Procurement Bill [HL]

Lord Lansley Excerpts

Consideration of Commons amendments
Monday 11th September 2023 Lords Chamber

[The Minister of State, Cabinet Office (Baroness Neville-Rolfe) (Con)]

My Lords, in moving this Motion I will speak to Amendments 1, 4, 5, 81 and 82. I am very pleased to bring this important Bill back to the House today for consideration of amendments made in the other place. It is, I believe, a key Brexit dividend, making it possible for us to develop and implement our own procurement regime, which will be simpler, more transparent, better for small businesses and better able to meet the UK’s needs. I thank noble Lords on all sides of the House who contributed to the lengthy discussion on the original Bill, first introduced to this House in May last year.

In the other place, we made a number of important changes to the Bill, including a debarment appeals process, clarification of the City of London’s status under the Bill, at its request, and provisions to address trade disputes relating to procurement. Importantly, we also took significant steps to strengthen national security provisions in the Bill, creating a new mechanism that will allow us to protect public procurement from risky suppliers. We also committed to removing Chinese surveillance equipment from government departments’ sensitive sites and dedicating additional resources within the Cabinet Office to scrutinise suppliers for potential national security threats. It is now crucial that we take the Bill through to Royal Assent, so that we can implement its many useful provisions.

This first group of amendments focuses on procurement rules for healthcare services and the national procurement policy statement. They overturn amendments made to the Bill on Report in this House. Amendments 1, 81 and 82 are necessary to ensure the proper functioning of the Bill and the regulation of healthcare procurements. Engagement with the NHS has identified the requirement for a bespoke regime for healthcare services to drive the integration of healthcare and the development of better, more joined-up patient pathways through healthcare systems. This responds to the idiosyncrasies of the health system, as identified by those who work in it.

The forthcoming provider selection regime is a free-standing regulatory scheme of procurement rules which commissioners of healthcare services in the NHS and local government will follow when arranging healthcare services in their area. Parliament accepted this when passing the Health and Care Act 2022, which was debated for many days in this House. The DHSC published the results of its latest consultation in July and aims to lay the regulations in Parliament this Autumn. It would be incredibly unhelpful at this critical stage for both schemes, when both the healthcare regulations and the Procurement Bill are on the cusp of delivery, to start attempting to unpick it all. Doing so would add unacceptable and entirely avoidable costs and delays to both programmes for no tangible benefit.

Amendment 1 removes from the definition of a public authority in Clause 2(2)(a) the words “including the NHS”. This addition is unnecessary because it clearly meets the test for a public authority set out at Clause 2(a), which is that it is publicly funded. This is backed up by the fact that the relevant NHS bodies to be covered by this Bill as central government authorities are identified in draft regulations to be made under the power at Schedule 1(5). These regulations were consulted on over the summer and have been welcomed in this regard. Setting out the list of central government authorities in regulations is appropriate, as updates are needed from time to time as organisations inevitably change. Moreover, the NHS is not a single legal entity and does not have a clear meaning in law, so the naming of the NHS as a public authority in Clause 2 would have reduced clarity.

I turn now to Amendments 81 and 82. The version of what was then Clause 116 inserted on Report in this House needed to be removed and replaced with a provision that enables the DHSC to proceed with the provider selection regime. This is crucial for the reasons I have already set out, and I emphasise that this House will have the opportunity to scrutinise the new affirmative regulations when they are laid. I hope that I have been able to provide the noble Baroness, Lady Brinton, whose Motions 1A and 81A deal with these matters, with sufficient reassurances and that she will not press her amendments today.

Amendments 4 and 5 removed two amendments from Report stage in the Lords relating to the national procurement policy statement. These required that, prior to publishing an NPPS, the Minister must give due regard to a number of specified principles and mandated the inclusion of a number of priorities in the NPPS itself. In respect of the first amendment, the noble Baroness, Lady Hayman of Ullock, has subsequently tabled a modified version of it—in Motions 4A and 4B in lieu—which, as before, would require the Minister drafting the NPPS to have regard to a set of principles. The modification suggests a set of principles more in line with those we have already established in Clause 12, and I am happy to set out the Government’s stance on this issue now.

