Procurement Bill [HL]

Baroness Noakes Excerpts

Committee stage
Monday 24th October 2022 Grand Committee

From the point of view of those of us on these Benches, the Bill needs strengthening to prevent competition infringement. Can the Minister please explain why the looser word “considers” has been used in the legislation and what protection it would offer any suspect behaviour in a procurement process?

[Baroness Noakes (Con)]

My Lords, I, too, welcome my noble friend Lady Neville-Rolfe to her new position. As she knows, she and I share many views on the Bill; indeed, we supported each other’s amendments. I fully endorse the quotation read out earlier by the noble Lord, Lord Fox; I hope that my noble friend will stick to it.

Amendment 534 is in my name; my noble friend had added her name to it, and it was debated during an earlier sitting of the Committee. It asked for a report on procurement rules, specifically around simplification and SMEs. My noble friend will be aware that, obviously, it has not yet been moved because it is low down on the list. While she has now removed her name, about which I am distraught, I hope that, when we get to that part of the Marshalled List, we might have a more favourable response from the Government Benches.

I have three amendments in this group: Amendments 323, 326 and 327. They are probing amendments relating to some of the discretionary grounds for exclusion in Schedule 7. The mandatory exclusion grounds in Schedule 6 are all based on objective facts—mainly whether various offences have been committed. The discretionary grounds in Schedule 7 are a mix of subjective and objective tests. My amendments are designed to probe this. I could have tabled more amendments to the schedule, because other paragraphs in it also use subjective tests, but I chose paragraphs 8, 9 and 11 as examples of the issue that I wished to debate.

In each of these paragraphs, the test is whether a decision-maker considers that a supplier has done something. To take the example of paragraph 8, the ground is that the decision-maker considers that the supplier or a connected person has infringed a bit of UK competition law, or an overseas equivalent. I do not understand why all these matters covered by the paragraphs cannot be dealt with by objective tests, as are used in Schedule 6. Surely an infringement of competition law can be objectively determined and ought not to be left to the opinion of a procurement official. Can the Minister explain why the Bill uses subjective tests rather than objective ones for these paragraphs?

My amendments are rather more modest than replacing these provisions with objective tests but they seek to strengthen the nature of the subjective test from “considers” to “is confident”. I chose that wording to align with what is in the Explanatory Notes, which explain the paragraphs in Schedule 7. I suggest that, if a subjective test is to be used in Schedule 7, the hurdle should be set at a fairly high level. My amendment might not be the right one but it is there to probe the language of the Bill. I am aware that Clause 55 gives some opportunity for suppliers to push back on decisions by contracting authorities but, at the end of the day, judicial review is the only real remedy available to a supplier who feels that they have been badly treated by the terms of this Bill. As we know, judicial review is a very unwieldy remedy and, frankly, is not available at all for SMEs in practical terms.

I also note that, in paragraph 15, which deals with national security, the decision-maker has to determine whether there is a threat to national security. When my noble friend winds up, would she please explain the difference between “determines”, which is used in paragraph 15, and “considers”, which is used throughout the rest of the schedule?

[Baroness Bennett of Manor Castle (GP)]

My Lords, I rise with great pleasure, following the noble Lords, Lord Hunt of Kings Heath and Lord Fox, and the noble Baroness, Lady Noakes, to agree with everything that all of them said. I am going to be quite brief but I have three points to make. I will speak chiefly to Amendment 177, to which I have attached my name—as have the noble Lords, Lord Hain and Lord Hendy—but I also want to comment on a couple of other amendments in this group.

I join others in welcoming the Minister to her new post. Is it not good to have some certainty in politics? At least we have the certainty that the Procurement Bill will come round again, whatever else we might be doing or facing in other parts of the Westminster system.

There is a phrase about the certainty of death and taxes, except of course we know that taxes are not a certainty for many of the companies now operating in the UK or collecting many government contracts. The noble Lord, Lord Hunt of Kings Heath, referred to one of those companies in particular—a company that I describe as the great parasite. It does not pay its workers very well, which relates to another amendment from the noble Lord, Lord Hendy—we will get to that later—and it pays little or no tax in the UK.

There is a specific point to be made here. I am sure the Government would say that they want to see government and official money being spent well. However, the Tax Justice Network has noted, in looking at definitions of tax havens, that another term for them is secrecy jurisdictions. When companies operate out of tax havens, it is extremely difficult to see what is happening with their money and how they are operating; of course, they are not paying for the facilities and services they need to run their business and make their profits. In thinking about the great parasite, the example I often give when talking to schools, colleges and community groups is this: “Imagine the road outside. Think of all the lorries that have been carrying Amazon parcels up and down it today. Who is paying for that road? All of us in this room are, but Amazon is not”. If the Government are concerned about value for money and transparency in government procurement, Amendment 177 and the associated Amendment 180 are absolutely essential additions to this Bill.

