Procurement Bill [HL]

Debate between Lord Aberdare and Lord Hunt of Kings Heath

Committee stage
Wednesday 13th July 2022 Grand Committee

[Lord Aberdare (CB)]

My Lords, I have Amendment 71 in this group, which is a simple probing amendment seeking to understand why the Bill exempts contracting authorities from having regard to the national procurement policy statement for contracts involving frameworks or dynamic markets. I can find no explanation, in the Bill’s Explanatory Notes or elsewhere, why such arrangements should not be covered by the terms of the national policy statement, but perhaps the Minister will be able to give a simple answer.

A large number of construction-related public projects will be procured through frameworks and dynamic market contracts. A framework is an agreement with suppliers to establish terms governing contracts that may be awarded during the life of the agreement. The Government themselves acknowledge in the Cabinet Office’s Construction Playbook that framework agreements, as a means of longer-term strategic collaboration in construction, can provide the best medium through which procurement and contracting can deliver transformational improvements.

Last December, the Cabinet Office also published Constructing the Gold Standard: An Independent Review of Public Sector Construction Frameworks, based on an independent and objective review commissioned from Professor David Mosey of King’s College London. To quote the then Cabinet Office Minister:

“This review recognises the potential of frameworks as a powerful engine-room for implementing Construction Playbook policies that include strategic planning, integrated teams, continuous improvement and the delivery of better, safer, faster and greener project outcomes.”


The review states that the Civil Engineering Contractors Association

“identifies over 1,660 public sector construction frameworks procured between 2015 and 2019 with an aggregate value of up to £220 billion.”

Given that the national procurement policy statement will seek to define strategic priorities and set the parameters for better public procurement in line, I hope, with the gold standard prescribed by the review, why should contracting authorities be exempt from having regard to it in agreeing the terms of frameworks?

A similar question arises in relation to dynamic markets. At Second Reading, the Minister stated:

“The new concept of dynamic markets … is intended to provide greater opportunity for SMEs to join and win work in the course of a contracting period.”—[Official Report, 25/5/22; col. 929.]


Again, it is not clear to me why the terms of the national procurement policy statement should not also apply to dynamic markets—although I am quite prepared to believe that I may be missing something.

[Lord Hunt of Kings Heath (Lab)]

My Lords, I have several amendments in this group: Amendments 69, 70, 76 and 79. It was interesting to hear the comments from the noble Baroness, Lady Boycott, about hospital food. She may not know that I am president of the Hospital Caterers Association. I must come to its rescue: it does a fantastic job, given the budget it is given. What she may not know is that in the Health and Care Act there is a section which mandates Ministers to set standards for hospital food, following the hospital food review. The issue will be whether there is enough resource with which to fund the standards that Ministers will set. As part of this Bill, the noble Baroness might like to look at amending the Health and Care Act to ensure that there is consistency of approach, because she has made a very important point indeed.

We are continuing this debate about the relationship between the Bill and sustainability and environmental outcomes, and the Minister has been responding. His first response was at Second Reading, when he accepted that the Bill does not include any specific provisions on the target to achieve net-zero carbon emissions by 2050, but he went on to say that contracting authorities will be required to have regard to national and local priorities, as set out in the national procurement policy statement.

The problem is that the existing national procurement policy statement, published in June last year, is full of ambiguity. If I were a procurement director, I would find it very difficult to find my way through all these objectives, some of which are in a tension with each other. I think the Minister’s response will be, “Ah, but that’s the flexibility we want to give to public bodies to make their decisions themselves”. The problem is that in translating that you still come back to the point that the Government are not, at the end of the day, prepared to use procurement sufficiently to ensure the implementation of their sustainability and environmental policies.

Paragraph 10 of the national procurement policy statement sets out:

“Contracting authorities should have regard to the following national priorities in exercising their functions relating to procurement. The national priorities relate to social value; commercial and procurement delivery; and skills and capability for procurement.”


Additionally:

“All contracting authorities should consider the following national priority outcomes alongside any additional local priorities in their procurement activities: creating new businesses, new jobs and new skills; tackling climate change and reducing waste, and improving supplier diversity, innovation and resilience.”


