Scottish Government: Devolved Competences

Baroness Goldie Excerpts

Wednesday 13th March 2024 Lords Chamber

[Baroness Neville-Rolfe (Con)]

I hope the noble Lord, Lord Cameron, and myself will be able to take on the challenge of the thistle. I reassure the noble Lord that there have been official-level discussions on these matters, as you would expect. I am afraid that it would not be appropriate to provide a running commentary, but I will update the House in the coming months on the outcome of this work.

[Baroness Goldie (Con)]

My Lords, does my noble friend the Minister agree, in pursuance to the question from the noble Lord, Lord Foulkes, that there has to be concern about the cost to the Scottish taxpayer of the Scottish Government taking unsuccessful court action to hold an independence referendum? They also took court action unsuccessfully to progress the Gender Recognition Reform (Scotland) Bill and, after a vast amount of work, put on ice unworkable plans for a deposit return scheme. Does my noble friend the Minister have any idea of the costs of these endeavours?

Devolved Authorities: Expenditure outwith Competences

Baroness Goldie Excerpts

Monday 5th February 2024 Lords Chamber

[Baroness Neville-Rolfe (Con)]

I know there are strong feelings about this, and people in Scotland want both their Governments to concentrate on the issues that matter most to them: growing the economy, gripping inflation and improving public services. On the point about timing, as I said, the Government only recently, on 24 January, responded to the committee’s inquiry, reiterating the work that is under way. I am delighted that the Cabinet Secretary is back; these issues are being given active consideration.

[Baroness Goldie (Con)]

Does my noble friend the Minister agree that, as Scotland’s educational standards decline, its NHS faces acute challenges—not least the recruitment of consultants—and ferries languish in a Scottish government shipyard, overpriced, overdue and much needed by the operators, the response of the Scottish Government, not only to spend money on completely illegitimate and incompetent objectives, as the noble Lord, Lord Foulkes, said, but to make Scotland the highest-taxed part of the United Kingdom, is, in the face of these challenges, as incomprehensible as it is regrettable?

[Baroness Neville-Rolfe (Con)]

I agree with much of my noble friend’s sentiment, and that the Civil Service should not carry out political work. It has its own Civil Service Code, which replicates the Civil Service Code that is operated across the UK, and it should pursue the priority items that people care about.

Procurement Bill [HL]

Baroness Goldie Excerpts

Report stage
Wednesday 30th November 2022 Lords Chamber

[Lord Alton of Liverpool (CB)]

My Lords, the noble Lord, Lord Wallace of Saltaire, is right to remind us not just of events in Victorian Britain but of what is happening at the moment and the impact that events in Ukraine and elsewhere will have on our procurement programmes.

I serve on your Lordships’ International Relations and Defence Committee. As the noble Baroness, Lady Goldie—it is wonderful to see her in her place—knows, throughout the whole of this year we have been conducting an inquiry into procurement and defence priorities, which the noble Lord, Lord Wallace, touched on. We began it before the second invasion of Ukraine in February. From my discussions with the noble Lord, Lord Coaker, who pressed this issue in Committee, I know how important this is, for all the reasons he described. He has a great sense of patriotism and cares for our Armed Forces, and I strongly associate myself with him and the desire for a probing amendment to test some of these questions.

One reason why I hope the noble Baroness, Lady Goldie, will be able to reply in terms to the noble Lord, Lord Coaker, on Ajax especially, is that the noble Baroness, Lady Anelay, who is chair of our Select Committee, was here during his speech—she was unable to stay—and said that I can tell the House that she strongly agrees with the questions he put. She hopes that the noble Baroness will be able to answer them because they will be part of the terms of our committee’s report, which we have to complete before the House rises for the Christmas Recess at the end of December. So it is important that, if the noble Baroness is not able to answer those probing questions this evening, we are given answers in due course.

One of the witnesses to the Select Committee inquiry was Professor John Louth, who was the director of defence, industries and society research at RUSI from 2011 to 2019. When we asked him directly about the way in which we should go about defence procurement, I asked him specifically about the Bill and whether it would be welcome. He said:

“I have tried to read as much of this as possible … It is hard to identify the end state that the Government are looking for”.


