Procurement Bill [Lords]

Alex Burghart Excerpts

2nd reading
Monday 9th January 2023 Commons Chamber

[The Parliamentary Secretary, Cabinet Office (Alex Burghart)]

I warmly welcome the new hon. Member for City of Chester (Samantha Dixon). I could not help but notice that the Chamber filled up slightly when she was speaking—almost as though she was more popular than the subject under debate today. I genuinely enjoyed her speech; as a former history teacher, the only thing I was disappointed not to hear mentioned was a beautiful silver penny from the early 10th century, which seems to show the walls of Chester. It was issued, we think, by Alfred the Great’s daughter—another great woman who represented her city.

The Bill before us is a major and exciting piece of post-Brexit legislation. It is an opportunity for this country to take back control of its procurement regime to the advantage of our businesses, our authorities, our public services and our country. I must at the outset say some words of thanks to Lord Agnew, who was instrumental in seeing this legislation drafted in the first place, to my right hon. Friend the Member for North East Somerset (Mr Rees-Mogg), who played a fundamental role in ensuring it was prepared for the statute books, and to Baroness Neville-Rolfe and Lord True, who took the Bill through in the other place.

Despite some of the remarks made by Opposition Members, I also thank the Opposition for their constructive stance towards this legislation. It is important that we get this right. Enormous opportunities are there to be taken from this £300 billion-worth of public procurement. We on the Government side of the House can very much see how those advantages will be made.

As I have said, the Bill will replace the current bureaucratic and process-driven EU regime for public procurement by creating a simpler and more flexible commercial system that better meets our country’s needs while remaining compliant with our international obligations.

[John Spellar]

Will the Minister give way?

[Alex Burghart]

Oh, I would be delighted to.

[John Spellar]

I know that the Minister has to talk about Brexit and all the rest of it to please those on his Back Benches, but surely the real problem is not in Brussels but in Whitehall, with Ministers who will not get a grip of Whitehall and behave like every other European country by backing our own industry.

[Alex Burghart]

If the right hon. Gentleman had witnessed the consultation that was held on the legislation, he would see that the problem very much was in Brussels. For a very long time now, authorities and businesses of all sizes in this country have been aware of the enormous limitations in the way in which EU procurement rules are set out. The Bill cuts through that.

[John Spellar]

No, it does not.

[Alex Burghart]

The right hon. Gentleman says that it does not, but the shadow spokeswoman, the right hon. Member for Ashton-under-Lyne (Angela Rayner), said at the start that it did and praised the fact that it was creating a single rulebook. This will make it easier for our authorities to procure decent services from people who will be able to provide better value for money and will be held to account better. I am very pleased that it is this Government who are bringing it forward.

Opening up public procurement to new entrants such as small businesses and social enterprises so that they can compete for public contracts is a major part of this work, as is embedding transparency throughout the commercial lifecycle so that the spending of taxpayers’ money can be properly scrutinised. The main benefits of the Bill have been reflected by hon. Members on both sides of the House, including my hon. Friend the Member for West Worcestershire (Harriett Baldwin). By delivering better value for money, supported by greater transparency and a bespoke approach to procurement, the Bill will provide greater flexibility for buyers to design their procurement process and create more opportunities to negotiate with suppliers. As my right hon. Friend the Member for North East Somerset said, that will drive better value for money.

As we slash red tape and drive innovation, more than 350 complicated and bureaucratic rules governing public spending in the EU will be removed. We are creating better and more sensible rules that will not only reduce costs for businesses in the public sector, but drive innovation. That will be at the heart of our work as we encourage authorities to publish pipelines that allow businesses of all sizes to prepare for contracts in new and interesting ways.

We will make it easier for people to do business with the public sector. The Bill will accelerate spending with small businesses. A new duty will require contracting authorities to consider SMEs, and will ensure that 30-day payment terms are made on a broader range of contracts.

We also intend to take tough action on underperforming suppliers. The Bill will put in place a new exclusions framework that will make it easier to exclude suppliers who have underperformed on other contracts. As has been mentioned a number of times, it will also create a new debarment register—accessible to all public sector organisations—that will list suppliers who must or may be excluded from contracts.

A number of hon. Members on both sides of the House have referred to the excellent work that has been done on the ProZorro service in Ukraine. I am pleased to be able to let the House know that Ukraine was on our advisory panel and has actually informed our work, and our single digital platform takes a lot from what Ukraine has done with ProZorro. The platform will enable everyone to have better access to public procurement data. Citizens will be able to scrutinise spending decisions, suppliers will be able to identify new opportunities to bid and collaborate, and buyers will be able to analyse the market and benchmark their performance against others on spending with SMEs, for example—better transparency; better for taxpayers.

[Nick Smith]

Will the Minister please tell us when his single digital platform will be ready for use by industry across our country?

[Alex Burghart]

The platform is based on a system that we already have. We are confident that we will be able to introduce it in line with bringing this Bill into force. Obviously, we have to pass the legislation and get Royal Assent, and then there will be a settling-in period. But it is going to be functional very soon.

We are also strengthening exclusion grounds. The Bill toughens the rules to combat modern slavery by allowing suppliers to be excluded when there is evidence of that, accepting that in some jurisdictions it is unlikely that a supplier would ever face conviction. My hon. Friend the Member for Totnes (Anthony Mangnall) made some important points on that score. It is absolutely right that we should be able to debar suppliers who have engaged in such dastardly crimes. It is too soon, however, to say exactly which suppliers are going to be debarred, but he has read the legislation and can see what the potential is. We will consider suppliers according to a prioritisation policy. Once on the list, suppliers will stay on it for up to five years unless they can show that they no longer pose a risk—these are the self-cleaning clauses. Any contracts awarded during an investigation can be terminated if the supplier is debarred. Safeguards are built into the grounds to stop suppliers from renaming themselves. I am happy to talk about those.

[Alicia Kearns]

I thank my hon. Friend for meeting me earlier today. It was enormously appreciated and I thank him for his time. How does he plan to overcome the risk of playing whack-a-mole—business after business being involved and MPs and others being relied on to flag them up? Will the procurement unit be proactive or will we instead focus on components and vulnerable sectors to ensure that we have the protections we need?

[Alex Burghart]

My hon. Friend raises an excellent point, which I was happy to discuss with her earlier. Obviously, the issue is under active consideration. In her speech, she also referenced debarment. I reassure her that the debarment provisions allow for proactive investigations into any supplier or subcontractor and that cases will be selected by the Minister for the Cabinet Office. Selections of cases will be governed by a robust prioritisation policy, which we will set out in due course. The debarment list will be publicly available for all contracting authorities to consult, demonstrating how transparency is at the heart of the Bill.

Value for money is a core component of what we are seeking to achieve. I assure the hon. Member for Birkenhead (Mick Whitley) that buyers will be able to give weight to bids that create jobs and opportunities for communities in the delivery of a contract, supporting and levelling up our objectives. Now that we have left the EU, central Government buyers can reserve competitions for contracts below certain thresholds for suppliers in the UK and/or SMEs and social enterprises only.

I am pushed for time, Madam Deputy Speaker, so allow me to draw my remarks to a close. This key legislation has been made possible only through our having left the European Union. It comes at a time when we have a need for a new procurement policy in this country. I say to the right hon. Member for Ashton-under-Lyne, who made a number of claims about PPE and VIP lanes, that the Bill provides strong safeguards to preserve the integrity of procurement. Equal treatment obligations require that all suppliers participating in the procurement must be treated the same. Additionally, any conflicts of interest should be identified for anyone acting for, or who has an influence on a decision made by or on behalf of, the contracting authority in relation to the procurement. If a conflict of interest puts a supplier at an unfair advantage and if steps to mitigate that cannot prevent that advantage, the supplier must be excluded. Furthermore, the direct award provisions have clear and narrow parameters for use. They include a new obligation to publish a transparency notice before making a direct award and maintain obligations to publish contract details once awarded.

This Government are absolutely committed to integrity, transparency, value for money and delivering for the British people. This Bill will make a difference to our procuring authorities, to our public services and to our taxpayers. It is good for our authorities, our taxpayers and our local communities, and it is good for our country. I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time.

PROCUREMENT BILL [LORDS] (PROGRAMME)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Procurement Bill [Lords]:

Committal

(1) The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 23 February 2023.

(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Consideration and Third Reading

(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.

(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

(6) Standing Order No. 83B (Programming Committees) shall not apply to proceedings on Consideration and Third Reading.

Other proceedings

(7) Any other proceedings on the Bill may be programmed.—(Andrew Stephenson.)

Question agreed to.

PROCUREMENT BILL [LORDS] (MONEY)

King’s recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Procurement Bill [Lords], it is expedient to authorise the payment out of money provided by Parliament of:

(a) any expenditure incurred under or by virtue of the Act by a person holding office under His Majesty or by a government department; and

(b) any increase attributable to the Act in the sums payable under or by virtue of any other Act out of money so provided.—(Andrew Stephenson.)

Question agreed to.

SUPPORTED HOUSING (REGULATORY OVERSIGHT) BILL (MONEY)

King’s recommendation signified.

Resolved,

That, for the purposes of any Act resulting from the Supported Housing (Regulatory Oversight) Bill, it is expedient to authorise the payment out of money provided by Parliament of any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(Andrew Stephenson.)

Procurement Bill [ Lords ] (First sitting)

Alex Burghart Excerpts

Committee stage
Tuesday 31st January 2023 Public Bill Committees

[The Chair]

Copies of written evidence that the Committee receives will be circulated to Members by email and published on the Bill website.

Clause 1

Procurement and covered procurement

Question proposed, That the clause stand part of the Bill.

[The Parliamentary Secretary, Cabinet Office (Alex Burghart)]

It is a pleasure to serve under your chairmanship, Mr Mundell, and with all hon. Members on both sides of the Committee. This is a significant piece of legislation in this Parliament, and a substantial one. We have 124 clauses in 13 parts with 11 schedules to discuss in 12 sessions, and I look forward to sharing them all with hon. Members present.

Clause 1(1) sets out the technical definitions of “procurement” and “covered procurement”. Covered procurement means those procurements that are covered by the majority of the provisions in the Bill. They are mostly procurements by contracting authorities above the relevant thresholds for goods, services and works that are not exempted from the Bill.

However, the Bill does cover some aspects of procurements that go beyond that. That is why we have a wider definition of procurement, which means any procurement. That allows the Bill to make some limited provision in relation to matters such as below-threshold procurements, and procurements in accordance with certain international rules or certain treaties. For example, the provisions in part 6 of the Bill regulate certain procurements that are of a lower value than the thresholds set in schedule 1 but are none the less subject to some regulation under the Bill.

Subsection (2) makes it clear that the term “procurement” —and, by extension, “covered procurement”—includes all steps taken in the contract award, as well as the management of a contract, up to and including termination. Subsections (3) and (4) make it clear that references to procurement and covered procurement also apply where contracting authorities conduct joint procurement and procurement by a centralised procurement authority for the benefit of other contracting authorities.

[Florence Eshalomi (Vauxhall) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Mr Mundell. I start by paying tribute to Sarah, Christopher and Huw in the Public Bill Office for all their hard work in going through over 100 amendments tabled for Committee stage. I also thank the Minister for his opening remarks.

We have been clear that we want to work constructively with the Government to get the Bill into as good a state as possible. We all want procurement to work for British people, inspire confidence in the system and offer genuine value for money. I hope that the Minister will consider our amendments on their merits, as genuine attempts to get the Bill into as good a place as possible.

As we know, the Bill began its life in the Lords and underwent significant changes before reaching this place. While we expected the Government to table amendments to their own Bill—especially given that, sadly, we have seen four Chancellors of the Duchy of Lancaster since the Bill’s introduction in the Lords on 11 May 2022—I have to say that the scale of change between the Bill as drafted and the Bill before us today does not inspire confidence that what we end up with will be without significant loopholes. Even as we start Committee stage today, the Minister has put his name to 71 amendments. That is a noticeable number, following on from the hundreds we had in the other place. Of course, we welcome changes that bring the Bill into a more workable state, but if we are having to amend it on such a scale with just one stage of parliamentary scrutiny left, we cannot have much confidence that the end product will not be riddled with errors and inconsistencies that have gone unfixed.

When we are talking about a third of public spending and the livelihoods of countless workers rely on us getting this right, it is disappointing that the Government introduced a Bill that still clearly needs significant work in Committee and on Report. I know that several of the amendments have come as a result of the ministerial merry-go-round that the Government have subjected us to over the past year. We broadly welcome those changes, particularly in relation to the increased consideration of small and medium-sized enterprises within the Bill.

[Florence Eshalomi]

I thank the hon. Lady for that point. It is so important, because we have seen what can happen when we do not get procurement right. We all know the impact it has on our local communities; we all have small businesses and organisations in our communities that are good at handling and dealing with public contracts but never get a look in. The fact that so many really good amendments were tabled in the other place but not taken up by the Government is quite disappointing.

What businesses ask us for is certainty, especially during these difficult economic times, but the mess the Government have made of the Bill does nothing but offer more confusion to the many businesses who rely on procurement. The Bill today is vastly different from the Bill introduced in the Lords, but it is also different from the Bill promised in the Government’s Green and White Papers and—who knows?—it may be vastly different from the Bill that ends up on the statute book. That does not scream strong and stable from this Government, and it is unacceptable when public services and livelihoods are on the line.

I am sure we will hear warm words from the Government that many of the amendments we discuss in Committee are unnecessary as they plan to address them in the national procurement policy statement. But how can the Government ask us, businesses and the people who rely on procurement for the day-to-day running of the country to trust them on their word after the year of chaos and uncertainty they have subjected us to, not least in the state of the Bill?

Even this first clause had to be forced in by the Government in the other place due to confusion in the Bill originally introduced to the Lords. Labour did not oppose the introduction of clause 1, which narrows down the definition of procurement to cover public contracts, and we will not oppose it today. We understand why the definition has been included—to distinguish between the specified procurements and other general procurements, particularly as we know that certain procurements that are not meant to be caught by the full framework of this legislation are no longer automatically included. We also agree with the need to familiarise our language in respect of the World Trade Organisation’s agreement on Government procurement, which the United Kingdom became a part of on 1 January 2021.

However, I share some of the concerns expressed by Lord Coaker in the other place about the use of the term “procurement” in the Bill. In particular, amendment 34 moved in the other place took non-covered procurement outside the remit of procurement objectives. I understand why that is necessary for the purpose of the Bill, but I would like to think that all procurement, covered or not, is carried out along the principles of value for money, integrity and maximising public benefit. However, I read carefully the explanation from Baroness Neville-Rolfe in the other place and found her explanation convincing enough to not table an amendment on the issue.

[Alex Burghart]

I thank the Opposition for their support for the clause.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Contracting authorities

[Alex Burghart]

I beg to move amendment 27, in clause 2, page 2, line 13, leave out “including the NHS”.

This amendment would remove the specific reference to the NHS because the NHS falls within the definition of “public authority” regardless.

[The Chair]

With this it will be convenient to discuss the following:

Clause 116 stand part.

Government new clause 13—Power to disapply this Act in relation to procurement by NHS in England.

[Alex Burghart]

Amendment 27 and new clause 13 are necessary to address amendments made in the other place that would, if left, be problematic to the proper functioning of the Bill and to healthcare procurements.

First, it is necessary to remove from the definition of a public authority in clause 2(2)(a) the words “including the NHS”. We fully sympathise with the desire to mention that NHS bodies are contracting authorities—they absolutely are—but it is neither necessary nor helpful to make this addition, for a number of reasons. The NHS is not a single legal entity and does not have a clear meaning in law, so the inclusion of those words would create uncertainty and may have the effect of excluding bodies that are intended to be within it or unintentionally including bodies.

[Kirsty Blackman]

Will the Minister give us some examples of bodies that could be included or excluded by the continued inclusion of those words?

[Alex Burghart]

I am delighted by the hon. Lady’s enthusiasm to hear my next paragraph.

The relevant NHS bodies that are covered by the Bill will be specifically identified in regulations made under the power in schedule 1(5). This is exactly the same approach as under our existing procurement regulations, which is appropriate and helpful as it enables the list of central Government authorities to be updated from time to time as organisations change. There is absolutely no doubt that NHS trusts and various other NHS bodies are contracting authorities. This is because they clearly meet the test for a public authority set out in clause 2(2)(a), which is that they are publicly funded. That test is how we determine whether an entity is a public authority.

Clause 116, which was inserted in the other place, needs to be removed and replaced with the original clause. As it stands, the clause would delete the power agreed by Parliament in the Health and Care Act 2022 for the Department of Health and Social Care to make healthcare procurement regulations that are appropriate for patient care—otherwise known as the provider selection regime. NHS England and the Government have consulted extensively on proposals for the provider selection regime since 2021, and it has received strong support from health and care stakeholders.

The 2022 Act and the powers within it were approved by Parliament and received Royal Assent as recently as April 2022. Parliament recognised then that the procurement of healthcare services provided to patients is a special case and would benefit from procurement rules that would allow for the further integration of services and more joined-up care for patients. The provider selection regime is designed to support the reforms made by the 2022 Act by having flexible and robust procurement rules to support greater collaboration and integration in the NHS.

If clause 116 remains unamended, DHSC will be unable to proceed with its plans to foster the greater integration of healthcare services that better serve patients. If this power is not reinstated, procurement for NHS healthcare services will end up with a confusing scheme of double regulation under the Department of Health and Social Care’s healthcare procurement regulations and under this Bill. It is also likely to lead to greater competition and less collaboration for those healthcare services. I am working closely with colleagues in DHSC to ensure that the provider selection regime is compatible with, and not used to circumvent, the procurement obligations in the Bill, which properly apply to much of the NHS procurement landscape. Parliament will have the opportunity to scrutinise the provider selection regime regulations through the affirmative procedure when they are laid by DHSC in due course.

New clause 13 provides a power for a Minister of the Crown to make regulations disapplying the Bill in relation to areas covered by healthcare procurement regulations made under section 12ZB of the National Health Service Act 2006, as inserted by section 79 of the Health and Care Act 2022. Hon. Members will recall from the debate on the Health and Care Act that a separate but interrelated process of reforms is under way for the procurement of certain healthcare services. Using the powers in that Act, DHSC is currently preparing regulations to govern its proposed provider selection regime, with the aim of improving collaboration in the sector and removing barriers to integrating care. The Bill, following enactment, will therefore need to be disapplied to the relevant extent to enable that scheme of regulations to exist and achieve its intended purpose.

[Florence Eshalomi]

Labour does not intend to oppose amendment 27, nor the Government’s changes through clause 116 and new clause 13. Although we of course want the NHS included in clause 2 and the scope of the Bill, I am satisfied by the Minister’s response and do not intend to vote against the Government’s amendments.

I wish to touch on some issues relating to clause 2, which I will raise now to avoid the need for a separate clause stand part debate. In some ways, the issues relate to the intentions behind the amendment in the other place. The term “public authority” by necessity covers a wide range of organisations, from central Government bodies to local councils to arm’s length bodies and NHS contracting authorities. The number of organisations that fall under the definition of

“(a) wholly or mainly funded out of public funds including the NHS, or

(b) subject to public authority oversight,”

is exceptionally broad. With such a broad definition, there are always likely to be organisations that function on the edge of being a public body. Therefore, doubt still exists over some organisations’ status as public bodies and whether they come under the scrutiny that the Bill hands down to public bodies. There are two important examples of a vast number of bodies where such ambiguity lies: in our housing and education systems.

There is consistent ambiguity about whether housing authorities are public bodies, and the definition has a significant impact on millions of households. The latest English housing survey statistics, released in December 2022, show that approximately 2.4 million dwellings in England were managed by housing associations in 2021. The Minister will be aware that previous questions about the status of housing associations have gone to court. In Weaver v. L&Q in 2009, the Court of Appeal said that, for the purpose of the Human Rights Act, housing associations are public bodies and susceptible to claims. The Office for National Statistics has also found it difficult to put its finger on the status of housing associations, and their classification moved from private to public in 2015 and then public to private in 2017 following the passage of Government legislation.

Obviously, the status of housing authorities and their management goes far beyond the intentions of this Bill. We did not table an amendment on the issue because we understand the greater implications that tabling an amendment of that nature would have created, but I urge the Minister to address the point and give clarity on the issue, so that public bodies and housing associations have a clearer picture of what to expect from the legislation.

--- Later in debate ---

[Kirsty Blackman]

Thank you for chairing this sitting, Mr Mundell, and I thank your fellow Chair, who will be responsible for overseeing us and ensuring that we behave ourselves, which I am sure we will. I appreciate the opportunity to take part in the Committee and look forward to positive discussions about improving the Bill. I am not terribly hopeful that the Government will listen to much of what we say, but I hope they will listen even if they do not necessarily take it on board. In previous Bills, the Government tabled amendments that we had tabled. I hope the Minister will listen to some of what we say and that we can get clarity on some matters in response to our questions.

I want to make a couple of comments on the NHS. I am glad to hear the Minister’s confirmation that NHS trusts will definitely be included in the definition. It is good to have him say that in Committee, and it is helpful to the wider understanding of how the Government intend the Bill to work.

Let me comment on how procurement rules are intended to apply, and how the NHS and NHS trusts in England are moving. We need NHS reforms and NHS procurement reforms to result in two things: the best outcomes for patients and the best outcomes for people working in the NHS. Those two things are not mutually exclusive; they go hand in hand. If people have good terms and conditions, and pay that they can afford to live on, they will do a better job than if they are struggling to make ends meet and therefore worrying.

If decisions around NHS procurement are best for businesses—putting businesses’ interests first—those decisions will directly conflict with those other two aims. It may be that having some private-sector input is the best option in some situations, but it should never be the first port of call. We should run and manage the NHS so that we have fair pay and terms and conditions for people working in it, and the best possible outcomes for patients. We should outsource as a last resort. It will be interesting to see the further guidelines and the statutory instruments put forward by the Department of Health and Social Care in that regard.

It may seem odd that I am commenting on this issue, as an MP from Scotland whose NHS is entirely separate, but it has a significant impact on Scotland’s budget. How the NHS is funded in England gives rise to Barnett consequentials that allow the Scottish Government to fund the NHS in Scotland, so the less the Government are willing to spend on the NHS in England, the less the Scottish Government have to spend on our priorities, particularly in the NHS but also in other areas. I look forward to seeing the future statutory instruments and I will not oppose any of the suggestions under consideration.

[Alex Burghart]

Again, I thank the Opposition for their support for the amendments.

The hon. Member for Vauxhall asked an important question about housing associations. On the question of whether the definition of contracting authority includes housing associations, the proposed definition, as with its predecessor, does not address all individual bodies or categories of bodies explicitly. It is the same for multi-academy trusts. There are simply too many bodies that exist and that change over the course of time to address it that way. Rather, the definition uses a number of tests that determine whether a particular body is covered or not. As we go through the Bill line by line, we will come across those tests over and over again. Registered providers of social housing are included in our coverage schedules to the WTO Government procurement agreement under the indicative list of bodies that may be covered. The new definition aims to ensure consistency with those international commitments.

It is the case that under normal circumstances, simple oversight would not meet the test for management and control. However, in the case of registered providers of social housing, it is well understood and documented that the Regulator of Social Housing has more than simple oversight, carrying out regulatory activity that does meet this threshold—as under the existing regime as a body governed by public law. I reassure the hon. Lady that the Bill does not change that position.

I thank the hon. Member for Aberdeen North for her interest in the English NHS. We are also committed to having an excellent NHS that both supports the people who work in it and is free at point of use for all citizens.

Amendment 27 agreed to.

Clause 2, as amended, ordered to stand part of the Bill.

Clause 3

Public contracts

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to consider the following:

That schedule 1 be the First schedule to the Bill.

Government amendments 85 and 86.

Government motion to transfer paragraph 25 of schedule 2.

Government motion to transfer paragraphs 31 and 32 of schedule 2.

That schedule 2 be the Second schedule to the Bill.

[Alex Burghart]

We have already discussed how the majority of the Bill’s provisions cover the processes and procedures required of contracting authorities in relation to covered procurement. As that concept is based on the award, entry into and management of public contracts, it is necessary to be clear about what is meant by “public contracts”.

Clause 3 classifies three types of contracts that are public contracts and covered by the legislation. The first category is contracts for the supply of goods, services and works—provided those contracts are not subject to an exemption—that have an estimated value above an applicable threshold. The second category is frameworks—that is, contracts providing for the future award of other contracts, as defined more fully in clause 45—again provided that they are not exempt and have an estimated value above an applicable threshold. The third category is concession contracts—that is, contracts where part of the consideration lies in the rights to exploit the works or services as defined more fully in clause 8—again provided they are not exempt and have an estimated value above an applicable threshold.

Schedule 2 sets out the types of contracts for which the contracting authority does not need to apply the rules in the Bill for the contract award procedure because it is exempted from the procurement rules. Where exemptions apply only to part of a public contract—that is, the contract contains both exempt and non-exempt elements—the reasonableness test in paragraph 1(2) of the schedule will prevent the contract from being exempted if the main purpose of the contract could reasonably be separated and supplied under a different contract, and that main-purpose contract would not fall under one of the exemptions in schedule 2.

We have tabled an amendment to split schedule 2 into two parts, following consultation with bodies including the Local Government Association, which was very supportive of doing so. Part 1 will be for exemptions based on the relationship with the other party, where the contract will always be exempt if the relationship conditions are met, and part 2 will be for exemptions for specific goods and services. The reasonableness test will apply only to part 2. The Bill broadly maintains the exemptions available in current domestic procurement law, but simplifies how those exemptions are framed and ensures that the terminology used reflects domestic law.

The exemptions ensure that contracting authorities have the freedom to carry out the most appropriate procurement where the rules in the Bill would otherwise be unsuitable. Contracting authorities can also exempt a procurement from the Bill where the contracting authority determines that doing so is in the interests of national security—that power is available to all contracting authorities. National security interests can include where a procurement is too sensitive to advertise, or where the UK’s national security requires a UK capability. As is usual in legislation, national security is not defined in the Bill, in order to ensure that it is sufficiently flexible to protect the UK’s national security interests.

Defence and security contracts are exempt where local contracting is required where the armed forces are deployed or maintain a military presence in another state. Operational requirements mean that contracts need to be placed with local suppliers for speed of acquisition. That often makes it impractical and inefficient to place contracts with suppliers outside of the state in which the armed forces are deployed. Sometimes, the state requires local contracting as part of the conditions for the presence of the armed forces.

Schedule 2 also exempts defence and security contracts under international agreements. That covers Government-to-Government contracts; contracts awarded under a procedure of an international organisation of which the UK is a member, such as NATO; and cases in which the UK and another country jointly develop a product. In all those situations, the application of the domestic procurement law of one party to such an arrangement is not viable. All the exemptions are compatible with our international obligations, particularly those in the WTO Government procurement agreement.

Schedule 1 sets out the various thresholds applicable to the different categories of contract. Whether the estimated value of a contract is above or below the relevant threshold determines whether it is subject to the main regime for public contracts set out in the Bill, or to the below-threshold regime in part 6. The core thresholds in the schedule are derived from the WTO Government procurement agreement, to which the UK is a party. The threshold values in the GPA are set in special drawing rights, or SDRs. The UK is required to provide an update to the sterling equivalent of the SDR thresholds every two years—the next one will be in January 2024. For that reason, paragraph 2 of schedule 1 contains powers for an appropriate authority to update the threshold values, so that the UK remains compliant with its international obligations.

Separately, paragraph 3 provides a power to update the light-touch thresholds in rows 5, 7 and 8 of the table. Those thresholds are not determined by international obligations, and as such will be updated for different purposes—for example, to allow for inflation or reflect changing priorities for that category of contract. The defence and security thresholds in rows 1 to 3 of the table can be updated using either power, depending on whether the current policy is continued whereby they track the GPA thresholds for utilities, though that is not required by the GPA.

On amendments 85 and 86, on Report in the Lords my noble Friend Baroness Neville-Rolfe asked officials to engage with the LGA, which I previously mentioned. The LGA was concerned that the reasonableness test in paragraph 1(2) of schedule 2 would prevent public service collaborations facilitated by the exemptions in paragraphs 2 and 3 if the contract could reasonably be alternatively awarded through competitive procurement.

Paragraph 1(2) deals with contracts where exemptions apply only to part of a public contract—that is, the contract contains both exempt and non-exempt elements. It says that a contract is not exempted if its main purpose could reasonably be separated and supplied under a different contract, and that main-purpose contract would not fall within one of the two exemptions in schedule 2. However, unlike most other exemptions in the schedule, which are conditional on the subject matter of the contract, the vertical and horizontal exemptions are conditional on the relationship between the contracting parties. Provided that those strict relationship conditions are met, it is irrelevant what the activity of the contract is.

--- Later in debate ---

[Florence Eshalomi]

I have a few points to raise regarding both schedules, so will take them in turn.

Schedule 1 pertains to the threshold agreements that govern the levels above which many of the terms in the Bill become applicable to contracts. We want all contracts—whether they are for £50 or £50 million—to follow some level of basic principle in procurement: we have to ensure there is value for money for the taxpayer. However, we recognise the burden that the management of those contracts places on both the contracting authorities’ procurement managers and the companies that bid for the contracts themselves. We therefore understand the purpose of threshold levels within the system as a fair way to balance the need for scrutiny with the need to ensure the system is not over-burdensome. We also understand that the threshold levels are set by the agreement between the World Trade Organisation and the United Kingdom, and we do not wish to put an important trade agreement into jeopardy by attempting to meddle with them.

However, I have a couple of questions regarding the functioning of the schedule and the bureaucratic process that goes with amending the hard numbers in the Bill, as their real-terms value shifts in the dynamic world before us. First, does the Minister consider the mechanisms in place with the World Trade Organisation and in the Bill are sufficient to account for the current high inflation levels? The World Trade Organisation’s revised agreement on Government procurement, published in 2012, defines the current mechanism to deal with currency shifts. It states:

“The conversion rates will be the average of the daily values of the respective national currency in terms of the SDR over the two-year period preceding 1 October or 1 November of the year prior to the thresholds in national currency becoming effective which will be from 1 January...Thresholds expressed in national currencies will be fixed for two years, i.e. calendar years for all Parties except Israel and Japan”.

Having joined the GPA on 1 January 2022, we will have our threshold set at the value measured at that time until 1 January 2024. Does the Minister not see significant problems arising from having threshold levels based on the value of the pound at that time?

In December 2022, the Office for National Statistics found that inflation rose by 9.2%. If that trend is followed when the data from 2023 is released, the threshold values will be nearly 10% lower in real terms than the thresholds agreed when we joined the GPA. That is a significant amount of money, and it could draw in many contracts over the next year that have simply been the victim of weak economic management by the Conservative party.

Although there may be benefits to having extra scrutiny of more contracts, it should not happen by accident as a result of high inflation. Nor should it mean that a significant amount of contracts will be flung into scrutiny this year, then out of scrutiny on 1 January next year. I hope the Minister recognises that that creates inconsistency for businesses and procurement managers alike. Will the Minister inform the House whether steps are being taken at the WTO to assess the impact of inflation on the thresholds? What is his assessment of the impact of inflation on the rollercoaster workload of those responsible for near-threshold contracts?

Schedule 2 sets out contracts that are excluded from the definition of a “public contract” and the provisions that apply to public contracts. I understand the need for excluded contracts and do not object to any of the listed justifications for excluding contracts from the Bill. We cannot expect areas such as the intelligence services and particularly sensitive national security matters to follow all parts of an Act relating to public services. It is right for sensible and proportionate exemptions to help make procurement efficient, save people millions and run the services that we desperately need.

One such exemption is the horizontal and vertical arrangements that form paragraphs 2 and 3 of schedule 2. Those paragraphs carry over provisions from regulation 12 of the Public Contracts Regulations 2015. Vertical and horizontal arrangements are often used by local authorities to save public money. The vertical arrangements exemption, also known as the Teckal exemption, enables the award of contracts to entities that, although separate entities, are de facto in-house to the contracting authorities. The horizontal arrangements exemption, known as the Hamburg exemption, allows public authorities to co-operate to deliver services collectively.

Taken together, such arrangements give local authorities the tools to enter agreements to share services and achieve savings through economies of scale, and those savings are significant. The Minister highlighted the LGA, whose research shows that such agreements saved the public nearly £200 million in 2018-19. When we face a cost of living crisis and families are choosing between eating and putting on the heating, it is critical that we are as efficient as possible in how we run procurement. It is critical that we do not hinder innovative agreements that help councils, which have had their budgets slashed over the past decade, in saving the money they need to deliver services such as social care.

As the Bill stands, however, there is real concern that it will hinder the use of horizontal and vertical agreements within local authorities. Paragraph 1(2) of schedule 2 stipulates that

“a contract is not an exempted contract if…the goods, services or works representing the main purpose of the contract could reasonably be supplied under a separate contract”.

Groups such as the LGA have highlighted the fact that many contracts that fall under the vertical or horizontal arrangements can be supplied by a separate contract:

“It will often be the case that public services, whether front-line or back-office, could ‘reasonably be supplied’ by a provider that is not a public entity. As a result, the legislation can be interpreted as requiring the public sector to have to engage the market, even for arrangements wholly within the public sector”.

If enacted, the new wording could therefore close down models of collaboration and efficient service delivery that save public money.

Sub-paragraph 1(2)(a) of schedule 2 also opens up a new avenue of legal challenge against the public sector. From the words of Baroness Neville-Rolfe on Report in the other place, I understand that the provision is necessary to avoid a loophole when mixed contracts are inappropriately excluded. I am therefore pleased that the Government have tabled amendments 85 and 86, and I know that the LGA has worked hard with the Government to try to fix this loophole. However, I hope the Minister keeps up engagement with the LGA to ensure that the amendments fix the problem and do not create unintended threats to the existence of horizontal and vertical agreements.

[Alex Burghart]

On the hon. Lady’s two points, she is absolutely right that the mechanism that exists in our WTO arrangement is biennial. As I said, the next upgrade, relative to inflation, is in January 2024. There is nothing we can do about the fact that the updates are biennial—it is part of the agreement, and we have obligations internationally.

The hon. Lady is right that the high rate of inflation—which we are experiencing as a result of Putin’s dreadful war in Ukraine and the end of covid, and which is common to many western democracies at the moment—will make some previously below-threshold contracts into above-threshold contracts. There are pros and cons to that. It means that we will have a degree of extra competition that we would not have had before, but we will see a re-correction in what will now be less than 12 months.

[Florence Eshalomi]

Does the Minister agree on the inconsistency that this will bring for procurement managers, especially when we are proposing this legislation to cut some of the red tape and burden on those same procurement managers?

[Alex Burghart]

Obviously, some contracts will, as I said, be brought above threshold, and those contracts will need to be conducted in accordance with the law. However, as I said to the hon. Lady, that is something that all countries that are signatories to the WTO and that are experiencing inflation will find is happening. In some instances, it will also mean that there is better competition for contracts, which could result in lower costs to the public purse, so it is not all bad.

On mixed contracts, the hon. Lady is absolutely right. The work that my hon. Friend Baroness Neville-Rolfe did in the Lords with the LGA means that we have closed the loophole, and that is to the strength of the Bill.

Question put and agreed to. 

Clause 3 accordingly ordered to stand part of the Bill. 

Schedule 1 agreed to. 

Schedule 2

Exempted contracts

Amendments made: 85, in schedule 2, page 84, line 11, leave out from “in” to end of line 17 and insert—

“this Part of this Schedule.”

This amendment would ensure that contracts within the new Part 1 of Schedule 2 (which will comprise paragraphs 2, 3, 25, 31 and 32) are always exempted from being public contracts.

Amendment 86, in schedule 2, page 85, line 39, at end insert—

“Part 2

Subject-matter exempted contracts

General

3A (1) A contract is an exempted contract if it is—

(a) a contract of a kind listed in this Part of this Schedule;

(b) a framework for the future award of contracts only of a kind listed in this Part of this Schedule.

(2) But a Part 2-only contract is not an exempted contract if, on award of the contract, a contracting authority considers that—

(a) the goods, services or works representing the main purpose of the contract could reasonably be supplied under a separate contract, and

(b) that contract would not be a contract of a kind listed in this Part of this Schedule.

(3) In considering whether goods, services or works could reasonably be supplied under a separate contract, a contracting authority may, for example, have regard to the practical and financial consequences of awarding more than one contract.

(4) In this paragraph ‘Part 2-only contract’ means a contract of a kind listed in this Part of this Schedule that is not of a kind listed in Part 1 of this Schedule.”—(Alex Burghart.)

This amendment would apply the exception previously applied to all contracts listed in Schedule 2 to those listed only in Part 2 of Schedule 2, ensure it operates by reference to the opinion of a contracting authority, and clarify that the authority may have regard to practical and financial consequences.

Ordered,

That paragraph 25 of Schedule 2 be transferred to the end of line 39 on page 85.—(Alex Burghart.)

This is a motion to move paragraph 25 of Schedule 2 (defence and security contracts with governments) to the new Part 1 of Schedule 2 to ensure such contracts are always exempted from being public contracts.

Ordered,

That paragraphs 31 and 32 of Schedule 2 be transferred to the end of line 39 on page 85.—(Alex Burghart.)

This is a motion to move paragraphs 31 and 32 of Schedule 2 (utilities contracts with affiliates and joint ventures) to the new Part 1 of Schedule 2 to ensure such contracts are always exempted from being public contracts.

Schedule 2, as amended, agreed to.

Clause 4

Valuation of contracts

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to consider the following:

That schedule 3 be the Third schedule to the Bill.

Clause 5 stand part.

[Alex Burghart]

Clause 4 and schedule 3 are fundamentally interrelated. Clause 4 requires contracting authorities to estimate the value of contracts in accordance with a simple methodology set out in schedule 3, in order to determine whether the contract is above or below threshold and consequently what relevant rules need to be followed. It also includes an anti-avoidance mechanism that makes it unlawful to exercise any discretion in valuing a contract with a view to avoiding the effects of this legislation.

Schedule 3 contains the methodology that clause 3 requires contracting authorities to follow when they estimate the value of contracts. As well as the general rules in paragraph 1 of schedule 3, there are also special rules for frameworks in paragraph 2 and concessions in paragraph 3. The anti-avoidance provision in paragraph 4 is designed to ensure that contracting authorities do not artificially subdivide procurements to evade the rules. There is also a new rule for how to proceed when an estimate is not possible; in such circumstances, contracting authorities must treat the contract as above threshold.

In general terms, the long-standing mechanism in existing regulations works well, so the Bill proposes a similar mechanism, albeit with some adjustments to take advantage of opportunities for simplification and reduction of regulation and some inevitable structural differences as we move from one style of drafting to another.

In clause 5, as there are different thresholds for different types of contract, it is important that the rules adequately address the inevitable situations our contracting authorities will face, such as where a contract contains multiple elements that are subject to different thresholds—that is, a mixed contract. The existing regulatory environment provides a mechanism, across four different regulatory schemes, that allows authorities the flexibility to separate elements into separate contracts, or to mix the elements into a single contract, subject to certain safeguards to prevent rule avoidance.

However, those rules comprise around 14 pages of legislation, are somewhat complicated and can appear repetitive due to their need to address the multifarious combinations of elements within and spanning each regime. Thankfully, the harmonisation approach taken in the Bill means these complicated and seemingly repetitive provisions can be streamlined and simplified, while continuing to provide the necessary flexibility and safeguards against rule avoidance.

Clause 5 provides a safeguard to ensure that authorities do not mix above-threshold and below-threshold contracts purely for the purposes of avoiding the rules. Of course, separate elements can always be procured separately, and mixed contracts with elements that are properly inseparable should be allowed. But the basic safeguard remains that if separation is reasonably possible, but a contracting authority chooses not to separate, a mixed contract containing both above and below-threshold elements must be treated as above-threshold and therefore in scope of the legislation. When determining whether separation is reasonably possible, the practical and financial consequences of awarding more than one contract can be taken into consideration.

[Florence Eshalomi]

I thank the Minister for his explanation of clause 4 and schedule 3, which relate to the estimated value of the contracts, and are both relatively short and simple parts of the Bill. However, the importance of a value estimation is critical to the Bill and the management of procurement. That particularly relates to above-threshold contracts, regulated below-threshold contracts and the application of key performance indicators, as well as the publication of high-value contracts. Given the importance of that estimation, it is critical that contracting authorities get it right and that similar contracts do not end up with widely different values as a result of the calculation values. I would like the Minister to outline the support the Government are giving to those managing procurement within contracting authorities, so that the figures are correct. I have no doubt that such work has been done, but I would welcome an outlining of it.

I welcome the clarity of paragraph 4 of schedule 3 on anti-avoidance. It is critical that all contracts should be scrutinised under this legislation and that there should be no attempt through inventive accounting to avoid them coming under the provisions of the legislation.

I would like clarity on paragraph 5 of schedule 3, which states:

“If a contracting authority is unable to estimate the value of a contract in accordance with this Schedule (for example because the duration of the contract is unknown), the authority is to be treated as having estimated the value of the contract as an amount of more than the threshold amount for the type of contract.”

While it makes sense for contracts with uncertain value to be treated as having above the threshold amount, I have a question on how that applies to the cut-off value of £5 million for key performance indicators and the publication of contracts. Obviously, we do not want every contract without an estimated value to be covered by measures designed for larger contracts. But, similarly, there will be contracts where the value will likely exceed the £5 million currently set as the limit, even when their value cannot be estimated by the clause. Can the Minister inform me whether the clause covers the higher £5 million cut-off and what steps are being taken to ensure that the right level of scrutiny is applied when the value of contracts cannot be estimated?

[Alex Burghart]

As I said a few moments ago, the group we are discussing is in part about making sure that we do not create another loophole where, in a mixed contract, it is possible for a contracting authority to go for a below-threshold requirement because one part of the contract is covered by that. As we discussed in the previous group, the measure is intended to make sure that we are not creating an opportunity for people to play the system.

Question put and agreed to.

Clause 4 accordingly ordered to stand part of the Bill.

Schedule 3 agreed to.

Clause 5 ordered to stand part of the Bill.

Clause 6

Utilities Contracts

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to consider that schedule 4 be the Fourth schedule to the Bill.

[Alex Burghart]

Clause 6 explains that a utilities contract is a contract for the supply of goods, services or works wholly or mainly for the purpose of a utility activity. Utility activities are set out in schedule 4, but do not include activities that are carried out wholly outside the UK. In the case of private utilities, they include only activities carried out where a private utility has been granted a special or exclusive right.

A special or exclusive right exists where a private utility has been granted a right under a statutory, regulatory or administrative provision that has the effect of substantially creating a monopoly situation that would limit competition. A right is not special or exclusive if it is granted following a competitive tendering procedure under the Bill or otherwise on the basis of a transparent procedure and non-discriminatory criteria.

The utility activities set out in part 1 of schedule 4 cover the water, energy and transport sectors. Part 2 of schedule 4 lists specific activities that are not utility activities. An appropriate authority may make regulations to add or remove activities from part 2 of schedule 4. However, activities can be added to part 2 only where there is fair and effective competition in the relevant market and entry to that market is unrestricted.

Schedule 4 sets out the scope of utilities activities. This largely mirrors the coverage of the existing domestic regime and reflects our commitments in trade agreements such as the WTO Government procurement agreement.

[Florence Eshalomi]

Clause 6 and schedule 4 relate to the procurement of utilities, covering the scope of the Utilities Contracts Regulations 2016. Historically, the procurement of utilities as defined in schedule 4 has run slightly differently from general procurement. For example, the value at which a contract passes the thresholds in schedule 1 is £426,955 for general utilities contracts, as opposed to £138,760 for central Government authorities and £213,477 for sub-central Government authorities.

I thank the Minister for explaining the mechanisms in place specifically for utilities contracts. I do not disagree with the rationale behind the systematic differences between how utilities contracts are awarded and managed and how general contracts are awarded. Following the publication of the Green Paper, the Government have responded to the sector’s concerns that the proposed system would be too onerous compared with the Utilities Contracts Regulations 2016. However, I do not believe that the measures in the Bill should subtract from the significant problems that need to be addressed in the utilities sector.

In particular, we have seen the rail sector have deeply troubling issues among some contracted-out services in the past months, and it is vital that we manage contracts in a way that will help to mitigate those risks. For those of us who come from an Italian background, the word “avanti” means “to come in”, but I think it is fair to say that the word “Avanti” will see my hon. Friend the Member for Birkenhead and many others roll their eyes in despair. The fact is that too many of Avanti’s trains have not, in fact, been coming into stations, with many cancellations and packed trains becoming a sad norm for huge swathes of the country.

Those on Avanti are not the only ones struggling. TransPennine Express, which connects places such as Grimsby, Doncaster, Sheffield and Liverpool, has also seen its performance struggle significantly. That is despite reports in The Telegraph that shareholders are due to earn a share of £75 million. For customers who turn up for their trains, day in and day out—many of whom have annual season tickets costing thousands of pounds—to see shareholders due to earn a share of that £75 million is a slap in the face. That also happened during the pandemic, when a number of trains up and down the country were cancelled, yet shareholders were again in line to pocket big payouts.

We have also seen franchises such as the east coast main line and Northern fall to the operator of last resort following the termination of the previous operator’s contract. The fact is that the operation of train contracts in this country is simply not fit for purpose. Even the Prime Minister cannot deny the problems, saying at Prime Minister’s Question Time on 30 November 2022:

“My right hon. Friend is absolutely right about the unacceptable deterioration in the quality of Avanti’s service.”—[Official Report, 30 November 2022; Vol. 723, c. 898.]

Despite the criticism from the Prime Minister, the Government went on to award Avanti with a contract extension until 1 April 2023. That beggars belief.

My hon. Friend the Member for Lancaster and Fleetwood (Cat Smith) put it best when she said:

“By giving Avanti this six-month contract extension, after months of failure and rail chaos, this Government are frankly rewarding that failure. Avanti promised to improve services back in September, and instead it has gone and cut services, introduced this emergency timetable and almost entirely stopped selling tickets online.”

I remember trying to book tickets for annual conference last year; I kept going online and refreshing the page. I stopped using the laptop and went on to the iPad, thinking it was maybe the laptop that had problems. I stopped using the iPad and went on to my phone, thinking it was the iPad that had problems. But the tickets were not for sale; they came on sale a day before we were all due to travel to Liverpool. That mad rush at the whim of the train operators, effectively holding people to ransom, is frankly unacceptable.

My hon. Friend continued:

“The provision of reliable train services is essential for the economic growth and prosperity of more than half the UK’s population.”—[Official Report, 25 October 2022; Vol. 721, c. 160.]

At this time, we are hoping to see more people leave their cars at home and use public transport so that we tackle the really serious climate emergency. However, the fact that these companies are being awarded contracts yet are failing to deliver is another way in which the Government are not taking the climate emergency seriously.

Will the Minister provide clarification on the metrics that he will use to assess improvements or, indeed, failure, given that the bar is currently set so low? It is clear that the west coast franchise has been fundamentally mismanaged by Avanti. It may be beyond the Bill’s scope to completely fix the franchising mess in this country, but it is critical that we create a culture of procurement that is carried out in a way that restores public trust and offers fair treatment to everybody across the country.

--- Later in debate ---

[Florence Eshalomi]

Thank you, Mr Mundell, for your guidance. I agree with the hon. Lady that if we want to ensure that all sectors of our economy recover after the pandemic, it is important that people can get to those places.

I hope the Minister will work with the Department for Transport in implementing these regulations to ensure that proper levels of security and resources are in the Bill. Hopefully, that will restore trust in our rail sector.

[Alex Burghart]

Thank you for your guidance on digressions, Mr Mundell. As the hon. Member for Vauxhall is aware, rail is not dealt with in the Bill. Schedule 2(17) states that public passenger transport services are exempt and will continue to be regulated by other means, but I believe that Transport questions are coming up shortly, so she will have the opportunity to raise her concerns with the Secretary of State.

Question put and agreed to.

Clause 6 accordingly ordered to stand part of the Bill.

Schedule 4 agreed to.

Clause 7

Defence and security contracts

Question proposed, That the clause stand part of the Bill.

[Alex Burghart]

Clause 7 defines “defence and security contract”, which is used in certain clauses and schedules to make specific provision for such contracts. The definition primarily covers contracts currently within the scope of the Defence and Security Public Contracts Regulations 2011, but it also includes other contracts set out in subsection(1)(g), where the defence and security provisions in the Bill are to apply.

The clause also defines a defence authority contract, which is a defence and security contract entered into by a defence authority. A defence authority will be specified in regulations. It is a contracting authority that exercises its functions wholly and mainly for the purposes of defence or national security. The clause also sets out additional definitions for terms used in the definition of “defence and security contract”.

[Chris Evans (Islwyn) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Mr Mundell. I look forward to working with the members of the Committee and the Clerks as we work our way through this important Bill.

It is also a pleasure to serve opposite the Minister, whom I count as a personal friend. We often exchange text messages in the early hours of a Sunday morning or late on a Saturday night—I do not want anybody reading anything into that, but we are both huge boxing fans, and we are usually debating the merits of the latest big fight. The last time we faced each other, we debated the merits of Lennox Lewis, the greatest British fighter of all time. I think I won that one, but let us see how we go today.

Clause 7 sets out definitions for defence and security contracts—in particular, for the supply of a range of contracts on military equipment, sensitive equipment, logistics services, goods, services or works necessary for the development, production, maintenance or decommissioning of equipment and work that is relevant to the country’s readiness for action and the security of the armed forces. Those definitions are crucial, because defence procurement is one of the most important activities undertaken by the Government.

The Ministry of Defence is the fifth largest spender on procurement in central Government. In 2019-20, it spent £15.9 billion on procurement, and since the pandemic, that has inevitably increased. One of the key functions of a state is to defend itself, and for it to do that, we must ensure that our armed forces have the equipment they need. Our national security, our ability to defend ourselves as a nation and the lives and safety of our troops rely in part on procuring the best equipment. As a country, we have always taken that duty to our armed forces seriously, but at times, tragically, we have not reached the level they deserve. I hope that in this Committee we can work together to improve the procurement system with the shared goal of ensuring that our forces get the equipment they deserve.

Promoting public safety should be the priority of any Government, and defence and security contracts are at the centre of that principle. It is therefore crucial that we get it right. The clause speaks to the procurement of not just the supply of military equipment, but the goods, services or works necessary for the development, production, maintenance or decommissioning of such equipment.

For my sins, between 2015 and 2019, I served on the Public Accounts Committee, and I remember some very uncomfortable hearings with some—shall we say—reticent Ministers who had to explain a lot of mistakes. If there is one thing I learned, it is this: if we do not get contracts absolutely right, it is not just a waste of taxpayers’ money; it puts our safety at risk.

I know you said we should not digress from the clause, Mr Mundell, but I want to use as an example the contract for the decommissioning of the Magnox nuclear reactors. The Nuclear Decommissioning Authority failed to understand the scale and complexity of the work needed, and by the time the contract was terminated, the cost to the taxpayer, according to the National Audit Office, was £122 million. I am sad to say that that is not an isolated case—I could be here all day talking about all sorts of examples. I raise this because it is so important that procurement is undertaken with proper care and consideration, and unfortunately there are too many examples of that just not happening.

--- Later in debate ---

[Kirsty Blackman]

I am happy to have a conversation with the hon. Gentleman afterwards and ensure he has the contact details for the supplier development programme, so that it can lay out some of its concerns to him. Hopefully, he can similarly provide a gentle push in the background to ensure that everybody—both the people looking to contract and the contracting authorities looking to have the best possible contract and tender applications made—is getting the best possible outcome from this scenario.

[Alex Burghart]

It is a pleasure to be opposite my friend on the Opposition Front Bench, the hon. Member for Islwyn. I am sorry to say that such was the scale of his knockout defeat in that debate that it appears to have blurred his memory—we established without controversy that, as I defended, Lennox Lewis was the greatest British fighter of all time.

To the hon. Gentleman’s point, we certainly agree that it is absolutely important to get these contracts right. The spirit running through the Bill is to have a streamlined process that makes it easier for everybody to understand their opportunities and responsibilities. On the point made by both the hon. Gentleman and the hon. Member for Aberdeen North, we will see as we go through the Bill that there are many opportunities through transparency and clauses put in to support SMEs to enable British businesses of different sizes to be able to avail themselves of opportunities in procurement, generally, but also in defence. In that spirit, I look forward to having specific conversations with the hon. Gentleman on those clauses as we progress.

Question put and agreed to.

Clause 7 accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Julie Marson.)

Procurement Bill [ Lords ] (Second sitting)

Alex Burghart Excerpts

Committee stage
Tuesday 31st January 2023 Public Bill Committees

Question proposed, That the clause stand part of the Bill.

[The Parliamentary Secretary, Cabinet Office (Alex Burghart)]

Colleagues will be sad to hear that we have only 117 clauses to go as we enter this second sitting. Clause 8 defines the concept of a concession contract. It is a type of public contract, and its award is regulated by the Bill. Subsection (1) sets out the key concepts specific to a concession contract. There are two main features. First, under a concession contract, at least part of the consideration received must lie in the right to exploit the works or services. A good example might be a concession contract to operate a canteen where the supplier receives income from customers.

Secondly, in exploiting that right, the supplier or concessionaire must be exposed to a real operating risk. Subsection (2) defines an operating risk, which is a risk that the supplier will be unable to recover its costs through the concession—for example, the risk of fluctuating vehicle numbers and income under a contract for the construction and operation of a toll bridge where the supplier has the right to receive the toll income.

[Florence Eshalomi (Vauxhall) (Lab/Co-op)]

Apologies for my lateness, Mr Efford. Clause 8 refers to concessionary contracts—contracts through which the authority contracts out work on the basis that the contracted company may be able to exploit or charge for extracted resources. Examples include the channel tunnel, which was paid for by private finance, with the financiers picking up the benefits. We support these contracts in principle—they can help us to build things without much cost to the taxpayer, and can help to expand the state—but there needs to be a balance. There needs to be guidance on what the right cost is. We could lose millions if the cost is wrong and the concession is given away too cheaply. Also, when deals regarding important infrastructure are signed, there needs to be caution to ensure that the long-term running of the system is up to standard. It is important that performance-based targets are included, as well as provisions for infrastructure building.

The Green Paper highlights that proposals for integrating the regulations for concession contracts into the core regime will be taken forward. However, there will be specific provisions covering the definition of a concession, how a concession contract is to be valued, and the duration of that concession. Those specific provisions address the key points raised by stakeholders in the consultation. The Government also propose to retain the higher financial threshold for concession contracts, greater discretion with regard to the method of calculating the estimated value of a concession contract, and an exemption for lottery-operating services, as well as other exemptions that come under the current regime; in all other respects, procurements for concession contracts will be subject to the new regime. We support the clause.

Question put and agreed to.

Clause 8 accordingly ordered to stand part of the Bill.

Clause 9

Light touch contracts

Question proposed, That the clause stand part of the Bill.

[Alex Burghart]

Light-touch provisions reflect the fact that certain public contracts, including those for social, healthcare and legal services, can warrant special treatment and greater flexibility. Flexibility is permitted by the scope of our international agreements. Clause 9 introduces the term “light-touch contract”, and provides for regulations to define which exact services should be subject to the lighter rules. As in the existing regime, common procurement vocabulary codes will be used to specify services.

The special features of the contracts are identified in subsection (4), which helps to prevent any inappropriate use of the power, as does compliance with our international agreements, which would prevent us from expanding the scope of what is included in the light-touch regime.

Light-touch contracts will be openly advertised unless a direct award ground applies. Contracting authorities will have to apply the exclusions and consider conflicts of interest. Transparency will be maintained through publication requirements, including requirements for an award notice, a contract detail notice and, when the contract is over £5 million, publication of the contract. By integrating these light-touch contracts into the broader regime, and having carve-outs where greater flexibility is justified, we have made it much clearer how such procurement should be run, and have ensured that probity and transparency are built into the process, while respecting these contracts’ unique characteristics.

[Florence Eshalomi]

I understand the need for a light-touch contracts regime, but I share the concerns expressed in the other place about the scale of the changes. Lady Noakes tabled a probing amendment that pressed the Government on why such contracts are not more narrowly or widely defined. Her amendment 30 sought to confine light-touch contracts to those concerning health or social care services provided to individuals, on the basis that that is how they are used at the moment—that is my understanding. However, if the Government believe that the definition should be wider, they should put that in the Bill. Open-ended regulation-making powers should not be necessary and are not desirable.

As the Minister is aware, the Cabinet Office delegated powers memorandum justifies the power by saying:

“While the scope of what is to be included in regulations made under this power is known, it is not practical for the Bill to include a long list of detailed…CPV codes to indicate which categories of contracts may benefit”

from the light-touch regime. It goes on to say that

“CPV codes may evolve over time, which would…require amendment to the Bill.”

However, the report of the Delegated Powers and Regulatory Reform Committee found that explanation to be inadequate, as

“it does not explain why it is considered appropriate for the power to be so broad that the issue of which kinds of contracts are to be subject to the ‘light touch contract’ regime is left entirely to regulations. There is nothing of substance on the face of the Bill to limit the discretion afforded to Ministers to allow less rigorous regulation for contracts of a kind that they choose to specify in regulations. Clause 8(4) lists three factors which Ministers must consider but without saying what effect these factors are to have. The Memorandum suggests that the provision made in exercise of the power will simply be a list of CPV codes but the power need not be exercised in that way.”

