Procurement Bill [HL]

Debate between Lord True and Baroness Worthington

Committee stage
Wednesday 13th July 2022 Grand Committee

[Baroness Worthington (CB)]

Sorry to interrupt, but just to clarify, it seems to me that the reference to “maximising public benefit” in the Bill is completely and utterly superfluous and has no meaning. The Minister’s response has further confirmed that the only criteria that can really be taken into account are value for money and cost. We will need to return to this at Report, because it now seems very clear that this is not an accident or some kind of desire for flexibility; it is really saying that there is only one thing that counts, and that is cost—and in the short term.

[Lord True (Con)]

I respectfully disagree with the noble Baroness. It is acknowledged from the other side that value for money is an extremely important criterion. It is one of the things in Clause 11. We have discussed mechanisms and we have had discussions about the national procurement policy statement, wherein, in the draft on the table, lie large numbers of things which the noble Baroness is seeking. It is frankly not the case to say that there is nothing in here other than value for money—that is not the Government’s submission to your Lordships. The Bill takes forward the change from the use of the term “most economically advantageous tender”, MEAT, to “most advantageous tender”, MAT. That is to reinforce the precise message that procurers can take a broader view of value for money than simply lowest price. We believe that the amendment tabled by the noble Baroness is not necessary.

Amendment 129A, in the name of the noble Lord, Lord Aberdare, would make it explicit in the Bill that contracting authorities must always include an objective mechanism for determining price or cost after contract award where and to the extent that value for money, but not price or cost, is evaluated when assessing which tender is the most advantageous. We believe that commercial practice and other provisions in the Bill mean that this amendment is unnecessary. It would be highly unusual for contracting authorities not to include an evaluation of price or cost when assessing value for money in their procurements. This is good commercial sense.

Further, contracting authorities are not free to act unbounded. The procurement objectives, including those in Clause 11, will apply. I do not think it is necessary to expressly legislate for it. We will, however, publish guidance to contracting authorities on evaluation. The noble Lord may well ask me when the guidance is to be published. He also asked how we can be sure that that guidance will bite further. It may be that I can come forward with further information after Committee.

I am sorry, I have been given a long speech—

Procurement Bill [HL]

Debate between Lord True and Baroness Worthington

Committee stage
Wednesday 6th July 2022 Grand Committee

[Lord True (Con)]

My Lords, I think the noble Lord makes a slightly different point. It is a point of concern, and we discussed it on the earlier group. I understand that how much is in secondary legislation and so on is a concern to noble Lords. When I talk about flexibility, I am talking about a structure that is simple and clear, and does not say, “Before you apply to procurement, you have to do a, b, c, d, e, f, g, h…”. We could probably use up the whole alphabet with the aspirations that we will hear in this Committee before anyone can get past the starting gate that we are discussing now. One needs to bear in mind the need for that sort of flexibility. That is the relative simplicity I am thinking about. However, time is late and I need to respond, not to the debate launched by the noble Lord opposite, but to the amendments.

My noble friend Lady Noakes came forward with a very thoughtful amendment, as always. There has been an outstanding debate, and I will want to study it in Hansard and reflect on everybody’s contributions. My noble friend had a very specific point in relation to estimation of cost and how services should be aggregated. Her probing amendment seeks to establish where the Government are coming from.

The proposed methodology in the Bill for estimating the value of contracts, which allows some flexibility, is very similar to the long-standing valuation rules in existing regulations and will therefore be helpful to procurers. Paragraph 4 of Schedule 3 contains an “anti-avoidance” provision that is designed to ensure that contracting authorities do not artificially subdivide procurements in order to evade the rules. This mirrors an analogous concept in the long-standing regulatory scheme but we think that it is presented in a simpler and more user-friendly way. It involves a general rule that contracting authorities should, where possible, seek to aggregate for the purposes of valuation but, as my noble friend said, it also permits exceptions where there are good reasons. Without the “good reasons” exception, the provision becomes something of a blunt instrument.

My noble friend asked for some examples so I will give one: an authority buying its printers from a particular supplier does not necessarily mean that it should buy all its toner, paper and servicing from the same supplier if it believes that it can get a better deal elsewhere. We believe that contracting authorities need to continue to have discretion not to aggregate where they have good reasons not to do so. I will look carefully at my noble friend’s point about the overall estimation of costs but we do not believe that it would be desirable to set out in legislation what constitutes a good reason because this will depend on the circumstances of each case. I request that this amendment be withdrawn.

Amendment 81, tabled by the noble Lord, Lord Wallace, seeks to add elements from the Government’s Sourcing Playbook as a new clause before Clause 14 to require contracting authorities to conduct a “delivery model assessment” when introducing “significant change” in their business model, helping to inform strategic decisions on insourcing and outsourcing. I agree with the noble Lord that rigorous assessment of contracting authorities’ plans is essential for good delivery. However, again, we have continuously sought throughout the development of the Bill to ensure that it remains flexible and does not unnecessarily stipulate blanket requirements, which tie contracting authorities down to a single process that adds unnecessary burdens or will not necessarily work in all cases. For example, “make or buy” decisions, which the noble Lord asked about, need to be considered carefully—indeed, our commercial guidance in playbooks includes comprehensive guidance on this—but, in our submission, it is not necessary for this to be mandated in legislation. Furthermore, large outsourcing contracts will obviously be scrutinised by departmental, Cabinet Office and Treasury controls to ensure value for money and successful delivery.