The Government recognise that these principles are important to procurement, which is why they are already reflected throughout the Bill. For example, value for money, integrity and maximising public benefit are set out as procurement objectives in Clause 12, which I have already mentioned. Contracting authorities must have regard to these when carrying out procurements, and transparency requirements already run throughout the Bill.

[Lord Lansley (Con)]

Before we proceed further in relation to Clause 12, will my noble friend confirm that the procurement objectives in Clause 12 relate to covered procurement only—that is, procurements that are in excess of the threshold—and therefore does not include exempt contracts, whereas the national procurement policy statement applies to all procurement?

[Baroness Neville-Rolfe (Con)]

If I may, I will come back to that when I have finished presenting. I did ask that question today; I do not think there is that much difference, but I will come back to my noble friend.

There are other specific requirements in the Bill that place obligations on contracting authorities regarding the fair treatment of suppliers and non-discrimination in decision-making. On value for money, I know there is concern from across the House that it is often interpreted to mean lowest cost. We have sought to address this through the move from most economically advantageous tender to most advantageous tender at Clause 19, which stakeholders tell us is a powerful signal in this regard.

Including a similar set of principles in respect of the NPPS risks creating duplication and confusion when we are looking to simplify the regime. However, while the NPPS should focus on the priorities of the Government of the day, many of them are already reflected in the current non-statutory NPPS introduced by this Government, and we have consistently demonstrated our commitment to them through measures such as the strengthening of social value policy following the collapse of Carillion and the procurement policy on carbon reduction introduced in 2021. In addition, the Public Services (Social Value) Act 2012 will continue to exist alongside the new regime established by the Bill. I hope that this will satisfy the noble Baroness.

The second amendment made by this House added a sub-section which required the inclusion of specific priorities in the national procurement policy statement relating to achieving targets set under the Climate Change Act 2008 and the Environment Act 2021, meeting the requirements set out in the Public Services (Social Value) Act 2012, promoting innovation among potential suppliers and minimising the incidence of fraud. I believe that these issues are already addressed in the Bill—for example, in Clause 12—or elsewhere outside of this legislation. For example, the Public Services (Social Value) Act 2012 requires contracting authorities to consider the economic, social and environmental well-being of an area when planning specified procurement, and there are additional obligations imposed by the Environment Act 2021. From 1 November 2023, Ministers will be under a statutory duty to have due regard to the environmental principles policy statement when making policy and will be subject to this duty when preparing the NPPS.

Finally, the scope and extent of the NPPS needs to be flexible, and these things should not be set in stone. Noble Lords have highlighted net zero, social value and innovation, but new challenges arise, such as the security threat from the Russia-Ukraine war. The Government of the day need to be able to respond to each major new challenge in an appropriate manner, without needing to change primary legislation. I beg to move.

Amendment to the Motion on Amendment 1

--- Later in debate ---

[Baroness Hayman of Ullock (Lab)]

My Lords, Amendment 4A in this group is in my name. My amendment in lieu would insert a number of priorities and principles into the Bill. I will be fairly brief because we discussed these issues at length both in Committee and on Report but we felt that they were important enough—and were considered important enough by noble Lords during those debates—to bring the amendment back once again.

My amendment asks that due regard be given to a number of priorities and principles. The first is “maximising public benefit”. Public benefit is mentioned in the Bill but we feel that it is too vague, which is why we want to pin it down more within another amendment. Maximising public benefit would include

“the achievement of social value, through the securing of environmental objectives”;

many noble Lords were concerned at the lack of environmental objectives in the Bill. It would also include

“promoting innovation amongst potential suppliers”.

We also think that it is important to have

“value for money, by having regard to the optimal whole-life blend of economy, efficiency and effectiveness that achieves the intended outcome of the business case”.

In our previous debates, the Minister spoke strongly about the importance of value for money, so I hope that she understands why the second part of our amendment is clearly important and would strengthen the Bill.

The next part of my amendment deals with transparency. We think that it is important that we act

“openly to underpin accountability for public money”,

tackle corruption and ensure that all procurement is fully effective in achieving this. We also think that good management should be in place in order to have proper integrity, prevent misconduct and exercise

“control in order to prevent fraud and corruption”.