In its conclusion, the Committee said that

“the reasons given by the Government for leaving entirely to regulations the question of which contracts should be subject only to the ‘light touch’ regulatory regime are inadequate”,

and recommended that

“unless the Government can fully justify doing otherwise, the Bill should include criteria for determining which contracts should be subject to that regime.”

I understand the Government’s response to the consultation—that it might be tricky to tie down a definition and put it in the Bill—and Labour therefore does not seek to amend clause 9 today. However, I share the concerns aired in the other place about the scope of this part of the Bill. I am also concerned that the Government have not justified their stance beyond pointing to the existence of the common procurement vocabulary codes. Many feel that that does not answer the question posed by the Delegated Powers and Regulatory Reform Committee. I would like clarity from the Government on whether they are working closely with the likes of Lady Noakes to put their minds at rest. In particular, I would welcome a clear definition of what the powers in clause 8 mean in practice and how the Government intend to use them.

Question put and agreed to.

Clause 9 accordingly ordered to stand part of the Bill.

Clause 10

Mixed procurement: special regime contracts

Question proposed, That the clause stand part of the Bill.

[Alex Burghart]

Clause 10 concerns mixed contracts that involve an element to be procured under the general rules regime and an element to be procured under one of the special rules regimes. We discussed the objective of clause 5, which is in a similar vein. It is important to provide for such mixed contracts—a need for them will inevitability arise—while safeguarding against exploitation of exemptions and the lighter-touch rules. That will be achieved through the introduction of a test of separability, a safeguard similar to that in clause 5.

If separation of the general rules regime and special rules regime elements are possible, but a contracting authority chooses not to separate out the contract, then that mixed contract must be awarded in accordance with the general rules. It will not qualify for the special rules regime if the elements could reasonably be procured separately, having regard to the practical and financial consequences of splitting the requirement out.

[Florence Eshalomi]

As the Minister outlined, clause 10 is similar to clause 5. It is uncontroversial, as we see it, and it closes a loophole where one part of a contract could come under the special rules regime.

Question put and agreed to.

Clause 10 accordingly ordered to stand part of the Bill.

Clause 11

Covered procurement only in accordance with this Act

Question proposed, That the clause stand part of the Bill.

[Alex Burghart]

Clause 11 requires contracting authorities to carry out covered procurement solely in accordance with the Bill. Specifically, they must use the procedures in the Bill for competitive award, direct award and framework agreements. That will ensure that contracting authorities properly engage with the market and achieve value for money.

The duty that clause 11 creates will allow a supplier to hold a contracting authority to account. Remedies are available under part 9 when it can be demonstrated that a contracting authority has materially failed to have regard to one or more of the requirements in the Bill— for example, where there is direct award without proper justification, or discriminatory technical specifications —and the supplier consequently suffers, or is at risk of suffering, loss or damage.

[Florence Eshalomi]

We support this uncontroversial clause. It underpins many parts of the Bill, and mandates that procurement must be carried out under the terms of the Bill. The clause also points to different parts of the Bill for different forms of procurement—to clause 19 on competitive award, clause 41 on direct award in special cases, clause 43 on direct award after switching procedures, and clause 45 on award under frameworks.

Question put and agreed to.

Clause 11 accordingly ordered to stand part of the Bill.

Clause 12

Covered procurement: objectives

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Procurement should be used to grow our economy locally, to build our country up and to provide greater resilience for future generations. I am pleased that the hon. Member for Aberdeen North mentioned the fantastic work of the Labour Welsh Government on the Wellbeing of Future Generations Bill, and that is what needs to be in procurement—that is the aim. The aim is not a quick buck and just to procure everything out. I shall rise to speak to other clauses looking at in-sourcing—something else that would be allowed more easily if social value was on the face of the Bill. I urge support for all the amendments in the group.

[Alex Burghart]

I will try to treat all the amendments in this large group in order. Amendment 9 seeks to replace the well-understood concept of value for money with a new duty, by importing into the procurement objectives the meaning of “social value” under the Public Services (Social Value) Act 2012. There are difficulties with that approach, I am afraid, in particular that there is no definition of “social value” in that Act. Contracting authorities are also likely to struggle to understand the concept of equity in the context of procurement.

Amendment 10 is unnecessary, as “public benefit” already allows for “public value” and for contributing to socioeconomic development to be considered where appropriate and relevant. This amendment also undermines the concept of what is in the public benefit by overlaying a similar but different concept of public value. That suggests that benefit and value are different things, and narrows the former term in a way that is not legally helpful.

Amendments 9 and 10 are also not necessary to ensure that social value is considered in the procurement objectives. The public benefit objective in subsection (1)(b) requires contracting authorities to think about the extent to which public money spent on their contracts can deliver greater benefit than it otherwise would—for example, broader social value or equitable outcomes for groups such as armed forces veterans, local employment and such like.

Amendment 101, tabled by the hon. Member for Aberdeen North, seeks to add transparency and anti-corruption efforts to the list of procurement objectives in the Bill. The Bill, however, will establish a world-leading transparency regime. It will see more commercial information published in three nations of the UK than ever before, including information on upcoming procurements prior to opportunities being advertised, and data against key performance indicators on major contracts, so that taxpayers can see how well contracts are being performed. Transparency is therefore already a mandatory requirement.

[Florence Eshalomi]

Is the Minister aware that the Government’s own “transparency ambition” document outlines a failure to provide for transparency in our procurement system? Some of the measures he has outlined are a step forward, but they still lack substantiveness to give providers and the public access to the full transparency that we need. Should we not look to follow in the steps of Ukraine in publishing an accessible digital dashboard, which would help the Government?

[Alex Burghart]

As the hon. Lady knows, transparency sits throughout the Bill. As I have just said, there are far greater requirements to publish than ever before, on an online platform that the Government will provide. She gave the important example of Ukraine. She will remember that we talked about this on Second Reading: the Ukrainians were advisers to the UK Government when we were putting our ideas together, so we are very much building on what they did in Ukraine. This will be an extraordinary step forward for transparency in the nations that are taking it up.

The Bill also requires contracting authorities to have regard to acting, and being seen to act, with integrity. That will oblige them to consider how to prevent fraud and corruption through good management, prevention of misconduct, and control. Failure to take anti-corruption steps or measures will be an indication that the contracting authority did not have a regard to the importance of acting and being seen to act with integrity.

Contracting authorities will also be required to comply with the provisions in the Bill on conflicts of interests and the exclusion of suppliers, preventing contracts from being awarded to inappropriate suppliers. That provides further opportunities to directly address transparency and anti-corruption issues within the context of a procurement. I hope that we all agree that it is essential that the procurement regime commands the trust of suppliers, the public and our international trading partners. In our view, the Bill already provides for those matters as it stands.

Amendment 89 seeks to define value for money. Clause 12 specifically does not define value for money to leave a degree of flexibility for different types of contracting authorities to adapt the concept for their own procurements. Contracting authorities should be able to select the most advantageous tender that prioritises things that deliver value for money for them. There are many precedents on the statute book where the term is left undefined, and that allows for a degree of flexibility. I could point to the Communications Act 2003, the Energy Act 2004, the Defence Reform Act 2014, the Bus Services Act 2017, and so on.

[Kirsty Blackman]

The Minister has answered the question in relation to value for money not being defined in this Bill because it is mentioned in other measures without that kind of definition. Regarding the term “public benefit”, is it also the case that it is widely used in other legislation without being defined? If the Minister does not have an answer now, I would be happy to hear something afterwards.

[Alex Burghart]

No, I am happy to say that it is already set out in the social value Act, I think, which I mentioned at the start of my remarks. Similarly to amendment 9, we feel that amendment 89 is unnecessary, as “public benefit” already allows for those factors to be considered, where appropriate and relevant to the contract being awarded.

New clause 2, also tabled by the hon. Member for Vauxhall, seeks to oblige contracting authorities to follow the six principles that the Government consulted on in the Green Paper. Now, the Green Paper was just that; it was a Green Paper and it formed the basis of what came subsequently. The six principles in the Green Paper were subsequently refined and then translated into the objectives and specific obligations that now exist in the Bill in the light of the responses to the Green Paper.

The language of a Green Paper is not the language of legislation, and one of the main lessons from the Green Paper and the consultation was the need to reflect the principles in a way that helps contracting authorities understand how they will implement them. That is what we have done. However, I assure the Committee that each of those principles remains within the Bill in an appropriate form. “Value for money” remains a fundamental tenet of the procurement regime. It is well understood by contracting authorities so does not need to be elaborated on.

“Public good” was focused on the delivery of strategic national priorities, so we revised it to the objective of “public benefit” to address the concerns raised in the public response to the Green Paper that it was solely about national, and not local, priorities. The revised principle supports wider consideration of social value benefits.

As we have discussed, “transparency” remains as an objective to encourage information sharing with suppliers, and “integrity” also remains an objective. The public response to the Green Paper indicated that “fair treatment” was too subjective for contracting authorities to determine by objective standards, so we introduced the concept of “treating suppliers the same”, which hon. Members will find in clause 12(2). Finally, “non-discrimination” has been converted from an objective to a hard-edged obligation in clauses 88 to 90.

The combination of the objectives and specific legal obligations in the Bill deals with procurement principles more effectively than the broad principles that the Government consulted on in the Green Paper. I therefore respectfully request that the amendments be withdrawn.

[Florence Eshalomi]

I heard the Minister’s response, and I think, again, that it is disappointing that there is a total shift between what was introduced by the Government in the Green Paper and what we now see in front of us. That was also noted in the other place.

I welcome the aim of the amendments tabled by the hon. Member for Aberdeen North. That is something that we do support, and I know that she highlighted it in a Westminster Hall debate just last week. Climate change is something that we are very much concerned about.

On ensuring that we think about the next generation, we can only do that if we protect the environment and the Earth that we are on now. We only have one opportunity. We cannot do it later, because there will be nothing left. That is a key issue that our young people are concerned about, and it must be front and centre in this Bill.

The climate elements of the Bill are really important. They touch on social value and on public value. There is an interwoven link showing why that is important, and that should receive due consideration, so it is a shame to hear the Minister not wanting to take those measures forward.

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We know that there are potential benefits for our local communities from enabling companies to keep IP and manufacturing at home, where it belongs. This is a small but important way in which the Government could make it clear that this is a realistic, sensible and reasonable way for a company to choose to go forward if it wants to. That would help jobs and organisations in our local communities. As I said, I support the amendments.

[Alex Burghart]

Amendments 90 and 91, tabled by the hon. Member for Vauxhall, seek to amend clauses 12 and 16 so that contracting authorities have to have regard to potential barriers to the participation of charities, particularly when carrying out pre-market engagement.

Charities provide important services and may well offer the best value for money in a procurement, particularly in the social and education services. That was in the forefront of our minds when allowing greater flexibility for light-touch contracts, which means that those procurements often facilitate the participation of charitable and not-for-profit organisations.

Before I go on, I must correct my remarks to the hon. Member for Aberdeen North at the end of our debate on the previous group of amendments. I foolishly leapt to my feet and said that it was the social value Act that was relevant. It is actually section 4 of the Charities Act 2011. I am grateful to have officials who do not err.

There are a broad range of charities involved in public procurement, including some very large, well-established organisations capable of effectively competing in a public procurement market. Charities that need extra support for public procurement will often meet the definition of SME in clause 119, and will therefore already benefit from the duty in clause 12(4) to support SMEs, which applies to pre-market engagement and the whole procurement lifecycle. I say as someone who has worked with and for both large and small charities that asking for charities of all sizes to be treated the same way is perhaps not appropriate. In addition, the provisions on reserving contracts for certain suppliers in clauses 32 and 33 will help those charities that qualify as a supported employment provider or public sector mutuals.

The Government are fully committed to supporting charities, hence the sector will often be the beneficiary of grants that sit outside the public procurement regime. However, the Bill already functions to give appropriate support to charities’ participation in public procurement. It is undesirable to include other types of organisations in clause 12(4) and risk diluting the separate requirement for contracting authorities to have particular regard to barriers that smaller suppliers face because of their size. I respectfully request that the Committee does not support amendments 90 and 91.

In the other place, my colleague Baroness Neville-Rolfe admirably championed small and medium-sized enterprises, and tabled amendments to complement the Bill’s existing provisions that support smaller businesses. Those include explicit duties to have regard to the participation of SMEs. Amendments 1 to 3, tabled by the hon. Member for Vauxhall, would amend those duties to include a specific reference to co-operative societies. I share her deep admiration for co-operative societies. They play a very important role in our economy and our society as a whole. I am happy to confirm to the Committee that the SME obligation will include co-operative organisations where they meet the tests for being an SME.

Many co-operatives will meet our definition of SME in clause 119. Where they do not, for example because they employ more than 250 staff, they should not benefit from the duty to support SMEs. We think it would be wrong to treat a large co-operative bank, for example, in the same way that we are proposing to treat SMEs. If we included other types of organisations, we would risk diluting the Bill’s particular regard to the barriers that SMEs face—the clauses would lose their impact, which would be a shame for the SMEs that the Bill seeks to support. I therefore respectfully urge the hon. Lady to withdraw her amendments.

Question put, That the amendment be made.

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Question proposed, That the clause stand part of the Bill.

[Alex Burghart]

Clause 12 sets out the procurement principles that establish what the Bill is designed to achieve, and how its success will be judged. The clause splits the procurement principles into objectives and other rules to help contracting authorities to understand what they are obliged to do.

The objectives in clause 12(1) set out the values of public procurement, the furthering of which contracting authorities must give proper consideration to in the course of making procurement decisions. Public procurement needs to be focused on achieving value for money, which is rightly at the top of the list of objectives set out in clause 12(1). However, each of those objectives has its own merit, and each must be considered independently. It is not the intention of the Bill that value for money, however important, disapplies or overrides the obligation on contracting authorities to have due regard for the objectives of public benefit, information sharing and integrity.

The rules on equal treatment in subsections (2) and (3) are obligations that set minimum standards that contracting authorities must follow. The Bill will also accelerate spending with SMEs through the creation of new duties that will require contracting authorities to have regard to SME participation. We want to level the playing field for smaller businesses and for buyers, not only to avoid putting up, but to remove barriers to their participation.

Question put and agreed to.

Clause 12 accordingly ordered to stand part of the Bill.

Clause 13

The national procurement policy statement

[Florence Eshalomi]

I beg to move amendment 22, in clause 13, page 10, line 2, leave out “may” and insert “must”.

This amendment would require a Minister to publish a National Procurement Policy Statement.

The amendment seeks to mandate that the Government “must” publish a national procurement policy statement, instead of just “may”. I am sure the Minister will tell me that the amendment is unnecessary as, of course, the Government will seek to publish a national procurement policy statement. However, as has been stated, the change that we have seen in the Bill from the Green Paper to today means that we can take nothing for granted when it comes to the Government’s word on procurement.

The amendment is identical to the one tabled in the other place by Lord Lansley. When Baroness Noakes introduced it, she said that the clause’s current wording leaves the door open for a statement not to be published. Given the importance of the policy statement in setting rules for covered procurement, it would be deeply damaging for it not to be published. I urge the Minister to ensure that that cannot happen by supporting our amendment.

[Kirsty Blackman]

It seems to me that this is probably the easiest amendment for the Government to accept. They have made it clear how important the national procurement policy statement will be, and how a significant proportion of the decision-making processes in the Bill will flow from that statement.

I support the amendment, and I would suggest going even further in saying that every Government should publish a national procurement policy statement. We have had quite a lot of Governments recently, but after every general election and every first King’s Speech of a new parliamentary Session, the Government should be clear in a number of areas. They should set out their policy direction of travel, not just in procurement but in general. That is a key moment when the Government could refresh their national procurement policy statement.

I do not have a significant issue with the Government updating the statement based on priorities. We have seen what has happened in the last few years with covid, and in the past decade or so, we have developed a better public understanding of the impacts of climate change. Science has changed, and not only have priorities changed, but the social system has changed as a result of covid. It therefore seems that updating the statement would be a sensible thing to do. If the Minister is not willing to accept the amendment, I urge him to make it clear that the Government intend to publish the national procurement policy statement, no matter whether the clause says “may” or not.

We will come to the clause stand part debate, but the clause states that there is an intention to keep the statement “under review”. Does the Minister expect that if Government priorities were to change significantly, a new or a tweaked statement would be published? For example, if something major happened, as with covid or the war in Ukraine, priorities may change as a result. Does he expect Government Ministers to at least consider updating the national procurement policy statement in the light of drastic changes that may or may not come to us in future?

[Alex Burghart]

Amendment 22 would require the Government to publish a national procurement policy statement rather than just allowing them to do so. We have had a lot of debate about the nature of procurement policy and the associated important elements of procurement, such as driving social change.

As has been demonstrated by the sheer number of topics that we have touched on, procurement is often used to transact wider policies. That is correct, but we have to be realistic about the fact that those policies shift over time. The hon. Member for Aberdeen North gave a couple of examples of that. Indeed, the Government demonstrated how quickly we can change our procurement policies in the light of Russia’s illegal invasion of Ukraine. It is therefore both preferable and necessary that procurement policy is aligned with wider Government objectives. As such, the publication of an NPPS is a decision based on the strategic policy priorities relevant to the Government at that time. It needs to be as flexible as possible, and mandating a Minister to publish one takes away some of that possibility.

However, I assure the hon. Lady that the Government absolutely intend to publish an NPPS. They are working on it at the moment, and I look forward to bringing it to the House and discussing it when the time comes. She is right that it will be possible for Administrations to update their national procurement policy statement, but it will also be possible for them to withdraw it. One reason for not mandating is that there may be times when the Government are working on a new one, and there is a hiatus between the two. I therefore do not see that changing the drafting of the clause and mandating the statement is necessary. I respectfully request that the hon. Member for Vauxhall withdraw her amendment.

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Division 7

Ayes: 6

Noes: 9

[Alex Burghart]

I beg to move amendment 28, in clause 13, page 10, line 9, leave out paragraph (b).

This amendment would remove the requirement for a Minister of the Crown to give due regard to certain principles before publishing the national procurement policy statement.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 7, in clause 13, page 10, line 12, after “environmental” insert “, cyber security”.

This amendment would make cyber security one of the strategic national priorities for procurement.

Amendment 11, in clause 13, page 10, line 12, after “environmental” insert “, national security”.

This amendment would add national security as part of procurement principles.

Amendment 107, in clause 13, page 10, line 25, at end insert—

“(vii) fair treatment of workers, by ensuring fair pay and conditions, workplace wellbeing, development of skills and progression and diversity in recruitment.”

This amendment would add a procurement principle based on the fair treatment of workers.

Government amendment 29.

Amendment 105, in clause 13, page 10, line 36, at end insert—

“(4A) The national procurement policy statement must include measures to ensure that no supplier may be granted a procurement contract with a contracting authority where the Secretary of State is satisfied there is established evidence that a provider has been involved in—

(a) modern slavery,

(b) genocide, or

(c) crimes against humanity.”

[Alex Burghart]

The purpose of amendments 28 and 29 is to overturn amendments added to the Bill in the other place, which require that prior to publishing a national procurement policy statement, the Minister must give due regard to a number of specified principles and mandate the inclusion of a number of priorities in the NPPS.

I reiterate that the Government recognise that those principles are important to procurement, which is why most of them are already core elements of the procurement regime and are reflected throughout the Bill. That is evident in the Bill’s drafting overall. For example, value for money, integrity and maximising public benefit are set out in clause 12 as procurement objectives that contracting authorities must have regard to directly when carrying out procurements. As discussed, transparency is also a requirement running through the Bill. Furthermore, specific requirements in the Bill place obligations on contracting authorities regarding fair treatment of suppliers and non-discrimination in decision making—for example, the conflicts of interest provisions in part 5. Therefore, although the principles are important, to incorporate them as part of the national procurement policy statement process when they are already applicable to procurements on the face of the Bill is unnecessary.

Similarly, the other place added a subsection that requires the inclusion of specific priorities in the national procurement policy statement. Those relate to achieving targets set under the Climate Change Act 2008, the Environment Act 2021 and the Public Services (Social Value) Act 2012, as well as to promoting innovation among potential suppliers and minimising the incidence of fraud.

We carefully considered which policy priorities should and should not be included within the regime, in order to maximise productivity and ensure that the Bill is as streamlined as it can be to deliver for all contracting authorities and maximise the benefits from all procurements. It is, I believe, more than adequate that the Public Services (Social Value) Act requires contracting authorities to consider the economic, social and environmental wellbeing of an area when undertaking specified procurement. Restating that in a policy statement would be unnecessary, as that Act is already binding on contracting authorities.

The amendment introduced in the other place looks to increase innovation and minimise fraud, but that is already at the core of the Bill. With our new approach to small businesses, we are unleashing innovation in the supply chain, and by embedding transparency throughout the procurement lifecycle, alongside our plans for oversight, tackling fraud will be easier than ever before. It would be counterproductive to restrict the flexibility of the national procurement policy statement by placing specific priorities in primary legislation.

We have made it clear that the NPPS will be used to set out strategic policy priorities, over and above those enshrined in the Bill, that are relevant at the time that the NPPS is to take effect.

[Florence Eshalomi]

I oppose amendment 28; it would remove Lords amendment 46, which was added on Report. Clause 13 currently mandates the Government to give due regard to a number of important principles before publication of their national procurement policy statement. Those principles follow on from the procurement principles promised in the Bill— namely, promoting the public good, value for money, transparency, integrity, fair treatment of suppliers and non-discrimination.

Those principles are important. We know that public good allows us to put what we believe is best for the country at the heart of procurement. When we also consider the huge amount of money spent on procurement —ultimately, it is the public’s money going towards delivering goods and services—it is right that the Government expect the money to be spent in the public’s interest. Procurement must always have that idea in mind, and it cannot be driven by any other aim of individuals in Government or other private individuals.

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The Government could start by following the Scottish Government’s lead in getting rid of Hikvision cameras. That is what is happening in Scotland; they are leaving our public authorities. As far as I am aware, the UK Government have unfortunately not yet made a statement that they will be doing the same, and it would be good if they were to do so. It would be good if they ensured that we started from the principle that no supplier involved in any of these atrocious crimes can be given a contract or public money that they can use to continue to commit such crimes.

[Alex Burghart]

Amendment 7 would require “cyber security” to be added to the list of principles to which Ministers should have regard when drafting a national procurement policy statement, and amendment 107 would require fair treatment of workers. Similarly, amendment 11 seeks to broaden the list of principles to which Ministers should have regard when drafting a national procurement policy statement by adding “national security”.

National security is, of course, of paramount importance. The Bill makes substantial provision for the protection of the UK’s national security through the national security exemption in schedule 2(21) and the discretionary exclusion grounds for suppliers in schedule 7(14). Where national security considerations are relevant, the Government have established policy and guidance that procurers must take strict account of.

Amendment 105 seeks to prevent the award of contracts to suppliers involved in modern slavery, genocide or crimes against humanity through measures to be included in the national procurement policy statement. The hon. Member for Aberdeen North mentioned her enjoyment of reading Bills. As she will see later on, the Bill already contains a robust regime for the exclusion of suppliers that are unfit to hold public contracts.

Schedules 6 and 7 set out a wide range of exclusion grounds that target the most serious risks to public procurement, and that explicitly includes modern slavery. We have also taken action to strengthen the way that modern slavery is defined, so that suppliers may be excluded where there is sufficient evidence that they are responsible for modern slavery anywhere in the world, whether or not they have been convicted of an offence.

I also draw the hon. Member’s attention to the debarment regime in clauses 59 to 64, which allows for Ministers to consider whether any supplier meets one of the grounds for exclusion and whether the issues in question are likely to reoccur. Suppliers on the debarment list face exclusion across the public sector at all levels. That is a significant step forward in our approach to supplier misconduct.

As I made clear in my initial remarks, the principles in clause 13(3)(b) are duplicative and do not serve a strong purpose. I therefore still propose to overturn them.

The hon. Lady remarked on failures in the existing regime. I gently extend the invitation to her, once again, to leave the existing regime behind and join the new regime; but alas, Scotland has declined to do so and will be stuck with the existing regime.

Question put, That the amendment be made.

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[The Chair]

With this it will be convenient to consider clause 14 stand part.

[Alex Burghart]

I hope the clauses can stand part of the Bill.

[Chris Evans (Islwyn) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Mr Efford. The clause states that Welsh Ministers may publish a statement setting out

“the Welsh Government’s strategic priorities in relation to procurement.”

I am pleased that the Welsh Government are adopting the Bill, subject to the legislative consent of the Senedd, of course. To put it simply, the clause comes down to respect. Devolution was originally introduced in the UK in 1998 through the Scotland Act 1998, the Government of Wales Act 1998 and the Northern Ireland Act 1998. It has since become embedded in our society and our national identities; a whole generation has not known anything different, which is a good thing. Protecting the voices of our devolved nations in UK legislation is crucial not only for maintaining the relationships between the UK Government and the devolved nations, but for our democracy as a whole. The Wales procurement policy statement is the voice of the Welsh Government on procurement and, by extension, the voice of the Welsh people, and that deserves a place in the Bill.

The Bill has arisen from our exit from the European Union. Our exit has given us opportunities to ensure that our legislation works best for the UK and the devolved powers. We need a procurement system that works for all communities across the UK and all the devolved nations.

Clause 14 also outlines the steps that Welsh Ministers will need to take before publishing the policy statement. They include carrying out a consultation and, after receiving the responses, making any necessary changes to the statement, which must then be laid before the Senedd. The Bill is a good example of how the two Governments can work together in consultation on legislation in a devolved setting.

I note the views of the Welsh Government on fair value and social partnership, which they have outlined in their Social Partnership and Public Procurement (Wales) Bill. It focuses on the wellbeing of Wales and a “prosperous Wales” as an outcome of procurement, and provides a framework for improving socially responsible public procurement. Ensuring that our public procurement system supports the whole UK’s prosperity is vital.

The social partnership between Government, employers and workers is also a strong focus of the Welsh Government’s Bill. It is valuable to include everyone who is at the table. A major component of the legislation is the requirement on certain public bodies to take into account socially responsible procurement by establishing wellbeing goals that they must meet when procuring, and to publish a procurement strategy. Under the Welsh Government’s framework, those public bodies will be required to seek to improve economic, environmental, social, and cultural wellbeing when carrying out procurement.

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The Welsh Minister also noted that it would not be appropriate to recommend consent until this matter of concern had been resolved. To reinforce my earlier point, devolution is embedded in our society, and respect for the Welsh Government should be best practice. Until those concerns are resolved, I am worried about the potential impact on the foundation of devolution; this may affect the relationship between the two Governments. I hope that the Bill is used as an opportunity to retain a Welsh voice in procurement, and to ensure continued co-operation between the UK and Welsh Governments.

[Alex Burghart]

I am delighted to follow the hon. Gentleman’s comments about Wales. I must say that work on this Bill has been an absolute model of co-operation between us in Westminster and colleagues in Cardiff. The Bill is very much a result of joint working, and it is stronger for it, and for the support it enjoys from colleagues from Northern Ireland, from Belfast. We hope that one day colleagues in Holyrood will see fit to join us in creating a new procurement landscape that takes advantage of the opportunities that leaving the EU has made available to us. I praise the joint working that we have seen so far, and look forward to joint working in the future.

Question put and agreed to.

Clause 13, as amended, accordingly ordered to stand part of the Bill.

Clause 14 ordered to stand part of the Bill.

Clause 15

Planned procurement notices

Question proposed, That the clause stand part of the Bill.

[Alex Burghart]

Clause 15 concerns the planned procurement notice. It is designed to give as much advance information to the market as possible, so that interested suppliers can determine whether they wish to bid in the procurement covered by the notice, and so that they have the maximum time for preparation. It also gives contracting authorities the option of reducing tendering periods by publishing a planned procurement notice. Publication of that notice may take place at any time before publication of the tender notice, but if its publication occurs at least 40 days and no longer than one year before publication of the notice, the contracting authority may, if it wishes, benefit from reduced tender periods of a minimum of 10 days.

[Florence Eshalomi]

As the Minister has outlined, clause 15 relates to planned procurement notices. When used well, such notices allow for significant benefits, both for the contracting authority and for the companies wanting to bid. For the contracting authority, they reduce the time limits associated with procurement notices by significant amounts; in many cases, that reduction may be from 25 days to 10 days, which represents a significant decrease in the time limit and reduces bureaucracy for contracting authorities. The clause will mean that suppliers get 40 days to plan for a bid before the official bidding time limit opens. We welcome that; it is a sensible mechanism that will benefit a number of SMEs, which often do not have legions of administrative staff. They will welcome that extra notice to prepare a bid for a contract.

As the Minister may be aware, Lord Hunt of Kings Heath and Lord Aberdare supported an amendment in the other place that attempted to make those notices mandatory. Lord Aberdare said:

“The existing wording in Clause 14(1) allows for better practice, confirming that contracting authorities are able to publish a planned procurement notice. But your Lordships will know that being able to do something within legislation does not mean that it actually happens…My preference might be simply to replace ‘may publish’ with ‘must publish’.”—[Official Report, House of Lords, 6 July 2022; Vol. 823, c. GC279.]

I do not think I need to push that point particularly hard with the Minister, but I hope that as we progress, he will explore in more detail what support can be given through the Bill to help SMEs.

How does the Minister expect the notices to be used by contracting authorities? When it comes to small contracts, the amendment tabled in the Lords may be too onerous on contracting authorities, but I think we can all agree that the notices are used by contracting authorities. As Lord True said in response to the amendments in the name of Lord Hunt of Kings Heath and Lord Aberdare,

“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.”—[Official Report, House of Lords, 6 July 2022; Vol. 823, c. GC290.]

Will the Minister outline to contracting authorities how often they should use those notices, and will he take a proactive approach to investigating how they are used by contracting authorities, and whether their use can be expanded?

Also, how can groups such as SMEs and charities find out about the notices? Perhaps the Minister is leaving much of this to the Government’s planned digital platform, but I hope he can confirm that the notices will be on the platform, and that SMEs will be able to find them efficiently.

[Alex Burghart]

Absolutely. This is all part of our enhanced transparency regime, which will make it much easier for everyone—authorities, suppliers, the public, the press, and hon. Members of this House—to see what is going on in public procurement. Planned procurement notices are a very good thing; they give authorities the option of making clear what they are about to do, thereby giving themselves the chance to speed up that process slightly later on. We have every expectation and hope that they will be widely used, and as the hon. Member for Vauxhall has said, it is often small and medium-sized enterprises that will particularly benefit. When this initiative is considered alongside our plans to encourage authorities to publish their pipelines, we can really start to see the benefits of enhanced transparency in this area.

Question put and agreed to.

Clause 15 accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Julie Marson.)

Procurement Bill [ Lords ] (Third sitting)

Alex Burghart Excerpts

Committee stage
Thursday 2nd February 2023 Public Bill Committees

[Florence Eshalomi]

I thank the hon. Member for her support.

At the moment it is clear that SMEs find the process frustrating and time-consuming. In his written evidence to the Committee, Colin Cram, who set up the conference company Open Forum Events Ltd to run conferences to support the delivery of improved public services, outlined his experience of the procurement system for SMEs. He stated:

“Tendering is expensive and time consuming. The way the UK’s public sector operates all too frequently inadvertently discriminates against SMEs, which will include the most innovative of suppliers on which the UK’s economy and future global competitiveness will depend. Many SMEs—which means most businesses in the UK—do not know how to tender properly and they don’t have the time to do so. According to the Federation of Small Businesses, at the end of 2021 there were 5.5 million SMEs employing fewer than 50 people each. Their average turnover was £1.25 million. However, only half were registered for VAT, so most will have a turnover well below that. Many of these will be capable of delivering contracts greater than the thresholds”.

He continued:

“Having to tender for every contract that might interest a small business would prove prohibitively expensive. To illustrate the point, a mid-cap business sought my advice. It was winning just 1 tender in 20 and was thinking of withdrawing from the public sector. I suggested that it should employ 2 full time tenderers. It took my advice, and its win rate went up to 1 in 4—without changing either the products or services that it was providing...To put together the simplest of tenders will cost not less than £1000 if properly costed. So, 4 attempts at tendering for the simplest of contracts would cost £4000 and 20 in order to win at least 1 contract would cost £20,000.”

I am pleased that we have made progress on SMEs, but Labour Members fear that, without more clarity and market engagement, SMEs will still be put off by the cost of applying for contracts that they think they have little chance of getting.

SMEs should not have to employ two full-time tenderers to improve their chances of winning contracts that they know they can do. Pre-tender marketing engagement can help to establish contracts that are more easily digested through the bidding process. We understand that some contracts will not be suitable for SMEs, but early engagement can help in figuring out where that is the case and hopefully open up more contracts to a variety of companies. I thank the hon. Member for Aberdeen North for supporting our amendment, and I hope other Members and the Government will support our amendments 20 and 21.

[The Parliamentary Secretary, Cabinet Office (Alex Burghart)]

It is a pleasure to serve under your chairmanship, Mr Efford. Amendments 20 and 21 seek to ensure that preliminary market engagement explicitly refers to SMEs.

I thank the hon. Member for Vauxhall for her support of the changes that Baroness Neville-Rolfe made in the House of Lords. We are all committed to improving options and opportunities for small and medium-sized enterprises to take advantage of the substantial amount of public procurement that exists in this country. We fully agree that preliminary engagement is an important part of that. That is why we have included the new duty to have regard to SME participation in the procurement objectives.

The duty will apply in relation to pre-market engagement just as it will cover the whole of the procurement life cycle. Consequently, we do not consider it necessary to clarify in the pre-market engagement clause that the word “suppliers” captures SMEs. It clearly does, and in view of the broad application of the general duty to support SMEs, there is no need for any drafting changes to be made.

To be clear, the new SME duty will lead contracting authorities to consider not only whether they have engaged with SMEs in their preliminary market engagement, but whether their procurement process and timelines are accessible to smaller businesses, supporting them to win and deliver more public contracts. It is nice to hear the hon. Member for Aberdeen North support small and medium-sized enterprises in England—would that the SNP in Scotland had supported the Bill, giving those same opportunities to SMEs in Scotland. I once again extend my invitation to her and the Government at Holyrood to join us on this journey.

[Kirsty Blackman]

The Minister keeps talking as if Scotland does not have procurement legislation, and will not have procurement legislation going forward. It is absolutely the case that we will continue to have procurement regulations and rules, and a fairer procurement system—one in which we do things such as mandate the real living wage, for example.

[Alex Burghart]

The hon. Lady has previously given some good examples of things that are going wrong with current procurement. The SNP has not tabled any reform to procurement in Scotland, and I am afraid that, without reform, Scotland will be stuck with the old regime, whereas from spring next year, small and medium-sized enterprises in England, Wales and Northern Ireland will be taking advantage of the regime set out in the Bill.

[Kirsty Blackman]

I hope the Minister is not suggesting that when the Scottish Parliament passes procurement legislation, the UK Government will again levy a section 35 order to stop us changing our procurement legislation.

[Alex Burghart]

Certainly not, because I am sure that there would be no need, whereas it was very clear that there was a need in the case to which the hon. Lady refers. She will know that the Government used that constitutional power reluctantly, but very well advisedly.

Amendment 25 would require contracting authorities that have stated in the tender notice that a contract is suitable for small and medium-sized enterprises to, in the event that no SMEs submit a tender, withdraw that tender notice and engage with small and medium-sized enterprises prior to republishing it, unless they can show that such engagement took place prior to the original publication. The Bill supports—indeed, it actively encourages—buyers to conduct preliminary market engagement. We have gone further than existing regulations: clause 17 requires the publication of a preliminary market engagement notice, and clause 12 contains a duty to have regard to reducing barriers facing SMEs. That should lead to increased openness and greater inclusion of SMEs in preliminary market engagement.

However, amendment 25 would add an extra layer of bureaucracy and delay for procurers to manage, and could well frustrate suppliers who have prepared a tender, only for it to be withdrawn if no qualifying bids are received. It is far better for us to increase SME participation in procurement by reducing barriers and highlighting the many benefits they bring to the public sector. I respectfully request that the amendment not be moved.

[Florence Eshalomi]

The Minister has said that there is no need for amendment 25, but it would cover similar grounds to those that we are discussing and would go further, ensuring that SMEs are given access to suitable tenders. When a contracting authority tags a tender as suitable for SMEs, it is only right that due diligence is carried out to ensure that SMEs have the opportunity to come forward. Unfortunately, tagging a contract as suitable for SMEs does not make it particularly accessible to them: it bears repeating that analysis by the Spend Network found that big corporations still win 90% of contracts, which we know are worth over £30 billion.

“Suitable for SMEs” cannot be another buzzword like “affordable housing”—one that does not mean anything to those SMEs that already say they are struggling to win these tenders. Amendment 25 would help to address that. If a contracting authority thinks that a contract is suitable for SMEs, it should be doing the work to engage those SMEs, ensuring that that contract is truly suitable. Under our amendment, contracting authorities would not have to go through that unnecessary bureaucracy. They will have had to engage with SMEs prior to offering the contract, but if none came forward, that would not hinder the contracting authority’s ability to award it. The purpose of the amendment is to help small businesses. Again, I hope the Minister will consider it carefully and support it.

[The Chair]

Minister, I realise you have given your response, but do you have anything to add?

[Alex Burghart]

I will just repeat what I said, very briefly. I understand the desire behind the amendment, but we believe that there are sufficient measures for preliminary market engagement for SMEs already in the Bill. In the case described by the hon. Member for Vauxhall, there is a danger that, if no SME came forward, we would be adding unnecessary process and cost to a procuring authority.

--- Later in debate ---

[The Chair]

With this it will be convenient to consider clause 17 stand part.

[Alex Burghart]

Clause 16 covers preliminary market engagement and is followed by clause 17, which includes provisions on related notice requirements. We want to promote and encourage contracting authorities to conduct preliminary market engagement. The information gathered during this stage can be invaluable for the authority as it clarifies its requirements, assesses the market’s capacity and develops its procurement strategy. This is even more important in the new regime, within which contracting authorities are given more flexibility to design their own competitions that are tailored and fit for purpose.

Clause 17 makes provision for contracting authorities to publish a preliminary market engagement notice prior to publishing a tender notice. The purpose of this preliminary market engagement notice is to advertise the fact that the contracting authority intends to conduct or has conducted preliminary market engagement. It is another great example of there being greater transparency and greater opportunities both for suppliers and authorities as a result of this Bill.

[Florence Eshalomi]

As the Minister outlined, clause 16 gives local authorities the power to undertake pre-market engagement. Although it may be expedient for there not to be pre-market engagement in relation to a number of contracts, particularly small contracts or contracts that are pretty standard for the market, it is entirely sensible for there to be such engagement when an authority is dealing with novel markets or markets where there is innovation. Pre-market engagement can be a powerful tool to help contracting authorities to understand the nature of their contract, what terms are fair in a contract and the nature of the market in relation to a particular piece of work. When it is done correctly, it can also help businesses to get a sense of whether they should put in for particular tenders.

Of course, it is right that any company that receives an unfair advantage in preliminary market engagement is not included in the contract, and we support this addition to the clause. However, I will ask the Minister a couple of questions about this clause that are in a similar vein to the questions I asked during the stand part debate on clause 15.

How often can we expect contracting authorities to undergo preliminary market engagement? As I have said previously, I understand why it is impractical to carry out such engagement on every above-threshold contract. However, it is important that there is some level of consistent practice in the system. In addition, although I also understand the need for flexibility among contracting authorities, I know that businesses want certainty and some certainty can come from knowing that different authorities will follow a similar level of preliminary market engagement as standard.

However, I also have concerns about the burden that this process may place on already stretched procurement departments, a concern I have already raised in earlier debates. The written evidence this Committee received from John Lichnerowicz is telling. He says:

“In my experience Procurement Departments particularly those containing CIPS qualified professionals are extremely overstretched and a bottleneck to public sector organisations being able to deliver their services.”

So it is easy to envision that this clause, as well as lacking clear mandates for local authorities to carry out pre-market engagement, will also mean that stretched procurement departments will not have the resources to carry out such engagement.

If pre-market engagement is done proportionally, it could save the taxpayer a small fortune. Will the Minister be issuing clear instructions as to when he intends such engagement to take place?

Many forms of pre-market engagement will involve consideration of contracts that are already being carried out for other contracting authorities. Although every contract will have some bespoke elements, this does not mean that what we learn from one engagement round in one place has no relevance to similar engagement rounds or similar contracts in other places. Will the Minister confirm that information from pre-market engagement will be shareable across contracting authorities and indeed that sharing such data should be relatively common where it is possible to share it?

Regarding subsections (3), (4) and (5) of clause 16, can the Minister say what the threshold for an unfair advantage would be? Of course we cannot have suppliers writing contracts, but engagement will necessarily expose suppliers to some level of information about the planned tender. At what level will such activity be considered to constitute an unfair advantage? Will guidance be issued to decision makers about this matter?

Finally, on clause 17 will the Minister confirm that efforts will be taken to ensure that such notices are received as widely as possible? Again, we all know it is important that small and medium-sized enterprises, charities and social enterprises are made aware of these notices and can then take part in preliminary market engagement if we are to have a true picture of the market. What steps will be taken to ensure that it is not just those who have keen eyes on contracting authorities who engage with them?

[Alex Burghart]

Let me take the hon. Lady’s questions in turn. Effective preliminary market engagement is a great tool to improve procurement. It will improve contracting authorities’ ability to act as an intelligent customer—that very much came out in the engagement work we did in the construction of the Bill—because it benefits suppliers, as the potential customer understands the market’s capability, is exposed to industry best practice and learns of potential innovative solutions being designed or tested. That will lead to more effective and efficient procurement by reducing the burdens on suppliers during the competition, avoiding the customer considering an unrealistic bid and improving the drafting of contract terms. We will not dictate to authorities when to undertake preliminary market engagement—we think it is better that that is their decision—but we are obviously encouraging them to do so. Of course, as the hon. Lady will know from other discussions we have had, transparency runs throughout the Bill. Sharing the outputs from such engagements will be possible and essentially a great thing.

Question put and agreed to.

Clause 16 accordingly ordered to stand part of the Bill.

Clause 17 ordered to stand part of the Bill.

Clause 18

Duty to consider lots

Question proposed, That the clause stand part of the Bill.

[Alex Burghart]

The clause requires the contracting authority, before advertising the opportunity, to consider whether the contract can be split into smaller chunks, or lots. That may be the right thing to do for a number of reasons. It could reduce supply risk by having numerous suppliers, or encourage smaller organisations to bid by making the opportunity more accessible and manageable—for example, breaking a large facilities management contract into regional contracts that local companies can deliver. Because that is important to provide opportunity, particularly for SMEs, clause 18(2) requires contracting authorities to either

“arrange for the award of…contracts by reference to lots”

or

“provide reasons for not doing so.”

[Florence Eshalomi]

As the Minister outlines, the clause obliges authorities to divide larger contracts into smaller lots where that is appropriate for the contract. That is a useful and necessary power, and it is one that we hope SMEs will welcome. Breaking down contracts is a good way of making them more accessible for smaller companies. I mentioned the evidence from John Lichnerowicz, who said that it can be difficult for all but larger suppliers to take on bigger contracts that are not broken down. His written submission states that

“overstretched Procurement Departments would lump requirements into a single large procurement which would go to only the biggest companies in their field who would then have the freedom to pick their favourite sub-contractors effectively eliminating the contribution of equally capable sub-contractors and adding a main contractor’s margin into the sub-contractor’s costs for little benefit”.

--- Later in debate ---

[Alex Burghart]

As the hon. Lady will see in clause 18(2), contracting authorities will be required either to arrange by lots or to report on that; they will be required to give a reason, so there will be transparency.

The hon. Member for Brighton, Kemptown characterised money from public contracts as going into shareholders pockets. Obviously, larger contracts are also going to very successful charities. I can think of lots of examples of that in areas where I have lived and areas where I work and live now, so I do not wish to give the impression that is always the case.

[Lloyd Russell-Moyle]

Even if it were going to these mega-charities, which are huge international organisations and firms, it surely is not right for them to come in and take a contract, and take the top slice off it if the work is still done by small, local organisations. Whether they be for profit or not, local, small organisations should have a chance of just getting the smaller elements of the contract directly, should they not?

[Alex Burghart]

It is wonderful to hear the hon. Gentleman supporting our Bill once more. Making contracts more accessible to small and medium-sized enterprises is a major purpose of the Bill. It is not always mega, international charities that are getting local contracts. In Essex, I see that is not the case.

[Nick Fletcher (Don Valley) (Con)]

I refer Members to my entry in the Register of Members’ Financial Interests, which states that I am an owner-shareholder of an SME. There are other benefits of working for a main contractor, and that should go on the record. The Bill should make it easier for small enterprises to gain that work, but if a contractor works directly for the client, it becomes the main contractor. When it becomes the main contractor, it becomes responsible for the health and safety and everything that goes with it, so there is an awful lot of cover for smaller contractors to work for a main contractor so that the main contractor takes some of those responsibilities away. I know what we are trying to do here and it is a good thing to do. If small and medium-sized enterprises work for the main authority, they become responsible, so there is a cover that main contractors provide. They are not just taking the top slice for nothing; they are actually taking on responsibility for the entire project.

[Alex Burghart]

My hon. Friend makes an excellent point.

Question put and agreed to.

Clause 18 accordingly ordered to stand part of the Bill.

Clause 19

Award of public contracts following a competitive tendering procedure

[Lloyd Russell-Moyle]

I beg to move amendment 95, in clause 19, page 14, line 16, at end insert—

“(aa) must disregard any tender from a supplier that does not guarantee the payment of at least the Real Living Wage to all its own employees and contracted staff and those of any sub-contractors;”

This amendment, together with amendments 96 to 99, is designed to ensure that no public contract can be let unless the supplier guarantees the payment of the Real Living Wage to all those involved in the delivery of the contract.

--- Later in debate ---

[Florence Eshalomi]

I thank my hon. Friend the Member for Brighton, Kemptown and the hon. Member for Aberdeen North for their remarks. The amendments are important because so many people are having to take the difficult decision to take strike action as their wages cannot sustain them. We are seeing situations where people are unable to feed their children and heat their properties. People who work in our core public services are relying on food banks. Instead of demonising those people, we as politicians, and the Government, should be looking at how we can help them.

I am proud to be a member of GMB and Unison. We should remember that trade union members are ordinary people. They pay their union subs, yet they are losing a day’s pay by going on strike to show the Government that their wages cannot sustain them. People are effectively on poverty wages. During this cost of living crisis, it is important that we listen to their valid concerns.

We see a number of employers still not doing the right thing by recognising the issues that their employees are going through, while still making millions of pounds in profits. As I said in my remarks on amendment 107, Labour is committed to delivering fair treatment for all workers, and that must include fair pay and conditions, workplace wellbeing and the development of workers’ skills. We believe that procurement offers a great opportunity to increase social value. Our later amendments will make it clear that we do not want to see those who are breaching the rights of their workers awarded public contracts.

Our ambitions on the minimum wage should not be limited to workers in procurement. Instead, Labour believes we should increase the minimum wage for everyone across the economy. An incoming Labour Government would want to ensure that everyone across the economy is paid a fair day’s wage. We would instruct the Low Pay Commission to factor in living costs when it sets the minimum wage, ensuring that it covers the cost of living.

The cost of living continues to increase for many people and, as inflation continues to rise, their salaries are not keeping pace. These measures would put hundreds of pounds into the pockets of the lowest-paid workers. We would also scrap the low pay category for workers aged 18 and 19.

[Alex Burghart]

Amendments 95 to 99, tabled by the hon. Member for Leeds East, would place legal requirements on contracting authorities in respect of the Resolution Foundation’s real living wage in their procurements. That would ensure that no public contract could be awarded unless the supplier guaranteed the payment of the real living wage to all those involved in the delivery of the contract, including subcontractors.

While the principle behind the amendments is admirable, the Government cannot support them. It is imperative that all contracts are awarded on the basis of the best value for money for the taxpayer and that staff employed on the delivery of public contracts are paid fairly, in line with existing legal requirements. But using procurement rules to compel private sector employers to pay their workers beyond minimum legal requirements would be disproportionate.

The hon. Member for Brighton, Kemptown talked about a floor. There is a floor: for this Government, it is the national minimum wage, or the national living wage for workers over 23. He also mentioned insourcing. Obviously, procuring authorities are completely at liberty to insource if they so wish, and the Bill does nothing to prevent that. If procuring authorities feel that they can get better services, a better deal or better conditions by insourcing, they are entirely at liberty to do so.

I should also let hon. Members know that when constructing a contract, a procuring authority can stipulate pay and conditions as part of that contract. Procuring authorities have big levers at their disposal.

[Lloyd Russell-Moyle]

Can the Minister give me an assurance that the terms and conditions that procuring authorities can issue can be the sole reason for not awarding a contract, if a supplier does not fulfil that sole clause?

[Alex Burghart]

I cannot give the hon. Gentleman an absolutely categorical answer, but I can tell him that procuring authorities have it within their power to use that as part of a suite of conditions.

[Lloyd Russell-Moyle]

I am not quite clear whether the Minister is unable to give me an assurance from his position, or because procuring authorities cannot do so. If he just cannot give me an assurance from his position, I would appreciate his writing to me to confirm whether procuring authorities have the ability to put in a clause that says, “We can disregard contracts that do not fulfil our wages and conditions requirements.”

[Alex Burghart]

I will certainly let the hon. Gentleman know.

The hon. Member for Aberdeen North raised a number of general points; I encourage her to go back and read Hansard. I am delighted that she is here; I am delighted that Scottish MPs are in the UK Parliament, and that the Scottish people voted to keep them here at the last referendum. I am very pleased that she is on the Committee and bringing her experience to it.

The hon. Lady will have heard me say in the Westminster Hall debate the other day that I wish the SNP was more involved in the running of the constitution of the United Kingdom. I wish, for example, that it was prepared to take up its seats in the House of Lords, in order to engage with debate there and further the interests of the people of Scotland. Alas, it would seem that the SNP has better things to do.

The hon. Lady said that I have said that she should not be talking about these matters. I really do not mind at all if she talks about these matters, but obviously, some amendments have Barnett consequentials and others do not. As long as she is happy for me to discuss what goes on in Holyrood and in Scotland, I am very happy for her to discuss what goes on in Westminster and in English authorities. I have no problem with that at all.

Returning to the issue at hand, as I say, it remains open to contracting authorities to include conditions or criteria around pay and remuneration in their tenders. Should they feel it is appropriate in the individual circumstances, they can design a procurement around those criteria. I respectfully ask that the amendment be withdrawn.

[Lloyd Russell-Moyle]

I would have been willing to withdraw the amendment if the Minister had been able to give me a cast-iron guarantee that procuring authorities could reject a contract solely on the basis of a failure to meet a wage level. He has not been able to give me that guarantee—although I welcome that he will be writing to me to confirm the position—so I do want to test the water on amendment 95. I will not move the other amendments.

Question put, That the amendment be made.

Division 14

Ayes: 2

Noes: 8

[Alex Burghart]

I beg to move amendment 30, in clause 19, page 14, line 21, at end insert—

“(ba) may disregard any tender that offers a price that the contracting authority considers to be abnormally low for performance of the contract;”.

This amendment would allow contracting authorities to disregard tenders offering an abnormally low price.

[The Chair]

With this it will be convenient to discuss Government amendment 31.

[Alex Burghart]

We tabled amendments 30 and 31 to ensure that contracting authorities can assess and disregard abnormally low tenders where the supplier cannot demonstrate to the buyer’s satisfaction that it will be able to perform the contract for the proposed price. We are committed to delivering value for money and the amendments will provide helpful safeguards against suppliers that seek to undercut the competition with unrealistic tenders.

[Florence Eshalomi]

While our response to amendments 30 and 31 is lukewarm, we think that they are important. We want all contracting authorities to consider value for money for the taxpayer when making procurement decisions, but there is a substantial risk of accepting below-value tenders for bids. Procurement has to be sustainable, and we know too well the risks when we get that wrong.

When considering the Bill, we must all remember 15 January 2018 and the collapse of Carillion. When it went into liquidation, it employed 42,000 people, including nearly 20,000 people in the UK. It also had a liability of £2 billion to some 30,000 suppliers and subcontractors, some of which sadly fell into insolvency themselves as a result of the collapse. While there are excludable grounds relating to poor procurement practices set out in later clauses of the Bill, I do feel that these amendments provide another check against the reckless behaviour of companies such as Carillion.

In 2018, following the collapse of Carillion, the then Chair of the Public Administration and Constitutional Affairs Committee, the hon. Member for Harwich and North Essex (Sir Bernard Jenkin), said:

“It is staggering that the Government has attempted to push risks that it does not understand onto contractors, and has so misunderstood its costs. It has accepted bids below what it costs to provide the service, so that the contract has had to be renegotiated. The Carillion crisis itself was well-managed, but it could happen again unless lessons are learned about risk and contract management and the strengths and weaknesses of the sector.”

--- Later in debate ---

[The Chair]

Minister, do you wish to respond?

[Alex Burghart]

I will respond as part of the clause stand part debate.

Amendment 30 agreed to.

Amendment made: 31, in clause 19, page 14, line 23, at end insert—

“(3A) Before disregarding a tender under subsection (3)(ba) (abnormally low price), a contracting authority must—

(a) notify the supplier that the authority considers the price to be abnormally low, and

(b) give the supplier reasonable opportunity to demonstrate that it will be able to perform the contract for the price offered.

(3B) If the supplier demonstrates to the contracting authority’s satisfaction that it will be able to perform the contract for the price offered, the authority may not disregard the tender under subsection (3)(ba) (abnormally low price).”—(Alex Burghart.)

This amendment would require contracting authorities to notify suppliers of the fact that the contracting authority considers the price to be abnormally low and give suppliers reasonable opportunity to demonstrate that it is workable before disregarding their tender.

Question proposed, That the clause, as amended, stand part of the Bill.

[Alex Burghart]

Clause 19 describes the rules that apply to the award of a public contract following the conclusion of a competitive tendering procedure. Contracting authorities are able to award a contract only to the supplier that submits the “most advantageous tender”, which is the tender that satisfies the authority’s requirements and best meets the award criteria when assessed in reference to the assessment methodology and the relative importance of the criteria. The clause describes the circumstances that would either require a contracting authority to exclude a supplier or disregard a tender, or give the authority the discretion to do so.

Contracting authorities are required to disregard tenders when the supplier does not satisfy the conditions for participation, and may disregard a tender that materially breaches a procedural requirement. Contracting authorities are also permitted to disregard tenders from suppliers that are not treaty-state suppliers, or when the supplier intends to subcontract the performance of all or part of the contract to a subcontractor that is not from such a country.

The clause also refers to provisions elsewhere in the Bill that allow for contracts to be reserved for supported employment providers, for contracts for particular services to be reserved for public-service mutuals, and for tenders from suppliers that are not members of a dynamic market to be disregarded. It also deals with when suppliers must or may be excluded. I will come to those specific provisions later.

The Government have a moral obligation to spend taxpayers money efficiently. These rules, which provide better flexibility for procurers, will help to ensure that every pound goes further for our communities and our public services.

[Florence Eshalomi]

The clause contains a small change, which could have significant ramifications, but it is one that we support. Moving from “most economically advantageous tender” to “most advantageous tender” can make a significant difference to the reality of how contracts are awarded. Throughout this process, we have heard of many people who apply for contracts, and have a lot to offer, but fail the most economically advantageous tender test. The new wording gives them a fighting chance at winning contracts.

Charities may also benefit from that. However, the National Council for Voluntary Organisations is cautious about the power of the new term. I hope the Minister is aware of some of the concerns that it raised. It says, in its submission that

“this alone will not have the desired effect. This was already possible under current regulations and guidance, as contracting authorities are meant to account for the wider benefits of any bid, but in reality, it has rarely been applied, with decisions continuing to be dominated by lowest unit costs.

The change in language to assessing for the MAT will not be sufficient to change practice and culture. Further clarity and expectations are needed so that assessing the MAT includes placing more emphasis on the importance of social value and recognising the different ways this can be delivered.”

I think it is important to get clarity on how this will be applied. With the right instruction, this new rule can open up how authorities judge applications, but if the Government get it wrong, it could lead to confusion and be little better than the status quo.

It is worth considering the advice from Colin Cram, which I mentioned earlier. He said that it costs £1,000 for all the effort that goes into that tender, so SMEs need to know how much things such as the social value will matter in this new test, and whether it is worth them tendering for contracts. Everyone needs clarity to help them to understand that, and to make economic decisions about how to bid. I would therefore welcome a firm commitment from the Minister and the Government on how we could plan for clarity on that term, and a timetable on how that will be published widely to SMEs.

[Alex Burghart]

I am very pleased to hear the Opposition’s support for this clause and for our significant shift from MEAT to MAT—from most economically advantageous tender to most advantageous tender. That framing sends a very clear signal to contracting authorities to take a broader view, beyond price, of what can be included in the evaluation of tenders—wider social and environmental considerations, for example. We think that the clause will make a significant difference and that, partnered with the national procurement policy statement—NPPS—it will open the way for new thinking about public procurement. I commend it to the Committee.

Question put and agreed to.

Clause 19, as amended, accordingly ordered to stand part of the Bill.

Clause 20

Competitive tendering procedures

Question proposed, That the clause stand part of the Bill.