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[Baroness Neville-Rolfe (Con)]

I think we have made a bit of progress; I will not go down that rabbit hole or we will not make enough progress.

If I might, I turn to Amendments 306, 307, 308 and 320 tabled by the noble Lords, Lord Wallace, Lord Fox and Lord Hain. They would introduce new mandatory exclusion grounds in relation to offences of sanctions evasion, money laundering and failure to prevent bribery, and new discretionary exclusion grounds in relation to various financial and economic misconduct when the contracting authority has sufficient evidence in the absence of a conviction.

The mandatory grounds for exclusion cover the types of misconduct which raise only the most serious risks for contracting authorities. We have already strengthened the mandatory grounds significantly in comparison to the EU regime, but they cannot and should not cover every offence. On sanctions, the types of freezing orders referred to in the amendment are unlikely to be relevant to public contracts. On bribery and money laundering, we have included a range of mandatory exclusion grounds covering the most serious offences. This expands the scope of the offences covered in the EU regime to cover blackmail as well as bribery. However, I reassure noble Lords that the offences in question which are not listed as mandatory exclusion grounds are likely to be subject to discretionary exclusion, under the ground of professional misconduct. This will depend on the circumstances, but if the ground is met, contracting authorities could exclude the supplier.

As to the amendment to include financial and economic misconduct as a new discretionary exclusion ground, we have already explained to this Committee that the exclusion regime is not a substitute for a judicial process. I am not prepared to require contracting authorities to weigh up complex evidence of financial and economic misconduct in which they have no relevant experience. That is a key issue with the ambitious proposals described by the noble Lord, Lord Fox.

Amendments 323, 326 and 327, tabled by my noble friend Lady Noakes, concern the discretionary exclusion grounds for potential competition infringements and the test for when these apply. These exclusion grounds recognise that there may sometimes be evidence of competition infringements in the absence of a regulatory decision or ruling. It is critical that suppliers known to have been involved in collusion, bid-rigging and anti-competitive behaviour are held to account, given the fundamental importance of fair and open competition to procurement.

However, I reassure the Committee that these grounds should not be used to exclude suppliers merely because they are under investigation by the CMA or another regulator; there must be sufficient evidence that a breach of competition rules has occurred. I think my noble friend pointed out that the language used in the Explanatory Notes differs from that in the Bill. I am advised that this does not reflect a difference of policy or meaning. Authorities must “consider” that the conduct specified has occurred before determining that the exclusion ground applies. She went on to ask about why there were subjective tests in the discretionary grounds. I have to say that I had some difficulty in exactly following her logic in all this, and we may need to discuss these points further after Committee. The answer is because exclusion is a risk-based measure and a last resort, and suppliers are protected by a right to challenge the exclusion decisions because of the nature of those decisions.

[Baroness Noakes (Con)]

A moment ago my noble friend said, in respect of the amendment by the noble Lord, Lord Fox, that she did not want decision- makers trying to weigh up complex financial matters, but she somehow seems quite happy to have decision-makers weighing up equally complex matters scattered throughout Schedule 7 and in the discretionary exclusion grounds. I struggle to see the intellectual cohesion in the Government’s position.

[Baroness Neville-Rolfe (Con)]

I thank my noble friend for her further comments, which I will consider carefully. I myself feel strongly, as someone who has witnessed small construction companies being investigated by a competition authority that at the end of the day have been found completely innocent, that it would be difficult if they were not able to continue to engage in procurement during a long period of investigation. However, as she explained, we need to get right how we deal with the discretionary grounds and ensure that there is enough certainty so that authorities do not spend too much time going round in circles. We need to reflect further on the points that she has made. I think I slightly misunderstood the purport of her original amendment, so I look forward to discussing that with her. I thank the noble Lord, Lord Fox, for his intervention.

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[Lord Clement-Jones (LD)]

My Lords, I would be very happy if the Minister introduced my amendment, but in moving it I will also speak to Amendment 243A and Clause 40 stand part. My noble friend Lord Fox will speak to other Liberal Democrat amendments in this group that are in the names of my noble friends Lord Wallace and Lady Brinton. I know that my noble friend Lord Fox has congratulated the Minister already but it is the first time that I have spoken since I saw her on the Back Benches in our previous proceedings. I must congratulate her on her seamless move to the Front Bench—again.