He said that there are

“lines and lines of rhetoric and legalistic reform”,

some of which is incomprehensible even for those of us who are academics.

I asked him specifically about Ajax, which the noble Lord, Lord Coaker, has been raising, and he replied that it has been a “disaster”. As we have heard, it was intended to be a state-of-the-art reconnaissance vehicle for the Army, and it has cost a staggering £3.2 billion to date, yet so far not a single deployable vehicle has been delivered—not one. It was of course supposed to enter service in 2017, but it has been subject to what the Commons committee called a “litany of failures”, including noise and vibration problems that injured the soldiers testing the vehicles. Can the Minister tell us whether those safety issues have been resolved, or whether they are ever likely to be?

The noble Lord, Lord Coaker, reminded us that the House of Lords Select Committee said the programme had been “flawed from the outset” and also that it was illustrative of a deeper failing, commenting that the Ministry of Defence

“once again made fundamental mistakes in its planning and management of a major defence programme.”

Pulling no punches, the Public Accounts Committee accused the department of failing to deliver vehicles which the Armed Forces need

“to better protect the nation and to meet our NATO commitments”.

In the current situation, with one eye eastwards to Ukraine, that is a very serious statement by a senior committee of Parliament—and this Bill, of course, is a Bill that will go down to the other place. It will go as a pristine Bill from the House of Lords, but the other place will be able to amend it, and I have no doubt that people from the Public Accounts Committee will want the answers that the noble Lord has gently been asking for this evening.

I will end by quoting Meg Hillier, who chaired the committee inquiry. She said:

“Enough is enough—the MoD must fix or fail this programme, before more risk to our national security and more billions of taxpayers’ money is wasted. These repeated failures … are putting strain on older capabilities which are overdue for replacement and are directly threatening the safety of our service people and their ability to protect the nation and meet NATO commitments.”


That is good enough reason alone, surely, for the Minister to give the House a comprehensive reply.

[The Minister of State, Ministry of Defence (Baroness Goldie) (Con)]

My Lords, I first thank noble Lords for their contributions. I understand fully that the proposed amendment is well intended, and I accept it in that spirit. I think it has certain implicit difficulties, which I shall move on to. I would never object to the Opposition Benches holding the Government’s feet to the fire—that is what the Opposition are there to do—but I hope they will be patient with me as I seek to explain why the precise terms of the amendment confront the MoD with difficulty.

The proposed amendment would require the Ministry of Defence to commission and publish a report from the National Audit Office, setting out instances of procurement overspend, withdrawal or scrapping of assets, termination of prepaid services, cancellations or extensions of contracts, or administrative errors with negative financial impacts. The reason the MoD rejects the amendment is not because it is not in sympathy with what I have identified as a well-intended sentiment expressed by the noble Lord, Lord Coaker, but quite simply because existing processes already ensure robust scrutiny and accountability of Ministry of Defence procurements.

Before I move on to that more detailed exposition, let me deal with a very specific point the noble Lord raised about the defence equipment plan which was published yesterday. He is more ahead than I am because I have been preparing for this. I have referred it to my officials, and I am told that it is difficult to calculate an accurate figure of inflation at the moment, due to volatility. That is an inadequate response to give the noble Lord from the Dispatch Box, so I offer to write to him. We will do further research in the department, and I shall endeavour to expand on what these particular difficulties are.

[Lord Coaker (Lab)]

That is totally acceptable, and I am very appreciative of it. The reason I asked was because the National Audit Office, commenting on the 2022-23 equipment plan, said it was already out of date because of inflation, Ukraine, the economic situation, et cetera. So I very much appreciate the offer from the noble Baroness to write and put that in context for us. I think it would be helpful if that was put in the Library for other Members as well.

[Lord Fox (LD)]

I join the noble Lord in welcoming that and also ask that the Minister includes currency because, while inflation is important, currency is actually more important in some cases. It is absolutely clear that a lot of these purchases are made in dollars and the dollar/pound rate will determine quite substantially the rising costs of equipment.

[Baroness Goldie (Con)]

I hear both noble Lords. To put a little context around this, the MoD has not been sitting in some splendid ivory tower in isolation as volatile economic circumstances swirled around us. Actually, we have built protective measures into many of our contracts to deal with inflationary pressures—or, indeed, to deal with the currency fluctuations mentioned by the noble Lord, Lord Fox. I appreciate that more detail is sought and I shall certainly look at that, with my officials, and endeavour to return to both noble Lords with some more information.