[Alex Burghart]

A key proposal in the Green Paper was simplification of the existing procurement procedures in the public contracts regulations, and clause 20 is the enactment of that proposal. It sets out how competitive tendering procedures should be run. The first option is an “open procedure”. That is a single-stage procedure whereby any supplier can submit a tender in response to the tender notice. The second option is a “competitive flexible procedure”. That will allow contracting authorities to design the procedure that works best for their procurement, allowing them to engage with suppliers, negotiate, and undertake numerous phases such as for research and development and prototype delivery. Once determined, that procedure will be set out in the tender notice and associated documents.

[Florence Eshalomi]

This clause is an important one. Again, it relates to the competitive tendering process. Although the mechanisms of these procedures are an incredibly important element of the Bill, many aspects of the procedure are addressed later in the Bill. Those are also referenced in the latter part of this clause. I will cover that later, but I do want to address some aspects of the clause now.

It is welcome that we are seeing a two-stranded procedure system in the Bill. We are aware that some contracts will attract very few bids and are suited to a single-stage tendering process. We are also aware that some tenders will attract many bidders and it is necessary to have a multi-round process to come to a conclusion as to who the best bidder is. Although this provision is welcome, there is discontent from some stakeholders about how the bidding processes will work in practice.

In written evidence, which we all received the other day, Zurich Insurance stated:

“As currently set out, it appears the ‘Competitive Flexible Procedure’ could be the most suitable approach for the Risk and Insurance services. However, it would be useful if more detail on how each of these procedures will operate could be provided within the Bill.”

I therefore have some questions regarding the nature of the multi-round process and how it will work in practice. First, how much effort will be required from contractors at an early stage of the competitive flexible procedure, before putting in a bid? Earlier I referenced and highlighted the evidence from Colin Cram, and we have also heard from him that the cost of putting in a tender can, for some small businesses, be in four figures. For contracts that could attract a large number of bidders—for example, a relatively small contract that can be carried out anywhere—that would mean that many bidders would in effect be entering a really expensive lottery with little chance of winning with their bid. That is particularly off-putting for SMEs, which do not want to spend a significant amount of their budget bidding for these contracts. Mr Cram, who supports the current system of restricted procedure, says that although that system is not perfect, it is much better than what is proposed. He says that the current system

“has a formal and very simple, easily understood and low cost approach to shortlisting businesses/organisations before asking them to tender. Typically, this might result in just 4 being invited to tender. That gives each one a decent, though still expensive, chance of winning.”

We all know that the new system will have advantages over the old, restricted procedure, but I hope that the Minister can address some of the concerns and outline how the new system will not be expensive for SMEs.

--- Later in debate ---

[Alex Burghart]

In answer to the hon. Lady’s question, the new competitive flexible procedure will allow procurers to design the procurement best to deliver their outcome , rather than being constrained by a rigid and bureaucratic process, which is often the case at the moment. That is good commercial practice.

We plan to provide templates and guidance for contracting authorities to use, so that there is consistency of application without stifling their ability to innovate. That flexibility will benefit suppliers, who will be able to negotiate and offer more innovative solutions. Additionally, when a contracting authority publishes an initial advert, it will have to set out the procedure it intends to run. The contracting authority, in setting out the procedure, will have to ensure that it is proportionate and takes into account the nature, complexity and cost of the contract. The procedure set out will then have to be followed. There is scope to modify the procedure, but that must be in a transparent way and only in so far as it would not have changed the market response.

I feel that we have planning and precautions in place to deal with the concerns expressed by the hon. Lady.

Question put and agreed to.

Clause 20 accordingly ordered to stand part of the Bill.

Clause 21

Tender notices and associated tender documents

Amendment proposed: 25, in clause 21, page 16, line 29, at end insert—

“(6A) Subject to subsection (6D), subsection (6B) applies where a tender notice or associated tender document indicates that a public contract is suitable for small and medium-sized enterprises.

(6B) If no small or medium-sized enterprise submits a tender, the contracting authority must withdraw the tender notice, and may not republish the tender notice until it has fulfilled the condition in subsection (6C).

(6C) The condition is that the contracting authority has conducted preliminary market engagement (see section 16) with a view to engaging with suppliers who are small and medium-sized enterprises.

(6D) Subsection (6B) does not apply if the contracting authority can demonstrate that it fulfilled the condition in subsection (6C) before the tender notice was published.”—(Florence Eshalomi.)

This amendment would require contracting authorities to engage with small and medium-sized enterprises before describing a contract as suitable for SMEs. The requirement would only apply if no SME submits a tender.

Question put, That the amendment be made.

--- Later in debate ---

[Alex Burghart]

The clause describes the requirement for contracting authorities to publish a tender notice in order to advertise and commence a competitive procedure. A tender notice may act as an invitation to submit a tender for the contract under the open procedure, or an invitation to suppliers to submit a request to participate in a multi-stage tender process under the competitive flexible procedure. In either case it must be published on the central platform, the publishing location for all notices required throughout the procurement cycle.

The central digital platform will contain public sector procurement information, allowing the citizen to understand the authorities’ procurement policies and decisions and to see how much money the Government, local authorities and the NHS spend on purchasing essential goods and services, and who is really benefiting from the public purse. Contracting authorities will also be required to provide any relevant associated tender documents, which will provide further details of the procurement. Transparency runs through the Bill like sunlight.

The Bill gives contracting authorities significant freedom to choose a procedure that will best deliver their requirement, but they must set out the process to be followed at the outset. While there is some limited ability to modify those—as we will see in clause 31 —contracting authorities must follow the processes set out in their tender notices or associated tender documents, and failure to do so will leave them at risk of challenge. Further details on the contents of the tender notice and associated tender documents await us in clause 93.

[Florence Eshalomi]

As the Minister said, the clause pertains to tender notices and all the associated documents. It is crucial to get this right. We cannot just expect measures to be in the Bill—they have to be in there.

The existing Contracts Finder function is the central functioning database for companies to find public contracts that are open for tender. With the Bill, the Government have talked about a new digital platform that will go much further than Contracts Finder, making the finding of contracts even easier. I wish the Government well in that goal, and it is important for a number of reasons.

--- Later in debate ---

I hope the Minister will accept that that is not acceptable. The Government must ensure that the new system is backed by strong standards to ensure that the publication of contracts on the new digital database is carried out to a good standard. I hope the Minister will outline how that will be done in his response.

[Alex Burghart]

One of the real advantages of having our online digital platform is that everyone, particularly the very small businesses that do not have much capacity, as the hon. Lady mentioned, will know where to go. Everyone will know where to look, and that will be an enormous convenience for all involved. It will help us to fulfil one of the major functions of the Bill, which is to help new entrants into the system and help fresh suppliers take advantage of the £300 billion pot of public procurement money.

Question put and agreed to.

Clause 21 accordingly ordered to stand part of the Bill.

Clause 22

Conditions of participation

Question proposed, That the clause stand part of the Bill.

[Alex Burghart]

Clause 22 enables contracting authorities to set conditions on suppliers’ participation in a procurement process. They are the conditions that a supplier must satisfy to be awarded a public contract. The current regime has often described these as the selection criteria. Conditions of participation must relate only to the legal and financial capacity and the technical ability to fulfil the requirements of the contract. Any conditions of participation set for those purposes must also be proportionate to the nature, complexity and cost of the public contract. That means the conditions should not be unnecessarily onerous for the supplier. A contracting authority can include qualifications, experience or technical ability but, to ensure fair treatment of suppliers and equality of opportunity, they cannot relate to a particular prior award of a public contract or contravene the rules on technical specifications in clause 56.

[Florence Eshalomi]

Clause 22 gives contracting authorities the power to set conditions of participation for contracts where necessary to get the suppliers to fulfil their full terms of contract. This is an important clause because it allows contracting authorities to put checks and balances in place to ensure that suppliers are fit to carry out the contract. That gives contracting authorities the confidence to engage with novel suppliers, providing a certifiable window into procurement. It ensure that checks can be carried out against the kind of collapse we saw with Carillion. This is a proportionate and necessary measure, so I would welcome assurances from the Minister that the guidance will be provided to contracting authorities on how to impose conditions of participation.

[Alex Burghart]

I thank the Opposition for their support of the clause. Obviously, we will set out a whole range of guidance around the Bill, but the conditions of participation set out in the clause speak for themselves.

Question put and agreed to.

Clause 22 accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Julie Marson.)

Procurement Bill [ Lords ] (Fourth sitting)

Alex Burghart Excerpts

Committee stage
Thursday 2nd February 2023 Public Bill Committees

[Chris Evans (Islwyn) (Lab/Co-op)]

I beg to move amendment 12, in clause 23, page 18, line 4, at end insert—

“(3A) Where—

(a) the contracting authority is the Ministry of Defence, and

(b) the contract concerns defence or security,

the award criteria must be weighted so as to advantage United Kingdom suppliers.”

This amendment would give advantage to UK based suppliers in the case of defence or security contracts under the Ministry of Defence.

As has been said during the Committee’s proceedings, when done well, defence procurement strengthens our UK economy and UK sovereignty. Labour in government would make it fundamental to direct British defence investment first to British businesses, with a higher bar set for any decisions to buy abroad. That is the objective behind the amendment.

The Government really have missed an opportunity in the Bill to put British businesses first. We should be using it to ensure that we buy, make and sell more in Britain. Across the country, we have amazing British businesses, with the capability to support all the country’s defence and security procurement needs. Our steel, shipbuilding, aerospace and material industries are national assets and treasures. We need to support them.

If we want to use legislation to empower British business, we need to ensure that British business has the first bite of the cherry of the investment on offer. For the good of our country, we should want to see as much as possible of our equipment designed and built here in the United Kingdom. There are those who think that putting that in the Bill is not necessary, and that being a British business that supports jobs and industry in the UK should speak for itself. Sadly, as we have seen, that is not true.

I draw attention to the recent signing of the contract for fleet solid support ships, which was awarded to a Spanish-led consortium. The Government claim that the contract will support 1,200 jobs across the UK and 800 at Harland & Wolff in Belfast, but it is worth noting that the Government have included no guarantees of those jobs in the contract itself. Under the terms of the contract, the Spanish company will do the majority of the complex manufacturing of the ships, which requires most of the expertise and technology transfers that underpin the project. Instead of investing in the UK’s own abilities in design and technology, we are paying Spain to strengthen its abilities.

To return to my point, the Government chose that Spanish state-subsidised bid over a bid that would have sustained more than 2,000 jobs directly in the design and building of the FSS ships and about 1,500 jobs in the wider UK supply chain, and supported about another 2,500 in local communities around the UK—not insubstantial figures. The award of that contract comes at a critical time for the UK shipbuilding industry. Today, we have already had a statement on the Floor of the House about British Steel. The GMB union has released research to show that shipbuilding and ship repair employment in Great Britain has fallen by 80,000 jobs since the early 1980s. Not only is that a massive decline in skills in the UK industry, but it poses a threat to the UK sovereign defence manufacturing capability at a time of international uncertainty.

I do not need to tell the Committee that this country has a skills gap that desperately needs to be fixed. According to the National Audit Office report on the digital strategy for defence published in October 2022, the Ministry of Defence is having difficulties recruiting and retaining the necessary workforce, because its pay rate cannot compete with the private sector. Some defence companies are actively trying to resolve the issue by recruiting through apprenticeship programmes, such as that at Rolls-Royce, which announced 200 new apprenticeships at its new nuclear skills academy in Derby, and the apprenticeship scheme at Leonardo, where I went last year to speak with the apprentices in Yeovil about their hard work.

Apprenticeships, however, cannot exist without the work to do. One of the main issues that defence companies come to me with is the sustainability of workflow. That makes employers reluctant to take on apprentices for fear that they will not have enough work or money to support them. For apprentices themselves it does not make the defence industry look like a stable place to grow their career. We need long-term investment in apprenticeships and skills development in the UK. There needs to be a culture change in Government to put the growth of local industries first and to review the pipeline of all major infrastructure projects to explore how to increase the materials made in Britain and to upskill the workers to get the jobs of the future.

Such concerns are spread across the whole United Kingdom. The Scottish Affairs Committee has raised those concerns regarding Scottish shipyards. In its report, “Defence in Scotland: military shipbuilding,” which was published on 23 January, the Committee said:

“Recent developments have introduced uncertainty about some orders in the pipeline and whether it sets out a clear ‘drumbeat’ of orders needed to sustain Scottish shipyards.”

UK workers deserve better than that uncertainty.

When discussing the UK defence industry, we must not forget the importance of small and medium-sized enterprises in the supply chain. We know that shipbuilding contracts can help to deliver benefits for the wider economy and in shipbuilding communities. If contracts keep going abroad, work for SMEs will also go abroad, and the skills will go with them.

Public money should be spent for the public good. We should always consider the wider value to society. Our smaller local businesses are at the heart of that. The amendment would advantage British businesses in bidding for defence and security contracts. As a result, it would also advantage UK businesses in the supply chain.

If we are serious about defence procurement, we must commit to buy, sell and make more in Britain. It is crucial, now more than ever, that we have a procurement system that supports our sovereign capabilities, ensuring that UK businesses have the advantage when it comes to securing defence and security contracts.

[The Parliamentary Secretary, Cabinet Office (Alex Burghart)]

It is a pleasure to serve under you this afternoon, Mr Mundell. Before I turn to amendment 12, I would like to refer back to our previous sitting. I said that I would get back to the hon. Member for Brighton, Kemptown, who is not in his place at the moment but will have the advantage of being able to read Hansard later. His question was whether a procuring authority can reject a bid if it requires a supplier to pay the real living wage. The short answer is yes. That option is very much open to procuring authorities. I am sorry that I could not provide him with that information earlier, because I know that he would have been happy to hear it.

Amendment 12, tabled by the Opposition, seeks to ensure advantage to UK-based suppliers for defence or security contracts. Defence contracting authorities will determine the right procurement approach on a case-by-case basis. That ensures the delivery of the most effective solution for the armed forces while ensuring value for money, taking into consideration factors including the markets concerned, the technology we are seeking, our national security requirements and the opportunities to work with international partners, before deciding the correct approach to through-life acquisition of a given capability.

The defence and security industrial strategy sets out a strong commitment to maintaining onshore industrial capability in key capability segments, such as those that are fundamental to the UK’s national security. That commitment does not always preclude the involvement of foreign-based firms, as long as they conduct the work in the UK and comply with certain security conditions.

I understand that the Labour party wishes to burnish its patriotic credentials—that is all for the good, I am sure—but to listen to the speech by the hon. Member for Islwyn, one could be forgiven for not understanding that 90% of defence spend is already within the UK. Indeed, the fleet support ships that he referred to will be built to a British design, with the majority of the construction at the Harland & Wolff shipyards in Belfast and Appledore and all the final assembly being completed at the Harland & Wolff shipyard in Belfast, bringing shipbuilding back to Northern Ireland. In our Westminster Hall debate the other day, it was good to hear the hon. Member for Strangford (Jim Shannon) praising that, and saying what a difference it would make to people and businesses in his community.

We must understand that there is already a good tradition of this approach. The Bill, though stipulations elsewhere, will actually make it easier for British small and medium-sized enterprises to bid for these contracts. We will also have better publication of pipelines, which will help them too.

While I appreciate what the hon. Member for Islwyn is trying to do with his amendment, there is a real risk that, if it was passed, we would see some defence authorities occasionally being forced to accept much more expensive contracts, perhaps with lower capability, and that would be to the detriment of both taxpayers’ money and, more significantly, the capability of our armed forces. I therefore respectfully ask, on those practical grounds, that the amendment be withdrawn.

[Chris Evans]

The Minister mentioned the hon. Member for Strangford, whose nickname is the hon. Member for Westminster Hall, he speaks in so many Westminster Hall debates—I think he lives there. I listened to what the Minister said, and I appreciate that 90% of contracts are in this country. However, the amendment would be a shot in the arm not only for our defence industries, but for our steelmaking capabilities, so I will press it to a vote.

Question put, That the amendment be made.

--- Later in debate ---

[The Chair]

With this it will be convenient to discuss clause 24 stand part.

[Alex Burghart]

The clause explains what we mean by “award criteria”. They are the criteria against which contracting authorities assess tenders under a competitive tendering procedure, and the clause sets out the rules that apply to them.

The clause requires that award criteria are clear, measurable and specific, comply with the rules on technical specifications, are a proportionate means of assessing tenders, and relate to the subject of the procurement. The clause requires that the way in which tenders are evaluated is transparent and set out in the assessment methodology, and that contracting authorities set out the relative importance of the criteria.

The clause makes it clear that award criteria can cover a wide range of things, from price to how things are produced to what happens at the end of the solution’s lifecycle, provided criteria relate to the subject matter of the contract. The rules allow a contracting authority to limit the number of lots that it wishes to award to a single supplier, when it has broken down a larger procurement into smaller lots or components. Where the contract is for light-touch services, which are person-centred services, reference is made to additional matters that can be considered to be relevant to the subject matter of the contract.

We want contracting authorities to be confident when designing and running procurement procedures. An area that often causes confusion is how far award criteria can be iterated during the process. Given the flexibility afforded to contracting authorities under the new regime, clause 24 makes it clear that award criteria may be added to through greater detail, or tweaked to add clarity during a procurement procedure, but any such refinements to award criteria should be made at specified points. The clause does not allow for wholesale changes to award criteria. For example, during a procurement procedure that allows for a research phase, a design phase and a development phase, the overarching criteria will remain constant, but the specifics may evolve. That is what the clause seeks to achieve.

[Florence Eshalomi (Vauxhall) (Lab/Co-op)]

It is a pleasure to serve under your chairship, Mr Mundell.

Clauses 23 and 24, as the Minister highlighted, relate to the award criteria and their refinement before the invitation of tenders. Award criteria for procurement need to be finely balanced to achieve the best deal for the public. If they are too narrow, we risk missing out on innovative processes, and the potential to save the taxpayer money and deliver those services efficiently; if they are too broad, we risk delivering substandard and inappropriate services.

In the lead-up to our consideration of the Bill, I spoke to different groups and charities. They said that broad contract terms often mean that contracting authorities end up awarding the contract to the cheapest bidder. That is despite the charities offering more bespoke and important services that address the needs of procurement far more substantially.

--- Later in debate ---

Will the Government issue guidance and provide a template for what they expect a set of award criteria for a certain service to look like to other contracting authorities? Will the Government ensure that good practice is developed across the country, and allow for the easy sharing of information on award criteria? Again, I highlight the fact that procurement officers are often stretched, and information on what has worked well in other areas could be vital to producing the greatest value for money. Information on things that have created headaches in other areas can be useful to avoid the same pitfalls happening across the country. I hope that the Minister will consider issuing such guidance and will ensure that different authorities talk to each other to establish best practice in the new system.

[Alex Burghart]

I am glad to be able to give the hon. Lady that assurance.

Question put and agreed to.

Clause 23 accordingly ordered to stand part of the Bill.

Clause 24 ordered to stand part of the Bill.

Clause 25

Sub-contracting specifications

Question proposed, That the clause stand part of the Bill.

[Alex Burghart]

The clause sets out a specific and somewhat technical provision, whereby a contracting authority can either permit or direct a supplier to subcontract the supply of goods, services or works to another supplier.

In certain procurements, circumstances exist where part of the contract needs to be subcontracted to a specified supplier. That could be due to economic or technical reasons relating to requirements of interchangeability or interoperability with existing equipment, services or installations. It could also be due to the protection of exclusive rights.

For example, a contracting authority might require the use of certain technical software that is owned by a single supplier. Therefore, in such procurements, a contracting authority may need to nominate a particular subcontractor that must be used. For direct award under clause 41, however, a contracting authority may only require a supplier to subcontract the supply of goods, works or services to a particular supplier where the justifications for a direct award set out in schedule 5 also apply to the subcontractor.

[Florence Eshalomi]

The clause states that where a contract could be supplied to a supplier under a direct award, the contracting authority can mandate that a supplier that wins a competitive tender process must subcontract the supply of those works, goods and services to the supplier that could have supplied the contract via a direct award. We have discussed the issues of subcontracting and of direct awards, and we will discuss them further under clauses 71 and 41 respectively. This clause is relatively uncontroversial, in that it seeks to ensure that the mechanisms for direct awards can apply via a subcontract. We therefore do not wish to oppose the clause and are happy for it to stand part of the Bill.

Question put and agreed to.

Clause 25 accordingly ordered to stand part of the Bill.

Clause 26

Excluding suppliers from a competitive award

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clauses 27 and 28 stand part.

[Alex Burghart]

We come to the clauses concerning the exclusion of suppliers. I appreciate that there is considerable interest in these clauses, and rightly so; they are an important part of the Bill.

Clause 26 sets out the basic principles governing the exclusion of suppliers from competitive award of contracts. Subsection (1) provides that contracting authorities must disregard tenders from suppliers that are “excluded”. Excluded suppliers are defined in clause 57 as those in respect of which a mandatory ground for exclusion applies, as set out in schedule 6, and the issues in question are likely to occur again, or that are otherwise treated as excluded suppliers under the Bill.

Subsection (2) provides that contracting authorities must consider whether a supplier is an “excludable supplier” before assessing tenders, and may, at their discretion, disregard tenders from such suppliers. Excludable suppliers are those in respect of which a discretionary exclusion ground applies, as set out in schedule 7, and the issues in question are likely to occur again.

Subsection (3) requires contracting authorities to give the supplier the opportunity to replace an associated person, such as a subcontractor that the supplier is relying on, to meet any conditions of participation, if the exclusion situation pertains to such a supplier.

Clause 26 is essential to give effect to the exclusions regime set out in the Bill with regard to the assessment of tenders, which protects contracting authorities and the public from suppliers that may not be fit to compete for public contracts. However, the clause does not provide the detailed grounds for exclusion and the process for how authorities should apply them. Those are set out in clause 57 and in schedules 6 and 7, which we will come to on a future day.

Clause 27 sets out the basic principles governing the exclusion of suppliers from competitive, multi-staged procurements. Those provisions are needed in addition to clause 26 to ensure that contracting authorities consider the exclusions at the start of multi-stage procedures, as well as when considering tenders.

Subsection (1) provides that contracting authorities must apply the exclusions regime to interested parties at the outset of all multi-staged procurements. For those procurements, authorities should consider whether each interested supplier meets any of the grounds for exclusion and, if so, whether the issues in question are likely to occur again, and whether that supplier is to be treated as an excluded supplier under the Bill for other reasons.

If a supplier is an excluded supplier under subsection (2), the authority must prevent the supplier from participating in, or advancing any further in, the procurement. Where the supplier is an excludable supplier under subsection (3), the authority may, at its discretion, permit the supplier to participate. That has the effect of making exclusions a gateway into the procurement.

Subsection (4) requires contracting authorities to give the supplier the opportunity to replace an “associated person”, such as a subcontractor the supplier is relying on, to meet any conditions of participation, if the exclusion situation pertains to such a supplier.

Clause 27 is essential because it gives effect to the supplier exclusion regime set out in the Bill, which protects contracting authorities and the public from suppliers that may not be fit to compete for public contracts. However, as with clause 26, clause 27 does not provide the detailed grounds for exclusion and the process for how authorities should apply them. Those are set out in clause 57 and schedules 6 and 7.

Clause 28 deals with exclusions and subcontractors. It sets out the circumstances in which contracting authorities must, or may, consider whether the exclusion grounds apply to subcontractors that the bidder in question intends to work with, and how to apply the exclusion regimes where that is the case. Importantly, that is not limited to direct subcontractors of the bidder but includes other subcontractors further down the supply chain.

Subsection (1) requires contracting authorities to request information from suppliers about all intended subcontractors and to check that they are not on the debarment list. Subsection (2) then allows contracting authorities to request additional information about any subcontractors and consider whether they are excluded or excludable suppliers. Contracting authorities may choose to do that for particular types or categories of subcontractors, such as all first-tier subcontractors or service-critical subcontractors.

If a subcontractor is an excluded supplier under subsection (3), the contracting authority must disregard their tender and exclude them from taking part in a competitive tendering procedure. If the subcontractor is an excludable supplier under subsection (4), the contracting authority may disregard their tender or exclude them from the procedure. Before disregarding a supplier’s tender or excluding them from a procedure under this clause, under subsection (5), the contracting authority must give the supplier the opportunity to replace the subcontractor in the supply chain in order to avoid itself being excluded.

We know that some of the worst corporate misconduct and unlawful behaviour occurs deep in supply chains to Government. That is particularly true with respect to forced labour and other modern slavery abuses. This clause is essential to ensure that the same standards to which we hold bidders for contracts can be applied all the way down the supply chain.

[Florence Eshalomi]

Clauses 26 to 28 concern the exclusion of suppliers on the grounds listed in schedules 6 and 7 related to mandatory and discretionary grounds for exclusion. We support the inclusion of exclusion grounds in the Bill. In the Green Paper “Transforming Public Procurement”, the Government said:

“The current procurement regulations allow contracting authorities to take into account the past performance of a supplier on only very limited grounds and commercial teams often have to rely on bidders’ self-declarations rather than objective, evidence-based information. We can act now to raise the bar on the standards expected of all suppliers to the public sector and ensure that outstanding small suppliers are able to secure more market share, increasing productivity and boosting economic growth.”

I am sure that there is complete agreement on that in the Committee today. There can be no question but that we should not give public money to those convicted of wrongdoing or acting in a way that damages the country and our communities.

Clauses 26 to 28 put into place terms to bring the mandatory exclusion grounds from schedule 6 and schedule 7 into force by using the language of “excluded” and “excludable”, as defined in clause 57. Of course, the strength of this clause is heavily determined by the strength of the grounds for exclusion.

We are pleased to see some steps forward from the system inherited from European Union directives, which was brought into power in this country via the Public Contracts Regulations 2015. In particular, we are pleased to see environmental misconduct implemented as a discretionary exclusion ground. Our environment is a key natural asset that provides us with the building blocks for living in this country. Those who seek to damage our environment—for example, by dumping waste and causing significant damage to plant or animal life—should not be given Government contracts. We are also pleased to see national security within the system, although, as the Minister can guess from our planned amendments, we feel that this could have a stronger presence in the Bill, with some of the ambiguity removed.

When reading through the clause, we had some concerns about how it will be applied and some of the doors that it leaves open on discretionary exclusion grounds. Although the Bill is clear that those excluded on mandatory grounds must be disregarded from a tendering process, it is not clear on the fate of suppliers that fall foul of the discretionary grounds. Here, the Bill says that contracting authorities “must consider” whether a supplier is excludable on discretionary grounds but “may disregard” their tender, as the Minister said. This discussion may seem similar to ones we have already had, but this could have far more serious consequences.

For example, let us say that a supplier is decided to be a national security risk following an assessment by a contracting authority and that is confirmed by the Government via the provisions in clause 29. That supplier then applies for a tender to another contracting authority. What is stopping that contracting authority awarding this contract, should it so wish? There does not seem to be any mechanism to permanently exclude an excludable supplier in the Bill. Even when the Government consider a threat so severe that it should go on the debarment list, the Bill would still allow authorities to apply the “may” rather than the “must” exclude part.

I am sure the Minister will say that he will issue clear guidance on this and that contracting authorities should, of course, exclude a supplier in this case, but these are serious grounds for exclusion; we all agree on that. We cannot leave it to chance that a contracting authority uses the powers as they are written in the Bill, rather than as the Minister wishes. At the very least, that creates ambiguity around the whole system.

--- Later in debate ---

I hope the Minister will assure me that there will be adequate and easy-to-follow training and guidance from the Government by the time that the system is in place. That would help to put our minds at ease, and the minds of all the businesses that come forward.

[Alex Burghart]

On that final point, the hon. Lady will have heard me say that we intend to introduce a major programme of training and guidance across many areas covered by the Bill, as part of breathing new life into procurement in our country.

On the hon. Lady’s previous points, this part of the Bill deals with the creation of the mechanism, the details of which are dealt with subsequently in the Bill. The mechanism is that there are some discretionary grounds for exclusion and some mandatory grounds for exclusion. When we get to the relevant clauses and schedules, we will be able to put our arguments, and she and her party can say whether they think that certain issues should be mandatory or exclusionary. I think she will see, when we get there, that sometimes there are grounds for mandatory exclusion on particular issues, but sometimes, on a different version of the same issues, there can be grounds for discretionary exclusion. As I say, we will get into the detail of that as we progress.

Question put and agreed to.

Clause 26 accordingly ordered to stand part of the Bill.

Clauses 27 and 28 ordered to stand part of the Bill.

Clause 29

Excluding a supplier that is a threat to national security

[Florence Eshalomi]

I beg to move amendment 18, in clause 29, page 20, line 42, leave out

“paragraph 14 of Schedule 7”

and insert

“paragraph 42A of Schedule 6”.

This amendment is consequential on Amendment 15.

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[Alex Burghart]

New clause 1 would legislate for the establishment of a committee to consider the threat to national security and cyber-security from suppliers in supply chains delivering public contracts. The Government take national security considerations extremely seriously, and we understand the importance of countering threats to our security throughout our supply chains. We recently demonstrated that through our action to remove Chinese surveillance equipment from sensitive sites across the Government estate. The inclusion of the national security exclusion ground in schedule 7 to the Bill will bring about a significant improvement to the existing EU-derived regime. It will allow a supplier to be excluded on national security grounds, even when the procurement does not meet the bar for exemption on those grounds.

We understand the intention behind the hon. Lady’s new clause, but it duplicates aspects of the new procurement regime underpinned by the Bill. I have already mentioned the ability to exclude a supplier on grounds of national security. The Bill requires any contracting authority that wishes to rely on those grounds when excluding a supplier or rejecting their tender to first notify a Minister of the Crown, who must be satisfied that the supplier should be excluded.

The notification not only ensures that the Minister agrees to the exclusion, but serves to alert them, if they are not already aware, that there may be security concerns about the supplier. The Minister may accordingly decide to investigate the supplier under clause 60, which could lead to the supplier being placed on the debarment list under clause 62. Furthermore, if a supplier already holds a public contract and is found to meet any exclusion ground, clause 77(2)(b) enables the contract to be terminated. Clause 77(2)(c) extends that to subcontracts. As with exclusion, any proposed termination on the grounds of national security must be brought to the attention of the Minister for a decision; again, that could trigger debarment from future procurements.

Under the new clause, the proposed committee would also consider threats to cyber-security. Existing policy in this area is detailed in procurement policy note 09/14. That mandates that where contracts have certain characteristics, suppliers must meet the technical requirements prescribed by the Cyber Essentials scheme. That applies when ICT systems and services supplied by the contract either store or process data at official level. In addition, the MOD, through the defence cyber protection partnership, has developed the cyber-security model that is to be applied to its procurements to ensure cyber-security-related risks are adequately managed throughout the life of the contract.

In short, contracting authorities are already alive to the need to consider national security, including cyber-threats, when procuring public services, and are well placed to review their contracts and supply chains for such threats, bolstered by the provisions of the Bill. However, I am mindful of the concerns raised by colleagues on Second Reading, and those concerns will continue to inform Government thinking as we move forward.

Amendments 15 to 19 seek to make exclusion on national security grounds mandatory, rather than discretionary. Any risk to national security should of course be taken very seriously indeed, but it is right that we leave some scope for nuance and flexibility in the application of the exclusion ground. Suppliers may pose a risk in some contexts, but not in others. For instance, in a relatively innocuous procurement, the exclusion of a supplier might not be merited if the contracting authority was confident that there was no potential for harm. A company that might raise concern in the manufacture of one technical device might also produce paper clips, which would not be a threat to national security.

It is important to note that contracting authorities must consider all exclusion grounds, mandatory and discretionary, against every supplier in each procurement. Any decision not to exclude a supplier that poses a national security risk must be weighed against that risk, and I am confident that contracting authorities will do so carefully.

[Kirsty Blackman (Aberdeen North) (SNP)]

I understand what the Minister is saying, but if the contracting authority is spending public money on those paper clips, it is funding a company that can breach national security and do things that are against the national interest. The contract may not be a risk to national security, but the company is, so surely it should be a mandatory, rather than a discretionary, exclusion.

[Alex Burghart]

There would be a balance of risks. Not all security threats are proven. Of course, it is up to the authority to assess the concerns at the time.

Question put, That the amendment be made.

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Question proposed, That the clause stand part of the Bill.

[Alex Burghart]

Clause 30 requires contracting authorities to exclude suppliers that have gained an unavoidable, unfair advantage in a procurement as a result of improper behaviour in relation to that procurement, and suppliers that have failed to provide an accurate and complete list of connected persons and associated persons when requested to by the contracting authority.

Subsections (1) and (2) are clear that exclusion as a response to improper behaviour, defined in subsection (4), is a last resort. It is to be used only where the supplier has gained an unfair advantage that cannot be remedied other than by exclusion. Subsection (3) requires contracting authorities to give suppliers the opportunity to remedy their improper behaviour. When suppliers seek to tilt the playing field in their favour via mis-representation or undue influence, and fail to remedy that, it makes fair and open competition for contracts impossible, and it is taxpayers who pay the price.

Transparency is another essential component of fair procurement, so subsections (5) and (6) are clear that suppliers that are not prepared to disclose full and accurate details of their connected persons, including beneficial owners and directors, or associated persons—for example, subcontractors that are relied on to meet conditions for participation in the procurement—are not fit to bid for public contracts. Contracting authorities must know who owns or has control over the suppliers with which they are contracting. The clause will support them in gaining that knowledge.

[Florence Eshalomi]

As the Minister has highlighted, clause 30 concerns the exclusion of suppliers who behave improperly during the procurement process. It is important that we do not tolerate improper behaviour in procurement. Many procurement contracts are public-facing and require a huge amount of trust, because the suppliers represent the contracting authority to the public. If there is evidence of misleading and improper behaviour that betrays a lack of integrity during the procurement process, it will raise doubts about whether such behaviour may flow through into how the company carries out the contract. Critical goods are procured via these processes, which are vital to the way our country functions, and we cannot let those who embellish their evidence during the tendering process have access to our supply chains.

The Opposition support the clause, but I have a few questions about how it will work. What steps will be taken to establish improper behaviour during the tendering process? What steps can be taken if information comes to light after the award of a contract? It is crucial that improper influence does not permeate into our procurement system; the measures in the Bill can prevent that, but there also needs to be transparency in the system so that we can spot things like undue influence and prevent improper behaviour from falling through the cracks. What steps is the Minister taking to ensure that undue influence, both formal and informal, is spotted during the procurement process?

I must also ask what consistent remedy is available to contracting authorities that find out about breaches following the award of a contract. Let me take hon. Members back to the covid-19 scandal, when billions of pounds-worth of unsellable personal protective equipment was written off. I know that that was not all due to fraudulent behaviour from suppliers, and that some fraudulent behaviour would not fall under the clause if a competitive tender were used. However, it is shocking that the Government admitted on 20 December 2022, in answer to a parliamentary question, that only £18 million of taxpayers’ money had been clawed back from PPE contracts.

There needs to be stronger clawback and remedies when suppliers act improperly. Perhaps that is a matter of culture more than legislation, as many contracts include such a clause, but it would still be helpful to hear what the Minister thinks needs to be done to ensure that more public money is clawed back from those who act improperly.

[Alex Burghart]

In answer to the hon. Lady’s final point, the Government are absolutely seeking to recover public money. The Department of Health and Social Care has been in a process of mediation, but obviously there will come a point at which mediation may need to lead to litigation. Contracts have been drawn up in a way that ensures that we can do the right thing by taxpayers.

On the hon. Lady’s earlier point, I can reassure her that we will publish guidance to support contracting authorities in this area, so that they can conduct due diligence on suppliers and their connected persons.

Question put and agreed to.

Clause 30 accordingly ordered to stand part of the Bill.

Clause 31

Modifying a section 19 procurement

Question proposed, That the clause stand part of the Bill.

[Alex Burghart]

There will be times when changes need to be made to the terms of a procurement. Clause 31 sets the scope for such modifications, with the intention of striking a balance between permitting changes required by contracting authorities and preventing abuse of that flexibility, for example to suit a particular supplier. Modifications are allowed in all procedures, but—with the exception of light-touch contracts, which have greater flexibility—they must be confined to non-substantial changes. In essence, that prevents a change that would be likely to impact the market response to the procurement.

Where a permitted modification is made, the contracting authorities must, in consequence, consider revising the time given to suppliers to respond to the invitation to tender or request to participate. The making of modifications will also be transparent, as the contracting authority must provide revised documentation that highlights the changes.

[Florence Eshalomi]

Clause 31 relates to the modification of a section 19 procurement prior to the deadline for submitting a request to participate in the procedure, where there has been no invitation to submit such requests. This sensible clause has proportionate provisions relating to the alteration of contracts. It is right that contracting authorities should be able to modify terms early in the process and carry out later alterations where they are not substantial, or relate to light-touch contracts.

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Mr Cram mentioned that even a simple bid can run into four figures, so if an SME sees a contract that it feels is good and offers value for money, and that it believes it can win, it may invest a significant amount of money into developing the bid prior to the deadline for submitting a request to participate in a procedure or for submitting a tender. If the terms are changed and make the contract unattractive to an SME, it would simply lose the money that it has invested, despite the increased time limits. Will the Minister ensure that there is not a culture of contract changes, so that SMEs do not lose a disproportionate amount of money during the process?

[Alex Burghart]

As the hon. Lady will know, we have included provisions throughout the Bill to make sure that bids are more accessible for SMEs and that we have a level playing field. In that respect, the clause is no different from others in the Bill.

Question put and agreed to.

Clause 31 accordingly ordered to stand part of the Bill.

Clause 32

Reserving contracts to supported employment providers

[Alex Burghart]

I beg to move amendment 32, in clause 32, page 23, line 22, after “operates” insert “wholly or partly”.

This amendment would mean that an organisation could meet the test of being a “supported employment provider” if it only partly has the purpose of providing employment or support to disabled or disadvantaged individuals.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 92, in clause 32, page 23, line 23, leave out “or disadvantaged”.

This amendment, together with Amendment 93 would ensure that provisions related to supported employers are targeted at disabled individuals, in line with the Public Contract Regulations 2006.

Government amendment 33.

Amendment 93, in clause 32, page 23, line 25, leave out “or disadvantaged”.

This amendment, together with Amendment 92 would ensure that provisions related to supported employers are targeted at disabled individuals, in line with the Public Contract Regulations 2006.

Amendment 94, in clause 32, page 23, line 25, leave out “30” and insert “50”.

This amendment would increase the threshold for an employer to be considered supported from 30% of disabled or disadvantaged staff to 50%, in line with the Public Contract Regulations 2006.

Clause stand part.

[Alex Burghart]

Amendments 32 and 33 seek to ensure that the provision is applied widely and as intended, so as to support disabled or disadvantaged people who might otherwise struggle to find employment effectively. Many of the organisations that wish to provide that assistance through the delivery of public contracts do so via arrangements commonly referred to as “employment programmes”, which can be established by one organisation or a number of organisations working together. We need to ensure that those programmes can qualify for a reserved contract. Amendments 32 and 33 therefore seek to clarify that the 30% threshold for disabled or disadvantaged workers can be applied to the programme or part of an organisation, and not just to the organisation as a whole. Where a programme is established as a result of organisations working together, each organisation can contribute to the 30% threshold.

The amendments also seek to clarify that, in order to qualify, an organisation does not necessarily need to have been set up with the sole purpose of assisting disabled or disadvantaged people in employment, but the part of the organisation interested in delivering the contract must have that purpose. This may be a subsidiary or a specific project within an organisation. Where it is applied to a programme made up of a number of organisations working together, the purpose applies to the programme.

Clause 32 allows procurements to be reserved for organisations that provide employment and/or assistance in finding and retaining employment for disabled or disadvantaged people, allowing public procurement to support organisations that assist people who might otherwise struggle to access the labour market, while delivering public services to a high standard. Such companies are often not for profit and will therefore benefit from a more level playing field when competing for a reserved procurement than might otherwise be the case. In order to qualify, the organisation, or an arrangement between organisations, must have the aim of assisting disabled or otherwise disadvantaged people in employment, and at least 30% of the workforce must be disabled or otherwise disadvantaged.

[Florence Eshalomi]

I thank the Minister for his explanation of amendments 32 and 33. We support the use of supported employers and believe that they could go even further, as I will argue in relation to our amendments 92 to 94, but I will first touch on amendments 32 and 33.

We are concerned that Government amendments 32 and 33 expand the definition of supported employment provider so that it would apply where the part of the organisation delivering the contract would meet the relevant thresholds, which could potentially allow for a further watering down of the requirements. Has the Minister considered the potential of the amendments to limit the effectiveness of supported employment by allowing more providers that are not focused on the needs of disabled people to access reserved contracts, or even the potential for larger contractors to game the system? We do not intend to push the amendments to a vote, but I would welcome clarity from the Government and I hope that the Minister’s response will satisfy me. We reserve our right on that.

On amendments 92 to 94, supported employment is a long-established practice and plays an important role in increasing employment opportunities for disabled people. The principle of reserving contracts so that only supported employment providers can bid for them is welcome. However, there are concerns that the Bill does not set a sufficiently high bar for an organisation to be a supported employer, dilutes the aims of reserving contracts and potentially opens the system to abuse.

The Public Contracts Regulations 2006 required 50% of employees to be disabled people, which provided a greater focus on the specific aim of supporting the employment of disabled people. Clause 32 instead enshrines the weaker standard defined in the Public Contracts Regulations 2015, which require only 30% of workers to be disabled or disadvantaged. That potentially limits the impact of supported employment in providing employment opportunities for disabled people.

Concerns have been raised that that approach does not fully recognise the importance of deaf and disabled people’s organisations, or DDPOs, which not only provide supported employment but have a wider role in society. There are clear links between the work of DDPOs and social value. DDPOs protect and uphold disabled people’s rights, campaign for equality and inclusion, and provide a range of peer-led accessible services. Their services support disabled people in accessing services and entitlements, challenging discrimination and exclusion, and having choice, control and independence.

Amendments 92 to 94 would return to the broad definition of a supported employment provider set out in the Public Contracts Regulations by requiring 50% of employees to be disabled and placing a greater emphasis on the role of DDPOs. Inclusion London, a membership body for DDPOs in London, defines a DDPO as an organisation the management committee or board of trustees of which has at least 75% representation from deaf and disabled people, the staff of which is made up of at least 50% deaf and disabled people at all levels of the organisation, and that works to provide services for or works on behalf of deaf and disabled people.

Amendments 92 and 93 would remove “disadvantaged” from the definition. Disability is clearly defined in the Equality Act 2010, which provides a more robust definition that would ensure that the aim of reserving contracts is effectively targeted at the right providers. Did the Government consider the merits of the 2006 definition in preparing the Bill, and did the Government assess whether that definition more effectively targeted the measure of reserving contracts? Will the Minister consider engaging with DDPOs to ensure that the benefits of those organisations are considered in implementing the Bill?

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[Alex Burghart]

Amendments 92 to 94, tabled by the hon. Lady, seek to reduce the scope of application of clause 32, which allows procurement to be reserved for supported employment providers. The clause is consistent with the requirements in regulation 20 of the Public Contracts Regulations 2015, which has functioned well since coming into force. Amendments 92 to 94 seek to revert to procurement rules from 2006, which have long since been repealed.

Amendments 92 and 93 seek to remove the support to disadvantaged people who may struggle to access the labour market. “Disadvantaged” is deliberately undefined in the Bill to enable contracting authorities, particularly local government, to address challenges in the employment landscape at any point in time. The underlying objectives could be to assist those who traditionally struggle to access the labour market, such as the long-term unemployed, prison leavers or care leavers. It is our intention that this clause be capable of broad application, at the discretion of the contracting authority. Amendment 94 would result in fewer organisations, including not-for-profit organisations, being able to qualify for a place in a reserved procurement.

Increasing the percentage of the workforce who must be disabled—or disadvantaged, as the clause is currently drafted—from 30% to 50% may at first appear as an incentive for organisations to have more disabled employees, and therefore appear laudable. However, in reality, it will reduce the competitive market. A threshold of 50% will be a very high target for most organisations looking to bid on their own. Similarly, employment programmes are often the result of collaboration between commercial and not-for-profit organisations, which contribute to meeting the threshold. We have taken steps to ensure those sorts of arrangements can qualify. Significantly increasing the threshold may put those collaborations at risk—we would not want to see that.

Suppliers might feel obliged to establish more complex supply chains to meet the threshold, which could hinder the quality of delivery and could drive up costs. Alternatively, suppliers might simply choose not to bid for Government contracts.

Ultimately, if a reserved procurement is to be successful, it requires competition. The smaller the pool of qualifying organisations, the less likely a reserved competition will be viable, meaning contracting authorities will not be able to use the provision, and the direct support to the people and organisations the clause aims to benefit will be lost.

Amendment 32 agreed to.

Amendment made: 33, in clause 32, page 23, line 24, leave out from “individuals” to end of line 26 and insert “where—

(a) disabled or disadvantaged individuals represent at least 30 per cent of the workforce of the organisation,

(b) if a particular part of the organisation is to perform the contract, disabled or disadvantaged individuals represent at least 30 per cent of the workforce of that part of the organisation, or

(c) if more than one organisation is to perform the contract, disabled or disadvantaged individuals represent at least 30 per cent of the combined workforce of—

(i) those organisations,

(ii) where a particular part of each organisation is to perform the contract, those parts, or

(iii) where a combination of organisations and parts is to perform the contract, those organisations and parts.”—(Alex Burghart.)

This amendment would mean that an organisation could meet the test of being a “supported employment provider” if part of the organisation meets that test and that part is to perform the contract, or the test is met by the combined workforce of organisations or parts of organisations that will together perform the contract.

Clause 32, as amended, ordered to stand part of the Bill.

Clause 33

Reserving contracts to public service mutuals

Question proposed, That the clause stand part of the Bill.

[Alex Burghart]

Clause 33 operates similarly to clause 32, but allows only specific procurements to be reserved for organisations that have spun out of the public sector to provide social services, with company decisions managed by company employees. Those companies are known as public service mutuals.

Public service mutuals play a vital role in supporting communities at a local level, delivering essential services and contributing to economic growth. However, they may struggle to compete with larger or more well-established suppliers, and it is therefore appropriate that we encourage these public service mutuals by enabling competition in certain limited circumstances among only those organisations that meet the requirements of this clause.

Subsection (6) provides a full definition of a public service mutual body for the purposes of applying this clause. For example, in order to qualify, the company must be run on a not-for-profit basis or restrict the distribution of profits to its members. The exact list of services that can be reserved under clause 33 will be provided in secondary legislation under subsection (8). All reservable services are also light-touch services; examples include adult educational services and rehabilitation services.

[Florence Eshalomi]

As the Minister has mentioned, clause 33 gives contract authorities the ability to reserve certain light-touch contracts for public service mutuals. I am pleased to discuss this matter; as a very proud Labour and Co-operative MP, I am happy to have another opportunity to talk about how fabulous co-operatives are and how they can benefit the public sector. It is fair to say that the Minister and I agree that public service mutuals have so much to offer in terms of innovation and how they can help the wider public sector. The running of services by people rooted in their community helps to bring an understanding of local needs to the heart of public service mutuals, and they can also improve both employee morale and the quality of services for users.

--- Later in debate ---

I am going back to the concerns that I raised the other day about the light-touch regime, which the Minister did not fully respond to. I hope that he can explain the light-touch regime a bit further today and say how it will apply to this clause specifically and to the rest of the Bill in general.

[Alex Burghart]

The hon. Lady will have heard me say on Tuesday about the light-touch provisions that the Government are heavily hemmed in by our international obligations in this area. The codes to which she referred are very specific and they are not included in the Bill because they are extremely numerous. I think there are about 500 of them, so it would have been very difficult for us to put them all in the Bill. However, I am grateful that she supports the general thrust of the clause.

Question put and agreed to.

Clause 33 accordingly ordered to stand part of the Bill.

Clause 34

Competitive award by reference to dynamic markets

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this, it will be convenient to discuss clauses 35 to 40 stand part.

[Alex Burghart]

This substantial grouping of clauses is of considerable importance to the Bill.

Clause 34 relates to the awarding of contracts under the new concept of a dynamic market. This is a highly flexible commercial tool. Dynamic markets are established by contracting authorities and essentially are “live” lists of suppliers that are pre-qualified to deliver certain types of contracts.

Dynamic markets are similar to existing dynamic purchasing systems, in that they will allow for suppliers to be admitted to the market if they meet the conditions of membership. To maximise the benefits of this flexible purchasing tool, we have significantly broadened the type of contracts that can be awarded in dynamic markets. Dynamic markets will be available for all types of procurement and not just for commonly used goods and services, as was the case for dynamic purchasing systems.

Clause 34 is the first in a series of clauses relating to dynamic markets. It allows a contracting authority that has established a dynamic market to award contracts under the market by undertaking a competitive flexible procedure. The use of a dynamic market does not avoid the need to comply with the usual rules for a competitive flexible procedure under clause 20.

Subsection (1) allows contracting authorities to restrict procurements to suppliers that are members of a dynamic market or a part of the market, for example if the dynamic market comprises categories of works or services. A supplier will be a member of a dynamic market if the market allows for the award of the contract in question by that contracting authority and the supplier has been admitted to the market. Subsection (3) requires contracting authorities to disregard tenders from suppliers that are not members of the dynamic market.

Dynamic markets are open to new suppliers to join at any time, as long as they meet the conditions for membership, which is a substantial improvement on the way things have been done up to this point. For that reason, subsection (4) requires contracting authorities to consider membership applications from non-member suppliers before excluding them from the procedure or disregarding their tenders. Subsection (5) says that the only exception to that is where, due to the complexity of the procurement, the application for membership cannot be considered in the timescales set out by the contracting authority for requests to participate or tenders.

Clause 35 sets out how dynamic markets, including utilities dynamic markets, may be established. It allows contracting authorities to establish arrangements known as dynamic markets, which are essentially live lists of suppliers that are pre-qualified to deliver certain types of contracts for the purpose of contracting authorities awarding contracts to suppliers that are members of the dynamic market.

Subsection (2) defines a utilities dynamic market, which is a particular type of dynamic market for the award of utilities contracts by utilities. Subsection (3) allows utilities to award utilities contracts under a utilities dynamic market established by any person, as long as the market has been established in accordance with the rules applicable to utilities dynamic markets as established by private utilities.

Subsection (4) defines a utility as a public authority or public undertaking that carries out a utility activity or a private utility. Utility activities are set out in schedule 4; private utilities are defined in clause 2. Subsection (5) states that the establishment or modification of a dynamic market is not a contract for the purpose of the Bill, making it clear that all the rules on the award of contracts do not apply.

Clause 36 sets out the rules on how suppliers can become members of dynamic markets, including utilities dynamic markets. Subsection (1) allows contracting authorities to set conditions of membership that suppliers must meet in order to be admitted to a dynamic market. The conditions of membership must be a proportionate way of assessing suppliers’ legal and financial capacity and technical ability to deliver contracts that might be awarded as part of the arrangement.

Subsection (2) prohibits conditions of membership that require the submission of annual audited accounts by suppliers that are not already required by law to have their annual accounts audited. It also prohibits conditions of membership that require insurances to be in place before the contract is awarded. As hon. Members will be aware, this is a major boon to SMEs that are seeking to get involved.

The restrictions on the conditions of membership of a dynamic market, set out in subsection (3), are similar to those applicable to conditions of participation in a competitive tendering procedure under clause 22. They include limiting conditions to those that are a proportionate means of ensuring suppliers have the relevant qualifications, experience and technical ability to perform the contract, ensuring that the conditions do not break the rules on technical specifications, and requiring that equivalents must be allowed where particular qualifications are required.

Subsection (4) says that when deciding on what is proportionate, the contracting authority must have regard to the types, complexity and cost of contracts that will be awarded through the dynamic market. Subsection (5) ensures that contracting authorities can require evidence that a condition of membership is met to be independently verifiable by a person that is not the supplier.

Subsection (6) ensures that dynamic markets remain open to new suppliers as long as the dynamic market is in operation. Applications for membership must be considered within a reasonable period and suppliers must be informed of the outcome of their application, with reasons. Suppliers that meet the conditions of membership must be admitted to the market in a timely manner. This measure is another great innovation. Where these systems have been in place previously, once the list is set up, it has been closed to new entrants. Now, new entrants will be permitted throughout the operation of the market.

Subsection (7) says that the membership of a dynamic market cannot be limited to specific numbers of suppliers and the conditions of membership cannot be amended during the lifetime of the arrangement.

Clause 37 outlines the rules on removing suppliers from a dynamic market. Any supplier that is on the debarment list for a mandatory exclusion ground must be removed from a dynamic market under subsection (1). It would be entirely inappropriate for suppliers subject to debarment on that basis to remain on a dynamic market.

Subsection (2) allows contracting authorities to remove a supplier from a dynamic market if it is an excluded supplier or has become an excludable supplier, or it is discovered to have been an excludable supplier when it applied for membership. Additionally, if the conditions of membership are no longer met, the supplier may be removed from the dynamic market. That provides contracting authorities with flexibility to manage their dynamic markets as they best see fit. Subsection (4) states that, before being removed from a dynamic market, a supplier must be told in writing of the decision and the reasons why.

Clause 38 sets out when fees can be charged to suppliers that participate in dynamic markets, including utilities dynamic markets. Subsection (1) allows for fees to be charged when a supplier is awarded a contract under a dynamic market—other than a utilities dynamic market, which is addressed separately. That avoids “pay to play” arrangements and ensures that fees are only chargeable if the supplier is awarded work. The fees must be calculated as a fixed percentage of the estimated value of the contract awarded. For utilities dynamic markets, subsection (2) states that fees may be charged in connection with obtaining and maintaining membership of the market.

Clause 39 sets out the transparency requirements for the creation and management of dynamic markets. Subsection (1) states that the notices are referred to as dynamic market notices. Subsection (2) requires contracting authorities to publish a notice before they set up a dynamic market. The notice must detail the authority’s intention to establish the market. A notice is also required, under subsections (3), (4) and (5), once the dynamic market has been established or modified, or when the market ceases to operate. Additional content requirements for the various notices will be set out in secondary legislation under clause 93. Clause 39(6) states that private utilities are not required to issue a notice when a utilities dynamic market ceases to operate.

Clause 40 speeds up procurements and reduces the burden for utilities using a utilities dynamic market, or UDM, by only requiring utilities to provide tender notices for upcoming procurements to suppliers already on a UDM, or appropriate part of a UDM, instead of having to publish the notices. In practice, that means utilities can, for example, provide the tender notice to suppliers on the UDM as part of the associated tender documents as each procurement under the UDM is commenced.

In order to take advantage of that flexibility, the notice setting up the UDM must meet minimum information requirements, which will be set out in regulations under clause 88. Utilities must specify in the UDM notice that only members of the UDM will be provided with tender notices. The notice setting up the UDM will be published continuously and will remain open so that new members may join at any time. If accepted, they would then be entitled to receive future tender notices.

[Florence Eshalomi]

Clauses 34 to 40 relate to dynamic markets. Dynamic markets expand on the existing dynamic purchasing system scheme by allowing such markets to be used for all procurements. That means that a reliable and ready pool of bidders can be gathered, which the contracting authority has verified meets the conditions of participation for the contract. When used correctly, such market innovations help save contracting authorities significant amounts of money and time by requiring early scrutiny only once for similar contracts.

Labour does not oppose the proportionate use of that mechanism. However, we note that those who supplied written evidence to the Committee picked up on some concerns. The Local Government Association, in its submission, outlined concerns about terms that are present in the current system but missing in the Bill:

“Councils use dynamic purchasing systems to effectively deliver a range of services that need to be procured quickly, for example, adult’s and children’s residential social care, apprenticeship training, asbestos removal, cleaning services, home-based care services etc.

In particular, local authorities heavily rely on DPS for school transport procurement, where a significant number of contracts must be let quickly each summer as children are allocated school places. These contracts are straightforward, with pre-approved suppliers typically competing on price. These contracts have no cross-border implications so don’t disadvantage operators in other countries as no operator without a local base is likely to bid.

Regulation 34(12) of the Public Contracts Regulations 2015 states: ‘Sub-central contracting authorities may set the time limit for the receipt of tenders by mutual agreement between the contracting authority and all selected candidates, provided that all selected candidates have the same time to prepare and submit their tenders.’

The Bill no longer allows this, and should therefore be amended to reinstate this important flexibility, to ensure that everything from school transport to social care services can be delivered on time for the individuals who rely upon…them”.

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Finally, some of those who provided written evidence—the Civil Engineering Contractors Association, for example—also expressed concerns about the expansion of the scheme to cover all procurements, as they were not familiar with it in their sectors. I hope that the Minister will ensure that all sectors are fully consulted and are made aware of the mechanisms involved, and that the use of these markets will be proportional per sector.

[Alex Burghart]

As I have said, we think that dynamic markets are a fantastic opportunity to speed up procurement and to bring SMEs into procurement opportunities that they have not previously had. Obviously, dynamic markets are themselves a dynamic new development and, as I mentioned, a lot of training and guidance will flow from the Bill. However, obviously, we will be working with partners throughout the system to ensure that this new way of working works.

Question put and agreed to.

Clause 34 accordingly ordered to stand part of the Bill.

Clauses 35 to 40 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Julie Marson.)

Procurement Bill [ Lords ] (Fifth sitting)

Alex Burghart Excerpts

Committee stage
Tuesday 7th February 2023 Public Bill Committees

[Florence Eshalomi]

I thank my hon. Friend for that point, and I hope that the Minister responds to it. It shows the many different angles from which, inadvertently, we could see national security threats coming into the country. We must make sure that we avoid that. We need to look at the issue of national security threats when we are directly awarding procurements.

