Procurement Bill [HL]

Lord Aberdare Excerpts

Committee stage
Monday 11th July 2022 Grand Committee

[Baroness Scott of Bybrook (Con)]

I understand. We will make sure to get that guidance well before Report.

Amendments 33, 34 and 35, tabled by the noble Lords, Lord Wallace and Lord Lansley, and the noble Baroness, Lady Bennett, relate to Clause 8(4). This subsection identifies features that may constitute light-touch contracts and complements the regulation-making power to determine light-touch contracts in Clause 8(2). The noble Lord, Lord Wallace, included a probing amendment to delete Clause 8(4)(a). However, recognising that Clause 8(4) is an indicative list, the relevance of the provision is to identify that light-touch services are often unlikely to be of cross-border interest. I hope that that makes sense; if not, we can discuss it further.

This is still a useful identifying feature of light-touch contracts and helps readers of the legislation to understand why some contracts have light-touch rules. Set against subsections (4)(b) and (4)(c) of Clause 8, subsection (4)(a) identifies that the services are not exclusively domestic. We are content that Clause 8(4) is appropriate as drafted.

Amendment 34, proposed by the noble Lord, Lord Wallace, and the noble Baroness, Lady Bennett, requests an addition to Clause 8(4), which aims to ensure that local authorities, social enterprises, not-for-profit organisations, mutuals and charities are properly considered for such contracts. Similarly, Amendment 35, proposed by the noble Lord, Lord Lansley, has been put forward to include a consideration that

“the suppliers of such services consist of small and medium-sized enterprises and few larger enterprises.”

Clause 8(4) does not dictate how contracting authorities award light-touch contracts. We already have adequate provision in the Bill to support these groups to obtain public contracts—for example, reserved contracts, the introduction of a new user choice direct award ground, and maintaining significant flexibility to tailor award criteria for light-touch contracts. We think that we strike the right balance in the Bill by creating opportunities for these sectors while maintaining fair treatment of all suppliers in the awarding of public contracts.

Amendment 207, proposed by my noble friend Lady Noakes, would make the time limit at Clause 33(5) equal to the maximum duration for such a contract. The intention behind the change is to prevent a public sector mutual from being repeatedly awarded a contract for the same services by the same contracting authority.

It is not considered appropriate to align the time limit with the maximum duration permitted under the clause. It should be noted that there is no obligation on the contracting authority to award contracts that were run for the full five years’ duration allowed, or indeed that use the reserved contracts provision at all. In fact, stakeholder feedback indicated that the existing provision under the Public Contracts Regulations 2015 is underutilised due to its tight restrictions.

Public sector mutuals are usually organisations that have spun out from the public sector and most often deliver services to their local communities rather than nationally. It is therefore feasible that a reserved competition may result in a sole compliance tender, especially if the purpose of the contract is to provide services for the single local authority, which is likely often to be the case. If the restriction time limit were to match the maximum duration time limit, this could prevent the reserved competition from resulting in compliant tenders and require a new and unreserved competition to be run, which may not be in the best interests of the public.

The clause currently empowers the contracting authority to manage this risk when considering the procurement strategy, using its knowledge of the market and supported by guidance. If the time limits were to align, it would require more complex drafting of Clause 33 explicitly to enable this risk to be overcome within the time of restrictions. As I have said, if the restriction is too long, it may result in the reserved competition receiving no compliant tenders, given, I repeat, that public sector mutuals are usually organisations that have spun out from the public sector. Therefore, I respectfully request that these amendments are not pressed.

[Lord Aberdare (CB)]

I am somewhat baffled by subsection (4) of the light-touch contracts clause. The noble Baroness has rejected several suggestions that criteria might be added to it regarding what light-touch contracts might be used for, on the grounds that it already provides sufficient scope. There are three criteria in the clause and all that the clause says is that the authority must consider the extent to which they are met. Does that mean that they are good criteria or bad criteria? If a supplier is from outside the United Kingdom, does that mean that one should favour them or not? I find it completely baffling.

[Baroness Scott of Bybrook (Con)]

My Lords, it is up to the organisation that is procuring. That is exactly what we are saying; we are freeing up that procurement process.