Importantly, we have added in “fair treatment of suppliers”. I thank the Minister for her work on improving the Bill for small and medium-sized enterprises, but we feel that more could be done to ensure that

“decision-making is impartial and without conflict of interest”.

The final part of my amendment concerns non-discrimination—that is,

“ensuring that decision-making is not discriminatory”.

The reason why we have had such a debate about this matter is that the principles were originally in the Government’s Green Paper and were consulted on. Our concern is that those principles were then left out of the Bill even though the objectives were included. So, my amendment would bring those principles back into the Bill.

We believe that social and public value are important requirements for any contracting authority to consider in order, for example, to encourage anyone contracting to work with local suppliers; to encourage contractors to reduce their CO₂ emissions; to encourage the hiring of more apprentices; and to encourage greater diversity. We believe that, if the Government are to deliver their ambitions of levelling up and net zero, it will be important to include these principles in the Bill. We know that social value is included in the national procurement policy statement—the Minister made much of the NPPS in our previous debates—but it is not referred to in the Bill. We also know that public benefit is mentioned in the Bill, but it is not clear to us how social value would sit within that framework. How will it all come together to ensure that it works for the public benefit? We know that the NPPS will include the Government’s strategic priorities but, again, we do not know clearly what those are. Further, the Bill does not mention innovation, which is why it is an important part of my amendment. As the noble Lord, Lord Lansley, said when we previously debated the Bill:

“When our current Prime Minister was Chancellor of the Exchequer, he put innovation at the forefront of his economic approach to improving productivity”.—[Official Report, 28/11/22; col. 1619.]


So why not include it in this Procurement Bill?

As the Minister said in her previous response to similar amendments, innovation and competition have an important part to play here. Procurement should be an enabler of innovation. It is important that there is clarity around these principles and objectives. How will innovation be part of it, for example? The Bill will shortly become legislation. We must revisit these concerns and we want to persuade the Minister to consider very carefully what we have been saying and why we are saying it. From her responses, we do not believe that at previous stages there was adequate explanation of how all this would operate. Good sentiment from the Government and the Minister, and promises around an NPPS we have not seen, are not sufficient to ensure that we have the best procurement legislation possible, which we all want to see. Our amendments would help achieve that end.

Sadly, the Minister has again disappointed me with her introduction on these issues, although I thank her for all the work she has done as we have progressed so far. It is my intention to move my amendment.

[Lord Lansley (Con)]

My Lords, I will contribute on Amendments 4A and 4B in particular. As noble Lords will recall, the structure of Amendment 4A, as an amendment in lieu of the Commons Amendment 4, incorporates to an extent some of the issues raised in the strategic priorities that your Lordships sent to the Commons to be included in the national procurement policy statement. I will explain how that works in a minute.

Like other noble Lords, I am grateful for the time and effort that my noble friend the Minister has given to listening to what we had to say. On Commons Amendment 5—which would get rid of the reference to “strategic priorities”—I was focused on innovation, as she knows. Innovation is essential to the quality and effectiveness of procurement. Also, public procurement is a substantial part of this country’s economic activity. If it promotes innovation, it can make a significant difference to our overall economic performance and to reconciling our productivity problems. The fact that, in the absence of Amendment 4, the Bill would make no reference to innovation is such an omission that, on those grounds alone, Amendment 4A should be added back to the Bill.

When we tabled our amendment, the noble Earl, Lord Devon, the noble Baroness, Lady Worthington, and I tried to ensure that the national procurement policy statement was clear about what we regarded as enduring strategic priorities. We have backed off from that. My noble friend and the Minister in the other place were clearly told that we must have maximum flexibility. I still do not understand why the Russian invasion of Ukraine might mean that public procurement in the United Kingdom should not have regard to social value; none the less, leaving that to one side for a moment, I accept that there is an ideological commitment in government to the idea that everything that government does must be so flexible that you cannot even predict some of the basic principles within it.

We have dropped the strategic priorities; we have made them principles. As the noble Baroness, Lady Hayman, rightly has it, we have moved from “must include” to “have regard to”. Therefore, Ministers are not constrained to include in the statement innovation, the achievement of social value, the achievement of environmental objectives or, for that matter, transparency, integrity, fair treatment, non-discrimination and value for money. However, the idea that any of these things would be left out of a national procurement policy statement is wholly unacceptable.