There is very little in the clause in legal terms preventing the use of national security threats in direct awards; as my hon. Friend highlights, there is no guarantee that they will not be used. Our amendments 13 and 14 would prevent threats from entering the system via direct awards. I hope that the Minister will support them.

[The Parliamentary Secretary, Cabinet Office (Alex Burghart)]

It is a pleasure to serve under your chairmanship again, Mr Efford, as we enter the third day in Committee. We are making good progress through the Bill, and we hope to make even better progress today.

Amendments 13 and 14, tabled by the hon. Member for Vauxhall, seek to prevent contracts from being directly awarded to suppliers that pose a risk to national security. As we have discussed, national security is of the utmost importance, which is why we have chosen to strengthen the protections in our rules by introducing a new discretionary exclusion ground for suppliers that pose a risk. As I have already explained, the provision has to be discretionary, because there will be situations where a supplier poses a threat in one context but not in another.

The amendment envisions circumstances where a direct award justification applies, meaning a competitive award is not feasible. That would include where there are no other suitable suppliers, or where there is an extreme and unavoidable urgency. It is in precisely those situations that it is vital for contracting authorities to retain an element of discretion in the national security exclusion ground; that element of discretion does not in any way lessen the obligation on authorities to consider whether exclusion is appropriate for the particular contract given the risk posed by the supplier.

Those considerations will of course be informed by the publication of guidance produced in partnership with national technical authorities such as the Centre for the Protection of National Infrastructure and the National Cyber Security Centre. I have complete confidence that contracting authorities will use the discretion appropriately. I respectfully ask that the amendment be withdrawn.

Question put, That the amendment be made.

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[Florence Eshalomi]

We fully support amendments 103 and 104, tabled by the hon. Member for Aberdeen North, which consider how we embed transparency into the system of direct awards. The two amendments highlight why we need additional layers of scrutiny to address glaring areas of conflict of interest in respect of Members of both the Commons and the Lords. It is vital to have additional checks in place.

Throughout the proceedings on the Bill the Minister has talked about the principle of impartiality, and said that the Bill will make VIP lanes, such as those we have seen, illegal and that it is all going to be fine. But that is just not the case. We need only to look at the pandemic to see why we desperately need to make sure that our procurement system is more agile and more transparent. The Tory VIP lane exposed a weakness in the system.

We must remember that we are talking about taxpayers’ money. We are at a time when so many people are feeling real difficulty in their choices and are seeing their household incomes reduce. Council and social housing tenants dread their rents going up. A number of councils have already highlighted how they are going to increase their council tax, including a borough in south London that is proposing to increase council tax by 15%.

Taxpayers’ money was wasted on contracts that were not fit for purpose and wasted as profits for unqualified providers. Worryingly, the Government have written off £10 billion of public funds that were spent on PPE that was either unusable, overpriced or undelivered, and it is worth bearing in mind that we are still spending £700,000 of taxpayers’ money a day on storing unused gloves, goggles and gowns. That money could pay for spaces in after-school clubs. It could pay for 19,000 full-time nursery places. It is public money.

The Bill does not pass the Mone or Paterson test; that waste could still be allowed to happen, over and over again. Handing more power to Ministers in respect of direct awards is not the way we want to go. We support the two amendments, because it is important that we empower local authorities to be able to ask the necessary questions when it comes to conflicts of interest. The current procurement system is not working, and we need to include new checks.

The amendments could be further strengthened by placing the onus on individual Ministers, civil servants and special advisers to make the necessary declarations but, as we have seen, when the onus is on them, they still do not make those declarations. Essentially, they have to be dragged kicking and screaming. We are in a situation in which we will not see the declarations of Ministers’ financial interests updated until May, if we are lucky. Anything could happen before May.

I draw the Committee’s attention to amendment 111, which we think further addresses the aims of amendments 103 and 104. We have an opportunity to learn from past mistakes and to tighten the freedom of Ministers to award direct contracts. It is about hardwiring transparency into our system. That should be a good thing and something we should all support. Instead, it seems the Minister wants to continue to have a back door and a VIP entrance. We must be clear that the Bill offers us a chance to clear that up.

The facts and figures speak for themselves. Some £3.4 billion of taxpayers’ money, in the form of contracts, went to Conservative donors and friends. A former Conservative Minister lobbied for Randox, which then provided 750,000 defective tests that had to be recalled, all while he was being paid £100,000 on top of his salary. Globus (Shetland), a business that has donated £400,000 to the Conservative Party since 2016, received £94 million-worth of PPE contracts.

Millions of people struggled during covid-19. The Government did some good things—including the furlough scheme to help people not to lose their jobs and the support for businesses—but a large group of people missed out on any money, including the 3 million people who form ExcludedUK. For those people who paid their taxes, submitted their returns and did not receive any money to have seen contracts dished out to friends, when those contracts were not even viable, was a slap in the face. When millions of people struggled during covid-19, it was not fair for them to have seen friends and donors of the Tory party prosper. As it stands, the Bill would continue to allow that to happen.

Our amendment 111 takes an important step, with amendments 103 and 104, towards addressing the situation, by asking Ministers to act, ensure genuine transparency in the system and restore trust in public money. This is about trust in the system. A number of members of the public do not trust our system; this is about restoring some of that trust and ensuring that, after years of waste and mismanagement, we do not find ourselves in this situation again.

Our amendment is based on a proposal by the independent National Audit Office and would mandate that:

“Any Minister, peer or senior civil servant involved in recommending a supplier for a contract under section 41 or 43 must make a public declaration to the Cabinet Office of any private interest”.

I hope we all agree that that is a straightforward, pragmatic proposal. It is not about layers of bureaucracy for business; it is about layers of additional scrutiny on Ministers to help to give the public confidence that another PPE Medpro scandal will be stopped and that we will not see a situation in which handfuls of millions of pounds of public money are redundantly spent on equipment that we cannot use.

The three amendments would outlaw VIP lanes once and for all, ensuring that we stop corruption. They would introduce a timeframe for transparency around declarations so that we can have information about conflicts of interests, instead of it being drip fed through the media or journalists. They would ensure that these scandals are not allowed to build up gradually over months and continue the erosion of trust. I hope the Minister agrees that Members of Parliament and the Government should have nothing to hide. If there is nothing to hide, they should support these reasonable amendments, which will help us to clean up our procurement system.

[Alex Burghart]

Conflict of interest in direct award contracts is clearly an extremely important topic. Amendment 103 would require a contracting authority to satisfy itself, before making a direct award, that no preferential treatment has been conferred on the supplier by virtue of any recommendation made by a Member of this House or the House of Lords. We understand—indeed, we agree with—the intent behind the amendment, but the Bill already covers such a scenario via robust requirements for contracting authorities to ensure equal treatment and address conflicts of interest. The bottom line is that if a conflict of interest puts a supplier at an unfair advantage, they must be treated as an excluded supplier and cannot be given a direct award.

Amendments 104 and 111 relate to the highlighting of political connections to political parties, Ministers of the Crown, Members of the House of Commons or House of Lords, or senior civil servants. As Members will have already heard, the Bill includes significantly greater transparency around direct awards than we have had in the past, via the new transparency notice in clause 44 and elsewhere. The conflicts provisions have been strengthened against the current procurement rules. A key change is the requirement in clause 82(5), which I will address in a future sitting, for contracting authorities to confirm that a conflicts assessment has been prepared, reviewed and revised as necessary when publishing a relevant procurement notice, which will include the transparency notice for direct awards.

The assessment must include details of any actual or potential conflict of interest identified in the procurement, and steps must be taken to mitigate such conflicts. That would include any political party affiliations the supplier has to any person acting for or on behalf of a contracting authority, and to anyone who influences a decision in relation to a covered procurement. In addition, in accordance with clause 84(4), if a contracting authority is aware that there may be even the appearance of a conflict, it must address that.

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[The Chair]

With this it will be convenient to discuss that schedule 5 be the Fifth schedule to the Bill.

[Alex Burghart]

Clause 41 permits a contracting authority to award a contract without first running a full competitive procedure when a justification in schedule 5 is met. The World Trade Organisation agreement on Government procurement contains grounds for limited tendering, on which the justifications are based. They will be familiar to those who use the current regime, and include justifications such as intellectual property, exclusive rights or technical reasons that mean that only a single supplier can deliver the contract.

Direct award may also be permitted where practicalities in the market make competition unfeasible—for instance, when buying commodities such as oil, where demand dictates the price, or when the contracting authority can obtain advantageous terms due to insolvency. There are also defence-specific provisions, and a new ground for light-touch contracts—for example, in adult and children’s social care—which allow for direct award due to “user choice” where the beneficiary of the contract or their carer has a legal right under other legislation to choose the supplier.

Overall, the Bill is clearly designed to support fair and open competition in order to secure the best outcome for the public interest. However, sometimes competition is not possible. For example, a supplier may own intellectual property rights that mean that only it can supply a particular good. Alternatively, competition may not be possible for technical reasons when the application of a particular legislative regime means that a contract can be awarded only to one specific provider. For example, the Children and Families Act 2014 may require special educational needs provision to be delivered by a particular supplier; or extreme and unavoidable urgency, such as the procurement of short-term recovery services following an unexpected flood, may render competition unviable. In such cases, limited exceptions to the requirement for competition are justified to ensure the effective and prompt delivery of critical services.

In respect of cases in which a contracting authority relies on one of the specified grounds, the Bill introduces a requirement for a transparency notice other than the very specific user choice exemption. That important new safeguard brings welcome transparency and accountability, and facilitates pre-contractual challenges if anyone fears foul play. Additionally, before publishing a transparency notice, the contracting authority must undertake a conflicts assessment in accordance with clause 82.

[Florence Eshalomi]

As the Minister outlined, these clauses relate to the provision of direct awards. Sadly, their abuse under the Government has done untold damage to the public interest, as I highlighted earlier. The current system does not work, and it is disappointing that the Government have failed to take this opportunity to learn from those mistakes. The Minister just said that competition is sometimes not possible, but taxpayers’ money must be treated with respect, not handed out in backroom deals or as a passport to profiteering.

I highlighted the case of PPE Medpro, but it is just the tip of the iceberg of the scandals we have seen unfolding over the past few years. We know that the companies that got into the VIP lane were 10 times more likely to win a contract, and that they did not go through the so-called eight-stage process of due diligence, as Ministers have now admitted. We also know that businesses that had the expertise to procure PPE and ventilators were not awarded contracts. That is worrying.

It is also worrying that no company was referred to the VIP lane by a politician of any party other than the Conservative party. It did not have to be that way. There could have been more transparency and faith in the system. At that time, Governments across the world were dealing with the covid emergency without wasting billions of pounds of taxpayers’ money and relying on backroom deals.

According to the watchdog, the Welsh Labour Government managed to prevent health and care bodies from running out of PPE. It said:

“In contrast to the position described by the…National Audit Office in England, we saw no evidence of a priority being given to potential suppliers depending on who referred them.”

The Welsh Government were able to create an open and transparent PPE supply chain—why were we not able to do that in England? The question that the Committee needs to ask is how we act to prevent a repeat of the waste that we saw during the pandemic.

This is about faith in politics. At a time when people are questioning politicians and Ministers, we have to restore that faith. This Bill gives us an opportunity to fix that. It is disappointing that the Minister has dismissed some of that and has failed to engage properly on the issue of VIP lanes. I hope he will respond constructively to ensure we fix the current system, which is not working.

Question put and agreed to.

Clause 41 accordingly ordered to stand part of the Bill.

Schedule 5 agreed to.

Clause 42

Direct award to protect life, etc

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The amendment does not put onerous obligations on the Government, but it ensures that Parliament has proportional oversight over the powers it grants the Government via the affirmative procedure. I hope Members will agree that it is right that Parliament does not hand over power indefinitely, and I hope the Minister will consider supporting this amendment.

[Alex Burghart]

Amendment 108 seeks to include a sunset clause on the face of the Bill in relation to any regulations made under clause 42, plus a prohibition on multiple uses of this power.

The fact that the regulations are subject to the made affirmative procedure gives the House a great deal of power. If the House does not wish to accept open-ended regulations, it will not have to. The scope of clause 42 is already suitably confined and restricted to prevent any abuse. The power can be used only in extremely rare scenarios. The regulations will have to be tailored to respond to the situation and their duration kept to the minimum. Further, any regulations made will have to be in compliance with our international agreements, which in practice will help ensure the scope is not too broad.

Any regulations made under this clause must be kept under review, and if the Minister considers that direct award is no longer necessary, the regulations must be revoked. For the avoidance of doubt, the use of the made affirmative procedure means that if regulations are not approved by Parliament, they will lapse after 28 days. Any regulations would likely be time limited through a sunset provision or subject to parliamentary review after a duration deemed appropriate in the context of the emergency event. If they were not, it would be open to Parliament not to approve them. We cannot see that Parliament will be satisfied with open-ended regulations permitting the procurement of goods or services beyond what is necessary to protect life in an extreme emergency event. As such, we respectfully suggest that the amendment is not required.

Clause 42 introduces a new power for a Minister of the Crown via statutory instrument to allow contracting authorities to award contracts directly within specific parameters. The power is crafted deliberately narrowly so that regulations can be made only where it is considered necessary to protect human, animal or plant life or health, or to protect public order or safety. The “extreme urgency” ground in regulation 32 of the public contracts regulations reflected in schedule 5 will be suitable for nearly all situations. But in rare cases, this may need to be overridden via Government direction to rapidly procure what is necessary for the protection of life.

The first Boardman review of covid-19 procurement suggested giving relevant Ministers the power to designate situations as a “crisis”, provided certain criteria were met, naturally with appropriate safeguards. The clause looks to implement these recommendations and aid emergency contracting. The current ground relies on individual contracting authority assessments and cannot be used if the need for urgency is caused by the authority itself or is foreseen. Regulations made in these circumstances would allow contracting authorities to procure with confidence, quickly and within specific parameters to deliver the essential goods or services.

In the extremely rare event that regulations under clause 42 are needed, there are already significant safeguards in the Bill. As I mentioned, the making of any secondary legislation will be subject to the scrutiny of the made affirmative procedure. The regulations will come into force immediately but will require approval from both Houses within 28 days. Without this approval, the regulations will cease to have effect. There is no limit on the regulations’ duration, allowing them to be tailored to the situation. Parliamentary scrutiny will ensure that the scope of the regulations is appropriate.

The obligation to publish a transparency notice prior to awarding a direct award contract remains even when relying on any such regulations. These new mandated notices demonstrate our intent—seen throughout the Bill—to drive further transparency into the procurement regime. We hope that clause 42 will never need to be used, but if direct awards are necessary to protect life or public safety in an ongoing emergency situation, the mechanism under the clause will significantly improve the situation by allowing contracting authorities to procure in confined circumstances, speeding up decisions and ensuring consistency across the public sector. I respectfully ask that the hon. Member for Vauxhall withdraw her amendment, and I recommend that the clause stand part of the Bill.

Question put, That the amendment be made.

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Question proposed, That the clause stand part of the Bill.

[Alex Burghart]

Sometimes, competitive tendering procedures do not go to plan. Clause 43 allows the contracting authority to switch from a competitive procedure to direct award where no suitable tenders are submitted and it becomes clear competition is not possible. There are only limited circumstances to determine that a tender is unsuitable, which are detailed in subsection (2)—for example, where the price is abnormally low, as we discussed the other day, if there is evidence of corruption or collusion, or if a procedural requirement has been materially breached in a manner that may put the tender at an unfair advantage.

[Florence Eshalomi]

The clause relates to the switching of contracts under very limited circumstances. The use of the clause is not ideal, but we understand that it may be necessary in certain circumstances. We therefore do not object to the clause.

Question put and agreed to.

Clause 43 accordingly ordered to stand part of the Bill.

Clause 44

Transparency notices

Amendment proposed: 104, in clause 44, page 30, line 23, at end insert—

“(c) any connections between the supplier and any—

(i) registered political party,

(ii) Ministers of the Crown, or

(iii) Members of the House of Commons or House of Lords

where such connections are of a nature likely to be relevant to the direct award of the contract.”—(Kirsty Blackman.)

Question put, That the amendment be made.

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Question proposed, That the clause stand part of the Bill.

[Alex Burghart]

Our approach in the Bill is clear: transparency is not optional. Clause 44 introduces a mandated requirement to publish a transparency notice when a direct award ground is going to be used. That goes further than the current voluntary notice. Direct award should, of course, be the exception and will be allowed only on the basis of specific and limited grounds set out in legislation. When direct award is relied on, the obligation will mean visibility, further demonstrating our drive to ensure transparency in public procurement.

[Florence Eshalomi]

As the Minister outlined, the clause covers transparency notices. Although we welcome the limited measures that the Bill takes to move towards transparency—for example, by obligating authorities to issue a transparency notice before awarding a contract—those are small baby steps that barely scratch the surface of what is required. Transparency should be a must; it is not a “nice to have”. It is about restoring public trust and it ultimately saves money. Lack of transparency in the procurement system reduces competition and increases costs, leaving the taxpayer to shoulder the burden. The adoption of open and transparent contracting makes good financial sense and will help to lead to a more competitive procurement system, ultimately, as I mentioned, saving on costs.

Transparency needs to be extended to Ministers. I have spoken at length about what we saw during the pandemic and the lack of transparency. Amendment 111 would go a long way to truly ensuring that Ministers, Lords and civil servants take transparency seriously.

[Alex Burghart]

The hon. Lady will have heard me say that we are mandating transparency like never before, and that all her concerns are already dealt with in the Bill.

Question put and agreed to.

Clause 44 accordingly ordered to stand part of the Bill.

Clause 45

Frameworks

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to debate clauses 46 to 49 stand part.

[Alex Burghart]

This considerable group covers award under frameworks. Clause 45 sets out that a framework is a public contract designed for the future award of contracts to a supplier or suppliers. Frameworks are not the answer for every purchasing need, but they have their place and can result in significant savings, both financially and in time. As a framework is a public contract, it must be awarded in accordance with the procedures set out in the Bill. Once a framework is awarded, subsection (1) allows contracting authorities to award future public contracts in accordance with the framework.

Subsection (3) states that contracts can be awarded under a framework only following a competitive selection process, unless subsection (4) applies. Subsection (4) sets out the circumstances in which a framework can provide for the award of contracts directly to suppliers who are party to the framework, without any further competition. These are where the framework is with only one supplier, or if the framework sets out the core terms of the future contract and an objective mechanism for supplier selection.

Subsection (5) requires that each framework must state the goods, works or services that can be procured under it, the mechanism for defining the price, the estimated value of the business that will be procured through the framework, and the process to award further contracts. Subsection (5) also requires that the framework must state the duration of the framework, the contracting authorities that are able to use the framework, and whether the framework is an open framework. Currently, all frameworks lock suppliers out for their duration as there is no mechanism to open them up, and we are changing that under the Bill.

The provisions ensure that all frameworks will contain basic information about the scope and estimated value of the framework to clearly set out the parameters in which the framework can be used, and to avoid frameworks being used in a manner that unduly or unfairly closes off markets to competition.

Subsection (6) prohibits the award of a contract under a framework to an excluded supplier. Subsection (7) allows for fees to be charged under a framework when a supplier is awarded a contract under a framework. Subsection (8) means that a framework may not be used to award a concession contract, nor may a framework be used to set up another framework. Subsection (9) disapplies certain parts of clause 45 to frameworks that are light-touch contracts.

Clause 46 sets out the process by which contracts can be awarded under a framework through a competitive selection process. Subsection (1) allows for a competitive selection process to include conditions that suppliers have to satisfy to participate. Subsection (3) prohibits conditions that require the submission of annual audited accounts by suppliers who are not already required by law to have their annual accounts audited. It also ensures that alternative evidence can be used when assessing the supplier’s financial capability and that insurances need to be in place only at the point of contract award. That is a major win for small and medium-sized enterprises, removing a substantial barrier that has often held them back from entering into procurement.

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[Florence Eshalomi]

Clauses 45 to 49 cover the framework arrangements that are in place and widely used across the public sector, helping to provide efficiency savings in procurement contracts. We feel it is important that there are powers in the Bill to allow for their existence, but we have concerns about the nature of the frameworks. We should make sure that we include strong terms to prevent any detrimental effects that they can have on procurement.

A big problem with the frameworks is that they can lock out suppliers and prevent the breakthrough of innovative and efficient suppliers in our system. That is outlined and emphasised in the Government’s impact assessment:

“The use of frameworks is established in the public sector, however stakeholders raised concerns around lengthy frameworks essentially locking suppliers out of a market for a number of years, without the opportunity to re-bid. This is particularly of concern for SMEs who may benefit from a place on a framework to assist business growth and gain experience in delivering contracts for the public sector.”

The Minister touched on some of that, but the Bill should look to reduce those concerns.

We also have concerns about some of the changes in language in relation to the term limit, which the Minister outlined. Currently, most frameworks have a term limit of four years. It is good to see that carried through in the Bill, even if there is an increase to eight years for defence, security and utilities. However, there seems to be a change to the contracts, whereby some of the terms can be extended. In the Public Contracts Regulations 2015, the time limit exception states:

“The term of a framework agreement shall not exceed 4 years, save in exceptional cases duly justified, in particular by the subject-matter of the framework agreement.”

However, clause 47 states:

“Subsection (1) does not apply if the contracting authority considers the nature of the goods, services or works to be supplied under contracts awarded in accordance with the framework means that a longer term is required…If a contracting authority relies on subsection (2) in awarding a framework with a term exceeding four or eight years, the contracting authority must set out its reasons in the tender or transparency notice for the framework.”

I would be grateful if the Minister confirmed what the difference is between those two terms. Will the clause make it easier or harder for contracts to be extended? If it makes it easier, as he suggested, will he tell us the justification behind the change? As we mentioned, there have been concerns about locking out suppliers through the frameworks, so we should be cautious about why the Government would seek to weaken provisions that prevent locking out. Clarity from the Minister on that point would be helpful.

I welcome the Minister’s comments on the new open frameworks procedure in clause 49, which has the potential to reduce time limits by unburdening contracting authorities from running the tender for a framework from scratch, but will he outline how often he would expect a typical framework to reopen? The legislation sets out a maximum of three years in the first instance, and then five years in the second. However, the explanatory notes state:

“This allows for the open framework to be re-opened on a more frequent basis—for example, annually”.

Again, the Minister touched on some of that, but does he expect the reopening of frameworks on an annual basis, and will there be any incentives in the system to encourage annual reopening?

[Alex Burghart]

As the hon. Lady heard me say, the great new initiative in the Bill—open frameworks—means that we will not see companies being shut out for long periods of time, which is good. We have seen SMEs being locked out from accessing public sector markets for up to four years at a time, so we have introduced the new open framework and the utilities dynamic market tools to bring down the barriers. I think we can all agree that that is much to the good.

The hon. Lady will also have heard me say that if a contracting authority is to go for a longer term than the four and eight-year maximum, it must be because of the goods, services or works that it will supply. Contracting authorities have to be clear and open about that, but we would expect them to do so only where there are specific reasons—for example, where it will take longer than eight years to recoup investment under the framework, or where contracts have a long lead time and therefore cannot be awarded within the requisite time period. Contracting authorities must have a rationale for that, and they have to be open. We think that the clauses cover that.

The hon. Lady will have seen that the maximum term provisions in clause 47 do not apply to open frameworks, which have a maximum duration of eight years. However, clause 49 requires open frameworks to be reopened for new suppliers to join at regular intervals—first, within the first three years of the framework, and not less than every five years thereafter.

Question put and agreed to.

Clause 45 accordingly ordered to stand part of the Bill.

Clauses 46 to 49 ordered to stand part of the Bill.

Clause 50

Contract award notices and assessment summaries

Question proposed, That the clause stand part of the Bill.

[Alex Burghart]

Clause 50 requires contracting authorities to publish a contract award notice before entering into a public contract. The notice will publish details about the outcome of the procurement process, alert the market to the fact that a contract is about to be signed and start the standstill period where it applies, which is a mandated or voluntary pause before the contracting authority can sign the contract. I will explain that further under clause 51.

Prior to the publication of a contract award notice issued under a competitive procurement, contracting authorities will be required to provide each supplier whose bid was assessed against the award criteria with an assessment summary containing information about the outcome of the assessment for the supplier’s own tender, to enable suppliers to understand why they did or did not win the contract. Unsuccessful suppliers will also be provided with a copy of the winning supplier’s assessment summary so that they can also see how their tender compared to the winning bid.

Clause 50 does not apply to contracts awarded under a defence and security framework, or to direct awards where the justification is that the contract is a user choice contract.

[Florence Eshalomi]

This is a simple clause relating to contract award notices and assessment summaries. We welcome these provisions and see it as a good step forward for suppliers and for transparency that each supplier that is not disregarded receives information about why their bid failed and why another bid was successful. That will help suppliers to improve their bids and to understand what a contracting authority desires.

We have spoken a lot about SMEs, and I think they will welcome the clause, because they often struggle to navigate the market and they may feel that the cost of failed bids is part of the reason. We await information on what will come from clause 93, but we will discuss that when we get to it. We are happy to support this clause.

Question put and agreed to.

Clause 50 accordingly ordered to stand part of the Bill.

Clause 51

Standstill periods on the award of contracts

Question proposed, That the clause stand part of the Bill.

[Alex Burghart]

Clause 51 covers the standstill period, which is a minimum eight-working-day pause following publication of the contract award notice before the contracting authority can enter into the contract. It gives unsuccessful suppliers, in particular, the opportunity to understand the feedback provided and raise legal challenges to the procurement process prior to the contract being signed, where they believe the procurement has been conducted unlawfully.

A claim notified during the standstill period triggers an automatic suspension of the procurement under clause 99, which preserves the potential for the challenging supplier to obtain the contract and protects the contracting authority from entering into an unlawful public contract. That mitigates the risk of a contracting authority paying twice—that is, paying the price of the contract plus compensation for a losing bidder with a successful claim—as after contract signature, the contracting authority is subject to post-contractual remedies under clause 101. That includes damages and the possibility of the contract being set aside—being declared void by the court.

If the standstill period passes without legal challenge, the contracting authority avoids the risk of a set aside claim under clause 101. A standstill period is not mandatory in all cases. Subsection (3) lists the types of contract where the contracting authority can elect to apply a standstill on a voluntary basis. Contracting authorities complying with a voluntary standstill period, which is also envisaged for contract modifications under clause 75, will receive the same protections as that obtained for a mandatory standstill.

[Florence Eshalomi]

Clause 51 is almost identical to similar provisions in the Public Contracts Regulations. As the Minister outlined, the standstill period will be welcomed and beneficial. The Opposition feel that the clause is necessary and that there is nothing controversial in it.

Question put and agreed to.

Clause 51 accordingly ordered to stand part of the Bill.

Clause 52

Key performance indicators

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[Chris Evans]

I outlined the importance of transparency and accountability in a previous debate on procurement. Our amendment 4 is an attempt to strengthen that further and to reinstate at £2 million the threshold for publishing contracts in major projects. I noted previously that the financial threshold was raised in the other place and that the Minister could not explain why £5 million was decided on. If the Bill is an attempt to make procurement more transparent, we have failed at the first hurdle.

On Second Reading, my right hon. Friend the Member for Ashton-under-Lyne (Angela Rayner), the deputy leader of the Labour party, said:

“Being granted taxpayers’ money is a privilege.”—[Official Report, 9 January 2023; Vol. 725, c. 353.]

I remind Government Members that their long-departed leader, Lady Thatcher, once said that it is not the Government’s money, but taxpayers’ money, and that every penny should be accounted for. I am looking at the Minister and hoping that I got that quote absolutely right—I am sure he will correct me if I did not. I believe that is true no matter the sum of money. Every pound represents the work of hard-working people across the country, and we—particularly those of us who serve on the Public Accounts Committee—should be mindful of that.

That is why contracts awarded at £2 million should have the same scrutiny as those worth more. Figures such as £2 million are often bandied about—we hear the value of transfers in sport—but that is still a considerable amount of money. If we are truly committed to reducing waste in procurement, we need more transparency throughout. Introducing key performance indicators at a lower threshold would signal to businesses that the UK requires value for money, and efficiency, from every procurement contract.

While I appreciate that the Government have stated that the changes to the threshold are to reduce any administration requirements, and to address concerns raised by the Local Government Association, the lack of transparency around how the threshold was decided has made me understandably cautious. Transparency and value for money must be priorities when spending taxpayers’ money. Increasing the number of contracts that are scrutinised by requiring key performance indicators would allow for transparency at all stages of a contract’s lifecycle and hold businesses to account on issues of social value.

When we are in the midst of a climate crisis, it is necessary to ensure that suppliers are actively working towards the UK’s net zero commitments. When industries across the country are facing a skills gap, it is necessary to ensure that businesses are committed to apprenticeships and training new generations. And while the country continues to face a cost of living crisis, it is necessary to ensure that jobs across the supply chain are protected.

[Alex Burghart]

There are few rarer treats than hearing an Opposition Member quote Baroness Thatcher. I am sure the hon. Gentleman will have reflected on, and enjoyed, the fact that she also said, “The problem with socialism is that you quickly run out of other people’s money.”

However, the hon. Member’s probing amendment is fair enough, and it is important that we discuss this issue. Hon. Members will recall that the Bill as introduced had a threshold of £2 million for the publication of KPIs on public contracts, but that the threshold was increased to £5 million in the House of Lords as part of a package of measures designed to reduce the administrative burden placed on contracting authorities, while still providing increased transparency in respect of larger public procurements.

The current financial threshold balances the need for transparency on KPIs with the costs and burdens of implementing the rules at a lower spend value. To reassure the hon. Gentleman, £5 million, which we have now fixed on, aligns with the thresholds that are used by central Government in the playbook for procurement. It is generally seen as the point where things become more complex. We thrashed out the number based on a lot of engagement with industry, and it was felt that that was an appropriate threshold to ensure that we were not including a lot of contracts with lower complexity.

Turning to amendments 75, 78 and 80, there are a number of places in the Bill where we apply financial thresholds that trigger obligations on a contracting authority. The Delegated Powers and Regulatory Reform Committee recommended that the affirmative procedure for secondary legislation should be applied for a number of those, and we made those amendments in the other place. That ensures greater scrutiny where there is a change in transparency requirements. We also indicated in our response to the DPRRC that we considered that the justifications for that applied equally to the amendment of the financial threshold for the setting and publication of key performance indicators. Amendments 75, 78 and 80 achieve this.

Clause 52 describes a requirement for contracting authorities to

“publish at least three key performance indicators”

for public contracts worth more than £5 million. That is a new requirement and it will ensure that we have visibility of how well individual suppliers are delivering in the public sector.

The clause is intended to bring transparency to the management of significant public sector contracts, allowing citizens and others to see how suppliers are performing. It should also ensure that companies that repeatedly fail to deliver do not win additional business—something that is not possible under the present procurement rules. The requirement does not apply if the contracting authority considers that KPIs are not an appropriate measure of contract performance in a given case. The example we give is of a contract for the one-off supply of goods. That is a one-time action and cannot be measured over time or by varying metrics.

The clause does not apply to the establishment of framework contracts—but it will apply to contracts awarded through the framework—utilities contracts awarded by a private utility company, concession contracts or light-touch contracts. A power is given for an appropriate authority to amend the financial threshold above which KPIs must be published. We have tabled an amendment to make the power to change the threshold subject to the affirmative procedure, so that if this Government or future Governments wish to adjust the threshold, they can easily do so, provided that they have Parliament’s consent.

The overall picture is enhanced by the spend data reporting obligation in clause 70. I respectfully request that amendment 4 be withdrawn.

[Chris Evans]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 52 ordered to stand part of the Bill.

Clause 53

Contract details notices and publication of contracts

[Chris Evans]

I beg to move amendment 26, in clause 53, page 36, line 9, leave out “£5 million” and insert “£2 million”.

This amendment would reinstate the threshold for publishing the contracts in major projects at £2m.

As noted in the explanatory statement, the amendment would reinstate the threshold for publishing the contracts in major projects at £2 million. As I have pointed out, the Government seem to have chosen £5 million as an arbitrary figure. I will not repeat the points I have already made. We do not want to place an undue burden on small and medium-sized enterprises to have to employ costly legal advice to redact sensitive company information. However, I believe that, with sums of more than £2 million, it is completely reasonable to expect transparency.

Trust in Government spending is important to overall trust in Government, especially when they are spending sums of public money in the millions. It is not unreasonable for the public to expect transparency about where their money is being spent, and that the information is readily available and easily accessible. Although I understand the need not to make the process too arduous for smaller businesses, the proper balance must be found.

[Alex Burghart]

The revised threshold of £5 million seeks to ensure that a disproportionate administrative burden is not placed on contracting authorities and, as I have said, it reflects what we have in the playbook. The figure came out of a large amount of engagement with industry. There was recognition that it is around the £5 million threshold that we see additional complexity in contracts. That is why we think that the current financial threshold balances the need for transparency in these important matters with the costs and burdens of implementing the rules at a lower spend value.

It is important to stress, however, that contracting authorities will still be bound by a transparency obligation to publish contract detail notices for contracts above the agreement on Government procurement thresholds, which will contain information on which supplier has won the contract and other information about the contract award. I respectfully request that the hon. Gentleman withdraws his amendment.

[Chris Evans]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[Alex Burghart]

Clause 53 requires contracting authorities that enter into a public contract to publish a contract details notice. This is a significant extension of transparency, which will allow interested parties to see details of public sector contracts. The contract must be published within 90 days of the contract being entered into or, in the case of a light-touch contract, within 180 days. The contract details notice will contain information on the goods and services procured, the value of the successful tender and the procurement method used.

The Welsh Government and the Northern Ireland Executive have decided to include a derogation from publication of a contract, which is their right.

[Chris Evans]

Clause 53 sets out the need for the publication of contract details for all contracts over £5 million. According to the Government’s own figures, one in every three pounds of public money—some £300 billion a year—is spent on public procurement. Ultimately, the taxpayer deserves to know that money from the public purse is being well spent.

I know from my time on the Public Accounts Committee—sooner or later, we will start doing PAC bingo, as every time I stand up I seem to mention how long I was on that Committee. I was there for five years. I promise that I am not going to speak for five years, Mr Efford—

[Chris Evans]

Fidel Castro was the master—I think 18 hours was his minimum. If you want me to do that, Mr Efford, I can. With lunch coming up, I think I would be the most popular member of the Committee.

I know from my time on the Public Accounts Committee that transparency leads to improved Government spending. There should be no place to hide poor contract decisions or, in the worst cases, possible cronyism. Unfortunately, there have been several scandals relating to procurement and Government spending. We have already heard this morning about the questions surrounding the procurement of PPE during the pandemic, which led, unfortunately, to the huge sum of £10 billion of public funds being spent on unusable, overpriced and even undelivered PPE.

At a time when so many families are struggling with the cost of living crisis, we cannot allow the public to feel that their hard-earned tax money is not being spent properly, and we all must work to restore public trust in Government procurement. The Government’s own “transparency ambition” document outlines a concerning failure to provide transparency in our procurement system. These reforms are long overdue and I am pleased that we are able to talk about them today. I think we can all agree that it is important that we increase trust in Government, and one of the key ways we can do that is through transparency. Labour would go further in government than the present Conservative Government. We would introduce a Ukraine-style publicly accessible dashboard of Government contracts tracking delivery and performance.

I am pleased that the Government have made some commitments to increasing transparency on large projects. The reforms—particularly the introduction of a number of new procurement notices covering the entire procurement lifecycle from planning through to contract expiry—are a welcome step forward. However, there are a few areas where we need clarity on implementation.

For example, at clause 53(2), the Bill states:

“A ‘contract details notice’ means a notice setting out—

(a) that the contracting authority has entered into a contract, and

(b) any other information specified in regulations under section 93.”

The Minister said on Second Reading that the Government

“will deliver world-leading standards of transparency in public procurement”—[Official Report, 9 January 2023; Vol. 725, c. 343.]

and that there is a

“statutory obligation on the Government to deliver a single digital platform to host this data.”—[Official Report, 9 January 2023; Vol. 725, c. 348.]

However, it is unclear what a contract details notice will look like in practice, and how much detail will be required—in other words, how much transparency will actually be provided. It seems strange that there is no outline of how much data will be provided and what form it will take. I worry that will allow for only the very basic details of public contracts to be provided. Could the Minister explain his understanding of what transparency notices will look like and what information they will be required to contain?

A concern raised by the Local Government Association is that the clause risks contradicting other pieces of legislation, which, in turn, risks the ability to achieve one single digital platform for procurement. The LGA has suggested that the Transport Act 1985, the Service Subsidy Agreements (Tendering) (England) Regulations 2002 and the best value transparency code may have an impact on the implementation of the Bill. Could the Minister tell us whether that has been resolved, or what plans the Government have to ensure that other legislation does not interfere with the implementation of the single digital platform?

Overall, I welcome the goals of the clause, but I feel that it requires closer attention to ensure that it is properly implemented.

11 am

[Alex Burghart]

I am happy to play bingo with the hon. Gentleman any time. One particular game that we might play is to call “Bingo!” every time the Ukrainian digital platform is mentioned, because it has been mentioned several times. And well might it be mentioned, because it is a model of good practice. The hon. Gentleman will have heard me say on several occasions that we were grateful to the Ukrainian Government for coming and advising us on the creation of our own digital platform, which he will also have heard me mention. That platform will be the harbour of transparency, enabling suppliers, contracting authorities, central Government, voters and the press to see what is going on and to hold people to account. It will be a great asset.

The precise details of what needs to be published are not fit to be put in the Bill and the requirements may change over time. However, we will set those details out in due course, and what will drive our considerations when we do so is the ability to hold suppliers and contracting authorities to account.

Question put and agreed to.

Clause 53 accordingly ordered to stand part of the Bill.

Clause 54

Time limits

[Alex Burghart]

I beg to move amendment 34, in clause 54, page 37, line 14, at end insert—

[The Chair]

With this it will be convenient to discuss the following:

Government amendments 35 and 36.

Clause stand part.

[Alex Burghart]

Government amendments 34 to 36 are technical amendments to allow shorter time periods to be set by utilities and contracting authorities that are not classed as central Government authorities, which will be defined in regulations made under the Bill, for procurements where there has been a prior selection round.

Following completion of that prior selection round, utilities and non-central Government authorities will invite identified suppliers to submit their tenders. The amendments will mean that they can negotiate a suitable time limit with all suppliers or, in the absence of agreement, a minimum of 10 days will apply. This flexibility exists in the current regime and, in common with all minimum time limits in the clause, is GPA-compliant. It was not included in the Bill previously because certain trade agreements did not permit such flexibility. However, following very positive progress in negotiations, we are now confident that we can make the change.

We know from our engagement with industry groups that utilities and sub-central bodies such as local authorities are hugely supportive of the change, because they will benefit from reduced timeframes and faster procurements. This will ultimately result in quicker delivery to the public of goods and services from those entities, benefiting us all.

Clause 54 as a whole deals with time limits during competitive procurements. It is important that suppliers are allowed adequate time during the awarding of public contracts, for example to prepare and submit tenders or requests to participate in a procurement.

The clause sets out minimum time periods that must be met in different circumstances, in line with the requirements of the GPA. These are minimum time limits. Consequently, contracting authorities are also directed to wider considerations for setting time periods, such as the nature and complexity of the contract, the need for site visits, and avoiding unnecessary delays.

[Florence Eshalomi]

These amendments set out the minimum timescales that apply when a contract is only between authorities and pre-selected suppliers. As these suppliers are verified to be compliant with the conditions of participation, it is logical that they would need less time to prepare a bid and would not be caught off guard by the 10-day minimum period, or the negotiated tendering period if one can be agreed. I thank the Minister for his explanation about why this is necessary, which was helpful. However, I also share the desire to reduce some of the unnecessary bureaucracy on both the authorities and the companies involved.

We do not seek to oppose these amendments. However, in relation to clause 54 there are considerable concerns about the minimum time limits that contracting authorities must abide by within certain circumstances. It is right to strike the balance between bureaucratic obligations on contracting authorities and the need for suppliers to have sufficient notice to compile a tender. As we have already outlined, this is really important for SMEs, which may sometimes lack the necessary staff or may require greater time to consider the consequences of bidding for contracts and to assess the ability of their company to do so.

We must also bear in mind the article 11 time periods of the World Trade Organisation’s general procurement agreement, which sets out minimum deadlines in line with the deadlines in the Bill. That is a step forward. We recognise that the Government’s hands are somewhat tied on this issue, but we should not wish to breach any international agreements. We therefore feel that the current amounts strike the right balance between bureaucracy and providing everyone with a fair chance to bid, so we do not intend to oppose them. As I have highlighted, we welcome the provisions in clause 15, which also interact with this part of the Bill. Trading off time limits in this part of the Bill for a pre-engagement notice is a sensible choice that benefits everyone, and we are happy to support the second part of this provision in the clause.

Amendment 34 agreed to.

Amendments made: 35, in clause 54, page 37, line 35, at end insert—

“‘central government authority’ has the meaning given in paragraph 5 of Schedule 1 (threshold amounts);

‘negotiated tendering period’ means a tendering period agreed between a contracting authority and pre-selected suppliers in circumstances where tenders may be submitted only by those pre-selected suppliers;”.

This amendment would define terms used in Amendment 34.

Amendment 36, in clause 54, page 38, line 2, at end insert—

“‘pre-selected supplier’ means a supplier that—

(a) has been assessed as satisfying conditions of participation before being invited to submit a tender as part of a competitive tendering procedure, or

(b) in the case of a contract that is being awarded by reference to suppliers’ membership of a dynamic market, is a member of that market;”.—(Alex Burghart.)

This amendment would define a term used in Amendment 34.

Clause 54, as amended, ordered to stand part of the Bill.

Clause 55

Procurement termination notices

Question proposed, That the clause stand part of the Bill.

[Alex Burghart]

Clause 55 requires contracting authorities, except private utilities, to publish a procurement termination notice as soon as reasonably practicable after making a decision to terminate a procurement. Each time a tender or transparency notice, which initiates a procurement, is published it creates a data record of the lifetime of that procurement and any resulting contract. Failure to confirm that a procurement has been terminated will result in the suppliers not being aware of a cancellation and in permanently incomplete data records and inaccurate records on our central platform, because the number of ongoing procurements will incorrectly include terminated procurements, which is unhelpful for anyone monitoring and using that data. A procurement termination notice is required to ensure that the data record and the full story of the procurement are concluded.

[Florence Eshalomi]

I thank the Minister for outlining that. The clause is simple. It ensures that when a tender or transparency notice is published, there must be a notice if the contracting authority does not award the contract. The clause is necessary, and we are happy for it to stand part of the Bill.

Question put and agreed to.

Clause 55 accordingly ordered to stand part of the Bill.

Clause 56

Technical specifications

[Alex Burghart]

I beg to move amendment 37, in clause 56, page 38, line 24, at end insert—

“(za) the standard adopts an internationally-recognised equivalent, or”.

This amendment would allow procurement documents to refer to a UK standard if the standard adopts an internationally-recognised equivalent.

[The Chair]

With this it will be convenient to discuss Government amendments 38 to 41.

[Alex Burghart]

The Committee will be delighted to hear that Government amendments 37 to 41 to clause 56, which concerns technical specifications, are very technical amendments. They will help to ensure that the Bill’s requirements in relation to standards, certification and accreditation are clear and fully align with how standards work in practice and the Government’s policies in those areas.

We are committed to openness and international trade, so contracting authorities must use international standards, or international standards that the British Standards Institution has adopted via a British standard, before using specific UK standards. We need to ensure that standards are appropriate, and we have strengthened the onus on the supplier to demonstrate that when claiming that it possesses an equivalent to standards requested by contracting authorities. In addition, the amendments make clear that contracting authorities can request evidence to verify that a standard has been met. That may include conformity assessments from certification bodies accredited by organisations such as the United Kingdom Accreditation Service, or UKAS.

[Florence Eshalomi]

The amendments help to clarify some of the technical provisions relating to the presentation and meeting of United Kingdom standards, as referred to in subsection (5). The Minister said that they are technical amendments. It is fine that we have technical provisions that have reached this stage without amendment, but we will be happy to hear clarification from the Minister this morning. We do not intend to oppose the amendments.

Amendment 37 agreed to.

Amendments made: 38, in clause 56, page 38, line 26, leave out paragraph (b).

This amendment is consequential on equivalent provision being made by the new subsections inserted by Amendment 39.

Amendment 39, in clause 56, page 38, line 29, at end insert—

“(3A) If the procurement documents refer to a United Kingdom standard, they must provide that tenders, proposals or applications that the contracting authority considers satisfy an equivalent standard from another state, territory or organisation of states or territories will be treated as having satisfied the United Kingdom standard.

(3B) In considering whether a standard is equivalent to a United Kingdom standard for the purposes of subsection (3A), a contracting authority may have regard to the authority’s purpose in referring to the standard.

(3C) A contracting authority may require certification, or other evidence, for the purpose of satisfying itself that a standard is satisfied or equivalent.”

This amendment would clarify how a contracting authority is to assess whether tenders, proposals or applications satisfy equivalent standards to United Kingdom standards (including that it may require evidence).

Amendment 40, in clause 56, page 38, line 36, leave out “such matters” and insert

“the matters mentioned in subsection (4)”.—(Alex Burghart.)

This amendment would clarify that the requirement in subsection (5) only applies where the matters mentioned in subsection (4) are referred to in the procurement documents.

[Florence Eshalomi]

I beg to move amendment 8, in clause 56, page 38, line 38, at end insert—

“(5A) For all procurement which is intended for use by natural persons, whether the general public or staff of the contracting authority, the technical specifications in the procurement documents must, except in duly justified cases, be drawn up so as to take into account accessibility criteria for disabled persons or design for all users.”

This amendment would reproduce on the face of the Bill requirements for accessibility criteria for disabled persons which are included in the Public Contacts Regulations 2015, which this Bill will replace.

Amendment 8, in the name of my hon. Friend and neighbour the Member for Battersea (Marsha De Cordova), addresses the fact that the Bill overwrites requirements that ensure publicly procured goods and services are accessible to everyone and has no clauses specifically relating to accessibility for disabled people or replacing the current regulatory framework for accessibility. Accessibility is included only in clause 94, with regard to electronic communication and in the recommendation. While the reference to accessibility in clause 94(2), which states that any electronic communications utilised as part of the public procurement exercise must be

“accessible to people with disabilities”,

is a welcome addition, it does not address concerns to ensure that public funds are used to drive improved outcomes for disabled people. The Bill does not include any reference to the need for public procurement exercises to take account of accessibility.

Amendment 8 would create a new provision in the Bill to ensure that publicly procured goods and services meet a minimum standard of accessibility. Currently, regulation 42 of the Public Contracts Regulations 2015 states that the specifications for procurement must be

“drawn up so as to take into account accessibility criteria for disabled persons or design for all users.”

The amendment would simply reproduce that existing requirement in the Bill, ensuring that the current regulatory framework for accessibility is maintained.

Legal experts do not believe that the public sector equality duty under the Equality Act 2010 is sufficient. That is recognised by the current system, which incorporates both the public sector equality duty and regulation 42 of the Public Contracts Regulations to ensure that goods and services are accessible to everyone. Even with regulation 42, contracting authorities continually fail to consider their obligations and procure inaccessible products. Accessibility for disabled people must be maintained at the heart of any new public procurement legislation.

In early 2020, the then Prime Minister wrote to every Government Department calling on his Cabinet to increase opportunities and improve access to services for disabled people. From publicly procured ticketing machines to online consultation software, the Bill offers a great opportunity to meet that expectation and ensure that Government services are accessible to all. I hope the Minister will agree that this amendment would help to ensure we do not go backwards on disability rights in procurement.

[Alex Burghart]

Amendment 8, tabled by the hon. Member for Battersea, with whom I had the pleasure of serving on the Work and Pensions Committee a few years ago, seeks to ensure that in procurements where the end product is intended to be used by people, the technical specifications account for the needs of people with disabilities. I very much want to reassure the Committee that the UK already has legal obligations that dictate how technical specifications are drawn up in these circumstances, with disability accessibility and even broader considerations covered by the public sector equality duty under section 149 of the Equality Act 2010.

The existing procurement regulations are derived from EU procurement directives, which were designed to be applied to member states where domestic laws do not adequately provide for accessibility requirements, as the Equality Act does. When applied to procurement, the Equality Act requirements are more pervasive than regulation 42 of the Public Contract Regulations 2015, and there is no need unnecessarily to replicate EU provisions when our domestic law is fit for purpose. Indeed, the Equality Act goes further than regulation 42, covering other protected characteristics and applying to the whole commercial lifecycle more broadly than just technical specifications.

Although we do not think this amendment is necessary, the Government remain committed to ensuring public procurement drives better outcomes for people with disabilities, and I recognise that implementation is currently patchy. We welcome engagement with charities and organisations supporting people with disabilities, to help ensure that disability accessibility is improved and effectively considered by contracting authorities in public procurement. As a consequence, I respectfully request that this amendment be withdrawn.

[Florence Eshalomi]

I understand the Minister’s concern and his admission that the Government will consult those disability charities, but does he agree with me that, as it stands, there are currently no requirements for goods and services to meet that standard of accessibility?

[Alex Burghart]

The hon. Lady will have heard me say that the legal duty that exists within Equality Act 2010 goes further than the EU procurement rules that we are getting rid of. It goes further than the EU procurement directives, so there is no loss of obligation in the creation of the Bill.

I am very happy to meet the hon. Member for Battersea, who is an expert in these issues, in order to reassure her. As far as we are concerned, the Equality Act 2010 goes further than the EU procurement directives, so this amendment is not necessary.

Question put, That the amendment be made.

--- Later in debate ---

Question proposed, That the clause, as amended, stand part of the Bill.

[Alex Burghart]

Clause 56 sets technical specifications that contain the required characteristics of the goods, services or works that a supplier has to provide. They are included within procurement documents to present suppliers with a full description of the contracting authority’s needs, to enable suppliers to propose a solution to meet those needs via a tender response.

In line with the broader goal of a simpler regulatory framework and increased flexibility to design efficient, commercial and market-focused competition, the Bill does not dictate how technical specifications are to be drawn up by contracting authorities, or mandate what exactly should be included.

As such, clause 56 simply requires contracting authorities to refer to performance or functional requirements over descriptive characteristics, to focus on the desired outcomes of a contract rather than being overly prescriptive on the method by which this is achieved. Clause 56 also prevents contracting authorities from referring to things like specific trademarks or producers—in essence prohibiting an arbitrary favouring of national or specific products—to avoid narrowing the competitive pool.

Contracting authorities must also use international standards where they exist, or national standards allowing for equivalents. This provision, required by the UK and other parties to the World Trade Organisation’s Government procurement agreement is helpful, as the UK advocates for high standards in the supply of goods and services and was a founding member of standards organisations, such as the International Organisation for Standardisation and the International Electrotechnical Commission.

Question put and agreed to.

Clause 56, as amended, accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned.—(Julie Marson.)

Procurement Bill [ Lords ] (Sixth sitting)

Alex Burghart Excerpts

Committee stage
Tuesday 7th February 2023 Public Bill Committees

[Florence Eshalomi]

It is a pleasure to serve under your chairship, Mr Mundell. Amendments 23 and 24 would ensure that everyone on the debarment list is excluded from the procurement system, except for under the provisions relating to the public interest test in clause 41.

On Thursday I listened to the Minister explain “exclusions”, “exclusionary” and the debarment list. We had hoped that the Minister would give a more substantive explanation, given the issues that we highlighted, but we remain concerned. I will not go over the debate, but I was not satisfied to hear that a contracting authority will have discretion to award, say, a paperclip contract, as the Minister said, to a company identified as a national security risk. I have my paperclips here, if the Minister would like one. I want to ask a question that most people in this country will have. Why we are giving public money to a supplier who is identified as being a threat? With all due respect to procurement officers, we cannot expect there not to be blurred lines. Something that seems innocuous might actually be an open door, not spotted by a procurement officer or even our own security experts.

I am sure we all heard last week about the issue of the spy balloon, and how that created alarm in the USA. In the end, military action was required to shoot it down. A US defence officer has revealed that other suspected spy balloons flew over the US during the Trump Administration. That shows that real threats can pop up anytime and anywhere, and they can take multiple forms. Amendments 23 and 24 reflect some of the dissatisfaction I have outlined. As the Bill stands, a supplier put on the debarment list on schedule 7 grounds would be classed as an “excludable supplier”, meaning the contracting authority could still, at its discretion, award them a contract. I understand from the Minister’s comments, and from conversations with stakeholders, why there needs to be discretion with regard to excludable grounds, but I do not believe that such discretion should extend to suppliers on the debarment list.

The Government have outlined the debarment list is reserved for the most serious cases of misconduct. On 4 August 2022, the then Minister Lord True wrote a letter to the now Minister Baroness Neville-Rolfe, in which he said:

“I should start by explaining that the debarment list is intended to focus on the most serious cases of supplier misconduct, where suppliers may pose a significant risk to contracting authorities or the public. It is not the case that every supplier which meets a ground for exclusion will be considered for inclusion on the debarment list. Rather, there will be a prioritisation policy which governs how cases are selected for investigation. It is likely that only a small number of cases will be considered each year.

It is also important to clarify that meeting a ground for exclusion is not sufficient on its own to justify the addition of a supplier to the debarment list. In addition to considering whether an exclusion ground applies, the Minister must also consider whether the circumstances that led to the application of the exclusion ground are likely to occur again. Only if the circumstances are considered likely to occur again may the supplier be added to the debarment list. This ensures that exclusion is not a punishment for past behaviour but a forward-looking measure based on the risk posed by the supplier.”

In the words of Lord True, suppliers on the list represent a significant risk to the public. It was therefore pleasing to hear the Minister say on Tuesday:

“Suppliers on the debarment list face exclusion across the public sector at all levels. That is a significant step forward in our approach to supplier misconduct.”––[Official Report, Procurement Bill Public Bill Committee, 31 January 2023; c. 63.]

I think most people would welcome the fact that suppliers on the list are automatically excluded. However, under the Bill, the contracting authority will still be able to exclude suppliers on the list on discretionary exclusion grounds. When a supplier represents such a risk that they are one of the few to be on the debarment list, why should they still be allowed access to public contracts? We do not want suppliers who commit egregious breaches near public contracts.

I refer back to the Minister’s example of a paperclip contract. Does he believe that a supplier who has been found guilty of environmental misconduct, has frequently breached contracts and performed poorly, is a national threat, or committed a breach that is grounds for discretionary exclusion, although the Government decided not to put them on the debarment list, should have access to public contracts? Will the public want their money to be spent that way, and handed to that supplier? Every supplier on the debarment list is surely one that the Minister believes should not be near our procurements. Again, we come to the question: why allow this discretion? Our amendment would ensure that those on the debarment list were excluded from all public contracts without question. I urge the Minister to think carefully about that, and to consider whether he can support the amendment.

I turn briefly to clause 58. Although every excluded or excludable supplier must be given the opportunity to prove that they are now a reputable supplier, it is important to remember that procurement rules are there to ensure that public money is spent efficiently and on delivering the public services we need. When it comes to deciding whether a supplier comes under the definitions set out in clause 57, has the Minister considered taking the US-style approach of weighing the reputational and delivery risk to the contracting authority of allowing the supplier to take the contract? There will be disadvantages and advantages to both approaches, but I would be interested to learn whether that was explored, and why the Government adopted the approach taken in the Bill.

[The Parliamentary Secretary, Cabinet Office (Alex Burghart)]

It is a pleasure to serve under your chairmanship once again, Mr Mundell. Amendments 23 and 24 would require contracting authorities to treat any supplier on the debarment list as being subject to mandatory exclusion, even when it is on the list because a discretionary exclusion ground applies. The concept of “excluded supplier” is by nature a blunt instrument. An excluded supplier faces exclusion from every public contract for five years unless and until a contracting authority is satisfied that the risk of the issues re-occurring has been addressed. For that reason, a supplier is an excluded supplier only when one of the grounds reserved for the most serious forms of misconduct apply—the mandatory grounds.

It is clearly right that when a Minister of the Crown places a supplier on the debarment list because a mandatory exclusion ground applies, and the issues are likely to occur again, authorities awarding contracts should treat that supplier as an excluded supplier. The inclusion of discretionary exclusion grounds in schedule 7 reflects the fact that, for offences where a range of misconduct could be involved, it might be appropriate to take into account factors such as the nature of the contract being tendered or the level of harm caused before deciding to exclude a supplier.

None the less, the Government believe that it should be possible to include a supplier that has fallen foul of a discretionary exclusion ground on the debarment list. This involves contracting authorities having to do their own due diligence on the suppliers’ misconduct and self-cleaning measures. However, given that discretionary exclusion grounds are potentially less serious, a contracting authority should retain some discretion with regard to that supplier, once they are on the list.

Clause 57 sets out the meaning of the terms “excluded supplier” and “excludable supplier”. The Bill provides elsewhere that contracting authorities are either obliged or permitted to consider whether suppliers should be excluded or excludable at various points in a procurement. In most cases, excluded suppliers must be prevented from participating in a procurement or being awarded a contract, while excludable suppliers may be excluded at the discretion of the contracting authority.

Excluded suppliers are defined in subsection (1) as those to whom a contracting authority considers that

“a mandatory exclusion ground applies”,

as set out in schedule 6. The contracting authority must also consider that

“the circumstances giving rise to the application of the exclusion ground are likely to occur again,”

or that the supplier is

“on the debarment list by virtue of a mandatory exclusion ground.”

