming healthcare procurement regulations will be subject to the same basic tests as set out in Clauses 4 and 9 on mixed contracts, which determine which rules will apply. This is important to prevent abuse of the exemption provisions; it also includes Amendment 185, which corrects a mistaken reference to a power for Northern Ireland departments, which unfortunately does not exist.

Amendment 170 is a technical adjustment to Clause 111 to make it clear that any regulations made to disapply the Bill to procurements in scope of the forthcoming healthcare procurement regulations can be made whether or not the procurement regulations are yet in force. Finally, Amendments 194, 195 and 196 amend the index of defined expressions in Clause 115.

I thank noble Lords for their patience, and will turn to the amendments tabled by other noble Lords when I have heard from them. I beg to move.

[Baroness Brinton (LD)]

My Lords, I shall speak to my Amendments 3 and 173. I thank the Minister and the noble Lord, Lord True, for responding to my questions, in private meetings but also at previous stages of the Bill, about why the NHS is treated differently from every other part of the public procurement sector covered by the Bill. The problem is that I have not yet heard a clear answer to that; nor, indeed, did those noble Lords who took part in the Health and Care Act during its time here get a clear answer from the Health Minister as to why this was proposed. More recently, in Committee, the Minister said that it was because only clinical services would be covered by these special arrangements for the NHS. I will come in a minute to the reasons for my concerns that that is not the case, but I start by saying very simply that Amendment 3 puts the NHS in the Bill, in the definition of a public body that has to observe the details of regulation under the Bill.

Moving on to the practical problems, the key issue is what is said in the National Health Service Act 2006 and the Health and Care Act 2022, which attempts to amend it. The specific amendment has not been enacted yet, but we can all assume, with the permission of the House, that it is this Bill that is holding that up. The Health and Care Act adds new Section 12ZB to the National Health Service Act, which says:

“Regulations may make provision in relation to the processes to be followed and objectives to be pursued … in the procurement of (a) health care services … and (b) other goods or services”.


The problem is that the new section goes on to say:

“Regulations under subsection (1) must, in relation to the procurement of all health care services … make provision for the purposes of ensuring transparency; ensuring fairness; ensuring that compliance can be verified; managing conflicts of interest”.


That is a very different bar of compliance than the Government want to see for every other part of the public sector covered by the Bill. At the strategic level, it will be enormously helpful to understand why the Government feel it is appropriate for the NHS not to be included, but my practical problem is that we have relied somewhat on the assurances of Ministers at the Dispatch Box that only clinical services would be caught by the new SIs under the Health and Care Act and the NHS Act 2006. I have just read out the parts that show that is absolutely not the case. In fact, there is a catch-all in “other goods or services”. So, while we spent a little time in Committee trying to discuss where the boundaries are, it seems to me that there are no such boundaries, and that leaves me very greatly concerned about how this will work in practice.

I have tabled Amendment 173 because if Amendment 3 is carried, Clause 111 is not needed. There is also an argument that if, for any reason, Amendment 3 is not carried, Amendment 173 will stand in its own right, but the two are inextricably linked. These two amendments are saying that the NHS should be covered in the Bill. I end by saying to the Minister that, despite the many amendments from noble Lords all around the House, I think everyone agrees that the Bill is better than the procurement arrangements we have had in the past, particularly in attempting to get transparency and accountability. The problem is that the arrangements for the NHS are not visible; they are SIs at the discretion of any Secretary of State for Health, and we have not even seen those in draft yet. I hope the Minister can give me some very clear reassurances or explanations, otherwise I may have to test the opinion of the House later.

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[Baroness Neville-Rolfe (Con)]

That is a point, but I did try to explain in my introduction that there was concern during the passage of the Health and Care Act, to which I was not party, that the NHS arrangements—I see that the noble Baroness, Lady Brinton, is nodding her head. Perhaps she is nodding it negatively.

[Baroness Brinton (LD)]

The important thing the House needs to hear is that during the passage of the Health and Care Act, Members from all sides of your Lordships’ House asked repeatedly why special arrangements were being made for NHS procurement when we knew that there was a Procurement Bill coming down the line and had not seen any detail of it. That is the question we are all waiting to hear the answer to.

[Baroness Neville-Rolfe (Con)]

I think I have been clear on the background to why it is different. I have also promised that regulations and guidance are being put together and will make very clear the differences: where the NHS rules need to apply and where the Procurement Bill needs to apply. That is the way in which these Bills have been constructed together. There are reasons. Especially on small NHS contracts involving social care, clinical services and so on, it clearly makes a great deal of sense to have a separate regime.

