Procurement Bill [HL]

Lord Hain Excerpts

Committee stage
Monday 18th July 2022 Grand Committee

[Baroness Stroud (Con)]

My Lords, I rise to introduce Amendment 353, tabled in my name and in the name of the noble Lords, Lord Alton and Lord Coaker, and the noble Baroness, Lady Smith, demonstrating cross-party support for this amendment. I also want to underline my gratitude to the Government for seriously engaging with this amendment to the Bill; I know that we share a desire to mitigate the two key risk areas in public procurement which this amendment covers, and I am grateful for their engagement.

Amendment 353 seeks to give the Government two things: first, it seeks to provide the tools to monitor and control the UK’s dependency on authoritarian states; and, secondly, it seeks to ensure a consistent approach to modern slavery across all government procurement. So let us look at how it seeks to monitor and control the UK’s dependency on authoritarian states first. Clause 1 places a burden on the Secretary of State to create regulations that reduce the dependency of public bodies on authoritarian states. There is no agreed definition of what constitutes an authoritarian state in UK law or regulation, therefore Clause 2 adopts the categorisations contained within the Integrated Review of Security, Defence, Development and Foreign Policy, allowing for the legislation to adapt to contemporary geopolitical developments in line with the latest iteration of the review. The countries this amendment would currently apply to as threats are Iran, Russia, North Korea, and, as a systemic competitor, China.

It should be noted that Clause 1 applies to all goods and services which originate in whole or in part in one of the named countries. The amendment is constructed to apply not solely to entire products but also to their constituent parts. So, for example, where a solar panel has been constructed in the UK but relies on polysilicon from another region of the world categorised as a threat or a systemic competitor, that solar panel would, therefore, be within scope of these regulations.

Clause 3 sets out what must be included in the regulations. So, proposed subsection (3)(a) provides for an annual review of dependency to be published by the Government, while proposed subsection (3)(b) requires the Government to define “dependency” and to establish acceptable levels of dependency across industries. Proposed subsection (3)(b) also seeks to appreciate that the risks associated with dependency vary across products and industries. For example, reliance on one region for semiconductors presents very different challenges for resilience from reliance on another region for PPE. So proposed subsection (3)(b) allows the Government the flexibility to take these nuances into account.

Yet the risks of economic dependency are not the only relevant matter here. The second part of this amendment, proposed new subsections (4) and (5), addresses a separate issue: the question of modern slavery in the supply chains of publicly procured goods. The presence of modern slavery in supply chains is clearly unacceptable. This has rightly been acknowledged by the Department of Health and Social Care, which has already taken steps in the Health and Care Act to eradicate from its supply chains goods which have been “tainted”—its word—by slavery. Proposed new subsection (4) adopts substantially the same language as Section 81 of the Health and Care Act, passed earlier this year. The requirement to bring regulations to, in the Department of Health and Social Care’s words, “eradicate” from public contracts goods and services “tainted” by slavery now stands as part of that Act.

When the Health and Care Act regulations are drawn up and passed, those procuring health equipment will have to apply different human rights standards from those procuring goods and services on behalf of other departments, as things currently stand. The main intention of this amendment is to ensure that the UK Government speak with one voice and apply these standards across government. It seems odd for us to be unwilling to procure goods from Xinjiang for the NHS but comfortable doing so for Defra. This is about correcting a loophole in the law and seems to be a matter of simple common sense.

In addition, paragraphs (d), (e) and (f) of proposed new subsection (5) provide improvements on the current modern slavery framework. I particularly commend to the Minister (5)(d), which will improve standards of disclosure and transparency by requiring firms to provide evidence and trace their full supply chain if necessary. Requiring public disclosure of supply chains will considerably improve compliance when compared with the current audit measurements. This is because it is difficult to conduct a credible audit in an authoritarian state. In this context, it is better to know where companies are sourcing from, rather than have an auditor who has no ability to get accurate information.

In conclusion, the two risk areas of economic dependency and modern-day slavery cut to the heart of our character as a nation. We want to stand as a beacon for liberal, democratic values around the world. To do this, we need to ensure we retain the autonomy to act in line with our values by reducing dependency on authoritarian states. We need to ensure that we are living consistently within our values by ensuring there is no modern slavery in our supply chains. The Department of Health and Social Care has shown the way; this amendment enables the rest of government to come into line.

