Procurement Bill [HL]

Baroness Noakes Excerpts

Committee stage
Wednesday 26th October 2022 Grand Committee

[Baroness Thornton (Lab)]

My Lords, my speech is a good way of following the excellent introduction to this group of amendments by the noble Lord, Lord Lansley. I start by thanking my noble friend Lady Hayman of Ullock for putting her name to Amendment 276A and the noble Baroness, Lady Bennett, and the noble Earl, Lord Devon, for putting their names to both Amendments 269A and 276A.

As the noble Lord, Lord Lansley, said, Amendment 269A is dealing with the key performance indicators, and it adds a line that I hope the Minister will find useful:

“including at least one indicator in relation to social value.”

This would mean that all public sector contracts over £2 million would have to include a key performance indicator on social value. This would ensure that social values are included in all public sector contracts over £2 million and would send a clear signal to the private sector in particular. It would also ensure—similar to Amendment 477A, which we discussed on Monday—that contracts with social value commitments are monitored effectively and transparently.

Amendment 276A concerns transparency and “open book accounting”. It would insert a proposed new clause that I hope the Minister will see as helpful, given that she has spoken already in Committee about transparency and its importance in the spending of public funding. It says:

“All suppliers bidding for public contracts must declare the expected profit and surplus they expect to generate through the contract.”


In childcare, for example, the top 10 providers have made £300 million in profit, despite the standards of care falling and local authority budgets being under such pressure. We know this because the newspapers have reported on the conditions in which we have found cared-for children. During Covid, when we had PPE, a number of companies were making significant profits from these contracts without the need to report to the contract what margin they were prepared to make. I believe that this prevented the state adequately protecting our public money.

This amendment would mean that, on all government contracts, the supplier would have to report what profit or surplus they were expected to generate from the contract and then report back each financial year on how much profit or surplus they had generated—although I do not believe that this would solve the problem of people charging the state too much money for goods and services, and there is still a risk that companies could cost-shift artificially to reduce their declared profits. This may well leave the taxpayer in a better position to understand the true costs of contracts and would advantage providers such as social enterprises and SMEs, which are more likely to be investing the money received from contracts back into their businesses than extracting public money as profit. That is an important point because charities and social enterprises are bound by their rules to complete their accounting in two or three ways, which would include the social value of the contracts they are fulfilling.

[Baroness Noakes (Con)]

My Lords, I have tabled Amendment 271 in this group. At the request of my noble friend Lord Moylan, and with the leave of the Committee, I will also speak to Amendment 486 as my noble friend is unable to join us today.

This Bill is of course about the procurement process, rather than contract management, but Clause 50 wisely requires the setting and publication of performance indicators, which are a key element of contract management. I was always taught that what gets measured gets managed. I cannot envisage a situation where contracts could be managed without some form of measurement that could be converted into performance indicators. Amendment 271 in my name leaves out Clause 50(2), because that allows the contracting authority not to set performance indicators if it considers that

“performance under the contract could not appropriately be assessed by reference to key performance indicators.”

Clause 50(2) is fundamentally unsound because it is tantamount to saying that the contracting authority cannot manage its contract.

There are some kinds of contract—for example, the delivery of health and social care services—where measurement may rely on subjective judgments by the service recipient, but they too can be converted into indicators. I disagree with my noble friend Lord Lansley, who seemed not to like subjective performance indicators; I think they are a perfectly good part of any framework of contract management. Light-touch contracts are of course not covered by Clause 50, and that covers quite a lot of the contracts involving health and social care.

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This amendment suggests that the supplier is always best placed to maximise the public benefits of intellectual property rights. That is obviously not right, but we are making progress in this area, which I hope will satisfy my noble friend.

[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.

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The Palantir saga—this is only part of its NHS contracts; there are many more—shows that without specific conflict of interest rules, which the NHS just does not have, firms will be able to get a head start. I suspect that across the UK there are many other public bodies or agencies that will be required to follow the rules being set out in the Bill which may have the same arrangements. Leaving it to good fortune, or hoping that people believe in the ethics of conflicts of interest, is not good enough. That is why I support the amendments. In particular, if the Government are not prepared to accept them, we really need to consider whether Clauses 74, 75 and 76 should stand part of the Bill.

[Baroness Noakes (Con)]

My Lords, I have Amendments 415 and 419 in this group. In addition, I will speak to Amendment 417, which is in the name of my noble friend Lord Moylan but originated as an amendment tabled by my noble friend the Minister.

Amendments 415 and 419 are somewhat narrower than the other amendments in the group, which the noble Lord, Lord Scriven, has spoken to. They simply probe how the Bill has been drafted in relation to the term “conflict of interest”. Under Clause 75 contracting authorities have a duty to mitigate conflicts of interest, and under Clause 76 they are required to carry out conflict assessments. In each case, the clauses define the term “conflict of interest” by reference to Clause 74. Under Clause 74(2), a conflict of interest exists if someone has a conflict of interest—hence the Bill basically says that the definition of a conflict of interest is that it is a conflict of interest, which is not entirely helpful.