Excludable suppliers are defined in subsection (2) as those to whom a contracting authority considers that

“a discretionary exclusion ground applies”

as set out in schedule 7. The contracting authority must also consider that

“the circumstances giving rise to the application of the exclusion ground are likely to occur again,”

or that the supplier is

“on the debarment list by virtue of a discretionary exclusion ground.”

In both cases, the supplier is excluded or excludable if they are on the debarment list. Private utilities can treat mandatory exclusion grounds as discretionary; that is set out in subsection (3).

Clause 58 sets out how contracting authorities should assess the risk of the re-occurrence of the circumstances that gave rise to the application of an exclusion ground to a supplier. Contracting authorities may have regard to the range of factors set out in subsection (1) when evaluating that risk. Subsection (2) imposes a duty on the contracting authorities applying the exclusions regime to give suppliers an opportunity to submit evidence to show that the circumstances are not likely to recur—that is, that they have “self-cleaned”. Suppliers are also entitled to make the case that they are not subject to a ground for exclusion, and to make representations more generally.

The self-cleaning evidence must be sufficient to satisfy the contracting authority that the circumstances that gave rise to potential exclusion are not likely to occur again. Importantly, subsection (3) stipulates that contracting authorities must not make disproportionate requests for information or remedial evidence. That protects suppliers by ensuring that contracting authorities focus on the most important aspects of self-cleaning relevant to the particular circumstances.

The hon. Member for Vauxhall understandably takes us back to the issue of discretionary versus mandatory exclusions, which we debated the other day. One thing we need to bear in mind—perhaps with regard to more rarefied objects than paperclips—is that there may be circumstances in which particular substances or items can be procured only from certain suppliers. That may be essential for the operation of certain processes or the response to certain emergency situations.

[Florence Eshalomi]

As I said, I understand why the Minister says that there should be some discretion, and that it should lie with the contracting authority. However, does he agree that such discretion should not stretch to the point at which an organisation is on the debarment list, and there is an issue of national security?

[Alex Burghart]

There is absolutely the issue of national security. However, it is important that we retain an element of flexibility, so that in extremis, if there is only one provider of an essential good, the public authorities that need it still have access to it, even if there are concerns about other activities performed by a certain company. Although I completely understand the hon. Lady’s desire to prevent companies whose practices we disagree with from unduly benefiting from the public purse, we have to retain a degree of flexibility so that, in extremis, public authorities can get what they need.

Question put, That the amendment be made.

--- Later in debate ---

[Alex Burghart]

Schedule 6 sets out the mandatory grounds for exclusion. They consist of criminal offences and other misconduct serious enough to merit exclusion if the circumstances in question are likely to reoccur.

[Florence Eshalomi]

As the Minister highlighted, the schedule covers the grounds on which a supplier can be excluded, with some general provisions on how the suppliers are treated. I have touched on our concerns about excluded suppliers and excludable systems, and we will say more about that when we come to schedule 7. However, we believe that the scope of schedule 6 could be widened to cover issues of national security, to ensure that suppliers who are a risk to national security are not included in our supply chain, even when contracting authorities want paperclips. We support the increase in the scope of the schedule, so that it excludes suppliers who have committed serious offences, and who represent a concern to the authorities in the delivery of services. We are pleased to support the schedule.

Question put and agreed to.

Schedule 6 accordingly agreed to.

Schedule 7

Discretionary exclusion grounds

[Alex Burghart]

I beg to move amendment 87, in page 110, line 33, schedule 7, leave out paragraph 15.

This amendment would leave out the discretionary exclusion ground relating to forced organ harvesting.

Amendment 87 removes an amendment made to schedule 7 in the other place. It created a discretionary exclusion ground for suppliers with connections to forced organ harvesting, which is, of course, an utterly abhorrent practice. However, serious unethical behaviour particular to a certain industry is already covered by the ground of professional misconduct. The Bill is not the appropriate place to address the issue.

Every exclusion ground, whether mandatory or discretionary, must be considered for each and every supplier for each procurement. I am sure the Committee can appreciate how burdensome that would be when there are thousands of contracts every year. We want to make public procurement simpler and less burdensome for suppliers, particularly those that are small and medium-sized enterprises, and to drive value for money for the public. Adding additional exclusion grounds costs contracting authorities time and money. It is therefore crucial that we limit exclusion grounds to those that pose a major risk to public procurement. No supplier to the UK public sector has been involved in forced organ harvesting, as far as I am aware.

I am, however, pleased to say that the Government have already taken significant steps to make it explicit that the overseas organ trade, or complicity in it, will not be tolerated. Under the Health and Care Act 2022, it is already an offence to travel outside the UK to purchase an organ. That is why I believe that the amendment is necessary to overturn a well-meaning but, in practice, very challenging change to the Bill.

[Florence Eshalomi]

As the Minister highlighted, amendment 87 would sadly overturn Lords amendment 91, made on Report, in relation to forced organ harvesting. I agree with the Minister that there can be no doubt that organ harvesting is an abhorrent practice, but we should be careful when saying that this measure would just result in additional bureaucracy and time in contracts and procurement.

The practice of forced organ harvesting involves the removal of organs from a living prisoner, which results in their death or near death. It is something that none of us should stand by and watch. Linking this back to taxpayers’ money, no taxpayer would expect a single penny of their public money to go to a company explicitly linked to this practice. Tragically, there is evidence that forced organ harvesting may not be a particularly niche issue.

The Minister highlighted that the measure, although well intended, would add more time and another layer of bureaucracy. I want to go back to the debates in the other place, and some of the powerful words from Lord Alton of Liverpool and Lord Hunt of Kings Heath, who moved the amendment that led to our discussion today. Both made moving and compelling arguments for the inclusion of the measure against forced organ harvesting, providing examples of evidence that the practice is taking place on an extremely depressing scale in China.

The excellent speeches made by Lord Alton and Lord Hunt have been backed up by the Office of the UN High Commissioner for Human Rights, which stated that serious human rights violations have been committed in the Xinjiang Uyghur Autonomous Region,

“in the context of the Government’s application of counter-terrorism and counter-‘extremism’ strategies. The implementation of these strategies, and associated policies in XUAR has led to interlocking patterns of severe and undue restrictions on a wide range of human rights. These patterns of restrictions are characterized by a discriminatory component, as the underlying acts often directly or indirectly affect Uyghur and other predominantly Muslim communities.”

The OHCHR also stated that the treatment of persons held in the system of so-called vocational education and training centres—VETC facilities—is,

“of equal concern. Allegations of patterns of torture or ill-treatment, including forced medical treatment and adverse conditions of detention, are credible, as are allegations of individual incidents of sexual and gender-based violence. While the available information at this stage does not allow OHCHR to draw firm conclusions regarding the exact extent of such abuses, it is clear that the highly securitised and discriminatory nature of the VETC facilities, coupled with limited access to effective remedies or oversight by the authorities, provide fertile ground for such violations to take place on a broad scale.”

That is damning. It shows there is evidence of this already happening. In an April 2022 paper published in the American Journal of Transplantation, Matthew P. Robertson and Jacob Lavee stated:

“We find evidence in 71 of these reports, spread nationwide, that brain death could not have properly been declared. In these cases, the removal of the heart during organ procurement must have been the proximate cause of the donor’s death. Because these organ donors could only have been prisoners, our findings strongly suggest that physicians in the People’s Republic of China have participated in executions by organ removal.”

As a country, we must stand steadfast against these practices and ensure that any supplier with ties to forced organ harvesting is not allowed anywhere near our procurement system. I do not think taxpayers would expect anything less. No one wants to be linked to these horrific practices.

I fully understand and appreciate that the Minister may have covered these and other concerns in his remarks, but we may want to consider that there is no doubt this practice is an exclusion ground. In Committee in the Lords, the Minister, Baroness Neville-Rolfe, said it was almost certain that it would be covered by paragraph 12, but I think we have to ask ourselves, how many times have we heard that something is almost certain, only for it not to be covered when the Bill passes? We cannot and should not take chances on this issue. It is a fundamental and critical issue of human rights. If the Committee is to do its job, we cannot support the attempts to remove forced organ harvesting as a discretionary exclusion ground. For those powerful and valid reasons, I will not be supporting the amendment.

[Kirsty Blackman (Aberdeen North) (SNP)]

It is tempting to think that forced organ harvesting is so far removed from anything that we consider human, or a normal occurrence, that it does not happen—but it does. As the shadow Minister laid out, the issue was discussed in significant detail in the other place. We know it occurs.

The Minister has given some level of assurance that other parts of the Bill cover this practice. Could he be explicit that he does not believe that any supplier involved in forced organ harvesting would be eligible to receive a public contract through the procurement framework set out in the Bill? If he can give that explicit assurance that he believes the practice is covered elsewhere in the Bill, and that provisions elsewhere in the Bill adequately do the job of this provision, I would be happy not to oppose the amendment. That assurance from the Minister would give us a measure of reassurance and comfort that the Bill covers everything that he intends and expects.

[Alex Burghart]

We are assured that the absolutely abhorrent practice of forced organ harvesting would qualify as serious unethical behaviour. Consequently, that would mean that, in the Bill, it would be covered by the grounds of professional misconduct. Within the Bill, we have that provision; outwith the Bill, we have the Health and Social Care Act, to which I referred in my remarks. I hope that no one will take away anything other than the fact that the Government are strongly opposed to this practice and to the people who conduct this practice and that we wish public procurement to have no part in it.

Question put, That the amendment be made.

--- Later in debate ---

The amendment could also give the Government the power to put companies that are flagrantly ignoring UK sanctions regimes on the debarment list. That would make it clear that companies that continue to work with regimes such as Putin’s Russia would be barred from the UK’s procurement system. I hope that the Minister will agree and support the amendment.

[Alex Burghart]

The amendment would introduce a new discretionary exclusion ground in relation to sanctions violations. The Government of course expect all businesses to comply with their obligations under the UK sanctions regime.

In 2016, the Office of Financial Sanctions Implementation was established to ensure that sanctions are properly understood, implemented and enforced. A range of tools are available to encourage compliance, including monetary penalties. However, we do not consider that sanctions violations pose a sufficient risk to public procurement to justify a ground for exclusion.

I am not aware of any evidence that public contracts have been awarded to suppliers that have violated sanctions. It is important that the exclusions regime focuses on the most pertinent risks, because each additional exclusion ground will increase burdens on contracting authorities and suppliers. That is why we have taken a targeted, risk-based approach, informed by extensive consultation across the public sector and with those who are most impacted by the exclusions regime, such as small and medium-sized enterprises. I respectfully request that the amendment be withdrawn.

Question put, That the amendment be made.

--- Later in debate ---

[Alex Burghart]

Amendment 112 would introduce a new discretionary ground for exclusion in relation to labour law infringements. There are already robust grounds for exclusion for the most egregious violations of the rights of workers. These are based on the serious labour offences within the purview of the director of labour market enforcement. Compared with the mandatory grounds in existing legislation—the Public Contracts Regulations 2015—they represent an expansion in the scope of the grounds on which suppliers can be excluded from procurements for labour violations, with new grounds including failure to pay the national minimum wage and offences relating to employment agencies.

It is right that exclusion is reserved for the most serious circumstances or behaviour that could, if not addressed, raise a sufficient risk to contracting authorities or the public as to make the supplier unfit to bid for public contracts. Nevertheless, where the treatment of workers and the protection of their rights is relevant to the contract being procured, contracting authorities are entitled to set conditions of participation in these areas and to evaluate treatment of workers as part of the award criteria in assessing tenders. This may be the case, for example, for the procurement of contracts for labour-intensive services. I respectfully urge the hon. Member to withdraw the amendment.

Question put, That the amendment be made.

Division 27

Ayes: 5

Noes: 8

[Alex Burghart]

I beg to move amendment 88, in schedule 7, page 111, line 44, at end insert—

“‘event’ means a conviction, decision, ruling, failure or other event by virtue of which a discretionary exclusion ground would apply to a supplier;”

This amendment would insert a definition of “event” for the purposes of paragraph 16 of Schedule 7.

[The Chair]

With this it will be convenient to discuss that schedule 7 be the Seventh schedule to the Bill.

[Alex Burghart]

Amendment 88 is a technical amendment that inserts a definition of “event” for the purpose of the five-year look-back period in schedule 7. It mirrors the same definition already included in schedule 6, but refers to an event by virtue of which a discretionary exclusion ground applies to a supplier.

Schedule 7 sets out the discretionary grounds for exclusion. Discretionary grounds involve a range of circumstances, some of which are potentially less serious and might not merit exclusion. It might depend on the circumstances relating to the exclusion ground, the type of contract being procured such as its urgency or criticality, or facts specific to the procurement—the number of bidders, for example.

Similar to the mandatory exclusion grounds, the discretionary grounds are subject to a five-year, look-back period, as set out in paragraph 16, whereby only convictions or other events that the decision maker was aware of within the past five years count when assessing whether grounds apply. Again, that is subject to a transitional regime to avoid the unfair retrospective effect of new exclusion grounds for events that would not have given rise to exclusion prior to the coming into force of the Bill.

The discretionary grounds generally apply to misconduct or circumstances involving either the supplier or a connected person of the supplier. Connected persons are defined in paragraph 44 of schedule 6, as I explained earlier. As with schedule 6, I hope that we have achieved our objective of making the exclusion grounds both clearer and more consistent.

[Florence Eshalomi]

As the Minister outlined, the amendment seeks to define the events, with reference to the relevant paragraph of the schedule on determining temporal cut-off points for events that may make a supplier excludable. We believe that it is a tidying-up amendment to ensure that the event is defined in the schedule, so we do not wish to oppose it.

More widely, there are some faults with the schedule and its implementation, but the Opposition view it as a step forward in procurement versus the Public Contracts Regulations 2015. We recognise the importance of clauses on matters such as labour markets and environmental misconduct, but the appropriateness of the scope of schedule 7 will depend on how stringent the rules on excludable suppliers are applied by contracting authorities. We should consider that when assessing how well the terms of the schedule will work in a few years’ time.

I would be grateful if the Minister explained why different timescales have been used in different parts of the Bill, as set out in paragraph 16. How were the decisions made for different grounds? We do not seek further amendments to the schedule, which we are happy to support.

[Alex Burghart]

I thank the hon. Lady for her comments and support of the schedule. She asked about the look-back periods in paragraph 16 and why they differ—perhaps she could intervene to clarify her question.

[Florence Eshalomi]

I asked about the different timescales outlined in paragraph 16. I would like a better understanding of how those decisions were reached.

[Alex Burghart]

I am embarrassed to say that my memory is failing me, but I will let the hon. Lady know later in the afternoon.

[Florence Eshalomi]

Thank you.

Amendment 88 agreed to.

Schedule 7, as amended, agreed to.

Clause 58 ordered to stand part of the Bill.

Clause 59

Notification of exclusion of supplier

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Clauses 60 and 61 stand part.

Government amendments 42 to 44.

Clause 62 stand part.

Government amendments 45 to 47.

Clauses 63 and 64 stand part.

Government amendment 76.

Government new clause 9—Debarment decisions: interim relief.

Government new clause 10—Debarment proceedings and closed material procedure.

Government new clause 15—Debarment decisions: appeals (No. 2).

[Alex Burghart]

We move on to a monster grouping. The clauses, which concern the debarment list, are important, ground-breaking provisions that will support contracting authorities to reject bids from suppliers that pose the most serious risk.

Clause 59 requires contracting authorities to notify either a UK, Welsh or Northern Irish Minister—depending on the status of the contracting authority—whenever action is taken under the exclusions regime against a supplier or subcontractor. Subsection (1) sets out the relevant actions, which include exclusion from a procurement, rejection of a tender, rejection of an application to join a dynamic market or removal from a dynamic market, or the replacement of an associated person or intended subcontractor.

The obligation to notify a relevant appropriate authority is in subsection (2), and must be made within 30 days of the relevant action. Subsection (3) sets out the information that must be in the notification. There is also an obligation in subsections (4) and (5) to notify within 30 days where a challenge is brought under part 9 of the Bill against a contracting authority with regard to any exclusion, and also on conclusion of any such proceedings.

--- Later in debate ---

[Florence Eshalomi]

This group of amendments and new clauses pertains to the debarment regime and a new interim relief scheme that suppliers can use when they wish a decision to be put on the debarment list. We support the addition of a debarment list to the Bill. It is right that suppliers that represent a significant risk to contracting authorities and the public are identified. Clearly, this is a strong step and represents a higher bar than simply excluding a supplier from a procurement tender process.

That high-bar intention for the list has been made clear by the Government and in the Minister’s remarks. I refer back to the letter of the then Minister Lord True to Minister Baroness Neville-Rolfe:

“I should start by explaining that the debarment list is intended to focus on the most serious cases of supplier misconduct, where suppliers may pose a significant risk to contracting authorities or the public.”

Ministers must also consider whether the circumstances that led to the application of the exclusion ground are likely to occur again. However, the Government might have changed their mind since then. Will the Minister confirm whether that is still the intention in that case?

Clarity is needed. The need for clarity highlights a potential flaw in the existing clauses: there is still some ambiguity about what the bar actually is to be placed on the debarment list. As drafted, any supplier deemed to be an excluded or excludable supplier can, in theory, be added to the list. It is also possible that no suppliers, even those with egregious cases, are added to the list.

The only other issue that I will raise is that of the threshold. Will there be additional guidance for suppliers and contracting authorities? The list can involve severe reputational and financial damage, so it is right to have safeguards. We will support the measure if the Minister can outline the additional safeguards.

[Alex Burghart]

The hon. Lady is right that Lord True wrote to a Member of the House of Lords about this, and we do not believe that the Government’s position has changed since then. I am afraid I cannot remember her second point—if she is happy to intervene on me, that will refresh my memory.

[Florence Eshalomi]

I will write to the Minister.

[Alex Burghart]

I look forward to receiving the hon. Lady’s letter.

Question put and agreed to.

Clause 59 accordingly ordered to stand part of the Bill.

Clauses 60 and 61 ordered to stand part of the Bill.

Clause 62

Debarment list

Amendments made: 42, in clause 62, page 43, line 30, leave out from “section” to end of line 39 and insert

“and, as part of that entry, must—

(a) state the exclusion ground to which the entry relates, and whether it is a mandatory exclusion ground or a discretionary exclusion ground, and

(b) indicate the date on which the Minister expects the supplier to cease to be an excluded or excludable supplier by virtue of the stated exclusion ground (and, accordingly, expects the entry to be removed from the list).

(4) A list kept for the purposes of this section is the ‘debarment list’.”

This amendment would make it clearer that each entry will relate to one exclusion ground and, as such, could be challenged individually.

Amendment 43, in clause 62, page 43, line 44, at end insert—

“(5A) The Minister may not enter a supplier’s name on the debarment list before the end of the period of eight working days beginning with the day on which the Minister gives notice to the supplier in accordance with subsection (5) (the ‘debarment standstill period’).

(5B) The Minister may not enter a supplier’s name on the debarment list if—

(a) during the debarment standstill period—

(i) proceedings under section (Debarment decisions: interim relief)(1) (interim relief) are commenced, and

(ii) the Minister is notified of that fact, and

(b) the proceedings have not been determined, discontinued or otherwise disposed of.”

This amendment would ensure that an application for interim relief under the new clause inserted by NC9 would suspend the Minister’s decision to add a supplier’s name to the debarment list.

Amendment 44, in clause 62, page 44, line 1, leave out from “review” to end of line 5 and insert—

“(b) may remove an entry from the debarment list at any time, and

(c) may revise a date indicated under subsection (3)(b).

(7) If a Minister of the Crown voluntarily removes an entry from the debarment list in connection with proceedings under section 64 (debarment decisions: appeals), a Minister of the Crown may reinstate the entry only after the proceedings have been determined, discontinued or otherwise disposed of.

(7A) A Minister of the Crown must remove an entry from the debarment list if the Minister is satisfied that the supplier is not an excluded or excludable supplier by virtue of the ground stated in the entry.”—(Alex Burghart.)

This amendment would restrict modifications that could be made to the debarment list, provide for the Minister to voluntarily suspend a decision to add an entry to the debarment list in connection with proceedings, and clarify that the Minister must remove an entry where a particular ground no longer applies.

Clause 62, as amended, ordered to stand part of the Bill.

Clause 63

Debarment list: application for removal

Amendments made: 45, in clause 63, page 44, line 16, leave out from “for” to end of line 17 and insert—

“(a) the removal of an entry in respect of the supplier from the debarment list, or

(b) the revision of the date indicated as part of such an entry under section 62(3)(b).”

This amendment would ensure that a supplier can apply to change the date indicating when it will cease to be an excluded or excludable supplier.

Amendment 46, in clause 63, page 44, line 21, leave out from “since” to “, or” and insert

“the entry was made or, where relevant, revised”.

This amendment would allow for the fact that a supplier may make different applications in respect of the same or different entries.

Amendment 47, in clause 63, page 44, line 23, after “subsection (1)” insert

“in relation to the entry or, where relevant, revision”.—(Alex Burghart.)

This amendment is consequential on Amendment 45.

Clause 63, as amended, ordered to stand part of the Bill.

Clause 64 disagreed to.

Clause 65

Timeline for removal of suppliers

Question proposed, That the clause stand part of the Bill.

[Alex Burghart]

Clause 65, which was added to the Bill in the other place, requires the Government to publish a timetable for the removal of Government surveillance equipment where there is evidence that a provider has been involved in modern slavery, genocide or crimes against humanity. That would require the Government to undertake a review of evidence that existing surveillance suppliers or subcontractors have been involved in those matters. Given the size and complexity of technology supply chains, any review of that nature would be costly and resource-intensive; it would need to cover hundreds, if not thousands, of companies.

The measure is intended to target Chinese suppliers, but it is not guaranteed to lead to action against them. The evidence surrounding the complicity of surveillance suppliers in the oppression of Uyghurs in Xinjiang is highly contested, and it would likely be difficult to show that any supplier had been involved in the matters set out in the clause. Although it is unclear what precisely is meant by “established evidence” that a provider has been “involved” in the specified abuses, proving that those suppliers knowingly provided technology for use in human rights abuses would be especially difficult. Even if there were sufficient evidence to do so, the cost and disruption of removing such surveillance equipment from across the entire Government estate would be significant. For that reason, public procurement policy has tended to focus on preventing unfit suppliers from participating in future procurements, rather than requiring the termination of existing contracts.

However, the Government are deeply concerned by both the accusations of modern slavery and the national security implications posed by such equipment, and they are taking action. In November, they announced that all Government Departments will be expected to remove such equipment from sensitive sites and to avoid procuring it in the future. We are also strengthening our powers in the Bill by introducing an exclusion ground for suppliers considered to pose a threat to the national security of the United Kingdom. Combined with the new powers for a centralised debarment list, that will mean that where the risk is sufficiently serious, Ministers can act quickly to ensure suppliers that threaten national security face exclusion from all contracts across the public sector.

I believe that we have taken decisive action in this area, both in the written ministerial statement and in the Bill. However, we are mindful of the concerns raised in both Houses, and we will continue to reflect carefully on those views as we move forward with the legislation and its implementation.

[Florence Eshalomi]

I thank the Minister for his closing remarks on that and the need to address some of the concerns. The clauses mandate the eventual removal of physical technology or surveillance equipment from the Government’s procurement system supply chain, where there is substantiated evidence of modern slavery, genocide or crimes against humanity.

--- Later in debate ---

[Kirsty Blackman]

Throughout the discussion of Hikvision and other companies in relation to human rights abuses, genocide and crimes against humanity, the Minister has missed the point. The shadow Minister has absolutely got the point.

For a start, the US has already blacklisted Hikvision. If the US believes that there is enough evidence to do that, and the Scottish Government are getting rid of the Hikvision cameras we have in Scotland, I do not see why the UK Government are unable to act in that regard. Two other jurisdictions have found enough evidence to debar Hikvision from providing cameras involved in our public life, yet the UK Government feel that there is still not enough evidence. They are somehow suggesting that perhaps the situation is over-egged, but it appears that the Foreign Affairs Committee does not think the situation is an over-exaggeration, and that it thinks that there is actually a risk and danger.

This is not just about the threat to our national security, although that is obviously incredibly important, and the Labour Front Benchers have been clear about national security throughout our discussion of the Bill. This is also about supporting a company that is committing human rights abuses. It does not matter whether a company is committing them here or elsewhere; the reality is that through public procurement, we are funding a company using facial recognition in mosques and committing atrocities against Uyghur Muslims in the Xinjiang region. How is that okay just because it is not causing any problems here?

Even if the company were not causing any threat to national security, this is about the direction of travel. On modern slavery, for example, the Government are pretty clear that no matter where that is happening, we do not want to be entangled with suppliers involved in modern slavery and enslaving people. We should not want to be involved with, and companies and suppliers should not be giving public money to, the people committing these crimes. Just because this is not modern slavery, it does not mean that they are not creating significant problems and putting people in severe danger as part of the extreme regimes that they are working for.

I do not see the justification in allowing public money to be given to any of these organisations. As I said last week, it is not as though this is a high bar; it is a low bar. We are saying that modern slavery and genocide are crimes against humanity. Those are pretty much the most serious things we can think of. Any organisation involved in those should not get public money, whether or not it is a threat to national security.

I am slightly pleased that the Government and the Minister seem a bit more willing to look at the possibilities regarding Hikvision. I appreciate that removing it from secure and sensitive sites, particularly, is a priority for the Government—they have agreed that they will do that—but that is not enough; we should not fund these organisations at all. Asking the UK Government to make a move in that regard in order to remove this technology and ensure that Hikvision does not get any more of our money is incredibly important, and not too much to ask.

I stress again the point made by the hon. Member for Vauxhall: the clause does not ask for immediate removal. It gives the Government six months to publish a timeline for removal—it is not giving them six months to remove the stuff, but to produce a timeline. They are not being asked for something entirely unreasonable. There are other camera providers and technologies out there that could be used instead to provide safety and security for places that we want to be safe and secure, without our supporting a company propping up a regime that is profiling and committing crimes against humans just because they happen to be Muslim. That is completely unacceptable, no matter where in the world it is doing that. Whether or not this is being done in the UK, the Government should take action on that.

I will therefore strenuously resist any attempt to remove clause 65 from the Bill. I used this phrase earlier, but it should not be too much to ask for the Government to take action on this issue. I am pleased that the Minister seems to have moved his language slightly since our previous debate, but it is not good enough and we are not there yet. We need a firm commitment from the Government to remove this technology that is causing so much harm to the lives of so many and to remove the support for the people causing such harm.

[Alex Burghart]

I thank hon. Members for their remarks. As I said, we think that the clause as drafted would be unworkable. On what the hon. Members for Vauxhall and for Aberdeen North said, we are moving to a new debarment regime, and I am not able to prejudge who will be covered by that regime. Suppliers will be considered for addition to the debarment list based on a rigorous and fair prioritisation policy. That policy is under development, and it is too early to say which suppliers will or will not be added to the debarment list.

We should remember that the new regime will give broader exclusion powers to authorities that have primary responsibility for applying the exclusions regime. The sorts of crimes we have touched on this afternoon, such as organ harvesting, modern slavery and the like, are very serious crimes against people and humanity, and no doubt that will have a bearing on future judgments. I appreciate where the amendment in the Lords came from, but we do not think the clause is workable. As a Government, however, we continue to consider the issue carefully.

Question put, That the clause stand part of the Bill.

--- Later in debate ---

Electronic invoicing: implied term

[Alex Burghart]

I beg to move amendment 50, in clause 66, page 45, line 30, at end insert—

“(5A) The implied term does not prevent a contracting authority—

(a) requiring the use of a particular system in relation to electronic invoices;

(b) in the case of a defence authority (as defined in section 7(5)), requiring the use of a system that requires the payment of fees by the supplier.”

This amendment would ensure that a contracting authority can require the use of a particular system in relation to electronic invoices, and that a contracting authority that is a defence authority can require that the system is one that requires the payment of fees by the supplier.

[The Chair]

With this it will be convenient to discuss clause stand part.

[Alex Burghart]

Before I discuss Government amendment 50, I will take this opportunity to go back to the question that the hon. Member for Vauxhall asked me about timescales for exclusion. Generally, the look-back is five years, but for some offences, we have transitional provisions to avoid creating retrospective offences in the early years of implementation. I am happy to write to her with a more detailed explanation if that will be useful.

Amendment 50 will ensure that the clause, which governs electronic invoicing, does not inadvertently prevent contracting authorities from requiring suppliers to submit electronic invoices via invoice processing systems. Invoice processing systems are used by many contracting authorities and we want to make it clear that their use is permitted under the clause.

The amendment will also ensure that defence authorities are allowed to charge suppliers for using such systems. For security reasons, the Ministry of Defence does not permit suppliers to have direct access to their internal system to submit invoices and track payments in relation to its contracts. Suppliers are thus required to use and register with a third-party system in order to carry out invoicing and payments with the MOD. They are charged a fee for use of that system. Amendments 51 and 52, and 61 to 64 are all related to that, and we will return to them later in Committee.

More broadly, the clause applies a term to every public contract to ensure that invoice processing is done electronically. That is essential for swifter payments to suppliers, proper audit trails and increased visibility on public contract spend. It retains the principles of the existing regime with regard to e-invoicing. Nothing in a contract may restrict or override the implied term.

--- Later in debate ---

[Florence Eshalomi]

I beg to move amendment 110, in clause 67, page 46, line 32, at end insert—

“(10A) Within six months of the passage of this Act, the Secretary of State must prepare, publish and lay before Parliament a report on the effectiveness of this section in ensuring prompt payment of small and medium-sized enterprises.

(10B) Not later than 6 months after the report has been laid before Parliament, a Minister of the Crown must make a motion in the House of Commons in relation to the report.”

This amendment would require the Government to report to Parliament on the effectiveness of this section in ensuring prompt payment of SMEs.

The amendment would add provisions to mandate that, within six months of passing this Act, the Government produce and publish a report on the effectiveness of implied payment terms in public contracts in ensuring the prompt payment of small and medium-sized enterprises.

One of the problems we see in procurement is the failure to promptly pay suppliers down the supply chain. Many of those suppliers are small and medium-sized enterprises, which require prompt payments to pay wages and bills, and, in some cases, to keep their company going. Failure to pay SMEs the money that they are owed can lead to serious repercussions.

The Government talk about improving the chances of SMEs when it comes to procurement, but for far too long, this has just been a lot of talk and no action. The statistics for SMEs and procurement are truly shocking. Analysis by the Spend Network found that big corporations still win the lion’s share—more than 90%—of contracts worth £30 billion a year that are deemed to be suitable for bids from smaller businesses.

Research from the British Chambers of Commerce and Tussell found that just over one in every five pounds, or 21%, spent by the Government on public sector procurement in 2021 was awarded to SMEs. They also found that SMEs now receive a relatively smaller amount of reported direct Government procurement spending than they did five years ago.

As a proportion of the overall procurement budget, direct spend with SMEs by local government bodies was the highest at 38%. NHS bodies across England spent 22% of their procurement budget with SMEs, while central Government was significantly lower than the average, awarding only 11% of contracts to SMEs.

We have touched on the issue of subcontractors and why they should be paid on time by those contracting out their services, whether that is a contracting authority, a prime supplier or a supplier three or four rungs down the supply chain. We are pleased to see terms to protect the 30-day payment standard between contracting authorities and prime suppliers, but, as the Bill stands, we have concerns about its ability to properly protect subcontractors down the supply chain.

On Second Reading, the Paymaster General said:

“On the prime, that is easy: we will be paying the prime contractor within the 30-day period. People in the supply chain will be aware of the contract under which they are supplying to the prime, and we expect that 30-day payment to trickle all the way down the chain. It is the first time that such a measure has been incorporated. It really will be for primes to be held to account. I say to hon. Members of this House that if partners to a contract are not being paid without good cause, it will call into doubt the contract with the prime supplier, so it will be very much in the interest of the prime supplier to deliver. Every effort the Government have made to improve the payment terms through the supply chains has so far been adhered to pretty well by industry. Across Government, we have seen a significant improvement in payments out to industry, and we are expecting a ripple-down effect as a result of the Bill.”—[Official Report, 9 January 2023; Vol. 725, c. 347.]

Although we recognise what the Paymaster General was saying, we are left with some concerns, especially for the SMEs that are waiting for that vital payment. I do not think we can expect these terms to ripple down the supply chain, and it may take a while for a ripple-up effect to take place if a subcontractor down the line misses payments to another subcontractor in the supply chain, which could be serious. The Government say that that would reflect badly on the prime contractor, but what methods will the Minister use to track this? How will he be able to tell whether it is effective?

Our amendment would add a requirement to assess the effectiveness of the Government’s claims about the ripple-down effect within six months of the Bill passing. As the Paymaster General highlighted on Second Reading,

“This is the first time that such a measure has been incorporated.”—[Official Report, 9 January 2023; Vol. 725, c. 347.]

Surely the Minister owes it to suppliers across the supply chain to check whether this method is effective. This should not be an arduous report to comply with, but it could provide a crucial stress test for the new system and feed into tweaks that go even further to ensure that all suppliers are paid on time. I hope that the Minister will agree with us about bringing SMEs into the procurement system and that those SMEs need to be paid in a timely manner. I urge him to support our amendment.

[Alex Burghart]

Amendment 110 would require Ministers to report to Parliament within six months of the Bill’s passage, detailing how effective the implied payment terms in clause 67 have been in ensuring prompt payment of small and medium-sized enterprises. The new regime will not come into force immediately on passage of the Bill; secondary legislation will be needed prior to the go-live, as will the comprehensive programme of learning and development and the digital platform to support the increased transparency obligations. I am afraid, therefore, that the time period in the amendment is impractical.

In addition, there is already a requirement for contracting authorities to publish payment information, set out in clause 68 on payments compliance notices, which requires reports to be published on the speed of invoice payments one month after the end of each successive six-month period. Those reports will enable interested parties, including taxpayers and suppliers, to see for themselves how prompt payment performance has changed as a result of the new regime without the need for additional reporting. The reports will address payments to all suppliers of a contracting authority, rather than just SMEs, and will be publicly available for all to inspect. I therefore respectfully request that the amendment be withdrawn.

Question put, That the amendment be made.

Division 29

Ayes: 5

Noes: 8

[Alex Burghart]

I beg to move amendment 51, in clause 67, page 46, line 33, at end insert—

“(za) ‘electronic invoice’ and ‘required electronic form’ have the meanings given in section 66(3);”

This amendment would clarify that “electronic invoice” and “required electronic form” in clause 67(8) have the same meanings as in clause 66(3).

[The Chair]

With this it will be convenient to discuss Government amendment 52.

--- Later in debate ---

[Alex Burghart]

Amendments 51 and 52 are technical amendments. Amendment 51 clarifies that clauses 67 and 66 mean the same thing when they refer to “electronic invoice” and “required electronic form”. Amendment 52, similar to amendment 50, ensures that contracting authorities can require the use of a particular system in relation to the processing of electronic invoices.

[Florence Eshalomi]

The two amendments are uncontroversial and clarify points covering the terms of use. We will not oppose them.

Amendment 51 agreed to.

Amendment made: 52, in clause 67, page 46, line 36, after “address” insert

“, or through an electronic invoicing system,”.—(Alex Burghart.)

This amendment would clarify that a reference to a contracting authority receiving an invoice for the purposes of clause 67 includes receiving an electronic invoice through a system specified in the contract.

Question proposed, That the clause, as amended, stand part of the Bill.

[Alex Burghart]

Briefly, clause 67 will set the standard by which all contracting authorities will be expected to pay their suppliers. The clause will imply 30-day terms into public contracts. Any attempts to override those payment terms will be without effect, unless the arrangements are to pay quicker than 30 days. Ministers may, by regulations, vary the number of days, provided that the number of days to pay suppliers does not exceed 30 days. SMEs will benefit from 30-day payment terms on a much broader range of public sector contracts, including those previously covered by public utilities and defence. The clause does not apply to concession contracts, utilities contracts awarded by a private utility or contracts awarded by a school.

Question put and agreed to.

Clause 67, as amended, accordingly ordered to stand part of the Bill.

Clause 68

Payments compliance notices

[Alex Burghart]

I beg to move amendment 53, in clause 68, page 47, line 18, at end insert “, or

(d) in relation to a concession contract.”

This amendment would exempt contracting authorities from the requirement to publish a payments compliance notice in relation to a concession contract.

[The Chair]

With this it will be convenient to discuss clause stand part.

[Alex Burghart]

Amendment 53 will exempt concession contracts, and payments made under them, from the scope of payments compliance notices. This minor technical amendment aligns with the scope of clause 67 on implied payment terms in public contracts, from which concession contracts are excluded, and brings consistency across the payment clauses. It will also save contracting authorities from additional bureaucracy, as they will no longer have to produce a payments compliance notice where concessions are the only payments they are making.

Clause 68 will require contracting authorities to publish a payments compliance notice—specified information detailing how quickly they have paid suppliers—every six months. We are strengthening payment legislation to ensure that the public sector is held to account on its own performance. We are aligning how the public and private sectors report on their payment performance, and we will report against the same set of metrics. By creating a central repository of Government payment information, we will increase transparency of public sector payment performance and make external scrutiny of that performance easier. The clause does not apply to private utilities, contracts awarded by schools or Northern Ireland contracting authorities.

[Florence Eshalomi]

The amendment will exclude concession contracts from the provisions of the clause. Given that the nature of these contracts is to give the right to exploit a developed resource, it makes sense to exclude them from this part of the Bill. We will not be voting against the amendment and we welcome the provisions in clause 68. Contracting authorities should report on their compliance with the 30-day payment term. As we have touched on previously, sunlight is the best disinfectant, and the clause shines a light on whether contracting authorities are complying with payment terms.

As I highlighted in the debate on clause 67, however, I have concerns as to whether this will lead to a ripple-down effect, although benefits may arise from suppliers feeling some level of scrutiny when they are responsible for paying subcontractors, many of which, as I mentioned, will be SMEs—the same SMEs that are currently struggling in the procurement system. I have touched on the value of those contracts and the fact that the big corporations continue to win the lion’s share of them, as shown by research from the British Chambers of Commerce. That research also found that direct spend is still quite a small proportion of the overall procurement budget.

I am disappointed that the Government did not see the sense of our amendment 110. I hope that will take action to ensure that suppliers are acting in the spirit of the clause.

[Alex Burghart]

We intend to issue guidance separately to contracting authorities, setting out how to include spot checks on the payment performance of supply chain members through terms and conditions. We do not think that needs to be done in legislation; it can be addressed through guidance. Furthermore, contracting authorities are often better placed to use civil remedies and can have a significant influence over suppliers, so they should hold suppliers to account and ensure that payment terms are passed down the supply chain to subcontractors, enforcing such terms through contractual remedies if necessary.

Amendment 53 agreed to.

Clause 68, as amended, ordered to stand part of the Bill.

Clause 69

Information about payments under public contracts

Question proposed, That the clause stand part of the Bill.

[Alex Burghart]

Clause 69 requires contracting authorities to publish specified information about any payment of more than £30,000 made by the authority under a public contract. That information must be published before the end of the period of 30 days beginning with the last day of the quarter in which the payment was made. The financial threshold and time limit for publication may be amended by regulations.

The clause does not apply to public contracts awarded by private utilities or schools, or to concession contracts. Its purpose is to bring transparency to the expenditure of public money, and to allow interested parties to ascertain the value that was specified in the tender, the value of the contract at the point of award, and how the contract spend is progressing. The Northern Ireland Executive have decided to include a derogation from this publication obligation.

[Florence Eshalomi]

As the Minister outlined, the clause relates to the publication of information on payments of over £30,000 by contracting authorities. Its impact will be heavily affected by the ultimate state of the online system, as specified in clause 93. It is frustrating that many aspects of the Bill are to be set out in secondary legislation: we will not know whether this is a sensible and proportionate measure until we know how the online system promised by the Government will work. However, we believe that this is an important provision of the Bill, and as such we do not intend to oppose it.

Question put and agreed to.

Clause 69 accordingly ordered to stand part of the Bill.

Clause 70

Assessment of contract performance

Question proposed, That the clause stand part of the Bill.

[Alex Burghart]

Clause 70 has two main functions. First, it requires contracting authorities that have set key performance indicators in their public contracts under clause 52 to assess performance against each KPI, and to publish the results at least once every 12 months. The exact nature of the information required in each case will be set out in regulations made under clause 90. The purpose of this provision is to bring greater transparency to the performance and management of public contracts.

Secondly, the clause requires contracting authorities to publish a notification in certain circumstances relating to breach of contract or poor performance by a supplier. The circumstances are equivalent to those that constitute the discretionary exclusion ground for breach of contract and poor performance in paragraph 13 of schedule 7. The purpose of the provision is to provide verifiable information for contracting authorities on suppliers that meet the exclusion ground for breach of contract or poor performance. Clause 70 does not apply to private utilities, and the subsections relating to poor performance do not apply to light-touch contracts.

[Florence Eshalomi]

As the Minister outlined, the clause relates to key performance indicators and lays out how they will be assessed in the system. Subsection (2) mandates an annual assessment of the key performance indicators and the publication of information in this area. Again, this subsection makes reference to clause 93 in terms of how information relating to the key performance indicators is to be published. It might be useful to consider what information should be part of that system.

There could be merit in having an obligation to publish information on performance workflows and the relationships between contracting authorities and suppliers. The obligation could mean that contracting public bodies must publish the following on a six-monthly basis in respect of service contracts: operational performance against contracts; changes to staff terms and conditions; financial performance and payments made to contractors; costs of client contract management; any financial penalties or service credits; and details of meetings between decision makers. They could also publish the contracts within three months of them being let.

Subsection (5) relates to information that must be published within 30 days where a contracting authority believes a supplier has breached a contract to the point of termination or remedy. It also covers instances where suppliers provide an unsatisfactory service following a proper opportunity to improve performance. The powers are important to ensure that the process is properly followed when a supplier is not delivering for the public. It is right for the supplier involved and for the public that the information is published. We therefore support the inclusion of the clause in the Bill.

Question put and agreed to.

Clause 70 accordingly ordered to stand part of the Bill.

Clause 71

Sub-contracting: directions

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clause 72 stand part.

[Alex Burghart]

Clause 71 covers subcontracting, which is an important part of the delivery of public contracts. It enables businesses to use specialist suppliers to increase their overall effectiveness and efficiency. It also encourages SMEs to participate in public sector procurement, which helps to encourage innovation and deliver value for money for the public. The clause applies when a contracting authority either requires or permits a supplier to subcontract, and also where that subcontractor has been relied on to pass conditions of participation. In such circumstances, a contracting authority may direct a supplier to enter into a legally binding agreement with the proposed subcontractor, failing which the contracting authority can refuse to enter into the public contract, require an alternative subcontractor, or terminate the contract if already commenced.

Clause 72 will ensure that the 30-day payment terms set out in clause 67 will apply throughout the public sector supply chain, regardless of whether they are written into the contract. That will ensure that businesses in the supply chain that substantially contribute to the performance of a public contract benefit from the prompt payment and the liquidity benefits it brings. Unlike the equivalent provisions in the Public Contracts Regulations 2015, clause 72 includes defence and public utility contracts, benefiting SMEs in the supply chain across a much broader range of public sector contracts. Those rules do not apply to utilities contracts awarded by a private utility, concession contracts and contracts awarded by a school.

[Florence Eshalomi]

Clauses 71 and 72 relate to the treatment of subcontractors in the system. We welcome the clauses as a step forward in the attempt to ensure the prompt payment of subcontractors. The Bill makes a slight alteration from the current system by making a 30-day payment an automatic term for subcontractors rather than requiring the contracting authority to include an obligation on its suppliers to flow down. We have spoken at great length about the issue of subcontractors being paid on time, and the fact that many smaller businesses rely on prompt payment. We do not see any issue with the clauses, which we are happy to support.

Question put and agreed to.

Clause 71 accordingly ordered to stand part of the Bill.

Clause 72 ordered to stand part of the Bill.

Clause 73

Modifying a public contract

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

That schedule 8 be the Eighth schedule to the Bill.

Government amendment 54.

Clauses 74 and 75 stand part.

Government amendments 55 to 58.

Clause 76 stand part.

[Alex Burghart]

I will take a deep breath. Clause 73 sets out when a contracting authority may modify a public contract or when a contract, as a result of a modification, will become a public contract—that is to say, a convertible contract. It provides that a contract may be modified in one of the following circumstances: where the modification falls within one of the grounds permitted under schedule 8; where the modification itself is not a “substantial modification”; or where the modification itself is below a threshold that makes it de minimis in effect. Certain contracts, such as below-threshold contracts and light-touch contracts, are exempt from the constraints on modifications.

A “substantial” modification in this context is one that increases or decreases the duration of the contract by more than 10%, or materially changes the supply of the deliverables under the contract, or makes the contract materially more economically beneficial to the supplier.

Clause 73(4) clearly defines what constitutes a “below-threshold modification”. Those low-value modifications, to be properly considered as such, must not materially change the contract in either value or scope. A cap is placed on successive modifications permitted under this ground, as the aggregated value of below-threshold modifications made during the lifetime of a contract should be less than the Government procurement agreement threshold amount for the type of contract. Overall, these provisions give contracting authorities more usable grounds to make modifications that are not sufficiently material to justify requiring contracting authorities to run a new competition.

Schedule 8 sets out seven grounds, in addition to the two provided in clause 73, on which contract modifications are permitted. Four of those grounds are based on policy retained from existing legislation, as consultation established that contracting authorities wished to retain those commonly relied on “safe harbours”. Those four grounds are where the modification is provided for in the contract; where the modification has arisen due to unforeseeable circumstances; where the modification is for additional goods, services or works in specific limited circumstances; and where the modification is to effect a transfer of the contract following a corporate restructuring. I would like to be clear that that concise ground on corporate restructuring is intended to cover all the circumstances, such as insolvency, detailed in the Public Contracts Regulations 2015.

We have also introduced three new grounds, to provide for greater flexibility that stakeholders have indicated is needed, and to give greater legal certainty to contracting authorities than the existing grounds currently afford. The new ground of

“Urgency and the protection of life, etc”

will enable contracting authorities to act swiftly and efficiently in extraordinary circumstances and modify existing contracts to adapt to those urgent requirements.

The new ground permitting modifications on materialisation of a known risk will give contracting authorities legal certainty that they can modify contracts to adapt to a risk that, although identified as such at the outset, could not be addressed in the initial contract document in clear and unequivocal terms. The risk must have materialised through no fault of the contracting authority or supplier and must have been identified in the tender or transparency notice.

For example, if, due to quickly emerging cyber-threats, a requirement for a new software system to hold personal information needs to be adapted in order for it to operate safely and adequately protect that information, the contracting authority can adjust the requirement accordingly, provided that the risk of the new cyber-threat was identified up front in the required notices.

--- Later in debate ---

[Florence Eshalomi]

I thank the Minister for the points he has outlined. Amendment 54 is largely uncontroversial, removing an unnecessary provision from clause 74.

Amendments 55 to 58, taken together, would reduce the burdens on contracting authorities to publish contract modifications, requiring them to do so only where they are required to under clause 74, which does not cover changes that only change the value or length of the contract to a relatively small degree. Without the amendments, even minuscule contract amendments would be required to be published. Although these measures cover the larger contracts affected by the Bill—in particular, those valued over £5 million—it would be a disproportionate burden on contracting authorities to be required to publish every change to a contract. We understand the rationale for the amendments and we do not intend to oppose them.

On clauses 73 to 76 more widely, we understand that it is necessary, on occasion, to alter public contracts. It is important that the circumstances are justified, and we are pleased to see schedule 8 set out proportionate reasons to modify contracts. However, it is important to ensure that contracts are drawn up in a way that does not open this part of the Bill up to abuse.

As noted in paragraph 1 of schedule 8, modifications can be made if they are agreed in the contract and do not

“change the overall nature of the contract.”

However, there must not be a free-for-all. Contracting authorities must draw up contracts that provide the right flexibility for change. We should not expect service levels to vary massively because contracts are written in a way that would allow modification under this part of the Bill. For example, our engagement with stakeholders has revealed concerns that modifications are seen as an alternative to remedy and clawback, and that expensive legal fees put authorities off using clawback clauses, with those authorities instead opting to renegotiate terms with suppliers. That should not be the case.

We do not believe the best way to tackle that is necessarily through the Bill, but it is an important point. In an answer to a parliamentary question dated 20 December 2022, the Government admitted that money was wasted and that only £18 million had been clawed back from PPE contracts. That was only highlighted after the National Audit Office revealed that the Government had effectively written off quite a lot of that money, and auditors had rebuked the Department of Health and Social Care for its management of taxpayers’ cash during the pandemic.

It is a shame that the Government are still locked in legal battles with companies that failed to deliver on their contractual obligations. The public expect their money to be clawed back when contracts are broken, but if even the Government find it difficult to claw back money from contracts, it is little wonder that smaller contracting authorities apparently rely on contract alterations to seek remedy. The result is that suppliers that have not delivered for the public keep winning contracts to deliver services.

I understand why people may look at a supplier and say, “This supplier has failed to deliver services to an acceptable standard. Why are they still delivering our services? Why has this supplier not had this contract taken off them? Why have we not got our money back?” They are all valid questions. I hope that the Minister will outline his understanding of the use of contract modification as a substitute for clawbacks, and what steps he is taking to ensure we get our money back from suppliers.

We feel it is right that contract changes are published. Clauses 74 and 76 allow for the publication of a notice of change and, for larger contracts, publication of the changes and the altered contract. Those measures are proportional to the provisions of clause 53, relating to publication when a contract starts.

Clause 74 refers to the terms of clause 93. We agree with the introduction of a new online programme, but it is disappointing that we do not have the detail of what will be expected as part of that system. We should not leave future Governments with their hands tied, unable to go beyond what we can achieve today, but we do think that the Government could show some base level of ambition and outline the basic level of transparency that we think the system should allow. I hope the Minister will touch, even just briefly, on how the system will work and what information will be expected under clause 74, via the provisions of clause 93.

[Alex Burghart]

To the hon. Lady’s first point, we all accept that, in exceptional circumstances, contracting authorities may have to move very quickly to procure essential goods, services and works with minimal delay. Launching a new procurement procedure can take time. When time is of the essence and when a supplier has proven in-contract its ability to deliver to time, cost and the expected standard, it makes sense to take the modification route. To be clear, these are areas where the urgency and protection-of-life grounds must exist in the first place.

With the new transparency rules in clauses 74 and 76, taxpayers will be able to see exactly where we propose to spend their money, including where there is additional expenditure through use of modification grounds. The transparency rules will require contract change notices to be published in circumstances where the urgency ground is used and, where such modifications are made to contracts over the £5 million threshold, the modifications themselves will need to be published.

On the hon. Member for Vauxhall’s general point about what happened during the pandemic, she will have heard me say on a number of occasions that the Department of Health and Social Care, despite the circumstances in which it was working, had robust contracts in place. That means it is capable now, where it was given defective goods, to enter mediation. If that proves insufficient, it will be able to enter into litigation. The whole purpose of the exercise in which we are currently engaged—at length—is to ensure that we have better procurement processes in this country. That is what the Bill is going to deliver.

Question put and agreed to.

Clause 73 accordingly ordered to stand part of the Bill.

Schedule 8 agreed to.

Clause 74

Contract change notices

Amendment made: 54, in clause 74, page 51, line 5, leave out paragraph (c).—(Alex Burghart.)

This amendment would remove unnecessary provision, as light touch contracts are excluded from the whole clause under subsection (6)(b).

Clause 74, as amended, ordered to stand part of the Bill.

Clause 75 ordered to stand part of the Bill.

Clause 76

Publication of modifications

Amendments made: 55, in clause 76, page 51, line 40, after “modification” insert “—

(a) in respect of which the contracting authority is required to publish a contract change notice under section 74, and”.

This amendment would limit the requirement to publish a copy of a contract as modified or a modification to those modifications in respect of which the contracting authority was required to publish a contract change notice.

Amendment 56, in clause 76, page 51, line 43, leave out paragraphs (a) to (c).

This amendment is consequential on Amendment 55.

Amendment 57, in clause 76, page 52, line 3, leave out

“or a transferred Northern Ireland authority”.

This amendment is consequential on Amendment 55.

Amendment 58, in clause 76, page 52, line 7, leave out

“or a transferred Northern Ireland procurement arrangement”.—(Alex Burghart.)

This amendment is consequential on Amendment 55.

Clause 76, as amended, ordered to stand part of the Bill.

Clause 77

Implied right to terminate public contracts

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clauses 78 and 79 stand part.

[Alex Burghart]

Clause 77 sets out that it is an implied term of public contracts that a contracting authority can terminate a contract if one of a number of termination grounds apply. These are where a contracting authority considers that the contract was awarded or modified in breach of the Bill and regulations made under it, where a supplier has become an excluded or excludable supplier, or where a subcontractor is an excluded or excludable supplier.

These last two grounds considerably expand the implied right to terminate on exclusion grounds and are a good example of how we are tightening the rules on poor suppliers. Contracting authorities must still give suppliers that subcontract to an excluded or excludable supplier the opportunity to cease their arrangements. Contracting authorities must also communicate any intention to terminate the contract on these grounds before proceeding to terminate.

Clause 78 requires contracting authorities to obtain approval from a Minister before terminating a contract in reliance on the discretionary exclusion ground for suppliers that pose a threat to national security. Subsection (1) states that this requirement applies when contracting authorities are seeking to rely on the implied termination right in clause 77 where a supplier or subcontractor is excludable in respect of the national security exclusion ground. Subsection (2) says that this requirement applies to all contracting authorities other than a Minister, a Department or a corporate officer of the House of Commons or House of Lords.

The clause is essential to ensure that contract terminations on the basis of national security are not made without ministerial consideration of the risk posed by the supplier and the impact of the decision. The requirement to seek ministerial approval will allow for the views of those tasked with protecting national security, including the security services, to be taken into account.

Clause 79 sets out the mandatory transparency requirement that all contracting authorities must publish a contract termination notice on termination of all public contracts, with the exception of private utilities contracts and user choice contracts that have been directly awarded. It specifies the time period by which it must be published, which is 30 days after a public contract has terminated. It also sets out that contract termination notices will contain information that will be specified in the regulations made under clause 93.

Clause 79(3) makes it clear that a reference to termination includes: discharge, expiry, termination by a party, rescission, or set aside by court order, whether or not under part 9 remedies. That list does not exclude other references to termination, and a contract termination notice should be issued at the conclusion of a contract, however that contract has ended.

[Florence Eshalomi]

Clauses 77 to 79 relate to provisions that allow for the termination of contracts in specific circumstances. The implied circumstances include the contract being awarded or modified in a material way in opposition to this Bill, or a supplier becoming an excluded or excludable supplier. They also provide for termination when a supplier is subcontracting all or part of the contract to an excluded or excludable supplier.

The Opposition understand and support the need for these provisions, but we have some concerns about the meaning of the clauses. When a contractor becomes an excluded supplier, will the contract be terminated automatically? It would seem strange that, although a contract cannot be awarded to a supplier under those terms, an excluded supplier is not automatically stripped of a contract when they become excluded.

Some of the provisions included under the excluded schedule are extremely severe. They include human trafficking offences, slavery offences, corporate homicide and even terrorism. We must make it clear that, when suppliers are convicted of such crimes, they must not provide contracts for public services. I hope we all agree on that. Does the clause allow for contracts with excluded suppliers to be automatically terminated, or is that at the discretion of the contracting authority? That is a really important point, and I hope the Minister will be able to clarify it. The public would not expect a supplier that has been convicted of terrorism to still be carrying out public contracts, even if the contracting authority decides it is right.

We also have concerns about how discretionary exclusion grounds are treated in this part of the Bill. As I have previously said, we want consistency in the Bill on when these grounds are applied. We do not believe that it makes sense for a company to have its contract terminated by one contracting authority for, say, environmental misconduct, but in the same breath keep a similar contract with similar risk with another contracting authority based simply on the decision of the authority. A lot of that is inconsistent and confusing, which has been highlighted, and it means suppliers that fall foul of discretionary exclusion grounds to the degree that a contract can be stripped from them may still be providing services to the public in other areas. The Minister has highlighted the need for discretion, which we understand, but surely there should be some level of consistency.

I also raise the inconsistency between national security in clause 78 and how the Minister laid it out previously. We do not wish to vote against clause 78, and we believe that it is the right way to carry out public procurement when considering national security. As the name suggests, national security is a national issue. However, during the Minister’s remarks on our amendments 15 to 19, he said:

“Amendments 15 to 19 seek to make exclusion on national security grounds mandatory, rather than discretionary. Any risk to national security should of course be taken very seriously indeed, but it is right that we leave some scope for nuance and flexibility in the application of the exclusion ground. Suppliers may pose a risk in some contexts, but not in others.”

The Minister went on to say:

“It is important to note that contracting authorities must consider all exclusion grounds, mandatory and discretionary, against every supplier in each procurement.”

He also said:

“There would be a balance of risks. Not all security threats are proven. Of course, it is up to the authority to assess the concerns”.––[Official Report, Procurement Public Bill Committee, 2 February 2023; c. 113.]

Based on what the Minister said in response to our amendments, there is some inconsistency in this approach. We need verification to identify a national security threat on a national scale and to disregard a contract on that basis, but to say that awarding or terminating a contract for a national security threat is at the discretion of authorities is a little contradictory.