[Lord Hain (Lab)]

My Lords, I commend the speech from the noble Baroness. It was compelling and I hope the Minister will find it so too. I wish to speak to Amendments 184 and 187 in my name and those of my noble friends Lord Hendy, Lady Wheatcroft and Lord Kerslake, to whom I am most grateful. These amendments grant Ministers the power to bar companies which have acted unlawfully or unethically from tendering for public contracts. It is hard to understand why that will not be acceptable to the Government.

The two amendments have the same objective but use different means. Amendment 184 requires a statutory instrument for Ministers to act to bar companies in that way, whereas Amendment 187 enables a quicker route but one that is capable of being challenged if any party considered that the Government had acted unjustifiably. As I say, it is hard to see why the noble Lord, Lord True, would not accept both amendments with acclamation.

It will come as no surprise to either him or many of your Lordships that the particular target I have in mind and which I am angry Ministers have been so shamefully slow and negligent about—despite the generous remarks about me from the noble Lord, Lord True, in the Chamber following a Question I asked, for which I am grateful and thank him—is Bain & Company. I first raised this scandal in your Lordships’ House nearly six months ago and have tried to get the Government to act on it by barring Bain from accessing public contracts.

It is a global brand and presents itself as reputable global consultancy operating right across the world. Bain has its second-largest office here in London, which has been awarded multimillion recent UK government contracts and has influence across our economy, so this company is particular to us. We should take account of the fact that in South Africa Bain purposefully assisted former President Jacob Zuma to organise his decade of barefaced looting and corruption, the company earning fees estimated at £l00 million or 2 billion rand from state institutions.

South Africa’s state capture commission, a judicial inquiry headed by Chief Justice Zondo, which recently concluded its work, and to which I gave written and oral evidence in November 2019, condemned Bain’s deliberate immobilising of the South African Revenue Service—SARS—as “unlawful”. So concerned is the commission with Bain’s illegal behaviour in the South African public sector that it has recommended that law enforcement authorities examine every public sector contract Bain has had, not just the SARS one, with a view to prosecution.

The Zondo report was devastating about Bain’s behaviour. The evidence,

“bears out the pattern of procurement corruption which has dominated the evidence heard by this Commission. These include … the collusion in the award of the contract between Bain and Mr Moyane”—

he was President Zuma’s crony put in to head SARS and effectively dismember it—

“the irregular use of confinement and condonation to avoid open competition, transparency and scrutiny … and the use of consultants to justify changes that were necessary to advance the capture of SARS.”

As expected there has been an upswell of civil society opposition to Bain’s continued presence in that country. Such public pressure recently forced Bain to withdraw from South Africa’s largest business association in disgrace.

These findings and events are devastating indictments of a company which operates at and influences the highest level of civil service and business around the world, including profitably from our own Government’s contracts for many years, and relies on the trust of its clients to deliver social and economic value.

Yet in South Africa, Bain used its expertise not to enhance the functioning of a world-renowned tax authority, as SARS was acknowledged to be, but to disable its ability to collect taxes and pursue tax evaders, some of them former President Zuma’s mates, all in the service of its corrupt paymasters. The very company which possessed the expertise to bolster South Africa’s defences against the ravages of state capture in fact weakened these defences and profited from it, yet this is the very company that works across our government and economy in the UK, influencing our public institutions and impacting millions of British lives.

Bain would have us believe that what happened in South Africa was the work of one rotten apple, but its South African office’s work was endorsed by leaders in London at the time and in its US headquarters in Boston, and many senior people currently working for Bain in London were in the South African business during the corrupt President Zuma era. Some of the very people who broke public procurement rules, colluded with Zuma and committed a “premeditated offensive” against SARS, as an earlier judicial commission described Bain’s actions, are now working in Bain’s London office through which it consults to our public institutions and businesses, including government departments.

We are not only dealing with the matter of to whom we pay taxpayers’ money, although that is a major issue; what should make us shudder is that we allow these people into the inner workings of our public institutions, including government departments. A company has demonstrated a propensity to act selfishly in its own commercial interest at the expense of public good. This is what Bain South Africa did, and it led to the devastation that followed. This is a warning to us all.

Given the scandalous collusion of Bain UK and Bain USA, I am asking that the UK Government and the US Government immediately suspend all public sector contracts with Bain and bar it from entering any new contracts. I wrote to the Prime Minister in February of this year requesting this, which resulted in Cabinet Office officials meeting with Bain. Subsequent to this meeting, the right honourable Jacob Rees-Mogg wrote to me in March this year and was clearly swayed by Bain’s superficial internal changes and repayment of only a tiny fraction of the fees that it had earned from South African public sector contracts in the corrupt Zuma era. Using weasel words, he assured me:

“The Cabinet Office continues to monitor the situation and will engage with Bain & Co again … to determine the most appropriate set of actions.”