I come back to the essential question: what are we trying to do? We are trying to set the framework for contracting authorities to undertake public procurement. From our point of view, the statement should include whatever the Government think it should include but it should not exclude such basic central principles of public procurement. We have only to ask ourselves what conclusion we would draw if the Government were to send a draft of an NPPS to Parliament which left these things out. In my view, we would have to reject it. What is the benefit of that? Better to put it in the Bill now, make it clear to Ministers and, frankly, officials, that it should be in the statement so that, when the draft of the NPPS comes, we can tick the box, send it forward and approve it.

The noble Earl, Lord Devon, will add matters on social value. I just say that we may have left the EU public procurement regime but, when you look at the centrality of social value to public procurement in other jurisdictions across Europe, the idea that you would not seek social value through public procurement seems wholly unacceptable.

I was quite struck by the paucity of argument presented in Committee in the other place when our amendment to the Bill was deleted. In addition to:

“It needs to be as flexible as possible”,—[Official Report, Commons, 31/1/23; col. 54.]


which was predictable, what irritated me especially, as my noble friend on the Front Bench is now aware, was that references to integrity, transparency and value for money are already in the Bill, in Clause 12. The Committee in the other place clearly paid no attention to the Bill in front of it, since Clause 12 relates to covered procurement. As we noticed in our debates in Committee, the national procurement policy statement is not confined to covered procurement. It extends to all procurement by government, though not including the NHS, which for these purposes seems to be excluded from “public authorities”, which is a curious definition in itself.

We knew that the NPPS was wider. The Committee at the other end seemed somehow to imagine that covered procurement was enough, but it excludes everything under about £112,000 in value. Therefore, many small procurements would not be affected by it. It simply is not acceptable. We need to go back and ask the Commons to think again about the exclusion of such central principles from the national procurement policy statement. It has been a long time coming back. We are nine months on from the point at which we sent the Bill to the Commons. We took some time getting it to the point that we did. Noble Lords will recall that on the first day in Committee we received 50 government amendments, this clever idea of covered procurement arising only at that point and not in the original draft of the Bill.

To make a final, acerbic comment, I find it somewhat astonishing that during the passage of the Bill the Government have been able to make many hundreds of amendments that they chose to make. At this stage, we are asking for only a small handful that the Lords want to make. The Government at this point might just bend and accept those amendments.

[The Earl of Devon (CB)]

My Lords, I regret that due to professional commitments I was unable to contribute as much as I would have liked to earlier stages of the Bill. However, I added my name to two amendments on Report, both of which focused on the importance of recognising social value in the development of the national procurement policy statement. I am grateful to the noble Lords who led on those amendments with such success—the noble Baronesses, Lady Hayman and Lady Worthington, and the noble Lords, Lord Coaker, Lord Fox and Lord Lansley—a truly cross-party team.

The recognition of social value now returns for our consideration with Amendments 4A and 4B. I am again grateful to the noble Baroness, Lady Hayman, for taking the lead and so succinctly gathering in one place the essential priorities and principles to which regard should be given. Chief among them from my perspective is public benefit through the achievement of social value.

I should at this stage disclose my membership of the APPG for Social Enterprise and explain that I was privileged to chair its inquiry into the performance of social enterprise during the dark days of the pandemic. The conclusions of that report were compelling, revealing without doubt that social enterprises—that is, enterprises committed to the delivery of social value alongside more commercial ambitions—performed considerably better during the pandemic than their competitors, be they charities or strictly commercial enterprises. Social enterprises were more resilient, lighter on their feet and more diverse in their employment and service delivery. They delivered a lot more of the smaller contracts—which, as the noble Lord, Lord Lansley, identified, would not be covered by Clause 12—and they performed better economically.

Where they performed much worse than their competition was in their ability to secure support and funding from local and central government through public procurement. We noted that this was a particular issue in England, as compared with Wales and Scotland, because in those jurisdictions social enterprises and social value are identified as priorities within their public procurement strategies. With this amendment we will achieve the same and ensure that the delivery of social value is a priority for government. I urge that it is supported.