Government Procurement Policy

Lord Hunt of Chesterton Excerpts

Thursday 24th November 2011 Lords Chamber

[Lord Hunt of Chesterton]

My Lords, I thank my noble friend Lord Sugar and the other speakers for their remarks about how government procurement needs to improve fast, first, to make government services more effective and, secondly, in order for the Government to support and stimulate UK industry, commerce, technology and medicine. It is important to note that procurement is the purchase not only of goods and services but increasingly of research, software and manpower. I declare an interest as a government scientific consultant and as director of a consulting company that is not growing, but that is deliberate. We are providing all sorts of information to companies that are growing. It is rather hard work, growing a company.

The key to the effective use of procurement to the development of industry, commerce and technology is for the Government to have long-term plans, as the noble Lord, Lord Palmer, has just pointed out, and to consider at the outset how they will be implemented in partnership between the private sector and relevant departments and agencies. In addition, the process of planning procurement should always think of the long-term export possibilities of the decisions, an aspect of policy that needs emphasising. Can the Minister give us some assurance that this aspect of procurement is now firmly on the government agenda? Furthermore, this should be part of the job description of departmental and agency managers. I used to be head of the Met Office. Of course, at no point in my job description was there anything to do with procurement efficiency or improving British industry, unlike that of my colleagues in other countries.

Procurement must also be at the highest standard internationally. Harold Wilson knew this when he initiated government programmes in the 1960s. He was perhaps the last technocrat in No. 10. He realised that it was absolutely vital to have advanced electronics. The transputer came from that. It was interesting to be on the House of Lords committee when we heard from, for example, the managing director of ARM—one of the most successful British software companies—that that came out of Harold Wilson’s programme on transputers.

Over the next decades, there will be huge investments, both in the UK and globally, in various areas, such as coastal defences, for which the Environment Agency is responsible, high-speed trains, carbon capture and storage, and innovative types of nuclear power. Will these investments lead to the greater competitiveness of UK companies? Only if the Government specify high standards and encourage innovative solutions.

The lack of funding for UK privatised and public laboratories—again, unlike what happens abroad—makes this more difficult. Already, other European and Asian countries in the areas that I just mentioned are raising the technical standards in these projects which the UK is not currently planning to follow. Therefore, these other countries will become more competitive in future. For example, the Netherlands is integrating coastal defences with coastal wind power. Norway’s work on carbon capture and storage has higher environmental standards than are planned for the UK. China has more than 600 engineers working on hybrid nuclear; we have a small company that is trying, with China, to begin in this area. In these areas, there will be world expertise in the UK, but it may not be used in the UK if we are not encouraging these advanced solutions.

The UK Government are still not publicising as vigorously as they might on their websites what they are sponsoring, particularly from contractors. In some cases, where there has been some advertising of advanced technology by the Cabinet Office, it is rather strange that the relevant UK companies have not been mentioned. Noble Lords may have heard the remark that I have mentioned before and which many companies in other countries have made that if any small company survives in the UK it must be jolly good.

I will just touch on the indirect aspects of government procurement, which has become increasingly important and has changed significantly since the 1960s. At that time, of course, Parliament regarded it as essential for all organisations in government to have their own very substantial research programmes. Parliament said that the electricity generating board should spend 10 per cent of its turnover on research—of course current electricity companies spend much less that that. I was privileged in the 1960s to work in the world-class Central Electricity Generating Board laboratories. Americans used to come and were amazed at the high-level research that was being conducted there. I was also, incidentally, branch secretary of the local trade union, the EPEA, which shows how these things go together.

The United Kingdom then looked like France, the United States and the Netherlands today, with their world-class government and industrial laboratories. What is to be done? The Government, instead of having their own laboratories, now have to rely on ad hoc advice from consultants and universities, neither of which have the experience of unbiased government experts. The Government need to have a very rigorous programme of using external advice to make their decisions. Of course, this should include international advice. For example, DfID, having eliminated its own natural resources lab—subsumed into the University of Greenwich—now funds much of its advice from centres in the United States or relies upon NGOs such as the ODI.

I hope that the Minister will explain how this procuring of expertise is managed so as to get the best advice about major procurement programmes and the business of government and regulations. One fears that a few big names are often used. I will give noble Lords a little story. When I was head of the Met Office, we asked a very large consultancy company—let us call it WP; you might imagine who that was—to advise the Met Office how to improve its financial controls, which it said would require the installation of a new system that would cost £1 million. On this basis, the Met Office then asked companies to say whether they would bid for this. The company said, “Oh no”, and that it would now cost £2 million. Fortunately, this was the 1990s and the Government had an excellent lab called DERA, the Defence Evaluation and Research Agency. We went down the road to them and we got the job done for half a million. Of course, DERA does not exist any more and doubtless you would have to go back to “WP” and get a very expensive answer.

I believe that we now need much more serious vigilance in real-time monitoring of such contracts, since we have moved to the present position.