For example, let us take what happens when a contracting authority identifies a threat. If the authority decides not to terminate the contract regardless, the contract is awarded with no follow-up from the Government and no check that it is a threat. If the authority decides to terminate the contract, it needs to go through a check with the Minister and confirm whether it is a threat. We think that is the right course of action, but why should the decision effectively be taken at different levels? Surely there should be an obligation to check with the Government regardless of whether the contract is terminated or not. At the very least, the Government can advise on the decision not to terminate the contract based on the threat.

As I and those who submitted evidence have highlighted, we can see procurement departments in many organisations being overstretched. We cannot expect those very same contracting authorities we want to come forward to bid for public contracts to act as MI5 or national security experts.

[The Chair]

I call the Minister, mindful that there will be a vote in the House at 4.12 pm.

[Alex Burghart]

I will try to contain my remarks to the next few minutes. Before I get to the specifics, I should for the sake of posterity record that, by working so hard today, hon. Members have reached the end of the selection list. Had more groupings been available, they would no doubt have wished to go further—[Interruption.] Cries of “More, more!” were heard from the Opposition Benches.

I will return to some of our previous conversations. As I said earlier to the hon. Member for Vauxhall, there will be times when a supplier may have made errors and got itself into trouble. It may be the case that there are times when a company has suppliers over which there are national security concerns, but they supply goods that cannot be found anywhere else and do not in themselves present a risk to national security. That is the role of the difference. The Division bell is ringing, but I am happy to pick up on this when we meet again on Thursday.

Question put and agreed to.

Clause 77 accordingly ordered to stand part of the Bill.

Clauses 78 and 79 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Julie Marson.)

Procurement Bill [ Lords ] (Seventh sitting)

Alex Burghart Excerpts

Committee stage
Thursday 9th February 2023 Public Bill Committees

[Florence Eshalomi]

It is a pleasure to serve under your chairship again, Mr Mundell.

Clauses 80 to 82 concern cases where a conflict of interest may arise during the procurement process. In particular, the clauses place obligations on contracting authorities to identify and mitigate against conflicts of interests where they may arise. The clauses are important, and it is correct, alongside the principle of non-discrimination, to ensure that suppliers that may be able to unduly influence the decisions of contracting authorities are excluded from the procurement process.

It is critical that taxpayers’ money is spent in the right way. We cannot and must not have a repeat of the back-room deals that we saw during the covid pandemic. The public expect their money to be spent in an open and transparent way, and they expect the value for money that comes with openness and transparency.

We know what happens when that is not the case. I have referred to this figure before, but it is important to keep stating it: the Government have written off £10 billion of public money spent on personal protective equipment that was unusable, unsellable, overpriced or undelivered. With £770,000 a day being spent to store unused gloves, goggles and gowns, that is not acceptable. The companies that got into the VIP lane were 10 times more likely to win a contract, and Ministers have now admitted that many did not go through the so-called eight-stage process of due diligence.

We know, therefore, that much more needs to be done to stand steadfast against conflicts of interests in procurements. We believe that clauses 80 to 82 may offer a step forward, but we also think that we could go even further to capture the wide range of influence on procurement decisions that may give rise to conflicts of interest.

Our amendments 116 and 117, taken together, would achieve that. They were suggested by Spotlight on Corruption in its written evidence to the Committee. We feel that they strike the right balance to increase scrutiny in the procurement system. In justifying the amendments, Spotlight on Corruption stated:

“As the Mone affair and the VIP lane as well as other COVID procurement scandals have shown, indirect influence over procurement decisions pose a real risk to public perceptions about the fairness and integrity of procurement. The fact that a minister, special adviser, or politician referred a company for emergency covid procurement appears to have been at least entertained as part of the decision-making process by procurement officials in awarding contracts. While this was an emergency procurement context, it has exposed the vulnerabilities in the UK procurement regime and the potential for those in political office to influence procurement decisions.

Sir Nigel Boardman’s reviews specifically recommended that conflicts of interest in procurement should be identified in relation to a broad range of actors, including: civil servants, special advisers, contractors, consultants and political appointees. The ‘VIP lane’, as well as the Owen Paterson affair, show that members of parliament, who may have private interests, can also seek to influence government procurement decisions in favour of those interests.

As it is not specified on the face of the Bill what the term ‘influences’ may include, it is not clear whether the term will be interpreted narrowly or more widely by contracting authorities. To ensure that it is interpreted widely, in our view, the Bill should contain specific language to reflect indirect influence (which might include lobbying or financial interests), and the wide range of people who may exert such influence.”

The Opposition agree with Spotlight on Corruption’s arguments and believe that it makes a strong case for the inclusion of such language in the Bill.

If we are asking the public to trust us with their money, we must never let the VIP lane scandal happen again. I hope the Minister will agree that the amendments would strengthen our defence against undue influence, and I urge him to support them.

[The Parliamentary Secretary, Cabinet Office (Alex Burghart)]

It is a pleasure to serve under your chair-personship again, Mr Mundell. It is good to be back for the fourth day of deliberation in Committee.

Clause 80 is clear that a contracting authority must take all reasonable steps to identify conflicts or potential conflicts of interest on the part of those acting in relation to a procurement. Amendment 116 is impractically broad. The Bill already provides safeguards in clause 82(4), which could lead to the contracting authority taking steps in relation to a person with an indirect influence on a procurement, where the contracting authority believes that such a circumstance would be likely to cause a reasonable person to believe there to be a conflict.

Extending conflicts of interest to be identified in respect of any individual with only an indirect influence over the decisions of contracting authorities, as the amendment seeks to do, would go too far. It would add unnecessary administrative burdens on contracting authorities and potentially make it impossible for them to comply with the requirements of the Bill. It is not reasonable for a procurement officer to be expected to identify all individuals who may indirectly influence a procurement decision, let alone their potential conflicts of interest, in respect of every supplier tendering for every procurement. For example, it could lead to a school, when undertaking any public procurement, having to identify and consider the interests of all senior civil servants and Ministers in the Department for Education and the Treasury. That would be neither practical nor desirable.

Amendment 117 would add a list of certain individuals for contracting authorities to consider when identifying conflicts of interest. Such a list of individuals is better kept in guidance rather than legislation. All the persons listed in the amendment, where they have influence in respect of the relevant procurement decision, will already be caught by the current provision but may not be relevant in every single procurement by every single contracting authority. We therefore respectfully request that the amendments be withdrawn.

Clause 80 sets out the obligations on a contracting authority to take all reasonable steps to identify and keep under review potential or actual conflicts of interest. It is followed by clause 81, on duties to mitigate, and clause 82, on conflicts assessments. When conflicts of interest are not properly identified and mitigated, there can be far-reaching consequences, which can lead to accusations of fraud, bribery and corruption, legal challenges and the undermining of public confidence in the integrity of our public institutions.

Clause 80 details the individuals in respect of whom conflicts, or potential conflicts, should be identified. That includes people acting for, or on behalf of, the contracting authority in relation to the procurement; a person with influence on the decision making; and a Minister acting in relation to the procurement. The clause also defines what constitutes an interest, which can be a personal, professional or financial interest, either direct or indirect.

Clause 81 sets out obligations on a contracting authority to take all reasonable steps to mitigate conflicts of interest. As a rule, it is important that we treat all suppliers the same in our procurements. That is critical for us to ensure fair and open competition and deliver the best value for money. At the same time, a conflict of interest relating to a supplier should not automatically lead to their exclusion. We must therefore ensure that where conflicts of interest are identified, contracting authorities can first attempt to put mitigations in place to avoid a given supplier having an unfair advantage or disadvantage. A contracting authority must take all reasonable steps to do so and may require a supplier to take reasonable steps too. However, to ensure open competition and genuine fairness in the procurement, if a conflict of interest does lead to an unfair advantage that cannot be avoided, or the supplier refuses to take certain steps to avoid it, that supplier must be excluded.

Clause 82 places specific duties on contracting authorities in relation to conflicts assessments. In large part, those duties are to ensure compliance with clauses 80 and 81. A conflicts assessment is a document that includes the details of both the conflicts of interest identified and any steps taken to mitigate them. The structure or format of such a document will remain within the discretion of the contracting authority, and is likely to depend on the procurement. A contracting authority must prepare a conflicts assessment at the start of the procurement and keep it under review, revising it where necessary. When publishing a relevant procurement notice, the authority must confirm that those actions have been undertaken. This is a new duty on contracting authorities that strengthens the existing requirements relating to conflicts.

It is important to clarify that there is no duty to publish the conflicts assessment; rather, contracting authorities must publish confirmation that the assessment has been prepared or revised. Conflicts of interest can adversely impact procurements at any point of the commercial lifecycle, and the Committee will note that the definition of “relevant notice” in clause 82(8), which specifies when there should be confirmation that the conflicts assessment has been revised, reflects that fact.

I respectfully request that the amendment be withdrawn, and commend the clauses to the Committee.

[Florence Eshalomi]

I understand the Minister’s concern about additional bureaucracy, but we should aim to make sure that there is no interpretation regarding undue influence. There is a view that the Bill should contain specific language to reflect indirect influence. I hope the Minister agrees that the notion of transparency and making sure that no perceived conflicts arise should be fully addressed in order to ensure that we restore public trust, especially as it relates to Government money—taxpayers’ money—and large contracts. We need to stamp out some of the concerns that many people rightly highlighted about what happened during the covid-19 pandemic. Yes, there were some cases in which emergency contracts had to be procured, but as I have already mentioned, on numerous occasions, the proper procedure was not followed. I hope the Minister agrees that the Bill should contain specific language reflecting what is termed indirect influence.

Question put, That the amendment be made.

--- Later in debate ---

[The Chair]

With this it will be convenient to discuss clauses 84 to 87 stand part.

[Alex Burghart]

The rules on contracts that are valued below the thresholds set out in schedule 1 broadly represent a continuation of the position under the Public Contracts Regulations 2015 and have four main functions. They apply some basic procurement standards on transparency; they continue the ban on burdensome pre-qualification stages; they ensure that suppliers get paid promptly; and they ensure that small and medium-sized businesses are considered. These rules are justifiably simpler and less onerous for contracting authorities and suppliers, given the low value of the contracts concerned. Taken together with the new duty to have regard to SMEs in clause 85, the rules will help to make Government procurement more accessible to SMEs and voluntary organisations, charities or social enterprises.

--- Later in debate ---

[Florence Eshalomi]

I thank the Minister for outlining the clauses, which, as he highlighted, deal with below-threshold contracts. While such contracts do not meet the threshold for inclusion in many parts of the Bill, they will still need to follow some bits of regulation in how they are processed. In particular, a contract details notice must be published for contracts above £12,000 or £30,000 —known as notifiable below-threshold contracts—after they are entered into. Below-threshold contracts must follow the procedures relating to the 30-day payment rules.

The clauses are almost identical to current regulations, and we support their inclusion in the Bill. We feel that the extra scrutiny is welcome for groups such as SMEs, which may find that these contracts are the right size for their enterprise to deal with. It is important to strike the right balance. In general, we are happy with the clauses and will not oppose them, but I would ask the Minister what protocol will be followed when the threshold figures are altered.

[Alex Burghart]

It will be in secondary legislation.

Question put and agreed to.

Clause 83 accordingly ordered to stand part of the Bill.

Clause 84 ordered to stand part of the Bill.

Clause 85

Regulated below-threshold contracts: duty to consider small and medium-sized enterprises

Amendment proposed: 2, in clause 85, page 57, line 27, after “enterprises” insert “and co-operative societies”.—(Florence Eshalomi.)

See explanatory statement to Amendment 1.

Question put, That the amendment be made.

--- Later in debate ---

[The Chair]

With this it will be convenient to discuss the following:

That schedule 9 be the Ninth schedule to the Bill.

Clause 89 stand part.

Government amendment 59.

Amendment 102, in clause 90, page 60, line 32, at end insert—

“(1A) A Minister of the Crown acting under subsection (1) must acquire the consent of Scottish Ministers.”

Government amendment 60.

Clause 90 stand part.

Government amendments 69, 77, 79 and 81 to 83.

Government new clause 11—Trade disputes.

[Alex Burghart]

Part 7 of the Bill is concerned with the implementation of the United Kingdom’s international obligations. The UK is currently party to 24 international agreements that contain procurement obligations, with each listed in schedule 9 to the Bill. They include trade agreements signed before our exit from the EU, such as the World Trade Organisation Government procurement agreement, and the recently signed Australia and New Zealand trade agreements.

Clause 88 uses the term “treaty state suppliers” to identify suppliers from countries that are entitled to benefit from one of the international agreements listed in schedule 9. The clause ensures that treaty state suppliers have the right to no less favourable treatment than domestic suppliers under the UK procurement regime to the extent covered by their relevant agreement, including the right to seek remedies. As the UK negotiates new international agreements or is required to amend existing agreements, delegated powers under subsection (3) will allow schedule 9 to be revised accordingly. In this way, schedule 9 will continue to reflect our updated international obligations and ensure that the UK remains compliant.

It is important for the Committee to understand that the delegated power in subsection (3) does not allow for substantive changes to the rules set out in the Bill regime, even where required by an international agreement. This is partly the reason why separate primary legislation is required to implement the UK-Australia free trade agreement. It is therefore not capable of being used to implement rule changes that might affect matters such as food standards, environmental standards or control over the health service. For that, the Government would need to return to Parliament with further primary legislation. Schedule 9 to the Bill is a list of international agreements that contain substantive procurement obligations and to which the UK is party.

Clause 89 sets out that a UK contracting authority may not discriminate against a treaty state supplier; that is to say that UK procuring entities may not treat the goods, services and works of treaty state suppliers less favourably than those of UK suppliers. Clause 89 is imperative in order to meet our international obligations. The principle of non-discrimination is firmly embedded in the WTO’s Government procurement agreement and other international agreements to which we are party. Being party to these agreements will ensure that UK goods, services, works and suppliers also receive the same fair treatment from our trading partners. In doing so, the UK will continue to enjoy the benefits of existing and future trade agreements, including guaranteed access to procurement opportunities in some of the world’s largest economies.

The power set out in clause 90 allows regulations to be made in relation to devolved procurement in Scotland to ensure that treaty suppliers are not discriminated against. The power is to be exercisable concurrently by a Minister of the Crown or Scottish Ministers, meaning that in the course of implementing international obligations under the Bill, a Minister of the Crown could also implement obligations for the whole of Scotland, in respect of both reserved and devolved procurement. This recognises both that the implementation and observation of international obligations is a devolved matter, but that the UK Government are ultimately responsible for compliance with our international obligations.

Amendments 59 and 60 seek to address a concern raised by the Scottish Government that the power in clause 90 is broader than is necessary, and in particular broader than the equivalent power that allows the updating of schedule 9 to the Bill to reflect new free trade agreements.

Although I can assure the House that it is not the Government’s intention to use the powers in clause 90 to interfere with Scottish procurement rules, we have listened and added a number of factors that would limit the exercise of the power. These amendments will ensure that either a Minister of the Crown or Scottish Ministers would only be able to make provision that is equivalent to provision in part 7 and only when it is necessary in order to ratify or comply with an international agreement, such as by adding to or amending the list of international agreements in Scottish procurement legislation. It could not be used to amend Scottish procurement rules substantively. I thank colleagues in Scotland for working constructively on this point.

New clause 11 and the consequential amendments 69, 77, 79, 81, 82 and 83 are needed to give the UK the ability to take necessary retaliatory or compensatory action as a result of a procurement-related dispute under the World Trade Organisation’s Government procurement agreement, or with a country with which we have a free trade agreement on procurement.

Under the UK’s trade agreements, if a country does not comply with its international public procurement obligations, we must be able to implement practical retaliatory measures; otherwise, we may not receive the full benefits of the commitments under these agreements. These amendments would give the UK a power to amend its domestic procurement legislation to take such action, for example to remove market access to particular procurement markets for suppliers from a trading partner that is in breach. Similarly, if the UK is in breach, it may need to implement measures to bring itself back into line.

This power is clearly limited in scope to procurement-related disputes and can only be used to make provision relating to procurement. The power cannot be used to address disputes relating to other areas of the UK’s trade agreements. It will also be subject to the affirmative procedure, so that there is a sufficient level of scrutiny in Parliament when it is to be used.

Without these amendments, the UK would be at a disadvantage among its trading partners, because it would not be able to take retaliatory action to incentivise other countries to comply with their procurement commitments and, in the absence of the necessary domestic legislative mechanism to compensate its partners in case of non-compliance, the UK would not be viewed as a trusted international partner.

[Chris Evans (Islwyn) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Mr Mundell, on what is the fourth day of our deliberations in this Committee.

Mr Mundell, you, my hon. Friend the Member for Merthyr Tydfil and Rhymney, the hon. Member for Aberdeen North and I are all members of the Celtic fringe, and we have all been accused in the past, somewhat unfairly, of speaking too fast. However, the Minister put us to shame just now, so I wonder whether he has Scottish or Welsh roots somewhere. [Laughter.]

As the Minister set out, part 7 of the Bill, which includes clauses 88, 89 and 90, sets out the implementation of international obligations in relation to procurement. These clauses have a strong theme of ensuring that no discrimination takes place between contracting authorities and treaty state suppliers, which are set out in schedule 9 to the Bill. Clause 90 also reaffirms this for procurements made by devolved Scottish authorities.

What is important about this part is our commitment to meeting our international obligations. I know from my role as a shadow Defence Minister how important it is to be an active member of the international community. It is important not only for the UK’s standing in the world; I have also found that when we meet these standards, we are also doing the best for this country here at home.

I think that we were all deeply moved yesterday by President Zelensky’s speech in Parliament. The war in Ukraine is a prime example of how important it is to meet our international obligations. By donating weaponry to Ukraine, we are aiding a member of our international community in their fight against an illegal invasion. However, if we are to continue to support the international community, we need to ensure that our procurement system can keep up.

As it stands, we will have a gap in our defence capabilities. In March 2021, the Defence Committee concluded that the Army would be “hopelessly under-equipped” in “obsolete armoured vehicles” and would be “very heavily outgunned” if it was called to fight an adversary, such as Russia, in eastern Europe in the next few years.

The war in Ukraine has shown us how dangerously close we are to this reality. We need to ensure that we are capable of defending ourselves first, so that we can then help others in need. I believe that a commitment to buy, sell and make more in Britain within our procurement system would help us to achieve that. Now, more than ever, we have to ensure we continue our commitment to a fairer world. I believe the way we conduct our procurement has a huge role to play in that.

--- Later in debate ---

[Kirsty Blackman]

As I mentioned in previous speeches, we are taking decisions here for the entirety of the UK. Like it or not, I have been elected in the same way as the hon. Member has, as a UK member of Parliament. We therefore have the right in this place to take decisions on procurement in England and procurement in Wales. We do not have the right to take decisions on procurement across the UK, given the agreement that the implementation of procurement and how it works in Scotland is devolved.

In fact, this Bill does not confer any rights on Members of Parliament to make decisions for the people of Scotland. It confers the power on Ministers to make that decision, which is very different from conferring it on Parliament. I have spoken before about the Executive power creep of recent years, which continues to give more power to the Executive and less to parliamentarians and MPs in this place. It is therefore important that the Scottish Parliament gets to take these decisions. I do not think the UK Government should be allowed to override the devolution settlement whenever they feel it convenient to do so, as we saw recently when they used section 35 to stop legislation put through the Scottish Parliament on a cross-party basis.

Again, the Bill is a further overreach of the UK Government’s powers. We are not suggesting for a second that the UK does not have the right to sign up to international agreements. It absolutely does, but we have the right in Scotland, as part of the devolution settlement, to implement those rules in devolved areas. In that regard, I would like to push amendment 102 to a vote. I am not convinced that I will get terribly much support, but I will do my best anyway. Hopefully the Minister will move Government amendment 59, which is a step forward, as I have said, and I hope he will also agree to the inclusion of our amendment.

[Alex Burghart]

To address the most pressing issue in this group, I must confess to having a Celtic heritage. Indeed, my grandfather was from south Wales, and his grandfather was born in the workhouse, not terribly far from the constituency of the hon. Member for Islwyn, so he has found me out.

[Chris Evans]

We are related in some way.

[Alex Burghart]

One family, one Wales.

I am pleased to hear the hon. Gentleman support NATO and the Government’s actions with regard to our allies in Ukraine. He will know that we have a trade agreement in place with Ukraine, and yesterday was a sign of the ongoing, very close relationships between President Zelensky’s Government and our own, and the necessary partnership in the face of tyranny.

Let me turn to amendment 102, in the name of the hon. Member for Aberdeen North. I must assure her at the outset that this is a power that the UK Government would only need in extremis. I completely understand that Holyrood and the Scottish Government—certainly under the SNP, I am sure—would always want to implement our international agreements. But what if another party that was not so upstanding was one day to be in power? What if another group of nationalists was to seize control from the SNP and wished to hold up our international agreements? There are other nationalist options—the former head of the hon. Lady’s party has formed a renegade bunch running under the name Alba—and perhaps they would not be as reasonable the hon. Lady’s party. Perhaps they would wish to prevent us from implementing our international trade agreements. That would not only prevent us from delivering the benefit of those agreements to the whole of the United Kingdom, but completely ruin our chances of signing future trade agreements. We understand her objections, but we believe that it is essential to ensure that in all circumstances the UK Government can make good on the promises that they sign with partners.

[Kirsty Blackman]

The Minister is suggesting that clause 90 will be used only in extremis. Do I read that correctly, or is that not his suggestion?

[Alex Burghart]

Certainly, if there was an international agreement and the Scottish Government wished to legislate or regulate to implement it, that would be our preference. As I say, it is important that we put safeguards in the Bill. On the hon. Lady’s point about burdens being placed on officials by having to keep up with procurement regulations in Scotland, I can assure her that my officials welcome the burden, and that their understanding of such regulations is so strong that they would not notice the extra weight at all. I hope that she will not move her amendment.

Question put and agreed to.

Clause 88 accordingly ordered to stand part of the Bill.

Schedule 9 agreed to.

Clause 89 ordered to stand part of the Bill.

Clause 90

Treaty state suppliers: non-discrimination in Scotland

Amendment made: 59, in clause 90, page 60, line 32, at end insert—

“(1A) Regulations under subsection (1) may only include provision that is equivalent to provision in—

(a) subsection (1), (2), (5) or (6) of section 88 (treaty state suppliers),

(b) section 89 (treaty state suppliers: non-discrimination), or

(c) Schedule 9 (specified international agreements).

(1B) Regulations under subsection (1) may not be made unless a Minister of the Crown considers, or the Scottish Ministers consider, that the regulations are necessary in order to ratify or comply with an international agreement to which the United Kingdom is a signatory.

(1C) In subsection (1B), the reference to being a signatory to an international agreement includes a reference to having—

(a) exchanged instruments, where the exchange constitutes the agreement;

(b) acceded to the agreement.”—(Alex Burghart.)

This amendment would mean that a Minister of the Crown or Scottish Ministers, in making regulations under clause 90, may only make provision equivalent to provision in Part 7 and if the Minister considers, or Scottish Ministers, consider it necessary in order to ratify or comply with an international agreement.

Amendment proposed: 102, in clause 90, page 60, line 32, at end insert—

“(1A) A Minister of the Crown acting under subsection (1) must acquire the consent of Scottish Ministers.”—(Kirsty Blackman.)

Question put, That the amendment be made.

--- Later in debate ---

Question proposed, That the clause stand part of the Bill.

[Alex Burghart]

A contracting authority is required to publish a pipeline notice if it reasonably expects that, in the coming financial year, it will pay more than £100 million under relevant contracts. The pipeline notice in clause 91 is designed to set out details of public contracts that a contracting authority proposes to enter into in the forthcoming 18 months with an estimated value of more than £2 million. It provides potential suppliers with advance notice of upcoming opportunities and allows them to plan for future work. The notice must be published within 56 days of the first day of the relevant financial year. Private utilities and transferred Northern Irish contracting authorities are not required to publish pipeline notices.

[Florence Eshalomi]

The clause introduces pipeline notices, which mandate large contracting authorities to publish a pipeline of contracts worth over £2 million every year for the upcoming year. We question why it is £2 million when the Government have altered the other thresholds of that value to £5 million elsewhere in the Bill. Will the Minister clarify that for us? However, we do not oppose the lower number or the pipeline notices in general, so we are happy for the clause to stand part of the Bill.

[Alex Burghart]

The threshold of £2 million was set following the determination that that was the best balance of realising the benefits of transparency against the efforts made by contracting authorities in providing the information.

Question put and agreed to.

Clause 91 accordingly ordered to stand part of the Bill.

Clause 92

General exemptions from duties to publish or disclose information

Question proposed, That the clause stand part of the Bill.

[Alex Burghart]

Clause 92 sets out when contracting authorities may withhold—for example, by way of redaction—information that they are otherwise required to publish or disclose under the Bill. The two exemptions are for national security and sensitive commercial information. “Sensitive commercial information” is defined as information that “constitutes a trade secret” or would be likely to prejudice commercial interests if published or disclosed. The exemptions are modelled on their equivalents in the Freedom of Information Act 2000 and are intended to be understood and interpreted in the same way.

However, the FOIA is a scheme for responding to requests for information, whereas the Bill is about proactive publication by contracting authorities. The sensitive commercial information exemption is subject to an overriding public interest test, while the national security exemption is absolute. If the contracting authority relies on either of the exemptions to withhold or redact information, it must notify anyone to whom the information would have been provided that information is being withheld or redacted and why. The latter requirement is suspended if it would be contrary to the interests of national security to make such a notification.

[Florence Eshalomi]

The clause relates to a small number of reasons why information may not be published where it would otherwise be required under the Bill. Of course, we agree that some information is particularly sensitive and should not be disclosed to the public. I welcome the Minister’s assurance on ensuring that national home security is absolute. The reasons for non-publication in the clause are proportionate and sensible. We do not feel that this is controversial, and we will not oppose its addition to the Bill.

Question put and agreed to.

Clause 92 accordingly ordered to stand part of the Bill.

Clause 93

Notices, documents and information: regulations and online system

Question proposed, That the clause stand part of the Bill.

[Alex Burghart]

In support of the Government’s drive towards ensuring greater transparency in procurement, there are many provisions in the Bill that place requirements on contracting authorities to publish information. Clause 93 confers a power to set out the form and content of the information to be published or provided as well as the place it is to be sent. That is a broad but necessary power. The World Trade Organisation GPA sets out the core of the detail of many of the notices that we have described in the Bill, which will give hon. Members a clear indication about the sorts of information that will be required to be published using these powers. 

However, the Government wish to push further and create additional transparency to that required by the GPA. For that reason, we have created new transparency obligations and proposed the power to set out the detail in clause 93. The flexibility inherent in taking that power allows us to tailor the transparency regime over time to ensure that we can benefit from greater transparency across the procurement landscape. The power allows us to set different requirements for different types of contract or different industries, depending on the needs and benefits of different areas. 

Clause 93 also puts an obligation on the Government to establish and operate an online system for the purpose of publishing notices, documents and other information under the legislation. The online system must make notices, documents and other information published under the legislation available free of charge and accessible for people with disabilities.

[Florence Eshalomi]

Clause 93 is perhaps the most referenced throughout the Bill; it has been mentioned about 24 times. We did not expect the legislation to be all-encompassing, but we are now at clause 93 and we are seeing a little more deflection and can kicking. We support the implementation of a new digital system, but the reality is that we do not have any idea what it will look like based on the clause.

We have high hopes for the system, and it has the potential to be transformative for procurement, which we will get to during the debate on new clause 14. We believe it can be taken even further, as was the case in Ukraine. We can take inspiration from what is happening in Ukraine, and their heroic fight against Putin’s barbarism, as we heard during President Zelensky’s address yesterday. We must also take inspiration from their procurement system, even in the midst of what is going on.

I was pleased to hear the Minister say on Second Reading that he was pleased to let the House know that Ukraine was on our advisory panel and has informed the work on our single digital platform, which takes a lot from what Ukraine has done with ProZorro. The platform will enable everyone to have better access to public procurement data. Citizens will be able to scrutinise spending decisions, suppliers will be able to identify new opportunities to bid and collaborate, and buyers will be able to analyse the market and benchmark their performance against others on spending with SMEs, for example. That will provide better transparency, which will be better for taxpayers. Those are welcome words from the Minister, but at this stage, they are just words.

On Second Reading, the Minister also said:

“The platform is based on a system that we already have. We are confident that we will be able to introduce it in line with bringing this Bill into force. Obviously, we have to pass the legislation and get Royal Assent, and then there will be a settling-in period. But it is going to be functional very soon.”—[Official Report, 9 January 2023; Vol. 725, c. 383.]

How soon will that be? When is that target? We all agree the system has huge potential, but, as we have already seen in the promised version of the Bill and the version before us today, we cannot be certain about anything until it is in the statute book. Will the Minister commit today to introduce the regulations under the clause as soon as possible? I hope that he will deliver on the promises he made on Second Reading.

[Alex Burghart]

The hon. Lady will have already heard in our debates in Committee, on Second Reading and in Westminster Hall the huge range of areas in which we are bringing in additional transparency. The online digital platform will be the repository of sunlight that she is understandably so interested in. It is necessary at this stage for us to keep the primary legislation broad, so that there will be flexibility for Governments over time.

We intend to bring forward the online digital platform in 2024, bringing the Bill into force and allowing us to see the benefits. It will be a major step change in how we see evidence of public procurement. I hope the Opposition will welcome that.

Question put and agreed to.

Clause 93 accordingly ordered to stand part of the Bill.

Clause 94

Electronic communications

[Alex Burghart]

I beg to move amendment 61, in clause 94, page 62, line 37, after first “a” insert “covered”.

This amendment would restrict the requirements in respect of electronic communications systems to covered procurements.

[The Chair]

With this it will be convenient to discuss the following:

Government amendments 62 to 64.

Clause stand part.

[Alex Burghart]

We are introducing amendments 61 to 64 to clarify the use of electronic communication systems and the application of other systems in various commercial circumstances. Clause 94 currently requires that electronic communication systems must be

“free of charge and readily accessible”.

Our intention is to allow businesses, particularly SMEs, to easily access the necessary documents and systems to bid for contracts, ensuring that access is open to all. However, the term “electronic communication systems” is broad, and concerns have been raised with us that it could inhibit certain practices that are currently commonplace, thereby making the Bill overly burdensome. For example, it could constrict the ability of utilities dynamic markets to charge for membership, and of the Ministry of Defence to make use of systems that charge to preserve secure payments.

Amendment 62 therefore limits the free-of-charge obligation beyond the point when the public contract is entered into and disapplies it to utilities dynamic markets. We have also tabled amendments 61, 63 and 64, which ensure that the clause only applies to covered procurement, and that the security exception in clause 94(3) extends to the whole clause.

Clause 94 sets out how communications relating to a procurement should be undertaken. Electronic communications can help reduce procurement process costs for suppliers and contracting authorities; reduce procurement timescales; encourage access to opportunities for suppliers; facilitate compliance with the rules; and promote traceability and auditability in the procurement process. As such, for covered procurements, we want contracting authorities to, so far as practicable, communicate with suppliers electronically and ensure suppliers do likewise. Electronic communication systems must be free of charge and readily accessible to suppliers, generally available and interoperable with other systems, and accessible to people with disabilities. There is an exemption from the requirement to communicate electronically if doing so would pose a particular security risk.

[Florence Eshalomi]

These amendments tidy up this part of the Bill by limiting requirements that relate to covered procurement, limiting the obligations on information after the awards of contract or in dynamic markets, and ensuring that all parts of the clause are excluded in the case of security risks. I am pleased to say that we do not feel the amendments are controversial, and that they sensibly fix a gap that could otherwise have caused problems, so we will not oppose them.

Clause 94 concerns electronic communications. In today’s modern world, electronic and digital communication is the norm, and we should expect all suppliers to have access to electronic communication methods. Such methods are the norm in wider society. It is right that information is freely available. We must ensure that it is accessible to everybody, so we welcome subsection (2), which puts some principles of communication in the Bill. We are happy for the clause stand part of the Bill.

Amendment 61 agreed to.

Amendments made: 62, in clause 94, page 62, line 42, at end insert—

“(2A) Subsection (2)(a) does not apply in relation to an electronic communications system used, or required to be used—

(a) after the award of the public contract, or

(b) in relation to a utilities dynamic market.”

This amendment would create an exception to the requirement for electronic communications systems to be free of charge and readily accessible to suppliers where those systems are used after award of a public contract or in relation to a utilities dynamic market.

Amendment 63, in clause 94, page 63, line 1, leave out “Subsection (1)” and insert “This section”.

This amendment and Amendment 64 would extend the exception in subsection (3) to any requirement in clause 94 the contracting authority considers poses a security risk.

Amendment 64, in clause 94, page 63, line 2, after “communication” insert “, or the use of an electronic communication system meeting the requirements of subsection (2),”.—(Alex Burghart.)

This amendment and Amendment 63 would extend the exception in subsection (3) to any requirement in clause 94 the contracting authority considers poses a security risk.

Clause 94, as amended, ordered to stand part of the Bill.

Clause 95

Information relating to a procurement

Question proposed, That the clause stand part of the Bill.

[Alex Burghart]

Clause 95 provides that regulations may be made requiring certain information to be shared in a particular way. The power will be used to specify that contracting authorities and suppliers must use the central online platform, to be established under clause 93, and to provide detail on the proposed register of suppliers.

As part of the central digital platform, the register of suppliers will allow suppliers to submit the common data needed for procurements, such as their full name and registered office address, date of registration, VAT number and so on, in an evidence locker, so that they can “tell us once” across the public sector. All contracting authorities will be required to use data from the register of suppliers in their procurements.

Clause 95 also requires contracting authorities to keep records of any communication between the authority and a supplier in relation to a covered procurement. All data published on the central digital platform will be aligned to the open contracting data standard, or OCDS. Adoption of the standard will significantly improve data quality and sharing.

[Florence Eshalomi]

The clause puts in place similar provisions to clause 93, and has huge potential to make our procurement system more efficient—for example, by standardising how information is shared. That would simplify the procurement system for SMEs, which would not have to navigate the surprising number of ways in which the information in the Bill could be presented.

I will not reiterate my points on clause 93, but I have similar concerns that these provisions are just words, before we have seen the regulations laid, but I hope the Minister will make good use of them as quickly as possible.

Question put and agreed to. 

Clause 95 accordingly ordered to stand part of the Bill. 

Clause 96

Data protection

Question proposed, That the clause stand part of the Bill.

[Alex Burghart]

Clause 96 sets out that the Bill does not authorise or require a disclosure of information that would contravene the data protection legislation. It defines the data protection legislation as being the same as the meaning set out in the Data Protection Act 2018. The effect of the provision is that there is no requirement to publish information that would otherwise be prohibited from disclosure under the Data Protection Act 2018.

[Florence Eshalomi]

This clause, as the Minister outlined, considers data protection and ensures that the Bill does not work contrary to the Data Protection Act 2018. It is entirely correct, and we do not object to it.

Question put and agreed to.

Clause 96 accordingly ordered to stand part of the Bill. 

Clause 97

Duties under this Act enforceable in civil proceedings

[Alex Burghart]

I beg to move amendment 65, in clause 97, page 64, line 6, at end insert—

“(6A) A supplier may not bring proceedings under this Part on the grounds that one or more of the following decisions of a Minister of the Crown was unlawful—

(a) a decision to enter a supplier’s name on the debarment list;

(b) a decision relating to the information included in an entry on the debarment list;

(c) a decision not to remove an entry from the debarment list, or revise information included in such an entry,

(see section 64 (debarment decisions: appeals)).”

This amendment would ensure that challenges to debarment decisions are all dealt with under clause 64 (debarment decisions: appeals).

[The Chair]

With this it will be convenient to discuss the following:

Clause stand part.

Clauses 98 to 103 stand part.

Government new clause 12—Part 9 proceedings and closed material procedure.

[Alex Burghart]

Clause 97 provides that, where a UK or treaty state supplier has suffered, or risks, loss or damage in consequence of a contracting authority’s failure to comply with certain parts of the Bill, that supplier can hold the contracting authority to account through civil proceedings for breach of statutory duty.

The relevant parts of the Bill govern the award, entering into and management of public contracts—namely, parts 1 to 5, 7 and 8. Clause 97(5) lists the few exceptions, however, where any compliance failure is best challenged through judicial review. Those are a failure to have regard to barriers facing SMEs, which is required by clause 12(4), and a failure to have regard to the procurement policy statements in clauses 13(9) or 14(8). Suppliers can also raise concerns with the procurement review unit, which may engage with the contracting authority on a non-statutory basis to resolve any issues.

Further, proposed new subsection (6A), courtesy of Government amendment 65, will ensure that, where a claim is on grounds that can be challenged through the debarment appeals process—under clause 64—the supplier cannot also bring a claim under part 9 on those grounds. Debarment decisions are taken by a Minister of the Crown, and not a contracting authority, thus it is appropriate for the Minister to respond to that claim. I invite hon. Members to accept the amendment. 

Clause 98 says that if a contracting authority has been notified during a standstill period that a claim has commenced in relation to the procurement, the contracting authority is prevented from proceeding with the public contract until the claim is resolved. That is called automatic suspension. However, it is important that the court has a discretion to lift the automatic suspension on application by the contracting authority, and permit the contract or modification to be entered into, where that is necessary, despite a legal challenge. The factors for the court’s consideration when deciding whether it is appropriate to lift the suspension are laid out in clause 99 on interim remedies.

Interim remedies are, by their nature, applicable before the determination of any legal claim, at whichever point it is raised in the procurement—pre or post contract signature. Types of interim remedy under clause 99 may therefore include suspending the procurement process or performance of the contract.

An important aspect of clause 99 is the new test for lifting the automatic suspension. Unlike the current test derived from the 1975 American Cyanamid patent case, the test on the face of the Bill is specific to public procurement disputes, and enables the court to consider the merits of the case with reference to factors that ensure that the interests of the contracting authority, the claimant, the successful supplier and the public are considered in a fair and balanced way. The test will also apply to injunctions made to prevent the contracting authority from entering into the public contract where there is no automatic suspension. 

Clause 100 deals with pre-contractual remedies. Suppliers bringing claims to the court at this time are most often seeking a fair opportunity to bid for the public contract. Accordingly, clause 100 includes remedies such as reversing a decision made by the contracting authority, or requiring an action such as the re-evaluation of tenders. The court may also award damages or make any other order it deems appropriate in the circumstances.

Clause 101 sets out the post-contractual remedies—that is, those that apply once the contract or modification has been entered into. For the most egregious breaches, such as failing to honour a mandatory standstill period, where the supply has been denied the opportunity to seek pre-contractual remedies the contract may be set aside by the court. This is currently known as the remedy of ineffectiveness, and an order of this kind makes the contract or modification invalid. Where a set aside ground applies per clause 102, the court must set aside the contract or modification unless there is an overriding public interest in maintaining the contract, in which case the court may instead reduce the scope or duration of the contract, and award damages.

In common with the existing regime, the award of damages to a supplier following a breach of statutory duty is discretionary, and judges can continue to make an appropriate assessment on the award of damages, including quantum, taking into account all the circumstances of the case, including the nature of the breach and its consequences. As I mentioned, clause 102 sets out the conditions that, if met, may result in the contract or modification being set aside, where the supplier has been denied the opportunity to seek pre-contractual remedies.

Clause 103 sets out the timescales in which a supplier must raise a claim under the Bill for breach of statutory duty. For all claims except some for set aside under clause 102, this will be within 30 days from when the supplier knew—or ought to have known—about the breach. For set aside claims, after the contract has been entered into, the time limit is 30 days from the date of actual or deemed knowledge, unless a contract details notice was not published, in which case the 30 days applies up to a long stop date of six months from contract signature. The six month cut-off also applies to claims for set aside of contract modifications. The court may extend the 30 days up to three months, but may not extend the six month cut-off. The timescales aim to give suppliers adequate time to raise legal challenges to the procurement, while also enabling contracting authorities to manage the risk of delay and disruption to their public procurements.

The Government have proposed new clause 12 to be inserted after clause 103 to allow the Minister for the Cabinet Office to apply for a declaration permitting closed material procedure applications in procurement challenge proceedings, as we discussed the other day. Closed material procedure involves the non-Government parties leaving the courtroom while sensitive material is heard.

[Florence Eshalomi]

Amendment 65 shifts the responsibility for the debarment list remedy to clause 64, rather than being under this part of the Bill. New clause 12 is a simple amendment that extends the power to the Minister for the Cabinet Office, rather than just the Secretary of State. Both amendments make sense and we do not oppose them.

Clauses 97 to 103 relate to remedy against contracting authorities when duties under parts of the Bill are breached. It is right that suppliers have remedy when contracting authorities do not follow due process while carrying out procurement. I listened to the Minister’s explanatory remarks about having a fair and balanced remedy for tenders and contractors, about discretionary damages, and about legal challenges and timescales, but has he given thought as to whether employees or contracted workers, or subcontracted organisations involved in delivering public contracts, can seek a remedy if the employment terms and conditions agreed as part of a contract are not delivered?

At the point of tender or contract, a supplier may commit to providing certain employment conditions—for example, the living wage. However, if the supplier in that example, having won the contract, does not implement an annual increase in the living wage, I hope the Minister agrees that there is little recourse for workers employed under the contract. There is no clear, robust mechanism for workers or parties such as trade unions to complain, or for workers affected to receive remedy if there is a failure to comply. There may be a redress mechanism or a point of contact for them in the contracting authority, but there is no certainty that complaints will be investigated, let alone remedied. We are concerned about that, as workers may miss out on long-term remedies. I would be grateful if the Minister responded to that point, either now or later in writing.

[Alex Burghart]

I am happy to respond to the hon. Lady with more detail in writing. I think her example relates to where a contracting authority had written in certain terms and conditions for the employees of a supplier, which then receives the procurement deal. In those circumstances, the supplier would obviously be in breach of the contract. That would be as serious as other breaches of contract. I will check the detail and get back to the hon. Lady, but it will obviously be within the supplier’s employees’ rights to contact the contracting authority and let it know that they believe the supplier is in breach.

Amendment 65 agreed to.

Clause 97, as amended, ordered to stand part of the Bill.

Clauses 98 to 103 ordered to stand part of the Bill.

Clause 104

Procurement investigations

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clauses 105 and 106 stand part.

[Alex Burghart]

Clause 104 enables the appropriate authority—a Minister of the Crown, a Welsh Minister or a Northern Irish Department—to investigate relevant contracting authorities’ compliance with the requirements of the Bill. It also obliges the relevant contracting authorities to provide reasonable assistance to the investigation within notified time periods, and allows the findings of investigations to be published.

Although the legislative definition of a relevant contracting authority in clause 104(5) excludes Departments, they may be subject to investigation; it is simply that Ministers do not require statutory powers to do this. Ministers already have the authority to investigate the procurement activities of Departments and ensure that any recommendations resulting from an investigation are duly taken into consideration. The Cabinet Office has established routes for co-operation with such investigations within Government. The new procurement review unit will utilise the statutory powers afforded by clauses 104 to 106, as well as non-statutory powers, on behalf of Ministers of the Crown.

Clause 105 allows the appropriate authority to make statutory recommendations as a result of an investigation under clause 104, where the investigation has identified that a contracting authority is engaging in action giving rise, or likely to give rise, to a breach of any requirement of the Bill. Clause 106 allows the appropriate authority to issue statutory guidance to contracting authorities, following an investigation under clause 104. This guidance will share the lessons of matters considered in the procurement investigation where those lessons are relevant to a larger number of, or indeed all, contracting authorities, including Departments, not just those that were the subject of the investigation. Contracting authorities are required by clause 106 to have regard to the published guidance when carrying out their public procurements and considering how to comply with the requirements of this Bill. It is left to the discretion of the appropriate authority to determine which contracting authorities would benefit from having regard to the guidance.

Subsection (3) highlights clauses 107 to 109, which restrict a relevant authority’s ability to issue guidance to particular contracting authorities. A Minister of the Crown can, with express consent from the devolved Administrations, issue guidance to all authorities, including devolved and transferred contracting authorities.

[Florence Eshalomi]

Clauses 104 to 106 concern oversight of procurement. Compliance with such is critical and it runs through the Bill.

As stated previously, the success of things such as the 30-day payment will ultimately come down to compliance with the Bill at all levels. We do not oppose these clauses, but we are concerned about the lack of ambition compared with what was outlined in the Green Paper. To take the Minister back to those proposals, the Green Paper states that the Government propose

“establishing a new unit, supported by an independent panel of experts, to oversee public procurement with powers to review and, if necessary, intervene to improve the commercial capability of contracting authorities. This unit would aim to improve capability and practices for the benefit of all contracting authorities and suppliers rather than provide remedies for an individual supplier on a specific procurement. This will be facilitated through greater information about purchasing and supply markets and behaviour, allowing targeted interventions to be implemented, optimising policy delivery and driving improvements in capability, behaviour and practice.”

We understand that proposals change between Green Papers and Bills—the Minister has touched on that before—but will he explain the reason for this reduction in ambition? What is proposed now?

There is a genuine question about to who will oversee compliance, especially as, despite the promises in the Green Paper, nothing has been done to reform the remedies system. The Bill contains little information on how the system will be overseen. It does not mention a procurement review unit, and refers only to an “appropriate authority”. Worryingly, the remit of the unit does not extend to central Government, Welsh Ministers or Northern Irish Departments, among other things. That seems like a large and inexplicable gap, which means that the unit will not be able to investigate compliance by any central Government Departments.

The “appropriate authority” has power to carry out an investigation of compliance by an authority under the Bill, and to make a recommendation; but it cannot make recommendations on compliance with a multitude of matters, including compliance with the national procurement policy statement, the national objectives in clause 12, or a specific procurement. On the face of it, that is relatively toothless, leaving the unit with limited remit and no enforcement powers. It also does not seem to be independent. That replicates the existing position, which we have discussed.

The Bill offers an opportunity to go further and to deliver better procurement systems across the country. Clearly, the Government do not wish to make the PRU into an appellate body, but the court system is an expensive and random way of enforcing compliance, tilted against challengers and small and medium-sized enterprises. While reforms of the court system belong outside the Bill, there is no evidence that any such reforms are being brought forward. We will not reject clauses 104 to 106, nor have we proposed amending them, but I hope that the Minister will address my concerns. I will welcome any feedback he can offer.

--- Later in debate ---

[Alex Burghart]

The hon. Lady will have heard me refer a number of times to the procurement review unit. We considered making the PRU an independent arm’s length body, but on consideration we felt that to do so risked creating unnecessary bureaucracy and cost and would lead to confused and overlapping responsibilities, with duplications of interactions with contracting authorities. Positioning it within the Cabinet Office best aligns it with other related functions to improve commercial standards among contracting authorities that are covered by the Government’s chief commercial officer.

We did not feel the need to put the PRU in the Bill, because it will not be a non-departmental body established in statute. The approach we are using here is similar to how the current public procurement review service utilises statutory powers under section 40 of the Small Business, Enterprise and Employment Act 2015, but is not specifically mentioned in that Act.

There are great opportunities for the PRU to assist in procurement processes across the country, which have been outlined during the debate.

Question put and agreed to.

Clause 104 accordingly ordered to stand part of the Bill.

Clauses 105 and 106 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Julie Marson.)

Procurement Bill [ Lords ] (Eighth sitting)

Alex Burghart Excerpts

Committee stage
Thursday 9th February 2023 Public Bill Committees

Welsh Ministers: restrictions on the exercise of powers

[The Parliamentary Secretary, Cabinet Office (Alex Burghart)]

I beg to move amendment 66, in clause 107, page 70, line 3, leave out “only” and insert “wholly or mainly”.

This amendment would mean that a public undertaking or private utility that operates “wholly or mainly in relation to Wales” will be treated as a devolved Welsh authority.

[The Chair]

With this it will be convenient to discuss the following:

Government amendment 67.

Clause stand part.

Clause 108 stand part.

Government amendment 68.

Clauses 109 and 110 stand part.

Government amendments 70 to 73.

Clause 111 stand part.

[Alex Burghart]

It is a pleasure to open this afternoon’s proceedings with this substantial grouping. I will begin with amendments 66 and 67. The Bill provides Welsh Ministers with various powers, and clause 107 sets out the parameters for their exercise by specifying the bodies that Welsh Ministers may regulate. Welsh Ministers may exercise powers under the Bill only in relation to devolved Welsh authorities and procurements covered

“under a devolved Welsh procurement arrangement.”

The Bill adopts the definition of a “devolved Welsh authority” found in section 157A of the Government of Wales Act 2006 and extends it, for the purposes of the Bill, to include certain public undertakings and private utilities, and other contracting authorities that ought reasonably to be regulated by Welsh Ministers for pragmatic reasons.

As the Bill was introduced, we recognised that the competence was ill-defined with respect to Welsh contracting authorities, and that it would have the effect of requiring devolved contracting authorities that operate principally in Wales but have some operations in England to follow two sets of rules. We have been working closely with the Welsh Government to include a pragmatic approach to the definition in the Bill. As such, we have agreed with the Welsh Government to include in their competence, for the purposes of the Bill, any contracting authority that is a private entity or utility that operates

“wholly or mainly in relation to Wales”

and whose activities

“do not relate to reserved matters”.

For example, Welsh Water, a not-for-profit private company providing water services in Wales, would fall into that category.

Finally, we have also agreed to extend Welsh Ministers’ competence in relation to a contracting authority that is not a devolved body for the purposes of the 2006 Act, but the functions of which are exercisable “wholly or mainly” in Wales and, wholly or mainly,

“do not relate to reserved matters”.

I am pleased to introduce the amendments and recognise that this is a pragmatic solution for many public bodies who operate, for example, in Herefordshire and across the border in Powys.

Turning to amendment 68, clause 109, which we will cover in a moment, establishes that

“A Minister of the Crown may exercise a power under this Act for the purpose of regulating a contracting authority that is a devolved Welsh authority only in relation”

to certain areas. The Welsh Government raised concerns that, as drafted, clause 121 would give an appropriate authority—in this instance defined as a Minister of the Crown—the power to

“by regulations make supplementary, incidental or consequential provision in connection with any provision of this Act.”

The provision set out in clause 121 is used to amend other legislation, where necessary, to ensure the functioning of the Bill, and it is right that Welsh Ministers should be able to agree to any subsequent amendment to legislation within their competence. I am pleased to change this so that any power for Ministers of the Crown to make consequential provision requires consent. That respects the devolved competence of procurement and makes practical sense for the Bill. I thank Welsh Government officials and Ministers for working closely to agree these important amendments.

As we have discussed, clause 107 sets out the parameters for the exercise of powers provided to Welsh Ministers by specifying the bodies that they may regulate. The Bill provides a Northern Ireland Department with various powers, and clause 108 sets out the parameters for their exercise by specifying the bodies that a Northern Ireland Department may regulate. A Northern Ireland Department may exercise powers under the Bill only in relation to “transferred Northern Ireland authorities”, as defined in the Bill, and any

“procurement under a transferred Northern Ireland procurement arrangement.”

For example, the Northern Ireland Department sets up a framework for services that could be used by UK or Welsh contracting authorities.

The starting point of the competence of Northern Ireland Departments is that conferred on them by the Northern Ireland Act 1998, which is that they are competent in respect of a public authority whose functions are exercisable only

“in or as regards Northern Ireland”

and are wholly or mainly transferred functions—that is, neither reserved nor excepted.

In addition, we have agreed with the Northern Irish Government to include within their competence, for the purposes of the Bill, any public or private utility that operates only in, or as regards, Northern Ireland and whose activities do not relate to reserved matters. For example, Northern Ireland Water Ltd, a company providing water services in Northern Ireland, would fall within that category.

Clause 109 sets out certain restrictions on how a Minister of the Crown may exercise powers created by the Bill, taking into account that public procurement is largely a devolved matter in Wales and Northern Ireland and that, as such, certain functions fall within the regulatory ambit of Welsh Ministers or a Northern Ireland Department. The clause sets out how, where two bodies can both exercise powers, those concurrent powers are to be exercised.

The clause establishes that a Minister of the Crown may exercise a power under the Bill for the purpose of regulating a devolved Welsh authority only in relation to procurement under a reserved procurement arrangement or transferred Northern Ireland procurement arrangement. In respect of Wales, this means that if a Welsh devolved authority uses a framework or dynamic market established by a reserved body such as the Crown Commercial Service, it must do so in accordance with reserved rules. That means, for example, that they must have regard to any national procurement policy statement issued by a Minister of the Crown, rather than a policy statement issued by Welsh Ministers.

That restriction, however, does not extend to clause 66 on electronic invoicing or to clause 106 on the issuing of guidance following a procurement investigation. Instead, these powers, and the powers in clause 121 on consequential provision, can be exercised in respect of devolved Welsh procurement only with the consent of Welsh Ministers. No such consent is required if the regulations or guidance relate to a devolved Welsh authority’s participation in a reserved or a Northern Ireland procurement arrangement.

Clause 109 also establishes that a Minister of the Crown may exercise a power under the Bill for the purpose of regulating a transferred Northern Ireland authority only with the consent of a Northern Ireland Department, unless the regulations relate to procurement under a reserved or a devolved Welsh procurement arrangement authority. As in the Welsh example, this means that, if a transferred Northern Ireland authority procures via a reserved framework or dynamic market, for example, it must follow regulations made by a Minister of the Crown. Similarly to the position on devolved Welsh procurement, a Minister of the Crown may not publish guidance under clause 106 that would regulate a Northern Ireland Department without consent, unless the guidance relates to reserved procurement or devolved Welsh procurement.

Finally, clause 109 provides that the restrictions on the powers of a Minister of the Crown in respect of devolved Welsh procurement and transferred Northern Ireland procurement do not apply in relation to certain named powers, including the powers to update schedule 9 to the Bill to ensure the application of new or amended free trade agreements and to ensure their implementation in respect of devolved Scottish procurement, and the power to make provision to allow the UK to respond to trade disputes.

Clause 110 defines the different types of “procurement arrangement” referred to in the Bill. The term is used primarily in clause 111, which provides powers to ensure that all UK bodies, devolved and reserved, can continue to work with one another and across the UK’s internal borders when undertaking procurements under one another’s procurement arrangements.

I turn to amendments 70 to 73. As the Committee is aware, procurement is a devolved matter, and Scotland already has its own procurement rules. Hon. Members may not be aware that Scottish devolved bodies are presently able to access commercial deals set up in the rest of the UK, and vice versa. Therefore, to enable devolved Scottish bodies to continue to use commercial tools such as frameworks established under the new regime, and to provide access for reserved contracting authorities to Scottish frameworks, the Scottish procurement regulations will need to be amended. As the Bill is drafted, a Minister of the Crown, as well as Scottish Ministers, can amend Scottish regulations for that purpose.

For context, having the power for a Minister of the Crown to amend Scottish regulation was a contingency power, should we be unable to agree with the Scottish Government on how the Bill would be implemented. I am pleased to say that we have an agreement in principle on how to proceed, subject to the normal parliamentary arrangements in both Parliaments, and there is therefore no requirement for the UK Government to be able to amend the Scottish procurement regulations. We are therefore amending the Bill to remove that power for Ministers of the Crown.

At the same time, the UK Government will lay regulations to ensure that devolved Scottish contracting authorities can access frameworks and other commercial tools established under the new regime. When that happens, it will be necessary for Scottish Ministers to disapply their regulations, as they have agreed to do. We propose amending clause 111 to ensure that they can do so and expanding it slightly to ensure that the power covers all Scottish procurement rules.

Clause 111 therefore sets out a series of regulation-making powers that will be used to ensure that procurement bodies across the UK can continue to work with one another and across the UK’s internal borders when undertaking procurements. First, the clause provides powers for a Minister of the Crown to regulate procurements by devolved Scottish authorities under purchasing arrangements set up by reserved authorities or by devolved Welsh or Northern Ireland authorities. That will ensure that devolved Scottish authorities can make use of frameworks and dynamic markets established by other UK authorities, benefit from procurements undertaken by centralised procurement authorities, and jointly procure with other UK authorities acting as the lead authority. In those circumstances, devolved Scottish authorities will be required to follow certain rules in the Bill, details of which will be set out in secondary legislation.

The clause also provides powers for a Minister of the Crown to disapply the Bill’s provisions for reserved authorities, devolved Welsh authorities and devolved Northern Ireland authorities when they are procuring under purchasing arrangements established by devolved Scottish authorities. That will allow those authorities to benefit from arrangements put in place under the Scottish regulations and to undertake joint procurement with devolved Scottish authorities acting as the lead authority.

The clause also creates new powers giving Scottish Ministers the competence to amend Scottish procurement legislation to apply it to reserved authorities subject to the Bill when procuring under purchasing arrangements established by devolved Scottish authorities. Scottish Ministers are also given a power to disapply devolved procurement regulations where a devolved Scottish contracting authority procures using commercial tools set up under the Bill. That arrangement was reached after lengthy consultation with the Scottish Government, and I am delighted to say that they are pleased with the results.

[Florence Eshalomi (Vauxhall) (Lab/Co-op)]

I thank the Minister for outlining the discussions with Scottish and Welsh colleagues. As he said, clauses 107 to 110 set out the devolutionary roles and responsibilities of the Welsh, Northern Irish and UK Ministers. Although Wales and Northern Ireland have opted to be part of this procurement system, they will still keep the appropriate regulatory powers within the Bill.

I will not repeat the excellent speech from my Front-Bench colleague, my hon. Friend the Member for Islwyn, on clause 14—it is fair to say that he has had more exposure to Welsh procurement than I have. However, we Labour Members are very proud of our colleagues in Wales and their strong record on procurement.