I was going to explain in more detail what we already do and how the National Audit Office already plays a role in all this. The National Audit Office is independent—we should remember that—and it already conducts a yearly audit on the defence equipment plan and undertakes regular audits of defence programmes. Further scrutiny of the performance of defence programmes is undertaken by the Infrastructure and Projects Authority, which tracks the progress of projects currently in the government major projects portfolio, not just that of the MoD. The details of these are published in its annual report. As an independent statutory body, the National Audit Office decides, independently of government, where to focus its resources and determines what projects and public bodies it audits and when.

It is important to emphasise that the Government do not direct the NAO; nor should we, because an essential feature of the importance and value of the NAO is that independence. Although it may not intend to do so, I argue that the amendment would interfere with that statutory independence. In addition, it would force the NAO to use its limited resources on a specific examination each year, irrespective of changing priorities: something might be significant one year and of far less concern the following year. It might even not reflect the continuing value of such an examination to Parliament: this is where we have to be very careful.

To reassure noble Lords, as I indicated, the Ministry of Defence continues to take steps to control the rise in the price of defence goods and services over time, including through improving the communication of longer-term priorities and requirements, including, as noble Lords will be aware, through the publication of pipelines. That is an extremely important development and signals likely demand to industry far better. It lets industry reflect on preparedness, instead of what was before probably a rather stop-start process, with industry asking, “Do you need anything?” and us suddenly announcing, “Yes, we do,” and everybody trying to create the thing from new.

The Ministry of Defence is utilising a new approach to industrial strategy. This strengthens supply chains and is driving pace and agility into the acquisition system through a range of transformation initiatives. The department has implemented steps to estimate project costs more accurately, including improving our risk forecasts through the use of reference class forecasts; that is, trying to use procurement as it happens, to inform us—what can be learned from the process? We have risk-costing pilots and we use the analysis of systematic, strategic or operational problems to inform us how the contract is proceeding. The MoD is also driving evaluation into programmes through the use of monitoring and evaluation frameworks and creating a process to capture and share lessons learned.

An important area, perhaps not widely understood, is that the MoD, like everyone else, can be hit by the quality and quantity of skills. That may be a significant impediment to us. Improvements are being delivered through the improved provision of training, initiatives to recruit and retain staff, and audits to identify and fill skills gaps.

The noble Lord, Lord Wallace of Saltaire, said that not much has changed. I think he started with the 1980s, then we seemed to regress further, into the Victorian age, when I am not sure we would recognise very much of what our procurement contracts are delivering. I respectfully disagree with him because, in addition to what I have previously mentioned, including the investment appraisal process, we have made other big changes. For example, all category A procurements, which are valued at £400 million or above, go through an extensive internal MoD process before they even get to the Cabinet Office, the Treasury or the Minister of Defence for approval.

Costs are now independently assured by the cost assurance and analysis team, tender and contract documentation is independently assured through the progressive assurance team, and direct award contracts are reviewed and monitored by the single-source adviser team. If that sounds like just verbiage, let me say that behind that are highly trained expert people who are there to identify the shoals, the reefs and the rocks, bring them to our attention, and make sure that we are not inadvertently drawn into areas of contract weakness where in the past we might very well have gone.

We are content that there are sufficient checks and balances in place to ensure that we achieve best value for money, learning from previous procurements. There are some good examples, and I was very struck by visiting Babcock at Rosyth, where it is building a Type 31 frigate. That really proceeded on a new basis of approach—it was born out of the national shipbuilding strategy. That programme was established in 2017, and following competition a contract was awarded to Babcock in November 2019 for the design and build of the five ships; it is currently under way, with the first ship scheduled for float-off in 2023. With barely three years passed since contract-award, the Type 31 build at Rosyth is well under way, with the first grand block now assembled in the Venturer assembly hall. The build programme is set to meet its deadlines of delivering all five ships off-contract by the end of 2028, and the build contract is on course to deliver the five ships at an average cost of £250 million per ship.

