Procurement Bill [HL]

Debate between Baroness Stroud and Baroness Neville-Rolfe

Committee stage
Monday 18th July 2022 Grand Committee

[Baroness Neville-Rolfe (Con)]

My Lords, I have listened to the debate and rise to address the Question that Schedules 6 and 7 be agreed. I am grateful for the support of my noble friend Lord Moylan, although he cannot be here today.

As the Committee knows, I speak from the perspective of someone who has worked in business and as a company secretary and a chair of the compliance committee in a British multinational business employing half a million people in several regions of the world, as well as in smaller for-profit and not-for-profit operations. I have also worked in government as a civil servant and a Minister. I worry intensely about the perverse effects of these provisions. My fear is that they will exclude good, dynamic and honest operators from contracts and serving the public good through procurement. Some firms and social enterprises could be put out of business. Many others, especially SMEs, will be persuaded to have nothing to do with procurement; and of course this Bill is immensely wide-ranging and covers at least £300 billion-worth of UK value added, including most utilities, which I have argued against.

The lists in Schedules 6 and 7 are very wide. Some exclusions are entirely new compared to the EU law they replace. Others have been promoted from the discretionary category to become mandatory. The new mandatory exclusions include corporate manslaughter, theft and fraud, and failure to co-operate. Schedule 6 also brings into the Bill offences in areas including money laundering and competition law, which are dealt with perfectly well in existing and separate regulations. There have also been several extensions to the grounds for discretionary exclusions; for example, a breach of contract, poor performance and “acting improperly in procurement”—goodness knows what that means.

I ask the Minister to think again about every new item and consider whether this gold-plating is justified, as I think it may be in the case, for example, of national security, assuming that is not covered in other regulations. Each and every firm and social enterprise will be involved in more red tape in having to verify compliance with every item across their organisation.

Clause 54, defining excluded suppliers, is key, so I want to play devil’s advocate. First, it gives contracting authorities a lot of discretion, so they can be difficult if they want to favour a particular bidder. Secondly, a mandatory exclusion applies to a supplier or an associated supplier, so compliance checks have to be spread into the nooks and crannies of their supply chains, over which prime suppliers have no direct control—that will help the French, by the way, who have more integrated supply chains. Finally, if there is a contravention such as a tragic manslaughter on a major building project, a theft or a fraud, a single conviction for modern slavery, or a tax or cartel offence a firm is pushed into settling by the regulators, that firm will then have to operate a tick-box system across all its operations to demonstrate in the words of Clause 54 that the circumstances giving rise to the application of the exclusion are not “likely to occur again”. How will they be able to do that?

Of course, I am against most of the evils listed in the schedules, but they do not need to be in this statute. In trying to do the job of the policemen, we risk seriously undermining the procurement sector and choking it with red tape. If we want to nationalise procurement, we should be more honest about it.

For large companies in many climes, compliance with these two schedules will be a nightmare, so they could decide not to bid and stick to non-public sector activities. Firms focused on procurement alone will be in constant fear of a contravention which will write off the value of their company, as they would be excluded from bidding in future, although officials reassured me that they would be allowed in again after five years.

This is not the public sector; a company cannot hang around for five years without any new business. I know from my own experience that small firms may be put off completely. We will see the loss of small suppliers to prisons, local authorities, transport systems and even defence, as we have already seen in the City and in housing because of complex regulation in financial services and delays in planning. Small firms do not have the risk capital needed to operate in such high-risk environments. This negative behavioural change is not costed in the impact assessment, although there is a brief non-monetised discussion on page 36. My concerns about Schedules 6 and 7 are not discussed at all; more unscrutinised guidance is suggested as the answer.

I feel that this is cross-compliance of the worst sort. It is inconsistent with a productive economy, and the people who will flourish will be lawyers and their counterparts in the public sector trying to apply these complex, wide-ranging regulations. I think that the schedules will have chilling effect. I ask my noble friend the Minister to look at both schedules again in the light of my comments on practicality, and devise arrangements that will avoid the perverse effects I have outlined.

As regards the other amendments, as I think I am speaking last, we had a good debate on small business last week, for which the noble Lord, Lord Mendelsohn, was sadly absent. I think we all agreed that it is an area that needs to be looked at again. However, for the reasons I have stated, I am a little nervous about a further exclusion to achieve the noble Lord’s objective, as proposed in Amendment 174, but we must come back to this issue.

As to further extending exclusions by SI, as proposed in Amendment 184, this is far too wide-ranging and vague, and could be abused. It could also cast yet a further chill on procurement by honest and good organisations and lead to retaliation against our own UK exporters. The more political we make procurement, the less vibrant the sector will be, hitting our growth and productivity, which already sadly lags behind that of many other countries. I hope that the noble Lord, Lord Hain, can find another way forward at his prospective meeting with the Minister of State.

My questions about compliance and resources also apply to Amendment 353, however well intentioned. I worry a bit that we are over-influenced by our experience on PPE, which was poor. However, we are now looking forward, of course, not backward. I am sorry to be critical.

In conclusion, there are many problems with this Bill. The easiest and best thing would be for it to be withdrawn, to look at the various points that have been made in recent days, and for the new Government to think again. In the meantime, I stand by the points that I have made as a practitioner.

[Baroness Stroud (Con)]

I just want to respond to my noble friend’s comments about Amendment 353 and underline a comment that my noble friend Lord Alton made. Actually, this is something that has already been done in the United States of America; there is already an Act that has been passed there. There has no chilling effect at all on government procurement. In fact, their Act is significantly stronger than anything we are proposing here. I ask my noble friend to be mindful of that. Companies are appreciating more and more being able to be confident and to tell their customers that they are in fact free of slavery in their supply chains.

[Baroness Neville-Rolfe (Con)]

The point is well made. I would be interested to know how long that Act has been in operation in the United States. One of the concerns I have had, looking at these various provisions in all their complexity, is that we are actually continuing relatively new EU requirements; they came into our law between 2014 and 2016 with a directive and a number of regulations. I am not clear to what extent they have been reviewed to be effective. You need them to be fair and effective, and you need to consider the people who are excluded as well as those who happily champion them—as one does if one works for a big multinational; I have worked for one. My comments are intended to encourage the Committee to look at the detail to ensure that perverse effects are minimised and excluded where they can be.