Given the controversy surrounding these direct contracts, the removal of Clause 40 on direct awards would, pending greater transparency and equity for SMEs, be the preferable course. But these are specific amendments to Clauses 40 and 42, which would prevent direct awards being used within framework agreements and instead open all such awards to competition. This issue is seen all the time within the G-cloud framework; it prevents proper competition from British SMEs and simply reinforces the dominance of certain key foreign players in the market. These amendments would provide the opportunity to redress the balance and help support UK SMEs.

We will debate the role of frameworks later, but these amendments seek to highlight the blurring of direct award rules by smuggling in large, uncontested contracts within framework agreements. The notion that there is a ceiling above which such awards must be competed for, and below which they can be awarded directly, is theoretically sound if it is rigorously adhered to. We on these Benches would argue that the threshold of £250,000 is too high and that a figure of £100,000 would be more appropriate. I seek the Minister’s view on thresholds and how they are arrived at. However, thresholds are pointless if they are ignored or bypassed, which is what seems to be happening.

One very good example of where this system has completely gone off the rails is cloud computing. This important service is central to the Government’s digital plans. It seems that rarely is the ongoing cloud service bid seen as a separate service; rather, it is wrapped in a package being competed for through a framework agreement by the consulting giants. These consultants always seem to partner with one or other of the dominant, non-UK cloud services companies.

This has gradually led to a disproportionate level of awards to these companies. For example, in 2012-17, one company, Amazon Web Services, was awarded £25.5 million-worth of contracts from a total market worth £381.7 million—a market share of 7%. By 2018-22, its market share had ballooned to just a shade under 40%. In the current financial year alone, 2022-23, AWS has seen £87.7 million-worth of contracts from a total market of £137.6 million—a market share of 64%. The US federal Government estimate that the UK public cloud market was worth $12 billion in 2020 and growing, so AWS can expect a healthy $5 billion-plus, with Microsoft Azure not far behind. Almost none of this would have been opened up to competition.

Of course, in the UK, a company is deemed to have monopoly power if it holds more than 25% of the market. At the same time, the SME share of the market has fallen from more than 50% to just 20% in the last five years, and barely 10% this year. It simply reinforces the dominance of certain key foreign “hyperscalers” in this market. To be clear, it seems that these services are available from UK-based suppliers. We are not asking for preferential access for these UK suppliers, just that they are not locked out by the use of framework agreements in this way and the awards of direct contracts under them.

The Government talk about building a UK digital future, yet they systematically underwrite the development of non-UK businesses by ignoring their own rules. The Procurement Bill is supposedly designed, according to the Queen’s Speech, so that

“Public sector procurement will be simplified to provide new opportunities for small businesses.”


On top of this, the Crown Commercial Service’s own guidance on direct awards suggests that the procedure is suitable only for low-value, low-volume commodity products. In the case of AWS, some of the contracts, such as the Home Office contract, top £100 million in value, so they cannot be considered low-volume or low-value, nor can cloud hosting be considered a commodity, given the proprietary nature of the service and the consequences of that.

If the Government are true to their word, they will accept these amendments to ensure that the balance is redressed and UK SMEs are given a chance to compete on a level playing field. I beg to move.

[Baroness Noakes (Con)]

My Lords, I have Amendment 236 in this group. It probes the relationship between direct contract awards and framework contracts.

Direct awards are allowed under Clause 40 if they satisfy one of the justifications in Schedule 5, paragraph 8 of which allows them if they are similar to existing contracts for goods and services that have been entered into in the previous five years and in which the initial tender set out the intention to use the direct award justification. My amendment would change those five years to four years, specifically to probe the differences between a repeat direct award under Clause 40 and an award under a framework contract, as covered in Chapter 4 of Part 3.

Clause 45 says that a framework contract has a maximum duration of four years other than for defence and utilities contracts. Doubtless this is my ignorance speaking but I hope that my noble friend the Minister can explain to me the rationale for allowing five years for direct awards under Chapter 3 as opposed to four years for framework contracts under Chapter 4. My question is pretty simple: is there a substantive distinction between direct awards and awards under framework contracts, where the justification for the direct award is in paragraph 8 of Schedule 5?

It seems to me that this is another example of how the designers of this new procurement system have lost sight of simplicity and underlying principles in designing the system. However, there may be a good reason for that, of course; I look forward to my noble friend the Minister explaining it.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I rise to speak briefly on Amendment 240 in particular, to which I would have attached my name had I noticed it in time. It is a pleasure to follow the noble Lord, Lord Clement-Jones. What he set out in terms of the problems of framework agreements are the kind of things we often encounter in the pages of Private Eye; it really is time that we saw some action on this issue.