I use that as an example because it seems to me, having seen it at first hand, a very modern illustration of where we have moved to. When I say to the noble Lord, Lord Wallace of Saltaire, that I do not agree with his characterisation, I also try to illustrate that argument by pointing out that there are different practices at play, informed—I fully admit—by a number of sources like the national shipbuilding strategy, which was an innovative change of direction for how we procure ships within the UK. But we have also had a very good example with the Poseidon aircraft programme operating out of RAF Lossiemouth in the north of Scotland on the Moray coast. It is an absolutely fantastic facility. That fleet comprises nine aircraft, which were all achieved on time, within budget, and to a challenging timeline.

It is very easy to be sceptical, and I fully understand why your Lordships rightly have been sceptical of some pretty poor experiences in the past, but all that I am pointing out is that we have moved on to a better way of doing things, and I hope that your Lordships understand from what I have been explaining and describing that there is a far better structure within the MoD to deal with these complex procurement contracts. These defence contracts are often complex, they are required quite often at speed to meet emerging threats, and are often needed to provide much-needed support to our Armed Forces, to ensure that we maintain operational advantage and to reduce the risk to our nation.

The noble Lords, Lord Coaker, Lord Wallace of Saltaire, and Lord Alton, all raised the issue of Ajax, and I think I have said before from this Dispatch Box that it was certainly not one of our proudest moments. Intrinsically, it is actually a very good vehicle, and it will provide an important capability. Following agreement from the Ajax safety panel, work has led to resuming the user-validation trials which were paused earlier this year. Results from these trials are being analysed to ascertain whether it is possible to deliver a safe system of work under which to conduct reliability-growth trails. Your Lordships are aware that there were issues with vibration and hearing, and the one thing that we were very clear about was that we were not going to put people at risk; my former colleague as Minister for Defence Procurement, Jeremy Quin, was absolutely insistent. That is why, despite the embarrassment, we paused what was happening until we had a better understanding of what was going wrong; but I make it clear that the MoD will not accept a vehicle until it can be used safely for its intended purpose.

Your Lordships will be aware that Clive Sheldon KC is leading the Ajax lessons learned review, which is looking at ways in which the Ministry of Defence can best deliver major contracts more effectively in future. That is an important review and we await his analysis, conclusions and recommendations, but I emphasise that any delay to Ajax will not affect our commitments to NATO. That is an important point to observe.

The noble Lord, Lord Coaker, asked about the “Prince of Wales” carrier. Rosyth on the Forth is where good things happen: as well as building the Type 31, that is where the Prince of Wales carrier is currently reposing. She is a state-of-the-art aircraft carrier. She has already proved her capabilities in a number of exercises, but there was an issue concerning the propulsion shaft and investigations are now under way. She is a huge vessel, and it was necessary to take her into dock to have the facilities properly to examine what was going wrong. Timelines for the repair of the shaft are being investigated and further updates will be provided in due course. We want her to return to operations as soon as possible. My understanding is that we have brought forward some routine maintenance anyway, so that can be attended to while she is at Rosyth. I have no more specific information at this time, but I expect we will get a further report when more is known about the underlying condition and how long it will take to rectify.

The noble Lord, Lord Coaker, raised the Type 26, which is a first-class ship. I have visited the programme in the yard at Govan being operated by British Aerospace. It is a fantastic piece of maritime equipment and it will be pivotal for the Royal Navy. It is proceeding very well. We have just awarded the batch 22 contract to the yard because we were absolutely satisfied about the professionalism, commitment and effectiveness of what British Aerospace was doing with the first batch. It is true that there has been a delay, but there are two reasons for that. Covid was one factor; it has created delays for our defence industry partners and their supply chain. I understand that there were also issues with locating the necessary corps of skills, but it now seems well under control and we hope that the new timeline can be adhered to. British Aerospace is certainly very keen to demonstrate that and to commit to making it happen.

The noble Lord, Lord Wallace of Saltaire, raised the issue of levels of munitions. He is quite right that particular demands have fallen on that area due to the conflict in Ukraine. Those of us who listened to the extraordinary, courageous address by Madam Zelenska yesterday—I was among those privileged to be there—could not help but feel huge admiration for her, her husband and the people of Ukraine, as well as a sense of pride that we have been able to come to their assistance. We have been able not just to support them in what they have been looking for but, I hope, to give them the reassurance of optimism and hope for the future; Madam Zelenska referred to that. I reassure your Lordships that, in our supply of anything we have provided to the Ukrainian armed forces, we have never compromised our own levels of stocks in relation to meeting our national security obligations.