To date, I have not heard anything about what has resulted from this monitoring or what set of actions has been determined. It sounds to me like Ministers are shelving any action, which is disgraceful if true, although I am encouraged that Mr Rees-Mogg has now invited me to meet him this Wednesday to discuss these matters.

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[Lord True (Con)]

My noble friend makes an important point. There are elements in here which are looking back and there are elements which are about the present. Legal issues are raised here, and it is important that I come to my noble friend and the Committee with a very specific definition and response to her question in relation to tax and finances.

Amendments 174 and 317 proposed by the noble Lord, Lord Mendelsohn, and Amendment 179 from the noble Baroness, Lady Hayman, seek to bring matters related to prompt payment performance into scope of the supplier exclusion regime. Prompt payment is important; it is lifeblood, in many cases, to small enterprises. The Government are committed to ensuring prompt payment of suppliers, and there are a number of ways in which the Bill does this. For example, 30-day payment terms will apply throughout the public sector supply chain, regardless of whether they are expressly written into the contract. In addition, payment performance can be assessed as part of the award criteria, providing it is proportionate and relevant to the contract.

The Government encourage suppliers to sign up to the Prompt Payment Code. However, we submit that requiring every potential bidder to become a signatory to the Prompt Payment Code is too onerous on some suppliers and would discourage them from bidding, undermining the ability of contracting authorities to achieve value for money.

The noble Lord, Lord Hain, with support from others, proposed Amendments 184 and 187, which seek powers for Ministers to exclude suppliers which have acted in any way unlawfully or unethically. The noble Lord was abundantly clear about what he had in mind when he spoke to his amendments, although he did not stop there; he made broader points about multinational behaviour which I also listened to and took in. We believe that, in the way the proposal is drafted, the threshold is too low for such a serious measure of acting in any way unlawfully or unethically. Exclusion should be reserved for suppliers which pose a serious risk to contracting authorities or the public. We believe that it is also appropriate that the decision to exclude suppliers falls in general to the contracting authority running a procurement.

However, the exclusion grounds cover unethical conduct. Any serious breach of ethical or professional standards applicable to a supplier is deemed to be professional misconduct, whether or not those standards are mandatory. The noble Lord will be pleased to know that professional misconduct is a ground where a debarment case could be made, as drafted in Schedule 7, paragraph 12(1), although I make it clear that I am not commenting on any individual case. As the noble Lord, Lord Hain, told the Committee, I understand that he is meeting my right honourable friend the Minister to discuss this issue. The review led by Cabinet Office officials into the case that he asked for—and indeed the Prime Minister instructed to be done—is now complete and is currently being considered by the Minister. Unfortunately, I cannot say any more at this stage.

[Lord Hain (Lab)]

I am grateful to the Minister. I will not detain the Committee, except to say that I find it hard to understand that a company that has clearly acted unlawfully, let alone unethically, in another country simply lines up with the rest for government tenders. I do not understand how that is consistent with honest business practice, let alone honest government practice.

[Lord True (Con)]

My Lords, the noble Lord made a strong case on this before. He has repeated it in a shorter version. I have told the Committee that the review has been conducted, as he—and the Prime Minister—asked. That is now complete, so let us see what happens. I cannot give any more detail because I simply do not know it as I stand here. The new debarment list will allow Ministers to debar suppliers in the most serious cases and therefore there is no need to make the additional provision.

Amendments 310, 318 and 322 tabled by the noble Baronesses, Lady Boycott and Lady Young, seek to add conviction of any environmental offence as a ground for mandatory exclusion. The mandatory grounds for exclusion are by nature a blunt instrument. They require the supplier to face exclusion from every public contract for five years, as my noble friend Lady Neville-Rolfe pointed out, unless and until the risk of the issues reoccurring has been addressed. For this reason, they are reserved for the most serious forms of misconduct.

The inclusion of environmental offences in the discretionary ground reflects the fact that, for offences where a range of misconduct may be involved, it may be appropriate to take into account factors such as the nature of the contract being tendered or the level of environmental harm caused, before deciding to exclude a supplier. There is guidance from the Environment Agency on what constitutes environmental harm.

The noble Baroness, Lady Hayman of Ullock, and the noble Lord, Lord Coaker, proposed Amendment 329, which seeks to introduce a discretionary exclusion ground where a supplier’s tender violates applicable obligations in the fields of environmental, social and labour law. I have already explained why we elected to narrow the exclusion ground relating to breaches of such law.