Paragraph 11states:

“Achieving value for money in public procurement remains focused on securing from contractors the best mix of quality and effectiveness to deliver the requirements of the contract, for the least outlay over the period of use of the goods or services bought. But the Government wants to send a clear message that commercial and procurement teams across the public sector do not have to select the lowest price bid, and that in setting the procurement strategy, drafting the contract terms and evaluating tenders they can and should take a broad view of value or money that includes the improvement of social welfare or wellbeing, referred to in HM Treasury’s Green Book as social value.”


Paragraph 12 states that the award criteria can be incorporated

“for comparing final bids and scoring their relative quality, to encourage ways of working and operational delivery that achieve social, economic and environmental benefits”.

This includes tackling climate change and reducing waste; contributing to the UK Government’s legally binding target to reduce greenhouse gas emissions to net zero by 2050; reducing waste, improving resource efficiency and contributing to the move towards a circular economy; and identifying and prioritising opportunities in sustainable procurement to deliver additional environmental benefits, for example enhanced biodiversity, through the delivery of the contract.

Paragraph 13 makes it clear:

“Public procurement should be leveraged to support priority national and local outcomes for the public benefit. This Statement sets out the national priorities that all contracting authorities should have regard to in their procurement where it is relevant to the subject matter of the contract and it is proportionate to do so”.


But here is the rub. Paragraph 15 states:

“Taking additional social value benefits into account effectively is a balance with delivery of the core purpose of the contract. Contracting authorities should ensure that they do not ‘gold-plate’ contracts with additional requirements which could be met more easily and for better value outside of the contract compliance process, particularly where legislation has already determined that such provisions do not apply, for example by imposing requirements in the Equality Act 2010 on the private sector that are only meant to apply to the public sector”.


Paragraph 14 says:

“There should be a clear link from the development of strategies and business cases for programmes and projects through to procurement specifications and the assessment of quality when awarding contracts. This is in line with Green Book guidance which makes it clear that the procurement specification should come from the strategic and economic dimensions of a project’s business case, and that commercial experts should be involved in the development of the business case from the start”.


The question I would ask is this: if you were a finance director or a procurement director in the public sector, what would you make of it? One has to see this in the context of having been through a decade—in fact, longer than a decade—of austerity where short-term fixes are much more common than longer-term sustainability investments.

I turn to the NHS, where I have some experience, and where I could certainly point to some really good examples of sustainability policies. In theory the intent in the Bill, as I see it, is to place greater emphasis on wider value than lowest price. But what this ignores, certainly in the NHS context, is the financial and economic reality that exists on a day-by-day basis. In an environment where savings are demanded in-year and budgets set annually, the overpowering financial incentive is to achieve cost improvement programmes. These savings filter down through the NHS financial system and become a target for finance directors and procurement directors who generally report to the finance director. While I am sure that if we had some finance directors in front of us, they would say that they strive to focus on long-term value, this requires a less tangible and measurable saving than the fact that product A costs less than product B.

In an NHS environment that is financially driven, targeted and appraised for striving to deliver savings targets in-year, and where the most measurable saving is lowest price, it is clearly going to be challenging to move away from that. This experience is probably reflected across much of the public sector; indeed, other parts of the public sector would probably say that the NHS has had it easier. Those of us in the NHS would of course say, “That’s because we need more money”, but the fact is that if the NHS is finding it difficult, other sectors are going to find it very difficult indeed.

My amendments are simply aimed at seeing sustainable development principles incorporated within the national procurement policy statement and the Wales procurement policy statement. At the end of the day, there really is an issue here, is there not? Whatever procurement policy is set out, public authorities will have challenging decisions to make. My own view is that, because of the way in which this has been put together, and potential future national procurement policy statements, public bodies are going to be left with very ambiguous statements where they do not quite know what they are expected to do. The Minister says, “Ah, but that’s flexibility”. I say that it undermines the wider goals towards which our procurement policy should be driven.