The noble Lord, Lord Alton, referred to someone—that sounds rather disrespectful; it was someone very eminent—who used to be in RUSI who had certain challenges with the Bill. As a former lawyer, I would say in response that I think the Bill is a welcome clarification and consolidation of procurement law in the United Kingdom. For the MoD, there has been carefully researched tailoring of the Bill to meet the unique requirements of defence. Our industry partners have been positive, so I think the Bill has the potential to introduce far greater clarity to industry—both primes and smaller contractors—and give them a much clearer sense of how they engage, what they can do and what the rules are. That is absolutely to be commended.

In conclusion, I am under no illusions about the challenges the MoD faces in relation to large-scale procurement. We recognise these challenges, and that is why we continue constantly to explore additional actions to mitigate the effects of cost escalation and cost growth. I hope I have been able to explain in sufficient detail what we do already—particularly the very specific character of the National Audit Office, which is independent of government—to enable your Lordships to understand why the MoD is unable to accept this amendment, while it does identify with the sentiment with which it was put forward. I ask the noble Lord, Lord Coaker, to withdraw the amendment.

[Lord Coaker (Lab)]

I thank the noble Baroness for her reply and her offer of a letter. I stress how important that letter is, given the quote I am about to read, which summarises the National Audit Office’s assessment of the equipment plan that the Government published:

“The equipment plan is based on data submitted by the end of March this year and does not take account of the impact of exchange rate changes, rampant inflation, fuel costs and the Russian invasion of the Ukraine.”


It would be helpful to your Lordships’ House if the noble Baroness would respond in a letter and put it in the Library. It would be very useful to hear what the Government are saying about the National Audit Office’s comments.

I know that there are problems with Ajax; we look forward to continuing discussions on that. We have raised a number of other difficulties. I think all noble Lords here recognised that there are significant successes alongside that and we should recognise those—I certainly do. We all want our Armed Forces to succeed. The noble Baroness is quite right to remind us of the support we have given to Ukraine and the bravery of the Ukrainian people. We are right to recognise that once again this evening. With those brief comments, I beg leave to withdraw the amendment.

Procurement Bill [HL]

Baroness Goldie Excerpts

Committee stage
Monday 18th July 2022 Grand Committee

Finally, on the outsourcing of ancillary services, I think this is one area which is hugely important for the morale of our service personnel. If we outsource delivery of catering, if we outsource accommodation and particularly its maintenance, they are exactly the sorts of things that affect the lives of service personnel on a day-to-day basis. Beyond that, it is not the service man or woman; it is their families. Very often, somebody —a spouse, very often a wife—is waiting in for the maintenance that has been outsourced. It is not adequate. It needs to be dealt with. Can the Minister give us some hope that this Bill will deal with the problems? If not, we will require other mechanisms to do so.

[The Minister of State, Ministry of Defence (Baroness Goldie) (Con)]

I am endeavouring, my Lords, not to tip my water down the back of my noble friend’s neck, although he might welcome that refreshment.

First, I thank all noble Lords for their contributions. I am in no doubt about the genuine interest which your Lordships have in defence. The noble Lord, Lord Coaker, articulately expressed that, and I respect that. I thank him for the way in which he expressed his sentiments. I know that he speaks for the other contributors to the debate.

I shall try to address the principal points which have come up, so I want in the first instance to address Amendments 101 and 485 and then proceed to speak to the government amendments in the group, Amendments 520 to 526 inclusive. As I have said, I shall endeavour to address the issues which have been raised.

I turn to Amendments 101 and 485, tabled by the noble Lords, Lord Coaker and Lord Hunt of Kings Heath, and, in relation to Amendment 485, also by the noble Baroness, Lady Smith of Newnham. They relate specifically to defence and security contracts and Ministry of Defence procurement.