So we believe that these things should not be mandated by legislation and that this is already achieved through the development and implementation of the sourcing playbooks, which the noble Lord kindly drew our attention to and actually complimented very much with his desire to put them into primary legislation. I am grateful for his endorsement of those principles.

I turn to Amendment 82, tabled by the noble Lords, Lord Hunt of Kings Heath and Lord Aberdare. Some of the underlying arguments on this clause obviously touched on extremely important issues. The amendment proposes to amend Clause 14 to create a presumption that contracting authorities should publish a “planned procurement notice” unless there is good reason not to. Again, I agree that it is vital that the market—particularly certain aspects of it to which the noble Lord and others referred—is given sufficiently early warning of what contracting authorities intend to buy so that suppliers can gear up to deliver. This is particularly important for SMEs and charities, which were referred to by the noble Lord and others.

The Bill makes additional provision to this effect in Part 8. Contracting authorities with an annual procurement spend of more than £100 million will already be required to publish a “pipeline notice”, which will contain information about upcoming procurement with an estimated value of more than £2 million that the contracting authority plans to undertake in the reporting period. This will allow suppliers to see higher-value upcoming procurements and make a decision on whether they wish to bid.

However, contracting authorities should be left to determine where planned procurement notices are useful for lower-value contracts, owing to the potential burden. I will come back to charities. Contracting authorities are incentivised to make use of these notices through a reduction in the tendering period in circumstances in which they are properly issued. They will not necessarily be useful in all circumstances; as such, the Government are currently not of the view that it would be helpful to mandate their use, but I will reflect on what the noble Lord said.

Amendment 84, tabled and interestingly spoken to by my noble friend Lord Lansley, seeks to add to the purposes of “preliminary market engagement” in Clause 15(1). This includes,

“ascertaining how the tender notice may be expressed in terms of outcomes and”

KPIs

“for the purpose of minimising … processes”.

Focusing on the outcomes of the contract, as opposed to being too prescriptive on how these are achieved, is indeed a sensible reason for conducting preliminary engagement—I agree with my noble friend on that. Contracting authorities are encouraged to consider KPIs in their preliminary market engagement. For example, Clause 15(1)(c) includes

“preparing the tender notice and associated tender documents”.

I will look at the Bill against what my noble friend has said, but, as I have said, in some respects the Bill already provides for this and encourages the purpose that he has asked for in terms of Clause 15(1)(c) giving the purpose of preparing the tender notice and documents.

Amendments 85 and 87, tabled by the noble Baroness, Lady Worthington, and others, are important. They provide that, when undertaking “preliminary market engagement”, contracting authorities may engage with suppliers in relation to designing a procurement process that will maximise certain public goods and encourage innovation. I very much hear what noble Lords across the Committee have said about innovation, and I will certainly take that thought away. I think there would be a lot of understanding and support in government for that aspiration; innovative new entrant suppliers should be actively sought out.

We wish to promote and encourage contracting authorities to conduct preliminary market engagement. However, this engagement needs to be appropriate and related to the subsequent procurement. Imposing such an obligation on contracting authorities could have the counterproductive effect of disincentivising preliminary market engagement which, I am sure we all agree, would not be desirable.

[Baroness Worthington (CB)]

Just to clarify, Amendment 85 would not make a mandatory requirement; it simply places it under the “may” condition of Clause 15. Therefore, it does not materially change Clause 15 but just explicitly states that we are seeking this process to draw out innovation.

[Lord True (Con)]

I take the noble Baroness’s point and understand what she is saying. This takes me back to the opening remarks. We have doubts about the appropriateness of including wider policy objectives, such as those suggested in the noble Baroness’s amendment, in this piece of primary legislation. Each procurement is different, and what is appropriate, for example, for a large-scale infrastructure project, may not be appropriate for a smaller, price-driven transactional arrangement. The strategic priorities that a Government require contracting authorities to have regard to when carrying out their procurement functions are, therefore, better detailed in the national procurement policy statement—which we will debate later in Committee—than in primary legislation.

Amendment 88, tabled by my noble friend Lord Lansley, seeks to require contracting authorities to take into

“account … the size or experience of”

suppliers when determining whether the supplier’s involvement in preliminary market engagement has placed them at an unfair advantage and, therefore, whether they should be excluded from any subsequent procurement. Like other noble Lords who have spoken, my noble friend put forward a thought-provoking point. As I said earlier, I agree with the importance of building capacity among SMEs. We have seen an increase in spending on SMEs in recent years. Figures published last month show that government spending with small businesses rose to a record £19.3 billion in 2020-21—the highest since records began. We hope that the new procurement regime will make it simpler, quicker and cheaper for suppliers, including SMEs, charities and social enterprises, to bid for public sector contracts, and with lower barriers to entry to the market.