--- Later in debate ---

[Lord Wigley (PC)]

My Lords, I am delighted to follow the noble Baroness. I support Amendment 38 moved by the noble Baroness, Lady Neville-Rolfe, and support very strongly the points that she and, more recently, the noble Baroness, Lady Noakes, have made. They relate to the pressing need to ensure that the burden on small businesses tendering for public contracts is addressed. This issue has arisen under other amendments, and I have no doubt that we need to get this nailed one way or another on Report. It is an important question.

We all draw on our experience. My experience, immediately before coming to the House of Lords after I had left elected politics, was when I chaired the board of Bangor University’s Bangor Business School. It related to the small business sector. These issues arose time after time. Some colleagues may be aware that way back, before entering full-time politics, I was involved in the manufacturing industry. I had two incarnations, the first of which was with large supernational companies, Ford, Mars and Hoover, when I was financial controller. Although those three corporations were not generally involved in public sector contracting, their approach to any question of contractual relationships was highly professional with relevant legal advice in-house and with the resources to buy in specialist advice when needed.

My second incarnation, which I undertook as a serving MP in the 1980s, was to chair a small company from its creation to when, after 11 years, it merged with a larger American-owned company to form a significant new entity employing 200 people at Llanberis in my constituency. We built—the hard way—the acorn from which that grew, raising our own capital locally and starting up by employing just one person full-time, an engineer to build automated diagnostic equipment for the medical sector.

In competing for contracts, we had to beat competitors that were much larger and with far greater resources and in-house expertise. A small company such as ours had a serious uphill struggle to compete on anything like a level playing field. We did so by being fleet of foot, resilient and flexible and by engaging proactively with potential customers. But it is unrealistic to expect SMEs to be in a position to compete on a level playing field with suppliers which have professional resources in depth. The danger is that such SMEs will be scared away from tendering for public sector contracts where the bureaucratic imposition is totally unreasonable for such small-scale operators.

In this context, the amendment is particularly relevant. If our company had not succeeded with the early contracts, we would not have grown to employ some 50 people, as we did at the point when the merger took place. Had we fallen by the wayside in that highly competitive situation, we would not now have the Siemens company that took over our successful company now employing more than 400 people at Llanberis, and with a further expansion a real possibility soon.

I support these amendments because I feel that there needs to be some mechanism written into the Bill to counterbalance the inevitable bureaucratic safety net which public sector bodies build with their procurement procedures. Providing some lower level of bureaucratic imposition on SMEs could make the difference between those companies, on the one hand, being suffocated out of the competitive arena by impositions that they cannot handle and, on the other hand, securing contracts which enable them, in the fullness of time, to grow, given the impact that that might have on our economy.

[Lord Aberdare (CB)]

My Lords, many of my amendments and those to which I have added my name relate to the issue of promoting greater access to public procurement for small businesses, but for whatever reason none of them has come up in this group, so I will just make two brief points.

First, I very much support all the amendments in this group. I wonder whether they will successfully address the large-supplier focus of procurement hitherto and whether they will be enough to bring in those much smaller suppliers, many of which could make a real impact on the provision of, for example, personal services at a local level but which are often excluded on the ground of having too small an income or no track record of delivering high-value contracts, even when the contracts that they want to deliver are far lower than that and they have delivered them at that level. So I suppose my question to the Minister is: how will the contracting authorities––local authorities or whatever—be dissuaded from imposing, or persuaded not to impose, thresholds and contract terms that actually deter or prevent some of those smaller enterprises from bidding? We have heard a lot about opening things up to small businesses, but unless you put restraints on the contracting authorities, those opportunities may not work.

Secondly, I very much welcome the amendment in the name of the noble Baroness, Lady Noakes, although it was spoken to first by the noble Baroness, Lady Brinton. It seems to me that one of the elements that is lacking from the Bill is any indication of how its provisions will be monitored and enforced. How will we know that it is working? I strongly support the review proposed in Amendment 534. Six years seems to be rather a long time to wait, but on the other hand this process will take time to work through.

Beyond that, I hope the Minister says something about how the Government intend to monitor the effect and impact of the Bill, specifically including whether it is actually succeeding in unleashing the energy, dynamism, innovation and entrepreneurship that come from smaller suppliers, and what mechanisms there might be to resolve the issue if it turns out that is not happening. I do not think we can rely on the courts, and certainly these small businesses do not have the will, resources or even time and energy to pursue issues such as this in court. So what mechanisms might the Government be able to use when the system does not seem to be working?