Amendment 101 would require a contracting authority to disregard any tender from a supplier which is not a supplier from the United Kingdom or a treaty state or which intends to subcontract the performance of all or part of a contract to such a supplier unless there is no other tender that satisfies all the award criteria. I understand the sentiment behind the amendment from the noble Lord, Lord Coaker, which is laudable, but I will explain why I think this amendment is neither necessary nor indeed desirable.

The Bill already provides a discretion for the contracting authority to exclude from procurements suppliers that are not treaty state suppliers and extends this to the subcontracting of all or part of the performance of the contract to such suppliers. This includes defence and security procurements. It is important to note that, for the majority of defence and security procurement, market access is guaranteed only to suppliers from the United Kingdom, Crown dependencies and British Overseas Territories. For those procurements, a supplier established in another country would not be a “treaty state supplier”.

However, due to the nature of defence procurement and the defence market, a discretion to go outside of UK suppliers or treaty state suppliers is required where doing so would best meet the requirement that the contract is to serve—there may be an immediacy about that—and would offer best value for money. Further, to exclude non-treaty state subcontractors would probably make some defence and security procurement much less effective and, in some cases inoperable, as it would exclude, for example, suppliers from the United States, Australia, France, Sweden or Canada from the supply chain.

I assure noble Lords that industrial consequences and commercial strategies will be given case-by-case consideration—that is already how we conduct business—taking into account various factors, including the markets concerned, the technology we are seeking, our national security requirements and the opportunities to work with international partners, before we decide the correct approach to through-life acquisition of any given capability. Where, for national security reasons, we need industrial capability to be provided onshore or where we need to exclude a particular supplier on national security grounds, we will not hesitate to make that a requirement.

The noble Lord, Lord Coaker, raised the specific matter of fleet solid support ships. He will be aware that in the refreshed National Shipbuilding Strategy there is specific reference to the fleet solid support ships. The procurement is in train; the first ship is scheduled to enter into service in 2028 and the last in 2032. I hope that reassures the noble Lord that the matter is under active consideration.

I turn now to Amendment 485. In a sense, this amendment was preceded by a general observation made by the noble Lord, Lord Coaker, and echoed by the noble Lord, Lord Alton, and the noble Baroness, Lady Smith. In essence it was: what difference does this make? That is a fair question and one that deserves an answer. I would say that the Bill provides greater flexibility to the MoD and includes the use of a single system to encourage participation by small and medium-sized enterprises. That is an area not just of significance to the economy but of particular significance to such smaller entrepreneurial organisations. They have sometimes felt out in the cold when major contracts were being awarded by the MoD, principally because, traditionally, the structure was to have a very large primary contractor, with the primary contractor subcontracting various aspects. This is designed to encourage greater participation by small and medium-sized enterprises, which I think is to be applauded.

MoD derogations, and the Bill itself, provide more flexibility to deliver the defence industrial strategy—I will not rehearse that; your Lordships are familiar with it, but I think it is a very positive strategy and one which I think received support from across the Chamber. That strategy replaces the previous defence procurement policy of defaulting to international competition. I know that was of concern to many of your Lordships and, as I say, the strategy has altered that, and I think that is important reassurance on where we are in defence and the greater flexibility we now have. That is why I said earlier that industrial consequences and commercial strategies will be given much more case-by-case consideration, taking into account the various factors which I previously mentioned.

Amendment 485 would require the Ministry of Defence to commission a report from the National Audit Office setting out instances of procurement overspend, withdrawal or scrapping of assets, termination of pre-paid services, cancellation or extensions of contracts, or administrative errors with negative financial impacts. I would suggest the amendment is unnecessary, as what it seeks to achieve is already being delivered through existing processes or initiatives; let me explain what these are.

The National Audit Office already conducts regular audits across defence, which we know to our discomfort because the National Audit Office is an independent entity in that it does not spare its comments when it comes to the MoD, and that is right—that is exactly what it is there to do. In these audits, it regularly includes recommendations for improvement to which we pay very close attention. These include value-for-money studies, such as the yearly audit on the defence equipment plan, regular audits on defence programmes such as Ajax—which the noble Lord, Lord Alton, mentioned—and carrier strike, as well as financial audits. As I say, MoD pays close attention to what the NAO says.