We are pleased that the Welsh and Northern Irish Governments are adopting the Bill. As my hon. Friend mentioned on clause 14, this is about respect for devolution and for the will of the people of Wales and Northern Ireland. These clauses are about enshrining that respect into law, ensuring that all authorities under the Bill discharge their powers in the right and appropriate manner, and giving everyone involved the flexibility to set the system that their people want. As such, and following the Minister’s remarks, we do not find the clauses disagreeable and will not oppose them.

Lastly, amendments 66 to 68 and 70 to 73 make minor tweaks to the balance of this part of the Bill. Again, we feel that the amendments are fine and are not disagreeable, so we will not oppose them.

Amendment 66 agreed to.

Amendment made: 67, in clause 107, page 70, line 12, leave out paragraph (b)—(Alex Burghart.)

This amendment would mean that a contracting authority whose functions are exercisable “wholly or mainly in relation to Wales” will be treated as a devolved Welsh authority regardless of the subject-matter of a particular procurement.

[Alex Burghart]

I beg to move amendment 113, in clause 107, page 70, line 14, after “section” insert “and section 123 (commencement)”.

This amendment is consequential on Amendment 115.

[The Chair]

With this it will be convenient to discuss Government amendments 114 and 115.

[Alex Burghart]

Amendment 115, on commencement powers, will amend clause 123 and require consequential amendments to clause 107. The amendment will make the commencement of devolved Welsh aspects of the Bill subject to the consent of the Welsh Ministers, and allow UK Ministers to amend the Act resulting from the Bill so that it no longer applies in respect of devolved Welsh procurement and could be commenced without consent in respect of procurement in England and Northern Ireland, and all reserved procurement, including that in Wales.

Amendments 113 and 114 are consequential amendments that amend clause 107, which we have discussed already.

--- Later in debate ---

[Florence Eshalomi]

It is reassuring to hear the Minister’s additional update from the Welsh Government and that they support the arrangements. The amendments mandate the consent of Welsh Ministers while making procurement, and allow for the exclusion of Welsh procurement from the provisions of the Act. In essence, they mean that Welsh Ministers have to consent to the Act, but that UK Ministers can exclude Welsh procurement from the regime. In practice, I assume that the proposals will ensure that Wales consents to the Act but that, should it not, a UK Minister can remove it from the system and then commence the Act without the consent of Welsh Ministers.

This is a sensible amendment that underlines the respect for the Welsh Government, and we are right to expect that from the Bill. As the Minister outlined, it is good that there is support. We are content with the amendments and will not oppose them.

Amendment 113 agreed to.

Clause 107, as amended, ordered to stand part of the Bill.

Clause 108 ordered to stand part of the Bill.

Clause 109

Minister of the Crown: restrictions on the exercise of powers

Amendments made: 68, in clause 109, page 71, line 12, after “section 66” insert “or section 121”.

This amendment would mean that a Minister of the Crown could not make consequential provision for the purpose of regulating a devolved Welsh authority without the consent of Welsh Ministers.

Amendment 69, in clause 109, page 71, line 32, at end insert—

“(ba) section (Trade disputes) (trade disputes);”.—(Alex Burghart.)

This amendment would allow a Minister of the Crown to exercise the trade dispute power under NC11 in relation to devolved Welsh authorities and transferred Northern Ireland authorities.

Clause 109, as amended, ordered to stand part of the Bill.

Clause 110 ordered to stand part of the Bill.

Clause 111

Powers relating to procurement arrangements

Amendments made: 70, in clause 111, page 73, line 4, leave out—

“A Minister of the Crown or”.

This amendment would remove the power of a Minister of the Crown to amend Scottish procurement legislation to apply it to procurement under devolved Scottish procurement arrangements by contracting authorities.

Amendment 71, in clause 111, page 73, line 5, leave out from “of” to end of line 7 and insert—

“(a) applying it in relation to procurement carried out by contracting authorities under devolved Scottish procurement arrangements;

(a) disapplying it in relation to procurement carried out by devolved Scottish authorities under—

(i) reserved procurement arrangements,

(ii) devolved Welsh procurement arrangements, or

(iii) transferred Northern Ireland procurement arrangements.”

This amendment would give the Scottish Ministers power to amend Scottish procurement legislation to disapply that legislation where procurement by devolved Scottish authorities may be regulated by provision made by a Minister of the Crown under subsection (1).

Amendment 72, in clause 111, page 73, line 8, at end insert—

“(za) the Procurement Reform (Scotland) Act 2014 (asp 12),”.

This amendment would extend the definition of “Scottish procurement legislation” to include the Procurement Reform (Scotland) Act 2014.

Amendment 73, in clause 111, page 73, line 13, leave out “those regulations” and insert “that legislation”.—(Alex Burghart.)

This amendment is consequential on Amendment 72.

Clause 111, as amended, ordered to stand part of the Bill.

Clause 112

Disapplication of duty in section 17 of the Local Government Act 1988

Question proposed, That the clause stand part of the Bill.

[Alex Burghart]

The clause ensures that authorities to which section 17 of the Local Government Act 1988 applies are not prevented by that section from complying with their obligations under the Procurement Bill. It also enables a Minister of the Crown or Welsh Ministers to make regulations to disapply, when required, a duty under section 17 of the Act.

The clause ensures that authorities covered by the 1988 Act can take advantage of domestic procurement policies. As stated in the other place, we intend to use clause 112 for the first time, once enacted, to make regulations so that local authorities may take advantage of the policy of December 2020 so that below-threshold procurements may be reserved to UK suppliers only, or to UK small and medium-sized enterprises or voluntary, community and social enterprises in a particular region or county of the UK.

As section 17 of the Act precludes local authorities from awarding public supply or works contracts by supplier location, tabling regulations under the clause will ensure that local authorities can take advantage of that permitted flexibility, already available to central Government Departments, in respect of lower value contracts.

[Florence Eshalomi]

The clause interacts with section 17 of the Local Government Act, which placed a duty on certain authorities not to consider non-commercial elements when awarding or managing certain contracts. The amendment to the section is necessary for the new procurement regime, in particular given the move from most economically advantageous tender to most advantageous tender. The clause will also give Ministers the power to disapply the Act via regulations. That could be used, to give an example from the explanatory notes, to allow relevant authorities to reserve below-threshold procurements by location and/or small and medium business size status. We support and welcome the measures and will not oppose clause stand part.

Question put and agreed to.

Clause 112 accordingly ordered to stand part of the Bill.

Clause 113

Single source defence contracts

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[The Chair]

With this it will be convenient to discuss that schedule 10 be the Tenth schedule to the Bill.

[Alex Burghart]

The clause introduces schedule 10, which amends the Defence Reform Act 2014 to enable reforms to the Single Source Contract Regulations 2014. The regulations continue to work well to deliver their objectives of ensuring value for money for the taxpayer and a fair price for industry. However, delivering the defence and security industrial strategy and building on experience since 2014 means some reforms are needed. They will ensure that the single source procurement regime can continue to deliver in traditional defence contracts and be applied effectively across the breadth of single source defence work in the future.

In paragraph 2(2) and 2(4) of schedule 10, we are taking a power to clarify that some cross-Government single source contracts with a substantial defence element will come under the Defence Reform Act regime. That will provide assurance on value for money on a greater proportion of single source defence expenditure.

We are increasing the flexibility of the regime by taking a power in paragraphs 3(2) and 3(8) of schedule 10 to enable contracts to be considered in distinct components with different profit rates being applied to different parts of a contract, where that makes sense. Further flexibility in the regime will be provided by a power in paragraph 3(3) to specify circumstances under which a fair price for all or part of a contract can be demonstrated in ways other than by reference to the pricing formula in the Defence Reform Act. Circumstances for using such an approach will be set out in regulations and will include, for example when an item has previously been sold in an open market or where a price is regulated by another regime.

We are simplifying the contract negotiation process by amendments in paragraph 9(3)(a) of schedule 10, which will ensure that the contract better reflects the financial risks involved, and in paragraph 8(3)(e), by taking a power that will clarify how the incentive adjustment should be applied. We are also removing two steps from the current six-step profit setting process. The amendment in paragraph 9(3)(b) will abolish the funding adjustment for the Single Source Regulations Office or SSRO. The same paragraph will also remove the adjustment that ensures that profit can be taken on a contract only once. That issue is dealt with through allowable costs by virtue of paragraph 12(3) of schedule 10.

We are simplifying some reporting requirements by way of amendments in paragraph 13 of schedule 10 to reflect concerns expressed by suppliers and to make compliance with the regulations more straightforward. We are making better use of the expertise of the SSRO by way of the amendments in paragraphs 18 and 19 by enhancing its power to issue guidance, and clarifying and expanding the range of issues on which it can adjudicate. That will empower the SSRO to play a greater role in speeding up the contract negotiation process.

[Chris Evans (Islwyn) (Lab/Co-op)]

I thank the Minister for his explanation of the clause, which is related to the Defence Reform Act 2014, which created the Single Source Regulations Office. I have only a question or two about the clause: is there any effect on that office? How does he envisage the regulations he mentioned developing over time? He has already said the regulations will be laid in due course, but can he give the Committee any idea of what they will look like in the new regime proposed in the clause?

[Alex Burghart]

With reference to the SSCR, where we procure in the absence of competition it remains vital that we strike the right balance between, on the one hand, paying contractors fair prices for the goods and services we buy and, on the other, providing assurance that the taxpayer is getting value for money. Experience from before 2014 showed that a non-legislative approach was insufficient to achieve that balance. The amendment in schedule 10 will apply only to contracts that are substantially for defence purposes. The criteria for including a contract will be set out in secondary legislation. To the hon. Gentleman’s point, that is necessary because it is not generally possible to price the defence elements of such contracts separately in primary legislation, so we need the flexibility in secondary legislation.

[Chris Evans]

I hear what the Minister says about regulations. Will that have any effect on the profit margins set by the SSRO?

[Alex Burghart]

That will depend on what the regulations were, which is for discussion at a future point.

Question put and agreed to.

Clause 113 accordingly ordered to stand part of the Bill.

Schedule 10 agreed to.

Clause 114

Concurrent powers and the Government of Wales Act 2006

Question proposed, That the clause stand part of the Bill.

[Alex Burghart]

The clause makes it clear that certain restrictions on the legislative competence of the Senedd do not apply in relation to powers granted to Welsh Ministers under the Bill. That ensures that Welsh Ministers can exercise the legislative powers granted to them under the Bill, and amendments to the Government of Wales Act 2006 are not uncommon in Westminster legislation that grants powers to Welsh Ministers.

[Florence Eshalomi]

As the Minister said, the clause contains provisions about the Welsh Government and actions that they can and cannot take on procurement. The clause makes a short and technical amendment that removes the prohibitions on the Senedd to legislate on qualified devolved functions in this area. We see no reason to oppose the removal of the prohibition, so we are happy for the clause to stand part.

Question put and agreed to.

Clause 114 accordingly ordered to stand part of the Bill.

Clause 115

Repeals etc

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss that schedule 11 be the Eleventh schedule to the Bill.

[Alex Burghart]

The clause and schedule 11 between them set out the legislation that will be repealed, revoked and disapplied once the Bill comes into effect. That includes the Public Contracts Regulations 2015, the Concession Contracts Regulations 2016, the Utilities Contracts Regulations 2016 and the Defence and Security Public Contracts Regulations 2011, which make up the existing procurement regime for England and Wales, and for Northern Ireland.

[Florence Eshalomi]

The clause repeals a number of pieces of primary and secondary legislation, as outlined in schedule 11. In practice, the clause and schedule will repeal the current procurement system under the likes of the Public Contracts Regulations 2015.

It is a little unusual that, under schedule 11, we will repeal part of a Bill that is matching this Bill stage for stage in its passage through this House. In fact, I believe that the Trade (Australia and New Zealand) Bill had its Second Reading in the other place just hours before we had Second Reading of this Bill. I know from the Minister’s references that he is fond of boxing, and I wonder which one of those two titanic pieces of legislation will win the bout against the rigmarole of getting a Bill through Parliament? We need to get the Bill through, but perhaps the trade Bill will be one of the fastest enacted pieces of legislation to pass through the House. Labour Members understand why the measure is necessary, however, to ensure that there are no gaps should this Bill take longer to pass through Parliament.

We also understand why we cannot have two procurement systems in place at the same time. As previously stated, we feel that the Bill is a step forward in addressing some of the issues in our procurement system that were introduced by the likes of the public contracts regulations. Many provisions that are part of those regulations have been brought into the Bill, and others have been improved on. We feel that the Bill could have gone further in many ways, and we will continue to argue for amendments in those areas for the rest of our proceedings in Committee and on Report, but we share the view that it will bring benefits to our procurement system as a whole. We will therefore not oppose the repeals alongside the enactment of the Bill.

Question put and agreed to.

Clause 115 accordingly ordered to stand part of the Bill.

Schedule 11 agreed to.

Clause 116 disagreed to.

Clause 117

Power to amend this Act in relation to private utilities

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Alex Burghart]

The clause provides a power for an appropriate authority to make regulations to reduce the regulation of private utilities under the Bill. That power may be used, for example, to disapply particular provisions or to modify them to reduce the regulatory burden, such as to reduce financial costs or administrative burdens.

In the UK, regulators such as Ofgem and Ofwat have promoted competition in many utility markets and provided a proxy for competition, with protection of consumers’ interests at its heart where that is not feasible. That oversight of private utilities justifies minimising the regulatory burden on them to avoid passing costs to customers.

As the Bill provides in clauses 89 and 97 that contracting authorities owe a duty to “treaty state suppliers”—that is, suppliers entitled to the benefit of international trade agreements—to comply with a substantial part of the Bill, the power can be exercised to make amendments only where they do not put the UK in breach of its obligations to those suppliers. The Bill already includes a number of measures that reduce the regulatory burden for private utilities, such as the transparency requirements being pared back to the minimum required by international trade agreements.

Parliament and interested parties will have ample opportunity to scrutinise any amendments proposed to be made under the power, as clause 117 requires consultation prior to making regulations. Parliament will rightly be able to scrutinise the regulations under the affirmative procedure.

[Florence Eshalomi]

The clause pertains to the ability to reduce regulations in relation to private utilities. It is important that the Bill does not create regulatory burdens where they are not necessary. The clause gives powers to ensure that the Bill can be amended to disapply parts of it in relation to private utilities.

Several exceptions for private utilities already exist throughout the Bill: for example, on the policy statements, the publication of certain information and assessing contract performance. Of course, that does not mean that private utilities do not go unregulated. It is important that groups such as Ofgem regulate the gas and electricity market, but it would be burdensome to have several different frameworks of regulation applying to bodies where they are not needed. That can end up duplicating regulation and creating unnecessary bureaucracy, and simplifying frameworks is one of the main reasons that the Bill is before us.

We believe that our private utilities should be regulated, particularly at a time when we see so many people up and down the country feeling the pain of skyrocketing energy bills this winter, but it must be done via the appropriate channels. For that reason, we are minded not to oppose the clause. However, I hope the Minister can briefly justify when the clause will be necessary and say that the powers will not be used overzealously.

In its report on the Bill, the Delegated Powers and Regulatory Reform Committee said:

“The Committee considered that there was inadequate justification for taking a power to make regulations for the deregulation of private utilities under the Bill. They considered that Ministers should explain more fully the proposed use of the power and unless the Government can fully justify it, the breadth of the power should be narrowed.”

In their response, the Government said:

“The power is limited by our international obligations. This means that we must retain some regulation of private utilities in order to comply with our trade agreements such as notice requirements and rules on conditions for participation and award criteria.”

How does that limitation play out in practice? What parts of regulation will be hard-locked into the system by it, and what parts will be open to amendment by the clause? In addition, does a mechanism exist to reapply regulation where it has been disapplied by the clause? It seems wrong for it to be the case that we could disapply bits of the Bill quickly but, should we realise that it was a mistake or maybe want to disapply the provisions only temporarily, the bar to reapply an existing regulation under the Bill would be a lot higher. Can the Minister inform me how that can be done, and what can be done in those cases?

As I mentioned, we are minded not to oppose the clause, but I would be grateful if the Minister could address some of those points.

[Alex Burghart]

Under the Bill, we have already reduced the regulatory burden for all types of contracting authorities, not just private utilities. Because the four sets of regulations will be streamlined into a single regime, it will be clearer for public authorities, which may currently need to use two or three of these sets of regulations, what rules they need to follow. All contracting authorities will benefit from a simpler, more flexible and commercial system that better meets our country’s needs while remaining compliant with our international obligations. We think it is right to go further for private utilities, as they operate in markets that are regulated in other ways—for example, by regulators such as Ofgem—and are more competitive and commercial.

As the hon. Member for Vauxhall said, the UK is party to trade agreements—for example, the UK-Switzerland trade agreement and the UK-EU trade and co-operation agreement—that require us to ensure that private utilities allow suppliers from those countries to participate in procurements covered by the relevant agreement. Under those agreements, suppliers from those countries have access to procurements by private utilities operating in sectors such as gas and heat, electricity, water, transport services and ports and airports. It is right that we are deregulating utilities, because they operate in different markets and we must have a pragmatic approach.

Question put and agreed to.

Clause 117 accordingly ordered to stand part of the Bill.

Clause 118

Regulations

Amendments made: 75, in clause 118, page 75, line 21, at end insert—

“(da) section 52 (key performance indicators);”.

This amendment would apply the affirmative procedure to an exercise of powers by a Minister of the Crown under clause 52.

Amendment 76, in clause 118, page 75, line 23, leave out paragraph (f).

This amendment is consequential on the Government‘s intention to replace the power in clause 64 with the substantive provision in NC15.

Amendment 77, in clause 118, page 75, line 29, at end insert—

“(la) section (Trade disputes) (trade disputes);”.

This amendment would apply the affirmative procedure to an exercise of powers by a Minister of the Crown under the new trade disputes clause in NC11.

Amendment 114, in clause 118, page 75, line 39, at end insert—

“(ua) section 123(6) (exclusion of devolved Welsh authorities);”.

This amendment would subject the power added by Amendment 115 to the affirmative procedure.

Amendment 78, in clause 118, page 76, line 21, at end insert—

“(ca) section 52 (key performance indicators);”.

This amendment would apply the affirmative procedure to an exercise of powers by the Welsh Ministers under clause 52.

Amendment 79, in clause 118, page 76, line 26, at end insert—

“(ha) section (Trade disputes) (trade disputes);”.

This amendment would apply the affirmative procedure to an exercise of powers by the Welsh Ministers under the new trade disputes clause in NC11.

Amendment 80, in clause 118, page 76, line 47, at end insert—

“(ca) section 52 (key performance indicators);”.

This amendment would apply the affirmative procedure to an exercise of powers by a Northern Ireland department under clause 52.

Amendment 81, in clause 118, page 77, line 1, at end insert—

“(da) section (Trade disputes) (trade disputes);”.

This amendment would apply the affirmative procedure to an exercise of powers by a Northern Ireland department under the new trade disputes clause in NC11.

Amendment 82, in clause 118, page 77, line 15, leave out from “under” to end of line 16 and insert “any of the following provisions”.

This amendment is preliminary to Amendment 83.

Amendment 83, in clause 118, page 77, line 18, at end insert—

“(a) section 90 (treaty state suppliers: non-discrimination);

(b) section (Trade disputes) (trade disputes);

(c) section 111 (powers relating to procurement arrangements).”—(Alex Burghart.)

This amendment would apply the affirmative procedure to an exercise of powers by Scottish Ministers under the new trade disputes clause in NC11.

Question proposed, That the clause, as amended, stand part of the Bill.

[Alex Burghart]

Clause 118 sets out the relevant procedures associated with the making of regulations under the Bill. They must be exercised by statutory instrument or equivalent powers in relation to Scotland and Northern Ireland.

Where a power is exercised by a Minister of the Crown, the powers listed in subsection (4) are subject to the affirmative procedure, those made under clause 42 are subject to the made affirmative procedure and, with the exception of commencement regulations, the rest are subject to the negative procedure.

Where powers are exercised by Welsh Ministers, those set out in clause 118(10) are subject to the affirmative procedure and all other powers are subject to the negative procedure. Similarly, where powers are exercised by a Northern Ireland Department, those set out in subsection (12) are subject to the affirmative procedure, and all others to the negative. Regulations made by Scottish Ministers under clauses 90 and 111 are subject to the affirmative procedure applicable in proceedings of the Scottish Parliament.

[Florence Eshalomi]

Clause 118 outlines the powers and restrictions related to regulations that can be passed under the Bill. We all understand the point of secondary legislation. We do not oppose its use in this Bill, nor do we oppose the clause. However, we share the concern of the Delegated Powers and Regulatory Reform Committee about the scale of the use of delegated powers. Its report states:

“This report identifies multiple failures in the Memorandum to adequately explain and justify very broad delegations of power which enable implementation of significant policy change by delegated legislation. This would give us cause for concern at any time but is particularly disappointing as it comes so soon after the publication of our report, Democracy Denied? The urgent need to rebalance power between Parliament and the Executive, in November 2021, and of revised guidance for departments on the role and requirements of this Committee.”

The DPRRC’s concern was shared by Chris Smith, e-procurement and procurement consultant at CA Procurement Consulting Ltd. In his written evidence to this Committee, he said:

“The latest version of the Bill relies heavily on secondary legislation, which has not yet been published, and I am concerned that the level of compliance of Contracting Authorities with transparency regulations and policies will not be improved by this Bill as it is currently worded.

Currently, there remains a significant gap in transparency and the data captured in the existing online systems that not only undermine accountability and scrutiny of the use of public funds but also means that the government cannot rely on obtaining accurate data from these systems, for example, on SME participation. The same goes for the private sector.”

I think it is fair to say that I have made my feelings clear to the Minister throughout the Committee’s proceedings about the use of secondary legislation. I will not go through all those points again—I am sure he can refer back to them—but I still have concerns about how heavily the Bill relies on secondary legislation.

It is not that we object to the use of secondary legislation, nor do object strongly to an instance of its use throughout the Bill. At the end of the day, it is an option that the Government can use to legislate. However, as the Minister knows, it was well within the Government’s gift to set out more information in the Bill so that we could scrutinise further what some of the powers will mean in practice. They could have either set out the scope of what regulations should do, or scrapped the need for regulations entirely and spelled out the provisions in the Bill. Instead, we have had hypothetical debates—some powers may be granted, and some may not; they may transform our procurement system, or they may go unused. It is a bit frustrating to produce legislation in that way.

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[The Chair]

I look forward to hearing about the Minister’s batteries.

[Alex Burghart]

Well, Mr Mundell, I reassure the Committee that my batteries are, if not at 100%, still perfectly green; I have many Duracell hours left in me.

We have consulted with the DPRRC. The hon. Lady will know from earlier discussions that we require a very high degree of flexibility in a lot of areas of the Bill, and that requires secondary legislation, but she can rest assured that a lot of the secondary legislation will see public consultation before it is formulated. She will also have heard me refer to the affirmative procedure, which we intend to use for a lot of the secondary legislation. That means that it will be considered in Parliament, which will give it a good level of public scrutiny. I hope that she will take that as reassurance.

Question put and agreed to.

Clause 118, as amended, accordingly ordered to stand part of the Bill.

Clause 119

Interpretation

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clause 120 stand part.

[Alex Burghart]

Clause 119 defines words and phrases of general application in the Bill that are not listed elsewhere—for example, “appropriate authority” is defined as a Minister of the Crown, Welsh Minister or Northern Ireland Department. Importantly, the clause also sets out the definition of “small and medium-sized enterprises”, and provides that an appropriate authority may amend by legislation the definition of an SME. The clause includes some concepts of wider application in the Bill, setting out, for example, that value of money thresholds are inclusive of VAT.

Clause 120 sets out where in the Bill the definitions of certain concepts of wider application can be found.

[Florence Eshalomi]

Clauses 119 and 120 relate to interpretation and definitions. Clause 119 defines terms, such as SME, that are common in the Bill but are not defined in individual clauses where they are mentioned; clause 120 contains a useful index of defined terms and where their definition appears in the Bill. We believe that the clauses are necessary and useful for navigating the many different terms that appear in the Bill, and we do not intend to oppose them.

Question put and agreed to.

Clause 119 accordingly ordered to stand part of the Bill.

Clause 120 ordered to stand part of the Bill.

Clause 121

Power to make consequential, etc, provision

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Clauses 122 and 123 stand part.

Government amendment 84.

Clause 124 stand part.

[Alex Burghart]

Clause 121 provides a power to make regulations that make supplementary, incidental or consequential provision. It is a standard clause that means that the Government can make regulations that ensure that the Procurement Act—as it will be—works effectively with the rest of the statute book. It includes the power to amend primary legislation.

Clause 122 explains the extent of the Bill—that is to say, the jurisdictions in which it will form part of the law. The Bill’s provisions extend to each of the jurisdictions of the UK. The majority of provisions apply to all procurement by contracting authorities in England, Wales and Northern Ireland, including matters that we agree are within the scope of devolved competence. The Bill also extends to Scotland and applies, in limited respects, to procurement by devolved Scottish contracting authorities.

Clause 123 is a standard clause setting out when the Bill’s provisions will have effect as law. Some provisions will commence when the Bill is passed and some will commence upon regulations being made by a Minister of the Crown. As we have discussed, however, and following agreement with the Welsh Government, that power can be exercised in relation to devolved Welsh procurements only with the consent of the Welsh Ministers.

We have committed to provide six months’ notice of the new regime coming into force from when the Bill is passed. We expect that to be spring 2024 at the earliest. The existing legislation will apply until the new regime goes live, and it will also continue to apply to procurements started under the old rules. Frameworks, dynamic purchasing systems and qualification systems let under the old rules can remain live for their planned lifespan.

Clause 124 is mainly for citation purposes, and does not necessarily cover all aspects of the Bill. Once the Bill receives Royal Assent, it will be cited as the Procurement Act 2022. Amendment 84 will remove the amendment made in the other place in respect of the financial privilege of the House of Commons.

[Florence Eshalomi]

Amendment 84 is a privilege amendment. It is added to Bills by convention to avoid the violation of the privilege that the House of Commons rightly enjoys over the ability to charge people and public funds. The amendment is a quirk of our constitution for Bills beginning in the Lords, and we are, of course, happy to affirm the privilege of this House.

Clauses 121 to 124 are standard parts of Bills in this House. Although there can sometimes be contention about when Bills should commence, it is welcome that, on this occasion, there is no such controversy and the Bill will commence on the day it passes. Of course, we do not object to that, or to the other provisions of the clauses. We are happy for them to stand part of the Bill.

--- Later in debate ---

[Alex Burghart]

I am grateful to the hon. Lady for supporting the clauses. As we are nearing the end of our debate today, I will come back on a couple of points that the hon. Lady made so that we have covered everything off.

Before the lunch break, the hon. Lady kindly supported the clauses in part 9 of the Bill. As mentioned, if suppliers are breaching contractual terms, that will be a matter to be resolved pursuant to those contractual terms. The contracting authority will actively monitor compliance of these types of matters under its usual contract management and monitoring procedures, which will be strengthened by the Bill. I hope that adequately answers the hon. Lady’s question such that there is no longer any need to confirm in writing.

Similarly, in the closing stages of Tuesday’s sittings, the hon. Lady asked whether contracts already entered into following a procurement process will be terminated automatically if a contractor subsequently becomes an excluded supplier. Termination of contracts is often covered by contractual terms, but clause 77 gives contracting authorities an implied right to terminate a contract should a contractor become an excluded or excludable supplier. Although it is not automatic, authorities are able to terminate in the circumstances set out in clause 77.

Given the range and variety of contracts that contracting authorities will enter into, they need to be able to consider individual circumstances and the fulfilment of contract deliverables. Automatic termination of contracts when a supplier becomes excluded or excludable takes no account of other contractual obligations and would have serious implications for the delivery of the essential goods, services and works on which the public rely.

There is no need to mandate automatic termination. Contracting authorities should be trusted to exercise discretion appropriately, including in relation to national security. As with excluding a supplier prior to contract award under the national security ground, a contracting authority will be required to seek approval from a Minister to terminate a contract on this ground. I hope that gives the further detail the hon. Lady was looking for.

[Kirsty Blackman (Aberdeen North) (SNP)]

If I can crave your indulgence, Mr Mundell, I will not be present at the Committee’s next sitting, so I want to say thank you very much to the Clerks, to Hansard and, in particular, to two staff members, Josh Simmonds-Upton and Sarah Callaghan, who have been excellent in providing me with valuable support.

Procurement Bill [ Lords ] (Ninth sitting)

Alex Burghart Excerpts

Committee stage
Tuesday 21st February 2023 Public Bill Committees

[Florence Eshalomi]

I thank my hon. Friend for that really valid point. It is important that we look at what has happened. Over the years, there have been many examples of outsourced services in which staff working conditions have been eroded and staff pay has not kept in line with inflation. The situation that we are seeing now is that staff are walking—they are voting with their feet and choosing to lose a day’s pay by going on strike. That is a result of some areas of outsourcing. From catering to social care, from cleaning to IT and HR services, almost no area of public services has been left untouched.

Too often, outsourcing is accompanied by deterioration in the pay, pensions and terms and conditions of the staff delivering the service. That almost creates a two-tier workforce of directly employed staff working alongside contractor staff, as well as a two-tier workforce within the contractor. The Transfer of Undertakings (Protection of Employment) Regulations can offer some limited protection for staff who are transferred to an outsourced contract, but staff recruited by the contractor after transfer have no such protection. Those inferior conditions can translate to lower costs for contractors, which can play a crucial role in their offering a cheaper tender and winning contracts.

A major flaw of this model is that it creates a false economy. The cost of the service is superficially low, but over time, staff have to claim universal credit. People retire without enough to live on and have to claim pension credit. Lower pay and insecure work have a negative impact on mental health. The decline in the number of decent public sector jobs in the community has a chilling effect on the local economy. The dots are not joined and the wider economic costs not considered.

In some regards, the supposed benefits of outsourcing have been eroded by the reality of contracting out services in recent years. There has been a notable turn towards insourcing—the process by which a public authority takes a service that has been contracted out and brings it in-house to be delivered by directly employed staff. However, we are still a very long way from the presumption that services should be outsourced only if it can be shown that the work cannot be delivered just as effectively in-house. Hundreds of thousands of carers, cleaners, porters, security staff and catering staff in our public services workforce are among the worst-off and most insecure workers in the UK.

Creating a check on such practices should be an objective of the Bill. That could be achieved through a public interest test to require contracting authorities to think holistically and outsource public services only when it is demonstrably in the public interest and when a robust assessment provides clear evidence that the services could not be better delivered in-house.

If a contracting authority is considering outsourcing public services that are currently delivered in-house, or where contracts are due for renewal, it should ensure that outsourcing or re-contracting passes a pre-procurement test and provides greater public value than direct service provision. The new clause would require the contracting authority to

“demonstrate to the public, service users and its employees that it has thoroughly assessed the potential benefits and impact of outsourcing the service in question against a public sector comparator with assessments being based on criteria to be set by the Secretary of State from time to time, including taking a five year consideration of—

(a) service quality and accessibility;

(b) value for money of the expenditure;

(c) implications for other public services and public sector budgets;

(d) resilience of the service being provided;

(e) implications for the local economy and availability of good work in relevant sub-national labour markets;

(f) implications for public accountability and transparency;

(g) effect on employment conditions, terms and standards within the provision of the service to be outsourced and when outsourced;

(h) implications for public sector contributions to climate change targets;

(i) implications for the equalities policies of the contracting authority and compliance with the public sector equality duty.”

Importantly, the public interest test would take place pre-procurement, and not all services subject to the test would eventually go to market. To increase transparency around those services that enter into the procurement process, the Bill should mandate information about outcomes of the associated public interest test to be published.

Under the new clause, the contracting authority and the provider of the outsourced service would also be required to

“monitor the performance of any contracted service against the public interest test and the stated objectives set by the contracting authority pre-procurement to demonstrate that outsourcing the service in question has not resulted in a negative impact on any of the matters mentioned in subsection (2)(a) to (i).”

Labour is clear that we would run the biggest programme of insourcing for a generation. We recognise the value offered by those delivering outsourced services, but we have concerns about the current scale of outsourcing. New clause 3 would lay out a clear test for outsourcing, ensuring it is done only when it is in the interests of the public, and that we do not hand out public services on the cheap.

We must create a culture of value for money throughout the public sector and avoid waste wherever we can. We believe that the new clause would help to create that culture. I hope that the Minister will give it due consideration and support it.

[The Parliamentary Secretary, Cabinet Office (Alex Burghart)]

It is a pleasure to serve under your chairmanship once again, Mr Mundell. I can feel an air of excited sadness in the room because there is a possibility that the Committee may finish its consideration of the Bill today.

May I begin with a small correction relating to remarks that I made on 2 February when discussing dynamic markets? I stated that the current regime for dynamic markets does not remain open for new suppliers to join at any time. I was confused when I was talking about that; I was talking about the new provisions that we are making for open frameworks, where it is now possible for people to jump on. I just wanted to put that on the record.

New clause 3 would require contracting authorities always to undertake a public interest test when considering whether to outsource or continue to outsource a public sector service. Following the collapse of Carillion in January 2018 and the ongoing difficulties of some companies in the outsourcing sector, the Government’s commercial function undertook a review of what we outsource, why we outsource and how we outsource. It concluded that

“when done well, the private sector can bring efficiency, scale and fresh thinking to the delivery of public services.”

In February 2019, we published the first sourcing playbook, which captured key policy reforms for better outsourcing that contracting authorities should follow when considering how best to deliver Government services. This applies whether the contracting authority decides to outsource and deliver a service in partnership with the private and third sector, insource and use in-house resources, or do a mixture of both. That includes carrying out a make-versus-buy assessment, now referred to as a delivery model assessment, which is mandatory for central Government services in certain situations, such as the introduction of new public services or where there is a need to re-evaluate an existing service, for example because of a deterioration in the quality of delivery. It is important to emphasise that the playbook supports a range of delivery models that should be carefully considered as part of a mixed-economy approach to service delivery.

As well as in-house delivery and outsourcing, different models, such as grant making, may also be available. Hon. Members will recall that when I spoke on clause 3, I referred to the types of contracts regulated by the Bill. In particular, contracts must be for pecuniary interest, which can encompass monetary and non-monetary consideration. Contracts merely for the reimbursement of costs and without further remuneration or other direct benefit to the supplier are not covered. We do not, for example, intend the regime to capture contracts for the deployment of grants.

The sourcing playbook, which is now in its third iteration, builds on policies set out in the first sourcing playbook and is a more agile and appropriate place for this type of provision. I recently met the Business Services Association, which was extremely supportive of the playbook approach.

The tests set out in the new clause would be hugely burdensome for any contracting authority every time it is considering outsourcing or re-letting an already outsourced service. For that reason, I ask that the new clause be withdrawn.

[Florence Eshalomi]

I understand the Minister’s hesitancy about supporting the new clause, which he claims is because of bureaucracy. Does he recognise that many local authorities and others are conducting a big wave of insourcing, including my local authority, Lambeth Council, which decided last year to bring back its cleaning and maintenance service? The feedback from residents was that the contractors providing the outsourced service were not delivering, so the council has now brought it back in-house.

A number of local authorities under different political parties are following in the same vein. The new clause would help us to help them to look at the key issue of value for money and ensure that every pound spent on contracts delivers value for money. The new clause is not about extra bureaucracy, but about taxpayers’ money being spent on the right contracts. Does the Minister agree that the new clause would help those organisations to do that?

[Alex Burghart]

The hon. Lady gives a very good example of how the existing regime allows for outsourcing. We are building on that: the playbook that I described is there to help all contracting authorities to make better decisions about whether they want to outsource or to keep things in-house. She is quite right that there are circumstances in which keeping things in-house is a very good thing, but we feel strongly that the new clause would create a series of unnecessary requirements when the tools to insource are already at the disposal of authorities.

Question put and negatived.

New Clause 5

Carbon reduction plans

“(1) Subject to subsection (4), contracting authorities must obtain, assess and publish a carbon reduction plan from all suppliers under consideration for qualifying contracts before entering into a public contract with any supplier.

(2) In this section, ‘qualifying contract’ means—

(a) a public contract with an average value of more than £5 million per annum (excluding VAT) over the duration of the contract,

(b) any contract to be awarded under a framework agreement anticipated to be greater than £5 million per annum (excluding VAT) in value, or

(c) any contract to be awarded by reference to a dynamic market which is anticipated to be greater than £5 million per annum (excluding VAT) in value.

(3) For a qualifying contract of the type referred to in subsection (2)(a), a ‘carbon reduction plan’ must contain—

(a) the supplier’s current greenhouse gas emissions,

(b) confirmation of the supplier’s commitment to achieving net zero greenhouse gas emissions by 2050 for their UK supply chain, operations, products and services,

(c) intermediate targets for reductions in their greenhouse gas emissions at no more than 5 year intervals, beginning with the date of award of the contract,

(d) as far as they are able, the greenhouse gas emissions attributable to performance of the contract,

(e) as far as they are able, targets for reductions in those greenhouse gas emissions, and

(f) other environmental management measures in effect which will be applied when performing the contract.

(4) For the qualifying contracts of the type described in subsection (2)(b) and (2)(c), a carbon reduction plan should contain the matters specified in subsection (3)(a), (b) and (c) only.

(5) In complying with requirements imposed by the regulations, a contracting authority must have regard to guidance prepared from time to time by an appropriate authority.

(6) ‘Greenhouse gas’ has the meaning given in section 92 of the Climate Change Act 2008, and ‘emissions’ has the meaning given in section 97 of that Act.”—(Florence Eshalomi.)

This new clause would require company-level carbon reduction plans for bidders for certain larger contracts, including information and targets from suppliers on the emissions attributable to the performance of the contract. It also specifies that the Carbon Reduction Plan must be a key performance indicator for certain contracts.

Brought up, and read the First time.

[Florence Eshalomi]

New clause 5 would introduce carbon reduction targets for certain large contracts, in general those worth £5 million or more. The new clause is inspired by the Government’s own procurement policy note 06/21, which outlines their intention to take into account suppliers’ plans to reduce carbon emissions when considering large contracts.

Climate change is the biggest threat we face as the human race. Everyone in this room must recognise and agree that we need to reduce emissions urgently if we are to avoid this crisis. We must not ignore or under-appreciate the impact that reforms to our procurement system will have on our carbon emissions. However, I fear that the Bill is a missed opportunity to deliver real change in environmental standards in the procurement system.

That is particularly true considering what the Government have already chosen to remove from the Bill. Removing amendments on social value and the procurement policy statement, for example, that would have incorporated emissions will do nothing to tackle climate change in our procurement system, and there is hardly anything else in the Bill to drive real progress on carbon emissions.

--- Later in debate ---

The Minister will probably say that these things are already in place, but what protections are there to ensure that future Governments consider them? We are now on our third Prime Minister in my three years and a few months in this place. We must ensure that we have clear targets on the statute book and that we lock these measures into the Bill. That will happen only if we all support the new clause.

[Alex Burghart]

New clause 5 would require contracting authorities to obtain carbon reduction plans from suppliers for contracts above £5 million per annum. In 2021, the Government implemented a procurement policy that required suppliers to provide carbon reduction plans when bidding for major Government contracts. The new clause would limit opportunities to amend and improve the policy as our ambition to achieve net zero progresses.

I assure the Committee that contracting authorities will continue to be able to take account of suppliers’ net zero commitments and carbon reduction plans, environmental targets, and climate change where they are relevant to the subject of the contract. The Bill and our existing policies already allow that in individual procurements, which is absolutely in line with the Government’s commitment to achieving net zero by 2050.

A key Government commitment is to encourage small and medium-sized enterprises into the Government supply chain. We are of course mindful of the impact that policy and legislation have on suppliers. The purpose of the Bill is to reduce unnecessary regulatory burdens in the procurement regime to support SME suppliers in winning Government contracts. In our view, contracting authorities are able to deal with these matters as it stands, and we will not be supporting the new clause.

Question put, That the clause be read a Second time.

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[Florence Eshalomi]

I beg to move, That the clause be read a Second time.

The new clause would disapply section 31(2A) of the Senior Courts Act 1981 where a breach of non-discrimination occurs under clause 89 and is caused by a representation to the contracting authority by a Member of Parliament, a Member of the House of Lords or a senior civil servant. In practice, this would ensure that relief is granted in the case of a court finding that there has been unequal treatment between traders as a result of the type of lobbying seen in the VIP lane scandal during the covid-19 pandemic.

In the debate on amendment 103, tabled by the hon. Member for Aberdeen North, the Minister said:

“We understand—indeed, we agree with—the intent behind the amendment, but the Bill already covers such a scenario via robust requirements for contracting authorities to ensure equal treatment and address conflicts of interest. The bottom line is that if a conflict of interest puts a supplier at an unfair advantage, they must be treated as an excluded supplier and cannot be given a direct award.”––[Official Report, Procurement Public Bill Committee, 7 February 2023; c. 139.]

I do not doubt that VIP lanes would breach provisions relating to equal treatment of suppliers, and I do not doubt that those provisions were broken during the VIP lane scandal. In fact, that was at the heart of Mrs Justice O’Farrell’s ruling in the PestFix case last year, in which she stated that the operation of a high-priority VIP lane was

“in breach of the obligation of equal treatment”.

Despite that finding, the plaintiffs in the case were not awarded remedy, and it is unclear what checks and balances are in place to ensure that a future Government will not rely on VIP lanes, even when they know that their application will fall foul of the law. That is summed up by Mrs Justice O’Farrell’s closing remarks:

“In these proceedings, the Claimants have established that operation of the High Priority Lane was in breach of the obligation of equal treatment under the PCR. However, the court has found that, even if PestFix and Ayanda had not been allocated to the High Priority Lane, nevertheless they would have been treated as priority offers because of the substantial volumes of PPE they could supply that were urgently needed. Although there is public interest in the outcome of this challenge, the contracts in question have been performed (or expired) and it is sufficient that the illegality is marked by this judgment. Therefore the granting of relief does not meet the test in section 31(2B). In those circumstances, the court must refuse to grant the relief sought.”

I believe that, at its heart, that ruling shows the flaws in the current system. In debates on other amendments and clauses, I have argued for more transparency in the Bill in relation to conflicts of interest. The Minister knows that the Opposition believe that shining a light on proceedings as early as possible helps to limit the time in which illegal activities can occur. Surely, however, as the Government rejected our earlier amendments, they must see the need to tighten up the consequences of acting against the law. We know that the use of the VIP lane was illegal, and we know that companies that got into the VIP lane were 10 times more likely to win a contract, but the fact is that we do not know whether there have been any real consequences associated with the use of the illegal VIP lane.

I hope the Minister will agree that the public are rightly angry about the use of the VIP lane. They are angry that billions of pounds were wasted on personal protective equipment that was not up to standard. They expect to see justice when illegal activities are carried out. What is the point of putting laws in place if there are no consequences? New clause 6 would tighten up action against activity that breaches rules on conflicts of interest by ensuring that the courts are able to grant relief when lobbying by MPs, peers or senior civil servants results in unfair treatment. I hope the Committee will support the new clause.

[Alex Burghart]

New clause 6 would, in circumstances where a breach of the non-discrimination principle in clause 89 was caused by a representation to the contracting authority by an MP, lord or senior civil servant, disapply section 31(2A) of the Senior Courts Act 1981 in the context of any judicial review.

Section 31(2A) essentially prohibits a court from granting relief, including awarding damages, where it is highly likely that the conduct complained of did not make a significant difference to the contracting authority’s decision. In other words, the intention of the new clause is to enable a court to grant relief when lobbying for a contract to be awarded to a particular supplier has led to alleged unequal treatment, even where the contracting authority can demonstrate that it would have selected the chosen supplier regardless of any lobbying.

While I understand that the new clause is motivated by a desire to ensure consequences if an MP, lord or senior civil servant lobbies a contracting authority to award a contract to a certain bidder, resulting in the unequal treatment of other suppliers, the Bill is crystal clear with respect to conflicts of interest, and there are consequences if those statutory duties are breached. Clause 81(3) states that if

“a conflict of interest puts a supplier at an unfair advantage”

and if steps to mitigate cannot avoid that advantage, the supplier must be excluded.

Under part 9, suppliers may seek legal remedies, including relief, if they have suffered or are at risk of suffering loss or damages as a result of a breach of statutory duties. Suppliers that have lost out on contracts as a result of such unlawful behaviour are best placed to hold contracting authorities to account.

Additionally, in respect of suspected non-compliances with the Bill, including conflicts of interest that put a supplier at an unfair advantage, an appropriate authority can investigate upon the request of any party, using part 10 of the Bill or other powers, and issue recommendations if commercial practices do not comply with the Bill’s provisions. There is simply no need for the Bill, which has additional remedies for breach of statutory duty, to start interfering with the rule of law applicable to judicial review claims. As a result, we respectfully ask that the new clause be withdrawn.

Question put, That the clause be read a Second time.

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I will make my point on waste mainly in the debate on new clause 8, but it is important that fleet solid support ships are properly monitored and that they do not fall into the current pattern of delays and overspend. While Labour would have directed investment first to British industry and British jobs, the Government unfortunately had other plans. Our objective behind the new clause is to ensure that the contract still works for the British people by ensuring that the number of UK jobs is clear, that SMEs are involved, that UK steel targets are met, that social value remains at the heart of procurement, and that the contract ultimately does not go the way of so many others by experiencing long and costly delays.

[Alex Burghart]

It is a pleasure to respond to the debate on new clause 7, which mandates a review of the procurement of the fleet solid support ships programme and requires findings to be published by the end of the year. Replying to my friend the hon. Member for Islwyn on this subject is sadly reminiscent of the second Anthony Joshua versus Usyk fight, where Joshua bravely, but unfortunately, deployed similar tactics to the ones he had used previously and met the same conclusion. The hon. Gentleman will be delighted to hear that monitoring is already part of the MOD’s approach to the programme. The MOD will track the process of the overall FSS programme, as well as social value and recapitalisation activities, through regular governance forums such as the project delivery board and the recapitalisation and social value committee.

In support of the forums, Team Resolute is obliged to produce regular reports demonstrating the progress achieved. Examples include reports detailing execution against Harland & Wolff’s shipyard infrastructure works commitments, and earned value progress in terms of design development and the ship build. Additionally, regular site visits will be undertaken by expert personnel in the Department.

I assure the hon. Gentleman that the contract will bring hundreds of jobs to the UK. The majority of the contract spend will take place in the UK, with most manufacture activities taking place in UK shipyards in Belfast and Appledore. All three ships will be integrated at Belfast, along with all testing and commissioning. As he knows, these are large ships, second only in length to the carriers. The use of a world-class auxiliary shipbuilder allows for technology and skills transfer to the UK, and for UK capability and employment to sustainably step up to deliver this contract. Team Resolute also said that it intends to use UK-sourced steel wherever it is practical to do so, and steel will be procured in accordance with Cabinet Office guidelines. It is sad to hear the hon. Gentleman talking this great programme down.

All this work will enable early identification and mitigation action against the risk of non-delivery. Key performance indicators for the programme will be reported against, with several relating to UK labour and the UK supply chain. MOD Ministers will receive regular updates throughout the programme, particularly in relation to UK skills development and ramp-up in the initial stages of the contract. That will supplement other regular reporting on FSS that the MOD has committed to providing to His Majesty’s Treasury.

The Bill sets out the framework for public procurement for contracting authorities generally across England, Wales and Northern Ireland. It is therefore not appropriate to set out requirements for one specific project, the timescale for which is finite. For those reasons, I respectfully request that the amendment be withdrawn.

Question put, That the clause be read a Second time.

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Parliamentary sovereignty is paramount in this country, which is why the Secretary of State must report to Parliament. We need to be able to hold the Department accountable for the waste of taxpayers’ money. I hope that the Minister will see this as an opportunity to make the MOD more accountable for public money and ensure that the system as a whole is more transparent.

[Alex Burghart]

I am very happy to play Ray Robinson to the hon. Gentleman’s LaMotta. He will remember fondly, as I do, that Jake LaMotta said, “I fought Sugar Ray Robinson so many times, it is a wonder I don’t have diabetes.” I will cease the boxing chat there, Mr Mundell, lest you get up and bite off my ear, as Mike Tyson did to Evander Holyfield in their second fight.

I am pleased to hear the hon. Member for Islwyn say that value for money and transparency lie at the heart of the Bill, because they do, and it is because of those principles that we feel the new clause is unnecessary. However, it is also unnecessary because the National Audit Office already conducts a yearly audit of the defence equipment plan and undertakes regular audits on defence programmes. Further scrutiny of the performance of defence programmes is undertaken by the Infrastructure and Projects Authority, which tracks the progress of projects currently in the Government major projects portfolio, the details of which are published in its annual review. As an independent statutory body, the NAO decides independently of Government where to focus its resources, and determines what projects and public bodies it audits at what point in time. The new clause would interfere with its statutory independence.

At the heart of the proposal is a desire to see defence procurement improve—an objective the Government share—but I encourage the Committee to follow closely the implementation of the Government’s defence and security industrial strategy, published in March 2021, which will increase the pace, agility and management of the Ministry of Defence’s acquisition process. We respectfully request that the new clause be withdrawn.

[The Chair]

I do not know much about boxing, but I know that when there is no knockout, the judges decide.

Question put, That the clause be read a Second time.

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[Florence Eshalomi]

I beg to move, That the clause be read a Second time.

The new clause would enable a future procurement system to mandate that procurement transactions be carried out in a specific way. It would build on the powers in clause 95 relating to procurement transactions, but take those powers further to ensure that everyone undertaking procurement under this regime uses a well-designed, specified system that is common throughout.

It is rare in a Bill Committee for the Opposition to propose giving unrestrained and optional power to the Government via an amendment or new clause, so I hope the Minister is delighted by our new clause. It is almost a knockout clause, I would say. We understand, and indeed welcome, the measures to introduce some degree of commonality across procurement through methods such as a single online system. Commonality within the procurement system brings many advantages. It can save contracting authorities the time, effort and money of running individual systems; boost the public’s understanding of procurement data and mechanisms, indirectly boosting transparency; and make our procurement system easier to navigate for suppliers, helping SMEs to bid for contracts efficiently, rather than having to shape-shift around the application process.

Around the world, increased commonality has been seen to increase efficiency and create a system that is the envy of the world. The Minister need only speak to one of his own party’s MPs, the hon. Member for West Worcestershire (Harriett Baldwin), about Ukraine’s ProZorro procurement system. Systems such as ProZorro and the Republic of Korea’s procurement system bring in a specified system that is used by everyone and that uses cutting edge digital technology to reduce bureaucracy. That was referenced in the Government’s Green Paper on procurement, which said:

“This lack of standardisation, transparency and interoperability is preventing the UK from harnessing the opportunities that open, common and shared data could bring. The ability to analyse spend, manage suppliers, counter fraud and corruption and see inside the supply chain to ensure compliance with government policies. The experience of other nations (e.g. Ukraine and South Korea) is that driving forward with a clear digital procurement strategy focused on transparency results in greater participation and increased value for money driven by competition.”

There is already international precedent for the introduction of a specified procurement system, and the Government have stated these lofty aims, so why should the Bill not make provision to go further?

Our new clause would not mandate immediate action, because we know that this would be complex and take time to set up. However, should this Government or a future one want to introduce a Ukraine-style system, it would be a shame if they found that difficult under the Bill. I therefore hope that the Minister will agree with us and support the new clause.

[Alex Burghart]

The hon. Lady’s new clause is on the procurement transaction system. We are absolutely delighted with the Opposition’s enthusiasm for our online system.

The Bill already contains provisions for the establishment of the online system for the purpose of publishing notices, documents and other information under clause 93. It also requires the online system to be free of charge and accessible for people with disabilities. Furthermore, as the Committee will remember, clause 95 requires certain information to be shared in a particular way, including through a specified online system, and requires contracting authorities to keep records of any communication between the authority and a supplier that is made for the purposes of, or in connection with, a covered procurement.

The online system will enable everyone to have better access to public procurement data, in particular because the detailed input received during the early design of the Bill from countries such as Ukraine and South Korea, which have specialist knowledge of designing procurement transparency systems. I am honoured to be able to say that my next meeting after this sitting is with the Deputy Prime Minister of Ukraine, at which we will discuss this very issue. I will thank him for his country’s input to our work going forward in the Cabinet Office.

[Florence Eshalomi]

Does the Minister not feel that the meeting would be even more beneficial and fantastic if he were to tell the Deputy Prime Minister that he had accepted the new clause?

[Alex Burghart]

I will be delighted to tell our friends in Ukraine that, because of the advice they gave us earlier, there is no need for the new clause. We have a great partnership with Ukraine, which straddles many areas, and a growing number of them. We have benefited from the Ukrainians’ expertise, and from that of colleagues in South Korea, which has very advanced digital government and economy.

As a result of the work we have done and are doing, citizens will be able to scrutinise spending decisions, suppliers will be able to identify new opportunities to bid and collaborate, and buyers will be able to analyse the market and benchmark their performance against others on spending with SMEs. The Government have already committed to sharing procurement information through the online system, and the new clause would simply replicate requirements that are in the Bill already.

The hon. Member for Vauxhall asked how we know whether future Governments will be bound, but the proposal will happen within the lifetime of this Government. The Government are committed to it, to delivering on it and to learning from the experiences of colleagues abroad. We therefore respectfully ask that the new clause be withdrawn.

Question put, That the clause be read a Second time.

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[Lloyd Russell-Moyle]

Quite right. This housing association had no footprint at all in Brighton and Hove and a very limited footprint in East Sussex. The women who were in that organisation’s housing might find it more difficult to go to them, because it is not a truly independent service.

Whether that is the case or not, what then happened was that the refuges and some of the counselling services that are provided in the city were sub-contracted out to some of the RISE people. So RISE picked up some bits of work, but not all of it. It could not offer the women wraparound support, just support in some very specific areas, so the service potentially became worse for women. A top-slice of the money has been taken out of the area for management and bid-writing fees and costs, which such organisations all take, and given to an organisation that is based nowhere near Sussex and does not have that specialism.

When women then complained and protested during covid, through covid-compliant protests, they were threatened by the police and told their protest was wrong and that they should not be protesting. Interestingly, the police allowed my hon. Friend the Member for Hove (Peter Kyle), the hon. Member for Brighton, Pavilion (Caroline Lucas) and me to address the covid-compliant demonstration. There was no problem with that; it was only as we left that the police pounced on the women organisers, in front of their children, and tried to fine them. That was particularly egregious. I represented those women and said that I would give statements to support them, and in the end the police dropped the case.

Even when women tried to speak up, they were abused and harassed by the police—they were women who have come through domestic violence and who have been RISE service-users. It was important to commission RISE, but it was also important that women themselves had their voices heard. At all stages—in the commissioning and the outcome—women’s voices were removed and shut down. New clause 16 would give that protection.

Even if the Minister does not support the new clause—I would like him to, but I assume he might not—I hope he will reassure us that he will strengthen the section in the guidelines on women-specific services, such as those who have suffered domestic abuse, and place additional emphasis put on ensuring that local women’s voices are heard, while also allowing some of the competitive tendering to be waived. That is already possible, but we need stronger guidelines, particularly for multi-authority procurement. We will push the new clause to a vote, but I hope the Minister provides those reassurances, as I suspect we all broadly agree on the issue.

[Alex Burghart]

New clause 16 seeks to ensure that authorities have regard to social value when carrying out procurement for services to support victims of violence against women and girls. Before I discuss the specifics, I should say that the Committee has debated over several days the centrality to this legislation of the fact that we are moving from a world of most economically advantageous tender to most advantageous tender—from MEAT to MAT. That gives contracting authorities the opportunity to make decisions that are not based solely on economic advantage. That will cover all areas, not just the specific area outlined in the new clause.

There is already a legal requirement in this area. Contracting authorities are already required to consider how social value might be improved for all types of service contracts under the Public Services (Social Value) Act 2012. That Act requires the authority to consider when placing a public service contract

“how what is proposed to be procured might improve the economic, social and environmental well-being of the area where the authority primarily exercises its functions, and how, in conducting the process of procurement, it might act with a view to securing that improvement.”

[Florence Eshalomi]

I thank the Minister for his remarks, but does he understand the concerns raised by local and national women’s charities? They say that the current guidance does not go far enough and, in their experience, they feel the guidance is ignored in many cases or given very little weighting in the contracts that are then awarded. Does the Minister agree that those organisations have valid concerns?

[Alex Burghart]

I understand what the hon. Lady is saying. Obviously, the 2012 Act will continue to apply to procurement of services to support victims of violence against women and girls. Moreover, the public benefit objective in clause 12(1)(b) requires contracting authorities to consider the extent to which public money spent on their contracts can deliver greater social value than it otherwise would, for example by encouraging local specialist service providers that understand the particular needs of the communities they serve.

With the combination of existing legislation and this new legislation, with its emphasis on MAT rather than MEAT, we feel that the duty in new clause 16 already exists in law. I therefore respectfully ask that the new clause be withdrawn.

Question put, That the clause be read a Second time.

--- Later in debate ---

[Alex Burghart]

New clause 18, which was tabled by the hon. Member for Nottingham North (Alex Norris), would allow public authorities to apply their own policies, under which they would not procure from certain countries because of those countries’ human rights conduct.