Amendment 240

“is intended to prevent the future use of ‘VIP lanes’ for public contracts.”

I rather suspect that the nation out there, which is exhausted by politics, is probably not glued to your Lordships’ Grand Committee on the Procurement Bill this evening. I looked up the schedule: people are probably watching either “The Simpsons” or “Britain’s Parking Hell”. However, I know from what I get in my mailbag and what I see on social media that what happened during Covid with VIP lanes is a huge, continuing concern among large numbers of the British public. It was only last month that the Government were forced to admit that 50 firms had been put into the priority lane for test and trace contracts, worth billions. They included Immensa, a firm that was subsequently at the heart of more than 43,000 false negative results and had been incorporated only in May 2020. This came after the Good Law Project successfully challenged the Government’s VIP lane for personal protective equipment contracts.

So we have a situation where people are now looking at politics and saying, “We want to see things done differently”. This small, modest amendment would set a marker for achieving that; I feel that it deserves more attention both in this Room and outside it.

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[Baroness Noakes (Con)]

My Lords, I have several amendments in this group. The first is Amendment 264, a probing amendment to find out why standstill periods, which are generally required by Clause 49, are not required for light-touch contracts or those awarded in dynamic markets. My amendment would achieve this by deleting paragraphs (d) and (e) from Clause 49(3).

As my noble friend just explained, the standstill period is a short pause after the publication of the contract award notice in order to allow an agreed bidder the opportunity to complain about a contract before the contract is finalised. This is a sensible part of the framework because challenging a contract after it has commenced is much less effective and is best avoided. The purpose of my amendment is to ask my noble friend to say what public policy grounds would deprive unsuccessful bidders of the opportunity to challenge contract awards under the light-touch or dynamic market regimes. What specifically are the features of those regimes that are suitable to override the rights of unsuccessful bidders, compared with other contracts?

My next amendments, Amendments 477 to 480, would have the effect of ensuring that procurement oversight extends to all procurement covered by the Bill. Clause 96 allows for investigations into compliance with the Bill, but excludes government departments, Welsh Ministers, Northern Ireland departments and utilities from its scope. My simple question to my noble friend is: why? She cannot possibly tell me that these contracting authorities are such paragons of virtue when it comes to procurement that they would always comply with the Bill. Government departments do not have a perfect track record on procurement and, in my view, ought to be capable of being investigated.

My final amendment in this group, Amendment 482, concerns the recommendations that can be made following a Clause 96 investigation. Clause 97(3) says that these recommendations “must not relate to” how to comply with the procurement objectives set out in Clause 11; must not recommend how the contracting authority should have regard to the Section 12 national procurement policy statement; and must not say how the authority should

“exercise a discretion in relation to a particular procurement.”

I can just about understand the last one, because recommendations should not interfere with

“discretion in relation to a particular procurement”,

but I do not understand why recommendations have to steer clear of procurement objectives or the NPPS. What is the point of making recommendations if the heart of the procurement rules, to be found in Clauses 11 and 12, are off limits? For example, is value for money off limits in an investigation because it is an objective within Clause 11? I cannot understand why that should be excluded. My amendment is to delete subsection (3) on a probing basis, to give my noble friend the opportunity to explain what all this is about.

[Lord Fox (LD)]

My Lords, I speak in place of my noble friend Lord Wallace on Amendments 349A, 349B and 353A, all of which refer to and reflect on the procurement review unit. On page 13 of Transforming Public Procurement: Government Response to Consultation, at points 46 to 49, the Government say:

“We have revised the proposals for this new unit. It will be known as the Procurement Review Unit (PRU), sitting within the Cabinet Office and will be made up of a small team of civil servants.”


They go on to detail quite fully what the PRU is—I will come back to its role and autonomy in a minute—but where is it in the Bill? Amendment 349A seeks to replace “An appropriate authority” with the promised “Procurement Review Unit”. Amendment 349B would give a role for the procurement review unit to advise. More specifically, in Amendment 353A we seek the insertion of the nature of the procurement review unit.

All these amendments are trying to probe where the Government got to between the consultation and the drafting of this legislation, and why in effect there is no PRU in the Bill. What happened to it and who has got it? When the Minister no doubt notices and reinserts it on our behalf, what will its role and its level of autonomy be? How many teeth are the Government prepared to give this PRU, and will it essentially have those teeth drawn? Essentially, where is it?