I am sure we will come back to that at the end, but out of courtesy I turn to the other amendments. Amendment 4, tabled by my noble friend Lady Noakes, proposes to rework the notion of control in the definition of a contracting authority in amended Clause 1(3)(b), to be consistent with the notion of a controlled person in Schedule 2. We have looked at this again in dialogue with the concerned stakeholders, notably the Local Government Association.

The meaning of control in Clause 1 is different from that in Schedule 2, and they need to be kept separate. The use of “control” in Clause 1, which sets out the contracting authority definition, is intended to ensure that contracting authorities that have a board where public authorities appoint more than half the members are themselves considered to be contracting authorities. This might include, for example, some centralised procurement authorities.

By contrast, the “controlled person” for the purposes of Schedule 2 is much narrower and intentionally very limited as it is intended to capture only a narrow group of entities, closely owned and controlled by contracting authorities. It requires that the controlling contracting authority is a “parent”, within the meaning of the Companies Act 2006. Although this might cover some of the same ground as majority board appointments, the concept used in Clause 1, it is not the same thing, and the text of the amendment can be satisfied in other ways. There is also a secondary activity threshold, which means that 80% of the activities carried out by the controlled person must be on behalf of its controlling authority. I am afraid that neither factor is appropriate to the contracting authority definition and their inclusion would have the effect of taking many organisations outside the scope of the contracting authority definition.

I recognise that, as my noble friend said, consistency is often desirable, but these terms achieve different aims. It is important that the Procurement Bill covers, as closely as possible, the same scope of bodies as in the existing procurement regulations, both for certainty and continuity for our authorities and to ensure compliance with the definition of a contracting authority in our free trade agreements.

I should, in passing, thank my noble friend Lady Noakes for her Amendment 190, which reflects discussion in Committee and which the Government are glad to support.

Moving on, I come to some of the very wide points made by the noble Lord, Lord Alton, although it is possible that some of these will come up again later on Report. It may be disappointing to the noble Lord, but we cannot go into the detail of individual contracts. Where a contract has been found to have underperformed or the PPE provided was not up to standard, the Department of Health and Social Care is working to reach a successful outcome—this includes mediation—for the taxpayer.

Offers for the supply of PPE came from a wide range of people from within government and outside. No matter where they came from, offers went through a robust process of checks and controls led by officials. This included price and quality checks as well as due diligence and credibility. As for Medpro, this is a live issue; we are currently engaged in a mediation process with PPE Medpro and I am therefore unable to comment on the specifics of this contract.

More positively, however, the Covid inquiry will cover procurement and the distribution of key equipment and supplies, including PPE and ventilators. In my view, that is quite right. It will also identify the lessons to be learned from all this and inform preparation for future pandemics across the UK.

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Moved by

[Baroness Brinton]

3: Clause 1, in subsection (2), in the definition of “public authority”, in paragraph (a), after “funds” insert “including the NHS”
Member’s explanatory statement
This amendment includes the NHS in the definition of a public authority for the purposes of this Act.

[Baroness Brinton (LD)]

My Lords, I am very grateful for the Minister’s response, and I thank my noble friend Lord Scriven for signing my amendment, and the noble Baroness, Lady Bennett, for intending to do so. I also thank the noble Lords, Lord Alton and Lord Coaker, the noble Baroness, Lady Noakes, and others who have spoken in support of it.

I am really grateful to the Minister for trying to explain why there would be less confusion if we had the arrangements currently being proposed under the Health and Care Act in relation to the National Health Service Act 2006 and those in the Procurement Bill. She said that Parliament had debated this only very recently, but I have covered that by saying that, when the then Health and Care Bill went through, we did not know what was being proposed in the Procurement Bill. The details of the Procurement Bill are so much more detailed than was intended or understood during the debate on the Health and Care Bill, so that is a problem.

I am astonished at the idea that accepting my Amendment 3 would create undue bureaucracy; the exact converse is true on all the points the Minister made. When you actually look at Section 12ZB, which will be inserted into the National Health Service Act 2006 after the passage of this Bill, you see that it does not make this clear in its reference to clinical services, which is not legally defined. It not only talks about “health care services” without defining what a healthcare service is, but goes on to say,

“and other goods or services that are procured together with”

them. The mini-debate we had a few minutes about how that would be decided and managed between the Cabinet Office and the Department of Health seems as though it would create a phenomenal amount of bureaucracy and the chance for people to abuse the system.

The Minister said that the arrangement would mean that the Department of Health could ensure that the provision in the Health and Care Act would not be used by the NHS to avoid the more stringent terms in this Bill. However, that seems to be exact reason why the NHS should abide by those stringent terms. For that reason, I would like to test the opinion of the House.