Railways: Public Procurement

Baroness Howe of Idlicote Excerpts

Tuesday 30th November 2010 Grand Committee

[Baroness Howe of Idlicote]

My Lords, I apologise for getting locked in the Division Lobby for a few minutes and therefore missing a little of the speech of my noble friend Lady Greengross. However, I have glanced at it and congratulate her very much on what she said and on initiating this debate.

The technicalities of railway systems are certainly not an area in which I have the slightest expertise or experience. However, as has been said, this debate is not about railways; its importance goes wider even than that issue. Indeed, the more I glanced through the report, the more I felt that most of its recommendations would be relevant to many other areas—not least when government departments are considering outsourcing social service contracts to the voluntary and other sectors, where many of your Lordships have considerable expertise and experience.

We know that the country is facing just such a situation, because the coalition Government wish to change and very much localise the big society—the way in which many, if not most, of our public services are provided in the future. If we take charities—the third sector—for example, we know that their main areas of concern and undoubted expertise are hardly likely to disappear. They were, after all, pioneers in what is now firmly accepted as state social service responsibilities. However, that does not mean that there will not be changes to be coped with in, to name but a few areas, population size, ageing, the effect of immigration, and medical advances, which mean that many more people live with quite severe handicaps, which again we provide for. Nor indeed does it mean that there will not be other challengers for these contracts from, as we have already heard, the business world claiming that they can provide an even better quality of service at a lower cost.

Larger charities have over recent years learnt to present their cases as required to fairly high commercial business standards and, with the help of organisations such as the NCVO, they are pretty well able to negotiate their own contracts, but smaller charities will certainly benefit from the report's emphasis on the need for greater transparency—I agree with what the noble Lord said—particularly when negotiating contracts. Clarity in the detail of what both sides are expected to deliver will be crucial. As the report states:

“a contract is the mechanism by which conflicts are resolved when things go wrong”.

This is one of the fundamental lessons which the report stresses should be learnt from the experiences of railway privatisation.

Two smaller but equally valuable lessons are what should constitute a sensible length for a contract and how risk should be allocated between the operator and the Government. One of the complaints that many third-sector operators have, apart from the main one that payments from the Government or the local authority are always late, is that the contract time, often only three years, is too short to achieve worthwhile results. The report's suggested sensible length of an initial contract is five years, a much more realistic timescale, which perhaps could be extended for the same period twice more if all the right boxes are ticked.

On risk, not least in the light of the ghastly situation that we are all facing, it should be realistically shared between the Government or the local authority and the operator or at least linked to something like the GDP, as is suggested. One crucial lesson when negotiating the contract is for the Government or the local authority to have a realistic and workable alternative method of operation in place before beginning negotiations, as my noble friend mentioned. There must be competition in the bidding process to get the best results. Another sensible suggestion is that an independent supervisory board can play a really effective role as a buffer between the day-to-day operators and the Government. Equally, there should be a representative on that board of those on the receiving end of such services.

The last element I want to stress is the need for there to be an independent audit of what is being achieved, not least to avoid the suggestion of inappropriate political influence. It is, of course, vital for the Government to be open and honest both with themselves and with the general public about what they are trying to achieve. Public procurement is not an us-and-them situation. A proper working relationship is essential if the contract is to be fully effective.

I shall end by underlining what my noble friend Lady Greengross said. The ideas and experience behind what the report is saying are important and contain lessons that need sober consideration by the many Ministers and government departments that will be involved in the massive amount of public procurement that is already under way. Can the Minister give the Committee his assurance that these lessons will have been carefully studied and learnt when future public procurements are made?