The Infrastructure and Projects Authority also publishes an annual report. That tracks progress of projects currently in the Government Major Projects Portfolio and it provides an analysis of how they are performing. The MoD has successfully introduced several initiatives following on from such recommendations to improve capability and deliver and obtain better value for money, including the defence and security industrial strategy, the defence and security 2025 strategy and the introduction of the Single Source Contracts Regulations 2014.

[Lord Alton of Liverpool (CB)]

My Lords, I am sorry to interrupt the noble Baroness. On the question of the National Audit Office, I was wondering whether the Minister could tell us whether there had been any formal discussions between her department and the NAO about whether something more formalised—as anticipated in the amendment before your Lordships—would be beneficial. If not, might she consider having such a discussion before we return to this issue on Report?

[Baroness Goldie (Con)]

What I think is important is that we accord the National Audit Office the absolutely critical character of independence, which is necessary for it to do the job it does. I think that part of that independence is that it is quite separate from government departments, and, with the greatest respect, I think that is what the MoD should not be doing. The National Audit Office should be saying, “If we think you’ve got dirt lying under the carpet, we’re going to rip the carpet up and have a look at the dirt”, and I think that is the freedom we expect the National Audit Office to have and that is the freedom it has got. As I say, everyone, I think, will understand that the Ministry of Defence knows well the feeling of being on the receiving end of a National Audit Office report which makes uncomfortable reading.

[Baroness Smith of Newnham (LD)]

My Lords, the Minister has spoken about the legislation giving the MoD greater flexibility, but following up from her response to the noble Lord, Lord Alton, to what extent does it enhance accountability, which is at the crux of what we have all been asking about?

[Baroness Goldie (Con)]

As the noble Baroness will be aware, the National Audit Office reports not to the MoD; it reports to Parliament. It is a very powerful line of accountability that introduces the legitimacy in any democratic society for elected parliamentarians—or Members of this House—to ask on the basis of a report what the department has been doing. It has never inhibited Members of the other place or Members of this House from doing just that, as your Lordships are very well aware.

The noble Lords, Lord Alton and Lord Coaker, raised particularly the very legitimate question of what we are doing within the MoD to try to improve our procurement performance. I think your Lordships will understand that, probably more than any other department, the Ministry of Defence carries out massive procurement contracts. Then again, that is a very justifiable reason for asking us to demonstrate that we are doing that effectively and efficiently, being fair to the taxpayer and to our industry partners.

--- Later in debate ---

[Lord Coaker (Lab)]

Will the Minister address the point about the treatment of contracted staff for the MoD’s ancillary services? I will just remind her that the Defence Select Committee report published recently says in its summary:

“It is an absurd state of affairs that the MoD is not allowed to look at a contractor’s previous performance when assessing their bid—a state of affairs that needs to be rectified immediately.”


Will the Procurement Bill rectify what the Defence Select Committee says is an appalling state of affairs that the supplier’s previous performance cannot be looked at?

[Baroness Goldie (Con)]

My understanding is that the Government’s response has been framed to that report and is currently under review. I have no more up to date information, but I will write to the noble Lord. The department is under an obligation to respond to that proposal.

[Lord Coaker (Lab)]

The Government cannot answer the point about whether the Procurement Bill will allow the MoD to look at a contractor’s previous performance when assessing its bid—a state of affairs that needs to be rectified immediately. Every time we have talked about what is an excluded supplier or an excludable supplier, we have been told that previous performance is one of the criteria that can be looked at, yet from what the Defence Select Committee said, and the Minister just said, is that it is not clear whether the MoD can do that.

[Baroness Goldie (Con)]

Well, yes, within the law the MoD can, and this Bill provides more flexibility for past performance to be taken into account. However, there are legal constraints which govern how any party entering into a contract can responsibly consider previous conduct. The Bill allows the MoD to exclude a supplier, and there are various grounds in the Bill to clarify when the MoD can make such a decision. Our view is that there is the necessary flexibility within the Bill. The Government will be looking at the observations of the Committee.

[Lord Coaker (Lab)]

It would be really helpful if the Minister, as she suggested, wrote to me and copied it to noble Lords in the Committee, because she said it was not allowed and then she said it was allowed, but the Defence Select Committee report, which was published just a few weeks ago, said the MoD was not allowed to look at a contractor’s previous performance when assessing its bid. So either the Defence Select Committee is wrong, or the MoD has changed the regulations or the Bill changes the regulations. All I am trying to seek is what the situation actually is.