While “interest” is defined in Clause 74, “conflict” is not. Clause 74 says who might have a conflict but not what a conflict actually is. Is it an objective test or can conflicts include subjective perception? Does it have to be an actual conflict or just a possible one? Clause 74 is no help whatever. Clauses 75 and 76 have tried to define “conflict of interest” by reference to Clause 74, but in doing so they have merely highlighted that there is no definition in that clause. I have not attempted to define the term myself as my amendments today are obviously probing ones, but some attention needs to be paid to the drafting.

Amendment 417 would delete Clause 76(4), which deals with conflict of interest assessments. Subsection (4) takes the contracting authorities into the realms of fantasy. They have to think about what they know that might cause “a reasonable person” wrongly to think that there are actual or potential conflicts of interest. It is often hard enough to identify the range of potential conflicts of interest; getting into the territory of trying to work out what a so-called “reasonable person” might wrongly think is a potential conflict of interest is mind-blowing.

Having worked out what this reasonable person wrongly thinks, the contracting authority must take steps to demonstrate that the imagined wrong thought by the imagined reasonable person does not in fact exist. This is beyond parody. For good measure, there is no definition of “reasonable person”. We do not know whether this reasonable person is assumed to have any knowledge of public procurement or the workings of contracting authorities. Those of us who live in the world of politics know that otherwise reasonable people often believe extraordinary things and their capacity for thinking extraordinary things wrongly is infinite.

I very much look forward to hearing how my noble friend the Minister will defend subsection (4).

[Baroness Bennett of Manor Castle (GP)]

My Lords, it is a great pleasure to follow the noble Baroness, Lady Noakes, and congratulate her on the first half of her contribution, which clearly identified a crucial problem that has undoubtedly been missed by numerous other eyes.

However, I entirely disagree with the second part of her contribution, which referred to Clause 76(4). I do not often find myself in the position of defending what is potentially the Government’s position—perhaps I am about to pre-empt entirely what the Minister is about to say—but subsection (4) says:

“If a contracting authority is aware of circumstances”.


It does not say, “We expect the contracting authority to be clairvoyant and know of every single circumstance where a reasonable person might”. We all know this. Think about local councils. Having been a local journalist on another continent, I think of a case where a large city authority kept commissioning a certain architect to do a whole series of projects. That ended up raising considerable public concern. If that is happening, noble Lords can see why it would make sense to pre-empt the explanation of why there is no conflict of interest and therefore no problem here. It is also worth pointing out that the amendment tabled by the noble Lord, Lord Moylan, said that this was a subjective judgment that would affect the letting of the contract. In fact, it would not; it just says that there must be details of the steps included. So I would defend Clause 76(4), if the Government feel that it needs to be defended.

Before I get to what I chiefly want to say, I want to apologise briefly. I attached my name to a number of amendments in the previous group; I meant to be here to speak to them but events unfortunately intervened and I could not be. I still stand behind them.

Coming to this group, I have attached my name to a number of amendments in various combinations of the names of the noble Lords, Lord Wallace of Saltaire and Lord Scriven, and the noble Baroness, Lady Brinton. As the noble Lord, Lord Scriven, clearly outlined—I will not go over the same ground—the Boardman review reported in May 2021, which has allowed plenty of time for this issue to be included in this Bill, despite all the hurry and rush that we know there has been around it. I would also point out something that the noble Lord did not say: when the Boardman report came out, the Government said, “We accept all of these recommendations”. If the Government have accepted them, they should surely be incorporated in this Bill.

I want to pick up on one amendment that I did not sign, although I would have had I noticed it: Amendment 413 in the name of the noble Lord, Lord Wallace of Saltaire, that

“a donation or loan of more than £7,500 to any political party in a calendar year”

should be declared. We are talking about transparency and trust. This is obviously a practical, simple step that would not be very hard to implement and would be well worth while.

Amendments 421 to 423 are about preventing undue influence. Like the noble Baroness, Lady Brinton, I shall concentrate on Amendment 423. There is huge public concern about the revolving door, and I note that my honourable friend in the other place, Caroline Lucas, has done a huge amount of work, dating back in Hansard to at least 2013, on the revolving door in the defence and energy sectors.

That concern is not restricted to the Green Party. I was just looking through some of the reports. In 2011, Transparency International UK issued a press release headed

“Revolving door between Government and business is ‘spinning out of control’”.

If it was spinning out of control in 2011, we are at jet engine speeds by this stage. In 2016, the Centre for Crime and Justice Studies, in a report entitled Redefining Corruption, said that the public want a ban on the revolving door. This amendment provides much less than a ban; it is a modest six months, and I am not altogether sure that it should not be longer, but there is certainly great public concern about this. In 2017, the Committee on Standards in Public Life expressed concern about the revolving door.

The noble Baroness, Lady Brinton, set out one disturbing case. Here is another. In 2020, We Own It highlighted the interaction between Serco and NHS Test and Trace, and the degree to which there has been a revolving door between Serco and the senior Civil Service, to the point where a former head of public affairs of Serco became a Health Minister—I am not sure how many Health Ministers back, but at some point, anyway.

Finally, we should not forget the Greensill scandal. Just look at the mess that arose in part because of a revolving door—indeed, in some cases people were stuck in the same door at the same time, apparently representing both private interests and public, government interests. The Advisory Committee on Business Appointments noted that there were thousands of potential cases, but initially looked at only 108. There is lots of discussion about limits to that committee’s power; it cannot possibly cover this issue. We must start from the other side of the contracts.

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[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.

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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.