[Baroness Goldie (Con)]

What I said to the noble Lord was that, as happens with any committee report, the department is preparing a response to the committee, and that is currently being done. I do not want to pre-empt that, but, when the response has been submitted to the committee, it will for the committee to determine whether it wants to make that response public.

On the issue that is perplexing the noble Lord and causing him anxiety, we believe that the Bill as drafted gives the MoD the power to exclude suppliers if we have reservations.

[Baroness Smith of Newnham (LD)]

My Lords, when the noble Baroness is writing to the noble Lord, Lord Coaker, could she undertake to clarify which point of this Bill deals with the issue, so that Members can look and assess whether we believe it is adequate, or whether a further set of amendments might need to be brought forward on Report?

[Baroness Goldie (Con)]

There is a part of the Bill that allows the Secretary of State to exclude a supplier; that is a specific provision in the Bill. Where defence and security contracts are concerned, I think these are powerful provisions. I am very happy to take the advice of my officials and see if I can clarify the position further for your Lordships’ Committee.

Moving on, government Amendments 520 to 526, to which I referred earlier, are what I would describe roughly as Schedule 10 amendments. Schedule 10 amends the Defence Reform Act 2014 principally to enable reforms to the Single Source Contract Regulations 2014. The regulations are working well to deliver their objectives of ensuring value for money for the taxpayer and a fair price for industry. That is the balance against which we always have to work. Delivering the Defence and Security Industrial Strategy and building on experience since 2014 means that some reforms are needed. This will ensure that the regulations continue to deliver in traditional defence contracts and can be applied across the breadth of single-source defence work in the future, providing value for money for the taxpayer while ensuring that the UK defence sector remains an attractive place in which to invest.

We are making two government amendments to Schedule 10 which will clarify the wording and deliver the full policy intent. The first relates to paragraphs 3(2) and 3(8) of Schedule 10, where we are increasing the flexibility of the regime by taking a power to enable contracts to be considered in distinct components—this is an important development—allowing different profit rates to be applied to different parts of a contract where that makes sense. Secondly, we are simplifying the contract negotiation process by an amendment to paragraph 8(3)(a) of Schedule 10, which ensures that the contract better reflects the financial risks involved, and in paragraph 8(3)(c) of Schedule 10, taking a power that will clarify how the incentive adjustments should be applied. We are clarifying the wording currently in paragraph 8(3)(c), which will become paragraph 8(3)(ea)—I am sorry that is a little complicated; it is just to achieve accuracy of reference—by government amendment in Committee to ensure that the schedule fully delivers the policy intent.

In short, these government amendments provide improved clarity and greater flexibility in the defence procurement process, and I hope your Lordships will be minded to support them.

[Lord Coaker (Lab)]

My Lords, I thank the noble Baroness for that informative reply, and I look forward to the letter to clarify the point that we had some discussion on. I apologise to the noble Lord, Lord Alton; I knew that he had signed the amendment and forgot to mention it. It is in my notes: “Don’t forget Lord Alton”—and I did. I apologise for that but thank him for his support.

For reasons of allowing us to move on to the next group, which I know a number of noble Lords are waiting to discuss, I would just say that Amendment 101 is almost like an encouraging amendment; it is trying to encourage the Government to do more. I accept what the noble Baroness said with respect to contracts and some of the difficulties that there are—to be fair, the noble Baroness, Lady Smith, raised that as well. The amendment is just an attempt to ask whether we can do a bit more to support our own industry and small and medium-sized enterprises. I know that the noble Baroness agrees with that and will take it on board.

As far as Amendment 485 is concerned, we need to look at what the noble Baroness has said, look again at the Bill and reflect on it. The important part of Amendment 485, as usual, is tucked away. Proposed new subsection (4) says:

“The Secretary of State must commission the National Audit Office to conduct a similar review annually.”


It is that continual microscope that is needed. I accept the point that the National Audit Office can conduct the reports and that it is independent. I accept all those sorts of things; the noble Baroness is right about that. I just think that all of us want to get this right. Therefore, that point about an annual review is particularly important. With that, I beg leave to withdraw.