It is obviously right and good that human rights abuses have no place in public supply chains, but the new clause is unnecessary and would give authorities too broad a discretion to apply blanket boycotts. Although the new clause would not allow for the singling-out of individual countries, it would allow authorities to exclude suppliers from entire nations without any consideration of whether a supplier itself has had any involvement in abuses or of the steps a supplier has taken to self-clean, both of which are important features of the new exclusions regime to manage risk appropriately and fairly.

Excluding suppliers based on where they are located would be disproportionate and in some cases would be contrary to the UK’s international obligations. The Bill already contains a robust regime for the exclusion of suppliers that are unfit to hold public contracts. Schedules 6 and 7 set out a wide range of exclusion grounds that target the most serious risks to public procurement, including modern slavery and human trafficking. We have taken action to strengthen the way in which those terms are defined, so that suppliers may be excluded where there is sufficient evidence that they are responsible for human rights abuses anywhere in the world, whether or not they have been convicted of an offence.

Guidance already exists to help contracting authorities to address human rights risks and there is well-established practice during procurements. The guidance is detailed, at over 40 pages long, and includes sections on managing risk from new procurements to assessing existing contracts, taking action when victims of modern slavery are identified, supply chain mapping, useful tools, training, and questions to ask.

I will also highlight the new debarment regime provided for in the Bill, which allows Ministers to consider whether any supplier meets one of the grounds for exclusion and whether the issues in question are likely to recur. Suppliers on the debarment list face exclusion across the public sector. This is a significant step forward in our approach to supplier misconduct.

We respectfully request that the new clause be withdrawn.

Question put, That the clause be read a Second time.

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Question proposed, That the Chair do report the Bill, as amended, to the House.

[Alex Burghart]

Thank you, Mr Mundell, for chairing so ably and excellently. I thank the Clerks for their fantastic work. I thank my tireless officials, without whose expertise I would not know what to do. I thank Committee members on both sides of the divide. It is only fair to record in Hansard that the Committee has been good-natured, intelligent and at times almost enjoyable. I thank His Majesty’s loyal Opposition for supporting the overall thrust of the Bill, although they do not agree with every detail. We left it in better shape than when it arrived, and I look forward to working with everyone to take it through Report and to Royal Assent.

[Florence Eshalomi]

I echo the Minister’s comments. I formally thank the Clerks—Sarah, Chris and Huw—for their endless emails and helping me to understand the groupings and procedure. I will be honest and let hon. Members know that this is my first time leading on a Bill Committee. Many years ago, trying to tell a girl from a council estate in Brixton that she would be leading for the Opposition on such a technical Bill would have been out of the question.

The issues that we have discussed are so important. I hope the Minister will see from some of the points that we have made and the amendments that we have tabled that we have an opportunity to ensure that procurement works for everybody, including those from council estates, who may not understand it but will see the impact on their everyday lives. I look forward to discussing the Bill robustly with the Minister again as it goes through its next phases.

Procurement Bill [Lords]

Alex Burghart Excerpts

Report stage
Tuesday 13th June 2023 Commons Chamber

1.33 pm

[The Parliamentary Secretary, Cabinet Office (Alex Burghart)]

I beg to move, That the clause be read a Second time.

[Madam Deputy Speaker (Dame Eleanor Laing)]

With this it will be convenient to discuss the following:

New clause 1—Removal from the procurement supply chain of physical surveillance equipment produced by companies subject to the National Intelligence Law of the People’s Republic of China—

“(1) Within six months of the passage of this Act, the Secretary of State must publish a timeline for the removal from the Government’s procurement supply chain of physical surveillance equipment produced by companies subject to the National Intelligence Law of the People’s Republic of China.

(2) The Secretary of State must lay the timeline before Parliament.”

New clause 9—Application of this Act to procurement by NHS England—

“(1) Omit sections 79 and 80 of the Health and Care Act 2022.

(2) For the avoidance of doubt, the provisions of this Act apply to procurement by NHS England.”

This new clause includes the NHS under this Act and procurement by NHS England under the Health and Care Act 2022.

New clause 10—Tax transparency—

“(1) This section applies to any covered procurement for a public contract with an estimated value of £5 million or over.

(2) When assessing tenders under section 19 or awarding a contract under section 41 or 43, a contracting authority must require the submission of a tax report where a supplier is a multi-national supplier.

(3) Where a multi-national supplier fails to submit a tax report, a contracting authority must exclude the supplier from participating in, or progressing as part of, the competitive tendering procedure.

(4) Subject to subsection (5), a contracting authority that enters into a contract with a multi-national supplier must publish a copy of the tax report—

(a) if the contract is a light touch contract, before the end of the period of 120 days beginning with the day on which the contract is entered into;

(b) otherwise, before the end of the period of 30 days beginning with the day on which the contract is entered into.

(5) Where a copy of a contract is by virtue of regulations under section 95 published under section 53(3) on a specified online system, the tax report relating to that contract must be published on the same specified online system—

(a) if the contract is a light touch contract, before the end of the period of 120 days beginning with the day on which the contract is entered into;

(b) otherwise, before the end of the period of 30 days beginning with the day on which the contract is entered into.

(6) A ‘multi-national supplier’ is a supplier with two or more enterprises that are resident for tax purposes in two or more different jurisdictions.

(7) A ‘tax report’ means a report setting out—

(a) the income booked in the UK,

(b) the profit before tax attributable to the UK,

(c) the corporate income tax paid on a cash basis in the UK,

(d) the corporate income tax accrued on profit/loss attributable to the UK, and

(e) any other information specified in regulations under section 95

for the multinational supplier.

(8) A Minister of the Crown may by regulations amend this section for the purpose of changing the financial threshold.”

This new clause would require large multinational corporations bidding for a public contract to provide information about their Income booked in the UK, their profit before tax attributable to the UK, their corporate income tax paid on a cash basis in the UK and their corporate income tax accrued on profit/loss attributable to the UK, and that information to be published.

New clause 11—Public interest—

“(1) Where a contracting authority is considering outsourcing public services that are at the time of consideration delivered in-house or where contracts are due for renewal, the contracting authority must demonstrate that they have considered whether outsourcing or re-contracting provides greater public value than direct service provision.

(2) As part of the duty in subsection (1), the contracting authority should demonstrate that it has assessed the potential benefits and impact of outsourcing the service in question against a public sector comparator with assessments being based on criteria to be set by the Secretary of State, including taking a five year consideration of—

(a) service quality and accessibility;

(b) value for money of the expenditure;

(c) implications for other public services and public sector budgets;

(d) resilience of the service being provided;

(e) implications for the local economy and availability of good work in relevant sub-national labour markets;

(f) implications for public accountability and transparency;

(g) effect on employment conditions, terms and standards within the provision of the service to be outsourced and when outsourced;

(h) implications for public sector contributions to climate change and environmental targets;

(i) implications for the equalities policies of the contracting authority and compliance with the public sector equality duty.

(3) The contracting authority and the supplier of the outsourced service must monitor the performance of any contracted service against the public interest test and the stated objectives set by the contracting authority pre-procurement to demonstrate that outsourcing the service in question has not resulted in a negative impact on any of the matters mentioned in subsection (2)(a) to (i).

(4) The Secretary of State must from time to time set budget thresholds for when a public interest test would be required.”

The new clause would create a process to ensure that contracting authorities safeguard the public interest when considering whether or not to outsource or recontract services.

New clause 12—Protection of subcontractors’ payments under construction contracts—

“(1) A project bank account must be established for the purpose of subsections (2) to (4) in accordance with the following requirements—

(a) the account must be set up by the contracting authority and the contractor under a construction contract as joint account-holders;

(b) the monies in the account are held in trust by the contracting authority and contractor as joint trustees;

(c) the contracting authority must deposit in the account all sums becoming due to the beneficiaries and any disputed sums must remain in the account until the dispute is resolved and any retention monies remain in the account until they are released to the beneficiaries;

(d) due payments from the account must be made to all beneficiaries simultaneously; and

(e) the beneficiaries include—

(i) the contractor;

(ii) all subcontractors where the value of each subcontract is at least 1% of the value (excluding VAT) of the construction contract entered into between the contracting authority and the contractor; and

(iii) any other subcontractor which has specifically requested that its payments be discharged through the account.

(2) Subsections (3) and (4) have application to construction contracts having a value in excess of £2 million (excluding VAT).

(3) Not later than 30 days after entering into a construction contract a contracting authority must ensure that a project bank account is in place.

(4) In the event that a contracting authority fails to comply with this subsection the construction contract ceases to be valid and may not be enforced by either party.

(5) The Secretary of State must provide statutory guidance on the operation of project bank accounts to ensure that such operation is standardised amongst all contracting authorities.

(6) Subsections (7) to (10) apply where retention monies are not protected within a project bank account.

(7) The contracting authority must establish a retention deposit account with a bank or building society which fulfils the requirements of subsection (1)(a) and (b).

(8) On each occasion that retention monies are withheld the contracting authority must lodge them within the retention deposit account and maintain a record of the names of each subcontractor having contributed to the withheld monies and the amount of the monies contributed by each.

(9) Subject to subsection (10), not later than 30 days after the date of handover of each subcontracted works at least 50% of the withheld retention monies must be released, and not later than the date which is 12 months from the date of handover of each subcontracted works the balance of the retention monies must be released.

(10) A contracting authority has a right of recourse to subcontractors’ retention monies but such right is limited to any subcontractor which is in default of its subcontract in having delivered works which are defective and in breach of the subcontract.

(11) Paragraphs (9) and (10) also apply where retention monies are protected in a project bank account.

(12) Non-compliance with subsections (6) to (11) renders any entitlement to withhold retention monies in a construction contract or subcontracts of no effect.

(13) Subsections (6) to (12) do not affect the right of any subcontractor to pursue recovery of any outstanding or wrongfully withheld retention monies against its other contracting party.

(14) The Secretary of State must provide statutory guidance on the operation of retention deposit accounts to ensure such operation is standardized amongst all contracting authorities.

(15) Any dispute under this section is referrable to adjudication in accordance with section 108 of the Housing Grants, Construction and Regeneration Act 1996.

(16) The Secretary of State must carry out a review of the operation of this section within 5 years of it coming into force.

(17) In this section—

“bank” has the meaning given to it in section 2 of the Banking Act 2009;

“building society” has the meaning given to it in section 119 of the Building Societies Act 1986;

“contractor” is the party engaged under a construction contract with a contracting authority;

“construction contract” has the meaning given to it in section 104, Housing Grants, Construction and Regeneration Act 1996;

“handover of each subcontracted works” signifies the date when the works as defined in each subcontract are substantially complete;

“project bank account” is an account set up with a bank or building society which has the requirements listed in subsection (2);

“retention monies” mean a proportion of monies withheld from payments which would otherwise be due under a construction contract, subcontract or any ancillary contract the effect of which is to provide security for the current or future performance by the party carrying out the works;

“subcontract” and “subcontractor” includes sub-subcontracts and sub-subcontractors.”

This new clause ring-fences monies due to subcontractors in construction supply chains through mandating use of project bank accounts and ensuring retention monies are safeguarded in a separate and independent account.

New clause 13—Dependence on high-risk states—

“(1) The Secretary of State must within six months publish a plan to reduce the dependence of public bodies upon goods and services which originate in whole or in part in a country considered by the United Kingdom as a high risk sourcing country.

(2) For the purposes of this section, a country is considered a high risk sourcing country by the United Kingdom if it is defined as either a systemic competitor or a threat in the latest Integrated Review of Security, Defence, Development and Foreign Policy.”

New clause 14—Procurement and human rights—

“(1) A contracting authority may apply a policy under which it does not contract for the supply of goods, services or works from a foreign country or territory based on the conduct of that foreign country or territory relating to human rights, provided that—

(a) the contracting authority has a Statement of Policy Relating to Human Rights, and

(b) that statement of policy is applied consistently and not specifically to any one foreign country or territory.

(2) Within six months of the passage of this Act, the Secretary of State must publish, and lay before Parliament, guidance on the form, content and application of Statements of Policy Relating to Human Rights for the purposes of subsection (1).

(3) Contracting authorities must have regard to the guidance published under subsection (2) when applying a policy in accordance with subsection (1).”

This new clause would enable public authorities to choose not to buy goods or services from countries based on their human rights record. They would not be able to single out individual nations to apply such a policy to, but would have to apply it consistently, and in accordance with guidance published by the Secretary of State.

New clause 16—Eradicating slavery and human trafficking in supply chains—

“(1) The Secretary of State must by regulations make such provision as the Secretary of State thinks appropriate with a view to eradicating the use in covered procurement of goods or services that are tainted by slavery and human trafficking.

(2) The regulations may, in particular, include—

(a) provision as to circumstances in which a supplier is excluded from consideration for the award of a contract;

(b) provision as to steps that must be taken by contracting authorities for assessing and addressing the risk of slavery and human trafficking taking place in relation to people involved in procurement supply chains;

(c) provision as to matters for which provision must be made in contracts for goods or services entered into by contracting authorities, including mandating or enabling the use of forensic supply chain tracing.

(3) In this section— “forensic supply chain tracing” is the process of using forensic techniques to track the movement of goods and services through a supply chain; “slavery and human trafficking” has the meaning given by section 54(12) of the Modern Slavery Act 2015; “tainted”: goods or services are “tainted” by slavery and human trafficking if slavery and human trafficking takes place in relation to anyone involved in the supply chain for providing those goods or services.”

New clause 17—Food procurement—

“(1) A public contract which includes the supply of food must include provisions ensuring that the supply of food under that contract—

(a) is aligned with the Eatwell Guide, and

(b) includes options suitable for a plant-based diet.

(2) The ‘Eatwell Guide’ is the policy tool used to define government recommendations on eating healthily and achieving a balanced diet published by Public Health England on 17 March 2016, as updated from time to time.”

This new clause would require public contracts for the supply of food to be aligned with current nutritional guidelines and to include plant-based options.

Amendment 14, in clause 2,  page 2, line 15, after “funds,” insert “including the NHS,”.

This amendment includes the NHS in the definition of a public authority for the purposes of this Act.

Government amendments 19 and 20.

Amendment 60, in clause 13, page 10, line 11, at end insert—

“(3A) When the Minister lays the statement before Parliament, the Minister must also lay before Parliament a report which sets out—

(a) the Secretary of State’s assessment of the impact of the statement on meeting environmental and climate targets,

(b) the steps the Secretary of State has taken or intends to take in relation to procurement to support the meeting of those targets.”

This amendment would require the Secretary of State to explain in a report laid before Parliament the Government’s assessment of the impact of the national procurement policy statement on meeting environmental and climate targets and to set out any intended steps in relation to the meeting of those targets.

Amendment 4, in clause 19, page 13, line 31, at end insert—

“(aa) must disregard any tender from a supplier that does not guarantee the payment of at least the Real Living Wage to all its own employees and contracted staff and those of any sub-contractors;”

This amendment, together with Amendments 5 to 8, is designed to ensure that no public contract can be let unless the supplier guarantees the payment of the Real Living Wage to all those involved in the delivery of the contract.

Amendment 5, in clause 41, page 28, line 26, at end insert—

“(3A) A contracting authority may not award a contract under this section to a supplier that does not guarantee the payment of at least the Real Living Wage to all its own employees and contracted staff and those of any sub-contractors.”

See explanatory statement to Amendment 4.

Amendment 1, in clause 42, page 29, line 14, at end insert—

“(3A) Provision under subsection (1) must not confer any preferential treatment on suppliers connected to or recommended by members of the House of Commons or members of the House of Lords.”

This amendment is intended to prevent the future use of “VIP lanes” for public contracts.

Government amendments 21 to 23.

Amendment 6, in clause 43, page 30, line 3, at end insert—

“(5A) A contracting authority may not award a contract under subsection (1) to a supplier that does not guarantee the payment of at least the Real Living Wage to all its own employees and contracted staff and those of any sub-contractors.”

See explanatory statement to Amendment 4.

Amendment 2, in clause 44, page 30, line 16, at end insert—

“(4) Any Minister of the Crown, Member of Parliament, Member of the House of Lords or senior civil servant involved in recommending a supplier for a contract under section 41 or 43 must make a public declaration to the Cabinet Office of any private financial interest in that supplier within 10 working days.”

This amendment would implement a recommendation by the National Audit Office that any contracts awarded under emergency provisions or direct awards should include transparency declarations.

Amendment 7, in clause 45, page 31, line 6, at end insert—

“(aa) permit the award of a public contract to a supplier that does not guarantee the payment of at least the Real Living Wage to all its own employees and contracted staff and those of any sub-contractors.”

See explanatory statement to Amendment 4.

Government amendments 24 to 30.

Amendment 61, in clause 58, page 40, line 38, leave out paragraph (c).

This amendment would remove provision allowing a contracting authority to have regard to commitments to prevent circumstances giving rise to the application of an exclusion ground from occurring again when considering whether a supplier should be excluded.

Amendment 62, page 40, line 41, leave out paragraph (e).

This amendment would remove provision allowing a contracting authority to have regard to evidence, explanations or factors not specified elsewhere in the clause when considering whether a supplier should be excluded.

Amendment 63, page 41, line 8, leave out subsection (3).

This amendment removes clause 58 (3), which limits the ability of a contracting authority to require whatever evidence is necessary to make their assessment about whether a supplier is reliable.

Government amendments 31 to 50.

Amendment 17, in clause 68,  page 49, line 15, at end insert—

“(10A) Within a year of the passage of this Act, the Secretary of State must prepare, publish and lay before Parliament a report on the effectiveness of this section in ensuring prompt payment of small and medium-sized enterprises.

(10B) Not later than 6 months after the report has been laid before Parliament, a Minister of the Crown must make a motion in the House of Commons in relation to the report.”

This amendment would require the Government to report to Parliament on the effectiveness of this section in ensuring prompt payment of SMEs.

Amendment 68, in clause 71,  page 51, line 11, at end insert—

“(6A) When a planned procurement notice is published under section 15 or a tender notice is published under section 21, the contracting authority must include a statement of the outcomes which the contract is intended to achieve.

(6B) The contracting authority must commission an independent evaluation of whether each contract delivered the outcomes mentioned in subsection (6A), unless the contract is excluded by regulations under subsection (6D).

(6C) An evaluation under subsection (6B) must—

(a) be performed by an independent body in accordance with UK Government Evaluation Standards, and include a clear recommendation on whether similar further public contracts should be begun, renewed or extended;

(b) be commissioned in time to be completed within six months of contract termination, renewal or extension;

(c) be published in full by the contracting authority immediately it is received from the independent external body.

(6D) The Secretary of State may by regulations specify types of contracts that do not require independent evaluations under subsection (6B).

(6E) Where the independent evaluation under subsection (6B) recommends that similar public contracts should not be begun, extended or renewed, any contracting authority which nonetheless intends to do so must publish its reasons not less than 30 days before the agreement is begun, extended or renewed.”

Government amendments 51 to 55.

Amendment 13, page 78, line 12, leave out clause 119.

Amendment 8, in clause 122, page 82, line 5, at end insert—

“‘Real Living Wage’ means the hourly wage rates for London and for outside London calculated annually by the Resolution Foundation and overseen by the Living Wage Commission (or their successor bodies);”.

This amendment inserts a definition of the Real Living Wage for the purposes of Amendments 4 to 7.

Government amendment 56.

Amendment 64, in schedule 6, page 106, line 7, at end insert

“or an offence under section 86, 88 or 92 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.”

This amendment is intended to ensure that the full range of criminal offences for money laundering are properly captured for the purposes of exclusion from public procurement.

Amendment 65, page 106, line 12, leave out “or 6” and insert ”, 6 or 7”.

This amendment includes the failure of commercial organisations to prevent bribery as an offence which is a mandatory exclusion ground.

Amendment 66, page 106, line 14, at end insert—

18A An offence under Schedule 3 of the Anti-Terrorism, Crime and Security Act 2001 (sanctions evasion offences).”

This amendment is intended to make criminal offences for sanctions evasion grounds for mandatory exclusion from public procurement.

Government amendment 57.

Amendment 15, page 110, line 12, at end insert—

“National security

42A A mandatory exclusion ground applies to a supplier if a decision-maker determines that the supplier or a connected person poses a threat to the national security of the United Kingdom.”

This amendment would move national security from among the discretionary exclusion grounds in Schedule 7 to the mandatory exclusion grounds in Schedule 6.

Government amendment 58.

Amendment 18, in schedule 7, page 113, line 2, at end insert—

“1A A discretionary exclusion ground applies to a supplier if a contracting authority determines that a supplier, within a year leading to the date of tender—

(a) has been found by an employment tribunal or court to have significantly breached the rights of an employee or worker engaged or formerly engaged by it with one or more aggravating features, or has admitted to doing so; and

(b) has not conformed with applicable obligations in the fields of environmental, social and labour law established by national law, collective agreements or international environmental, social and labour law provisions; and

(c) has not taken steps to rectify the situation through—

(i) paying or undertaking to pay compensation in respect of any damage caused by the breach of rights; and

(ii) clarifying the facts and circumstances in a comprehensive manner by actively collaborating with any relevant employment tribunal or court process and the parties thereto; and

(iii) taking concrete technical, organisational and personnel measures appropriate to prevent further breaches of rights of a similar kind.

1B In making a decision on whether a discretionary exclusion ground applies to a supplier under paragraph 1A, a contracting authority must—

(a) evaluate the adequacy of any action taken by the supplier in accordance with sub-paragraph (c) of that paragraph, taking into account the gravity and particular circumstances of the breach or breaches of rights, and

(b) make reasonable provision for the employer and the employee or worker concerned to make representations, which may be made by agreement by a trade association or trade union.”

This amendment would give contracting authorities the discretion to exclude suppliers who have significantly and repeatedly breached the rights of staff in the last year unless they have “self-cleansed”.

Amendment 67, page 113, line 17, at end insert—

“Financial and economic misconduct

3A A discretionary exclusion ground applies to a supplier if the decision-maker considers that there is sufficient evidence that the supplier or a connected person has engaged in conduct (whether in or outside the United Kingdom) constituting (or that would, if it occurred in the United Kingdom, constitute) any of the following offences—

(a) an offence under section 327, 328 or 329 of the Proceeds of Crime Act 2002 (money laundering offences);

(b) an offence under section 86, 88 or 92 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017;

(c) an offence under Schedule 3 to the Anti-terrorism, Crime and Security Act 2001 (sanctions evasion offences);

(d) an offence under section 2, 3, 4, 6 or 7 of the Fraud Act 2006 (fraud offences);

(e) an offence under section 993 of the Companies Act 2006 (fraudulent trading);

(f) an offence under section 1, 2, 6 or 7 of the Bribery Act 2010 (bribery offences).”

This amendment is intended to allow relevant Ministers and Contracting Authorities the power to exclude suppliers from procurement where they have evidence of financial and economic criminal activity, such as fraud, money laundering, bribery or sanctions evasion, but there has not yet been a conviction by a court.

Amendment 16, page 116, line 6, at end insert—

“Sanctions offences

14A(1) A discretionary exclusion ground applies to a supplier if the decision-maker considers that the supplier or a connected person has engaged in conduct constituting—

(a) An offence established in any regulations made under Part 1 of the Sanctions and Anti-Money Laundering Act 2018;

(b) An offence established under Part 5 of the Customs and Excise Management Act 1979.

(2) A discretionary exclusion ground applies to a supplier if the decision-maker considers that there is sufficient evidence that the supplier or a connected person has engaged in conduct outside of the United Kingdom that could result in such an offence being committed if that conduct occurred in the United Kingdom.”

This amendment would create a discretionary exclusion ground where a supplier (or connected person) has violated UK sanctions or export controls, or would have done so if they were in the UK.

Amendment 3, page 116, line 10, at end insert—

“Involvement in forced organ harvesting

14A(1) A discretionary exclusion ground applies to a supplier if a decision-maker determines that the supplier or a connected person has been, or is, involved in—

(a) forced organ harvesting,

(b) unethical activities relating to human tissue, including anything which involves the commission of an offence under sections 32 (prohibition of commercial dealings in human material for transplantation), 32A (offences under section 32 committed outside UK) or 33 (restriction on transplants involving a live donor) of the Human Tissue Act 2004, or under sections 20 (prohibition of commercial dealings in parts of a human body for transplantation) or 20A (offences under section 20 committed outside UK) of the Human Tissue (Scotland) Act 2006, or

(c) dealing in any device or equipment or services relating to conduct mentioned in paragraphs (a) or (b).

(2) “Forced organ harvesting” means killing a person without their consent so that their organs may be removed and transplanted into another person.”

This amendment is designed to give a discretionary power to exclude suppliers from being awarded a public contract who have participated in forced organ harvesting or unethical activities relating to human tissue, including where they are involved in providing a service or goods relating to such activities.

Government amendment 59.

[Alex Burghart]

It is a genuine honour to take the Procurement Bill through Report stage. As the House will know, this is a major piece of post-Brexit legislation that enables us, for the first time in many decades, to reform our procurement system, to the benefit of contracting authorities, suppliers and taxpayers.

I begin with new clause 15 and amendment 52. We are inserting into the Bill a new clause that allows us to meet the UK’s international obligations on record keeping. We are strengthening record keeping obligations in the Bill to more fully reflect our obligations in both the agreement on Government procurement—the GPA—and the comprehensive and progressive agreement for trans-Pacific partnership. They both require records to be kept for a minimum of three years. New clause 15 sets out the obligation on contracting authorities to

“keep such records as the authority considers sufficient to explain a material decision made for the purpose of awarding or entering into a public contract.”

A material decision is one that requires a contracting authority

“to publish or provide a notice, document or other information in relation to the decision”,

or decisions, that are required to be made under the Bill. Records must be kept for three years from award of, or entry into, a contract—or, if the contract is awarded but not entered into, from the date of the decision not to enter into it.

The primary goal of the Bill is to streamline procurement regulations and ensure the overall efficiency of the system, while avoiding overwhelming businesses and contracting authorities with a multitude of rules and regulations—a point that we will no doubt return to this afternoon. As such, and in line with international requirements, the obligations attach only to the award of, and entry into, contracts; they do not apply to the management stage of a contract.

Information on the management of major contracts will of course be put into the public domain, thanks to the Bill’s considerable transparency obligations. That includes information on key performance indicators, such as performance against them; information on amendments to contracts; and information on contract termination, which will require reporting on performance. The time limit already in the Bill on the duty to maintain records of communications with suppliers is being relocated to sit alongside the new record keeping duty. The record keeping requirement is intended to act as a minimum; contracting authorities may of course keep records for longer, and indeed may be required to do so under other legislation.

Government amendments 24 and 25 change the point at which, under clause 52(1), contracting authorities are required to publish key performance indicators. They will no longer have to do so before entering into a public contract. Instead, there will be a requirement to publish them under proposed new subsection (2A) of clause 52. Clause 53, on contract details notices, provides that the details of KPIs will be specified in regulations under clause 95. That is because it is not possible to publish the KPIs before entering into the public contract, as they arise as part of the process of entering into the contract.

Government amendments 19, 20 and 56 make a necessary technical adjustment to ensure that the City of London Corporation is caught by the Bill in respect of its public sector functions, but not its commercial functions. The Bill is intended to apply to local authorities—clause 2 makes it clear that publicly funded bodies are caught by it—but due to its evolution and structure, the corporation does not operate solely as a local authority. It has significant private sector trading activities—for example, it operates private schools and undertakes property management—that are clearly not intended to be caught by the Bill. Unlike district and county councils, being a local authority is not the corporation’s raison d’être; rather, it has some local authority functions bolted on to its wider organisational functions. Without the amendments to clause 2 and schedule 2, there would be a risk of unintended consequences; the Bill would apply to either all the corporation’s activities, including its commercial activities, or none of them, depending on whether the corporation’s balance of income was derived mainly from its trading activities or from public funds in any one year.

Government amendments 21 to 23 resolve a drafting inconsistency between clause 19, which governs the award of contracts following a competitive procedure, and clause 43, which has rules allowing a contracting authority to switch to direct award if no suitable tender was received in a competition. Under clause 19, a tender may be disregarded in a competition if it breaches a procedural requirement set by the contracting authority—for example, if it is submitted late or is over its word count. Abnormally low tenders can also be disregarded, provided the tenderer has advance notification and the chance to respond, pursuant to subsections (4) and (5).

The changes proposed to clause 43 will ensure that only a material breach of procedural requirements will render a tender unsuitable: for example, being 10 words over the set count should not result in an unsuitable tender permitting direct award. Abnormally low tenders cannot be deemed unsuitable unless the supplier has had an opportunity to demonstrate that it will be able to perform the contract for the price offered, as is required under clause 19.

Moving on to amendment 59, paragraph 2(3) of schedule 10 inserts new section 14(5A) into the Defence Reform Act 2014. The DRA, and the Single Source Contract Regulations 2014 made under it, make provision for the pricing of defence contracts to procure goods, works and services that are not let competitively and meet the necessary criteria, including a financial threshold. New section 14(5A) is being introduced to address uncertainty about when an agreement for new goods, works and services should be regarded as an amendment to an existing contract within the scope of the DRA regime, and when it should be regarded as a new contract in its own right. The proposed new subsection currently addresses the situation by identifying two specific categories of existing contract not subject to the DRA regime that, when amended on a non-competed basis to add further goods, works or services, would become subject to that regime.

A third such category of contract not currently addressed by proposed section 14(5) has subsequently come to light. That category covers a single source contract that was below the financial threshold set by the SSCRs that is subsequently amended to add new goods, works and services that take it above that threshold. Amendment 59 will ensure that such contracts are brought within the regulation-making power. A hypothetical example would be a contract that was let competitively for £6 million a few years ago and was not subject to the regulations, where proposed section 14(5) and section 14(3)(b) —which excludes contracts let through competitions—did not apply, and a single source amendment was subsequently placed a few years later for £10 million of new work. That kind of amendment is referred to in section 14(5), and under the proposed new regulations, it would be treated as a new contract for the purposes of the regulations. Under the current wording of schedule 10, the agreement covering the new work would fall under the regulations.

Amendments 38, 32, 36, 37, 39 to 51, 57 and 58 significantly strengthen the exclusions and debarment provisions for exclusion on national security grounds. As the Bill stands, placing a supplier on the debarment list on national security grounds will make it excludable from all contracts within the scope of the Bill. That means that the supplier will be identified as posing a threat to the national security of the UK, but contracting authorities will have discretion as to whether they exclude the supplier in each particular procurement. Having engaged with colleagues in the House and reflected on their concerns, I can confirm that the Government are content to further strengthen those provisions. The new amendments will enable a Minister of the Crown to take a stronger approach in response to a specific risk profile of a particular supplier and make targeted decisions about whether the debarment should be mandatory for particular types of contracts, depending on the nature of the risk.

[Bob Seely (Isle of Wight) (Con)]

I thank the Minister for the work he has been doing on the Bill, and for listening to colleagues—there is more work to be done, but we are certainly moving in the right direction. There is an issue about dual use stuff: we are talking about national security, but for technology such as cellular modules in Government cars that may or may not be being used by competitor nations to listen in to conversations, it is not just a narrow definition that we should be worried about, but a rather more expansive definition of some of the risks posed by that technology and where it is placed in either very specific national security contexts or, more broadly, among things that are critical to our national infrastructure.

[Alex Burghart]

I thank my hon. Friend for his remarks, and for the constructive dialogue that we have had while preparing for today’s debate. As he hopefully knows from what we have already said on this subject—he will hear it again in what I am about to say—the structure that we are putting in place will be able to make exactly that sort of assessment.

If a supplier poses an unacceptable risk in relation to certain goods, such as network communications equipment, the Minister will be able to enter on the debarment list that that supplier is an excluded supplier for contracts for the supply or support of that type of equipment, but that will not necessarily mean that the supplier will be excluded from all other types of contract. Similarly, the entry may also—or as an alternative—stipulate that the supplier is excluded from contracts relating to certain locations or sites, or contracts let by certain contracting authorities. That removes discretion from contracting authorities regarding exclusions where a supplier poses a threat for particular contracts, thereby reducing the risk of a supplier being allowed to participate in a procurement when they should not be.

By allowing this type of targeted and proportionate approach, we can direct that suppliers must be excluded where the risks are unacceptable, and allow contracting authorities to make appropriate choices where a risk is manageable—for example, if a supplier is providing pencils or plastic furniture. We think that approach to national security exclusions is both proportionate and robust, and will allow us to effectively counter the risk posed by some suppliers, including those that many in this House are concerned about.

[Damian Green (Ashford) (Con)]

The Minister has said that he wants a proportionate response and I take that point. I also thank him for the talks we have had about this issue, which is the basis of my support for new clause 1. However, one thing he has not yet addressed is the timescale. Clearly, a lot of kit that we would regard as suspicious under the Bill needs to be removed. Can he give some indication of what sort of timescale we will need to remove it?

[Alex Burghart]

I thank my right hon. Friend for the constructive conversations that we have had in getting ready for today’s debate. He is slightly pre-empting some remarks that I will come to later. I hope that he saw the announcement that the Government made the other day. It is in the nature of the work that we are doing that, first, we wish to remove devices and components that pose a security risk to sensitive sites—I will say more about the timescale for that later. Secondly, we intend through the use of the unit and the provisions in the Bill to prevent similar devices and components from entering our sites in future. It is a two-part process: first, get rid of what is already there and, secondly, prevent other such services from coming in in future.

[Sir Iain Duncan Smith (Chingford and Woodford Green) (Con)]

The Minister has mentioned sensitive sites. I do not quite understand what that phrase means—I am hoping that we will get a proper explanation in due course—but what I would observe is that, as far as I can see, every single Government site is by nature and definition sensitive. The Department for Work and Pensions is very sensitive because any disruption of its payments would render the UK in a terrible state. Is it not the case that all Departments of central Government are by nature sensitive sites and, therefore, should take upon themselves the reality that they must all rid themselves of these things?

--- Later in debate ---

[Alex Burghart]

My right hon. Friend makes a good point, and I thank him for his constructive engagement with me and the Minister for the Cabinet Office on this issue. We understand and hear his concerns about sensitive and non-sensitive sites—not least, we understand his view that the definition could incorporate a broader range of assets, where information gleaned on the movement of officials and politicians could be detrimental to our national security. We will continue to work on that issue with him, both in today’s debate and in the Lords debate that will follow it. I am sure that we can reach a sensible conclusion that will be to his satisfaction.

[Bob Seely]

If I remember correctly, in January, the security services took apart a UK Government vehicle because data was being transferred via a Chinese cellular module, a Chinese eSIM. We do not know who was in that car—whether it was the Defence Secretary or the Prime Minister. Evidence from a separate Tesla car scandal suggests that it would be possible for Chinese engineers to record private conversations using cellular modules. Just out of curiosity—I suspect I know the answer—are we ever going to get an update on what happened to that car and what was happening with it?

[Alex Burghart]

My hon. Friend will know that I am not in a position to comment on matters of national security, but he will have heard me say in answer to my right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith) that we understand the view that the definition in the Bill could incorporate a broader range of assets, where information is gleaned on the movement of officials and politicians that could be detrimental to national security.

Amendment 34 will commit a Minister of the Crown to keep suppliers under review for potential investigation for debarment on national security grounds. We recognise that proactive consideration of suppliers will be highly advantageous in minimising the risk of suppliers who pose a threat to our national security being awarded public contracts. The amendment will therefore commit Ministers to proactively consider a new debarment investigation where there is evidence of risk, so that the Government can act effectively and on time.

I am also pleased to announce that the Government will be creating a new specialist unit with dedicated resources within the Cabinet Office to take on and manage this new approach. That new national security unit for procurement will regularly monitor Government supply chains and review pertinent information to determine which suppliers should be investigated for debarment on national security grounds. The unit will be able to draw on the full range of expertise within government and access the latest intelligence, including that from Five Eyes partners. It will be able to respond swiftly to emerging threats. The unit will also carry out investigations of suppliers for potential debarment, which will be overseen by a committee. Following the outcome of an investigation, the committee will make recommendations to the Minister as to whether the supplier should be added to the debarment list. The final decision will be made by the Minister.

[Anthony Mangnall (Totnes) (Con)]

The Minister is making an excellent speech and I agree with the broad thrust of everything he is saying, but in terms of the practical application—how we debar businesses and organisations bidding in through a procurement process—can he just tell us how long an investigation would take? I realise it would be a case-by-case process, but if a procurement tender is put out, and a business or entity bids into it, how long would it expect that investigation to go on before that business or entity is debarred or not?

[Alex Burghart]

My hon. Friend will know that is a length of a piece of string question. In setting up the unit and providing it with resource, we are mindful of the need for it to be able to respond swiftly to emerging threats and to new entities. The unit will not serve its purpose if investigations go on too long. I cannot give him any guarantees on maximum length of time for investigation, but I can assure him that those concerns are very much in our thoughts as we go about establishing this new way of working.

The new unit will also have a role in supporting and upskilling contracting authorities. By directly engaging with them and providing guidance, the unit will help contracting authorities confidently implement the national security exclusion and debarment regime correctly, maximising its effectiveness.

Amendments 26, 27, 29, 30, 31, 33, 35, 38, 53, 54 and 55 are minor and technical amendments to ensure that the exclusions and debarment regimes can function effectively.

I take this opportunity to thank all colleagues who have engaged with us on this, including my hon. Friend the Member for Rutland and Melton (Alicia Kearns), who is not in her place today. She has been instrumental in helping us to formulate these ideas in regard to national security and in particular our commitment to the national security unit for procurement.

The Government are taking national security extremely seriously, as the Bill and the amendments just mentioned make clear. Concerns have been expressed in the House regarding the use of surveillance equipment provided by entities subject to the national intelligence law of the People’s Republic of China, the risks of which we fully understand. I take this opportunity to remind the House that, in November, the Government published a written ministerial statement asking Departments to consider the removal of visual surveillance equipment from Government sensitive sites and to cease any future procurement of such equipment.

Today, we are going further. I commit to this House that, within six months of the Bill’s Royal Assent, the Government will set out the timeline for the removal of surveillance equipment supplied by companies subject to the national intelligence law of China from sensitive sites. I make it clear that we are taking firm and decisive action on this important matter and that we will be held to account for that action. That is why we will provide a clear plan for delivering on it, adhering to the timeline requested by my right hon. Friend the Member for Chingford and Woodford Green. I hope that addresses his and other Members’ wishes that the Government take appropriate action.

If I may, I will address two final points. First, I thank each of the devolved Administrations for their constructive engagement during the drafting and passage of the Bill. I am pleased that the Senedd and the Scottish Parliament have agreed to the procurement aspects of the Bill, which are the vast majority of the clauses. However, despite our best efforts and several amendments, we have been unable to secure full legislative consent motions for the concurrent powers in the Bill relating to the implementation of international obligations. That is disappointing, but not unexpected, given that it is consistent with the position taken by the Scottish and Welsh Governments on the recent Trade (Australia and New Zealand) Act 2023.

I reassure the House that, as with current practice, we will continue to engage and consult with the devolved Administrations if they choose not to legislate for themselves in implementing the UK’s international obligations, in so far as they relate to areas of devolved competence. In the absence of a Northern Ireland Executive, a legislative consent motion for Northern Ireland was not possible. However, the permanent secretary for the Northern Ireland Department of Finance has written to the permanent secretary of the Cabinet Office to welcome the Bill as drafted and the close working relationship that has developed between officials.

Secondly, I take the opportunity to clarify the rules for private utilities where they have been directly awarded rights, for example, through a directly awarded contract at the request of the Department for Transport. Private utilities are within the scope of the Bill only where they have been granted a special or exclusive right to carry out a utility activity, effectively creating a monopoly situation. Clause 6(4) clarifies that the right is not special or exclusive where the right is granted following a competitive tendering procedure under the Bill or otherwise on the basis of a transparent procedure and non-discriminatory criteria. That has the effect, for example, that, if a contract for a utility activity with an incumbent supplier is renewed or replaced without competition, the supplier will have been granted a special or exclusive right. The supplier would therefore be classed as a private utility under the Bill. An example would be where an incumbent train operating company awarded a contract following competition has been directly awarded a new contract under DFT legislation.

[Florence Eshalomi (Vauxhall) (Lab/Co-op)]

Three years ago, in the aftermath of the covid-19 pandemic, vital frontline staff across our NHS were struggling against dangerously low stocks of personal protective equipment. We all heard the stories of frontline workers in the early stages of the pandemic. These stories show us the impact of not procuring adequate reserves for a pandemic such as covid-19, and they show us why we need the right culture to rapidly respond to emergency procurement demands whenever they may show. Sadly, what we saw during the pandemic did not live up to standards. What followed, with the horror stories of frontline workers in the early stages of 2020, was a case study in wasteful and inefficient emergency procurement.

In January, the National Audit Office found that nearly £15 billion was wasted on unused covid supplies. That is £15 billion that could be going towards tens of thousands of full-time nursery places. It is £15 billion that could be going towards clearing the backlog in our NHS. It is £15 billion that could hand every single person in this country £220 and still have change left over. Instead, the incompetence we saw from this Government cost this country a fortune. In fact, the Government’s record keeping was so flawed that the Public Accounts Committee’s July 2022 report on the awarding of contracts to Randox during the pandemic stated it was

“impossible to have confidence that all its contracts with Randox were awarded properly.”

It is not just incompetence that costs the country. During the pandemic, the Government created a VIP lane for those offering to provide PPE. The system was extremely useful for some suppliers, with the Public Accounts Committee finding that one in 10 suppliers coming through the high-priority lane were awarded a contract. That compares with just one in 100 for the ordinary lane. The Cabinet Office and the Department of Health and Social Care also accepted that leads that went through the high-priority lane were handled better. Who was in that lane?

In the Public Account Committee’s report on PPE procurement, it stated

“The British Medical Association and the Royal College of Nursing told us that their organisations did not have access to the high-priority lane, even though they were being contacted by, and therefore would have been able to put forward, credible leads based on the knowledge of their members. The British Medical Association also noted that suppliers which had contacted them, including suppliers trusted by doctors, tried the normal channels of reaching out to the Government but had ‘hit a brick wall’. Care England told us that it had similarly shared the details of potential suppliers but there had been no follow-through.”

Instead, those with contacts with Government Ministers and officials, MPs and Members of the House of Lords were given access to this VIP lane. That included PPE Medpro, a company set up only a few days before but—surprise, surprise—with links to a Tory politician, which was awarded more than £200 million of public money. In total, £3.4 billion of taxpayers’ money in the form of contracts went to Conservative donors and friends. At a time when we were asking people up and down the country to come outside and clap, the Tory Government were giving cash to their donors. The Bill must be used to ensure that that never happens again.

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The Bill is necessary: it is necessary to have procurement legislation and it is necessary that we ensure that it is as sound as it can be. I am not sure exactly how much time we will have for Third Reading, but I hope we will have the opportunity to thank all who took part in Committee, particularly the Clerks who, as ever, have been excellent during the passage of the Bill. We will not oppose the Bill on Third Reading, but we will do what we can to support amendments. Again, I welcome the Government’s commitment to make some changes on the back of conversations that they have had with both Conservative and Opposition Members who have been pushing for change.

[Alex Burghart]

It is a pleasure to wrap up a very interesting Report stage on this landmark piece of post-Brexit legislation that will allow our country to rewrite its procurement rules for the first time in decades.

It is a pleasure to follow the hon. Member for Aberdeen North (Kirsty Blackman), who had interesting reflections on the Bill. One could be forgiven for being able to listen to her remarks and not understand that the SNP has absented Scotland from the legislation. That is a great shame, and I believe that deep down she recognises the potential of the legislation. As the years go by, and small and medium-sized enterprises, and other businesses and contracting authorities in England, Wales and Northern Ireland benefit from the new regime, we will take pleasure in reminding businesses and contracting authorities in Scotland that it was the SNP that chose to keep Scotland out of it.

I touched on new clause 1, tabled by my right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith), in my opening remarks. I am grateful for his saying that he will not push the new clause to a vote today. In return, I am pleased to reaffirm what I said earlier: we are happy to talk to him and other colleagues who are concerned about the definition of “sensitive”, to ensure that it captures the issues about which he is concerned. We do not consider “sensitive” to attach itself just to sites of military significance or intelligence centres controlled by the agencies. It goes further, and we will take his points away regarding ministerial movements.

[Sir Iain Duncan Smith]

May I be clear? On the question I was asking, and have been asking, the Government have moved, particularly in reference to the national security laws of China, but my key point is that the Government should consider that all Departments fall into that category. There should not be any “B” definition. It would be far better if everybody were incorporated into that definition by the time the Bill got to the other place. Supplication would then have to be made for a variation or change, which the Cabinet Office will make a decision about. Start with the power; then let them come and ask for it to be changed. That is the way to do it.

[Alex Burghart]

I thank my right hon. Friend for his comments. He will have heard me say earlier that we understand his views that “sensitive” could incorporate a broader range of assets, where information gleaned on the movement of officials and politicians could be detrimental to our national security.

I reaffirm our commitment to make a statement in the House within six months of Royal Assent, setting out the timeline for the removal from sensitive sites of surveillance equipment supplied by companies subject to the national intelligence law of China. I state again my gratitude to my right hon. Friend for his important work in this area and for the constructive dialogue that we have had with colleagues on the matter.

Amendment 3, tabled by the hon. Member for St Helens South and Whiston (Ms Rimmer), introduces a new ground for the exclusion of suppliers involved in forced organ harvesting. The amendment replicates an amendment made to the Bill in the other House, and subsequently removed by Committee of this House. I reassure her that the Government are not turning a blind eye to the extraordinarily important subject that she raises and highlights consistently.

We are in full agreement that complicity in the abuses associated with the overseas organ trade must not be tolerated. The Government have taken action to address that issue on a number of fronts. The Health and Care Act 2022 prohibits commercial organ tourism. I know the hon. Lady was involved in discussions leading to those provisions being included in the Act. The Government continue to monitor and review evidence relating to reports of forced organ harvesting in China, and maintain a dialogue with leading NGOs and international partners on that very important issue. I reassure her that forced organ harvesting is already covered by the exclusion grounds for professional misconduct. These grounds cover serious breaches of all ethical and professional standards—whether mandatory or not—that apply to different industries and sectors. The mandatory grounds in relation to corporate manslaughter and human trafficking are also relevant in this context. We have sought to limit the grounds—particularly those which, like this one, require an assessment of factual circumstances by the contracting authority—to those where there is a major and particular risk to public procurement. We are not aware of any evidence that a supplier to the UK public sector has been involved in forced organ harvesting, but I want to reassure the hon. Lady that the Bill will be able to deal with this horrendous practice appropriately.

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[Debbie Abrahams]

I just want to make sure that the Minister has not forgotten my new clause 12.

[Alex Burghart]

I absolutely have not, and I am very much looking forward to getting to it after I gone through the intervening amendments. I appreciate the hon. Lady’s enthusiasm.

The mandatory grounds for exclusion cover the types of misconduct that raise only the most serious risks for contracting authorities. We have strengthened the mandatory grounds significantly in comparison with the EU regime, but they cannot and should not cover every offence that could raise a risk to contracting authorities. However, I can offer reassurance that the offences in question could justify discretionary exclusion on the ground of professional misconduct. This means that contracting authorities would have the flexibility to consider excluding the supplier, but could also factor in the nature of the contract being tendered and other relevant considerations in exercising their discretion.

Amendment 67 seeks to add a discretionary exclusion ground where there is evidence of financial and economic crime activity but there has not been any conviction of the listed offences. These concerns would already be caught by the ground of professional misconduct, which permits contracting authorities to weigh up the available evidence in the context of their procurement and use their discretion in determining whether an exclusion would be appropriate.

New clause 9, tabled by the hon. Member for Richmond Park (Sarah Olney), revisits the issues we discussed in Committee on the application of this Bill to certain healthcare services. New Clause 9 would insert a new clause 119 that would amend the Health and Care Act 2022, effectively deleting the power that enables the Department of Health and Social Care to make bespoke procurement regulations for the purposes of certain healthcare services, known as the provider selection regime. Amendment 13 deletes the existing clause 119 that provides a Minister of the Crown with a power to disapply the Bill to enable the provider selection regime regulations to be applied to those healthcare services.

The combined effect of these two amendments would be to stop the Department of Health and Social Care making separate procurement rules for certain healthcare services, and make the Procurement Bill apply to all healthcare services instead. As was discussed in Committee, the idiosyncrasies of healthcare delivery necessitate some special rules. The decision to create a free-standing scheme of healthcare-specific rules was taken in 2021 to give the NHS the tools required to deliver more joined-up patient pathways through the health system and to avoid some of the problems of double regulation of both the existing healthcare rules and the standard procurement rules. Significant effort has been expended and invested in consulting on and developing that free-standing scheme over several years now. All sides of the marketplace, including commissioners and providers in the healthcare industry, are expecting this new scheme to be delivered promptly to meet the policy aspirations that they have been so extensively consulted upon.

The Procurement Bill does not address any special measures tailored to support the healthcare reform made by the Health and Care Act 2022, as these measures have always been intended to be provided for in the new provider selection regime regulations. For example, the provider selection regime would permit direct awards to be made in defined circumstances, such as critical A&E services, that cannot be disrupted or when a certain provider is required to play a pivotal role in an integrated healthcare system. It would be incredibly unhelpful for both schemes at this critical stage, when both these healthcare regulations and the Procurement Bill are on the cusp of delivery, to start attempting to unpick it all now. Doing so would add unacceptable and entirely avoidable costs and delays to both programmes, for no tangible benefit. It would also mean more NHS contracts being subject to the rules of the Procurement Bill without due consideration of the exemptions and specific arrangements required to safeguard sustainable and joined-up delivery of NHS services to patients.

Of course Parliament will have its rightful opportunity to scrutinise the provider selection regime regulations, but it cannot be right to do this through the Procurement Bill for the purpose of killing off a near-ready scheme that supports important healthcare reforms that have already been debated and agreed by Parliament in the Health and Care Act.

Amendment 14, also tabled by the hon. Member for Richmond Park, would explicitly name the NHS in the definition of a contracting authority, a matter also discussed in Committee. Although I understand and entirely agree with the view that NHS bodies should be contracting authorities within the scope of this legislation, there is no need for any amendment in this respect, as the Bill already applies to NHS bodies in its current form.

New Clause 10, tabled by the hon. Member for Vauxhall, would require the submission of a tax report where a bidder is a multinational supplier. The tax reports of winning bidders would then be published. I understand that the aim of this amendment is to encourage contracting authorities to favour suppliers that can demonstrate responsible tax conduct. However, hon. Members will know that the basis on which contracts must be awarded under the Bill is by reference to award criteria that relate to the contract being tendered, not to other matters such as where a supplier pays tax. This is the right principle to deliver value for money for the taxpayer. Crucially, it is also a feature of the UK’s international obligations under the World Trade Organisation’s Government procurement agreement. Of course, the Government expect businesses to take all necessary steps to comply with their tax obligations. It is for His Majesty’s Revenue and Customs to enforce the law on tax, and indeed UK-based multinational enterprises are required to make an annual country-by-country report to HMRC.

Turning to amendment 2, tabled by the right hon. Member for Ashton-under-Lyne (Angela Rayner), we consider that the Bill already has the balance right in terms of achieving greater transparency on direct award. Indeed, save for the small subset of user-choice contracts, it will now be mandatory to publish a transparency notice declaring an intention to award a contract in every case. This will include confirmation of the contracting authority having undertaken a conflicts assessment prior to signature of the contract.

In addition, the Bill also requires the conflicts position to be kept under review and to be revised at key points in the procurement, which will be confirmed via the contract details notice, after the contract is signed. This further ensures contracting authorities comply with ongoing statutory requirements contained in the Bill. Of course, we are all aware that MPs and peers are already required to register their interests, and civil servants are required to confirm annually that their declarations of interest are up to date. Furthermore, the Bill includes an additional safeguard in clause 83(4) so that where

“a contracting authority is aware of circumstances that…are likely to cause a reasonable person to…believe there to be a conflict”

these must also be addressed. We take these matters very seriously, and there is no need for additional provision to cover this issue. We will continue to work with contracting authorities to show that they know the requirements around conflicts of interest and that they are implemented effectively.

On new clause 12, I welcome the ongoing efforts of the hon. Member for Oldham East and Saddleworth (Debbie Abrahams) to improve liquidity for small businesses, including by advocating for and championing the increased use of project bank accounts. We recognise the energy and enthusiasm she brings to that campaign.

As I said in Committee, project bank accounts are most often an effective way to ensure fair payment and to protect suppliers, and they are already the Government’s preferred vehicle for construction contracts where it is cost-effective and cost-efficient. Government Departments have made a commitment to use PBAs in construction projects unless there are compelling reasons not to do so. However, it is not the Government’s position that PBAs should be mandated across all contracting authorities, as they are not always suitable or cost-effective, particularly where the subcontractor is very small or is paid more frequently than monthly, or where the supply chain is short. Instead, we intend to continue educating contracting authorities, through guidance, on the circumstances in which we believe PBAs are practical and effective.

[Debbie Abrahams]

I remind the Minister that new clause 12 covers contracts worth over £2 million, so it is not for all contracts.

[Alex Burghart]

I accept the hon. Lady’s point, but there are other circumstances to consider, which I have just outlined.

We are already working with industry to discourage the withholding of retentions by supporting zero retention for high-quality work pilot projects and reducing the default rate of retentions within certain types of contract to zero. However, we do not support dictating the operation of construction contracts to the degree proposed.

Procurement Bill [Lords]

Alex Burghart Excerpts

Consideration of Lords message
Wednesday 13th September 2023 Commons Chamber

[The Parliamentary Secretary, Cabinet Office (Alex Burghart)]

I beg to move, That this House disagrees with Lords amendment 102B.

It is an honour once again to open the debate on this important Bill, which I am delighted to say is now so close to receiving Royal Assent. The Bill is a key Brexit benefit, delivering a simpler, more transparent procurement framework that will benefit small businesses and meet the needs of UK suppliers and contracting authorities.

Colleagues in the Chamber will also, I hope, remember that, when the Bill was last debated in this House, we offered significant new measures to protect the UK’s public procurement supply chain from threats to national security. Those included new grounds to add suppliers to the debarment list for particular types of contracts that will allow us to ban risky suppliers from bidding for those contracts; the creation of a new national security unit for procurement that will provide dedicated resources in the Cabinet Office to scrutinise national security risks in procurement; and a commitment to publish a timetable for removal of surveillance equipment supplied by companies subject to the national intelligence law of China from Government Department sensitive sites. Earlier this week in the other place, we went further: my noble friend Baroness Neville-Rolfe provided an official clarification of the definition of sensitive sites and committed to an annual written report detailing progress. I am sure this House will welcome our additional agreements and agree that they demonstrate the Government’s unwavering dedication to tackle these issues seriously.

I will deal today with one amendment that the other place sent back to this House, on the subject of organ harvesting. Let me begin by saying that I think all sides of this House are in complete agreement that organ harvesting is a dreadful practice that has no place in our supply chains. The question before us today is whether Lords amendment 102B is the right or necessary one to make, given other provisions in the Bill. In Committee in this House, the Government removed a discretionary exclusion ground for suppliers engaged in forced organ harvesting. The other place has subsequently proposed an amendment in lieu, with some modifications of the original amendment. This new version of the Lords amendment does not cover unethical activities relating to human tissue; it does, however, still cover forced organ harvesting and dealing in devices, equipment or services relating to forced organ harvesting.

I urge this House to reject this amendment for a number of reasons. First, as I have said previously, I do not believe that the amendment is necessary as, crucially, organ harvesting is already dealt with under existing provisions in the Procurement Bill. Under the Bill, any suppliers failing to adhere to existing ethical or professional standards that apply in their industry, including those relating to the removal, storage and use of human tissue, could be excluded on the grounds of professional misconduct. It is worth adding at this point that, as far as His Majesty’s Government are aware, no supplier in the UK public sector has been involved in forced organ harvesting. This means that it is very unlikely that any of our public money is being spent on that terrible practice. As noted above, however, if such a situation did arise, the exclusion for professional misconduct would apply.

Secondly, the amendment has significant consequences for contracting authorities. It extends to suppliers

“dealing in any device or equipment or services relating to forced organ harvesting.”

That is an incredibly broad provision that would be extremely difficult for contracting authorities and suppliers to verify in respect of all supply chains and customer bases. If there were any doubt about whether that discretionary ground applied, local authorities or NHS trusts would need to undertake significant due diligence to satisfy themselves that the entire supply chain and the end user of all goods provided by suppliers—potentially including oxygen masks, IT equipment and so on—were not used in these terrible practices. It would mean that a small business tendering for Government contracts would need to understand where their customers might be using or selling their products, to enable them to genuinely and legitimately confirm that they were not subject to this ground.

More generally, the amendment would create excessive bureaucracy, requiring each and every supplier bidding across the thousands of contracts awarded by contracting authorities each year to declare that they are not guilty of forced organ harvesting, when we know that there is no evidence of that horrific practice occurring in UK public sector supply chains. We believe that such a burden would be unjustified when the Bill already covers this issue.

Thirdly, the Government are already taking steps to tackle the issue of organ harvesting. We have been explicit that the overseas organ trade, or complicity with it, will not be tolerated. For example, by virtue of the Health and Care Act 2022, it is already an offence to travel outside of the UK to purchase an organ. In addition, the Government continue to monitor and review evidence relating to reports of forced organ harvesting in China, and maintain a dialogue with leading non-governmental organisations and international partners on this very important issue. This Bill creates new rules for suppliers and contracting authorities that will hopefully stay on the statute book for many decades to come.

[Sir Iain Duncan Smith (Chingford and Woodford Green) (Con)]

I apologise for being slightly delayed, Mr Deputy Speaker: I did not see this debate pop up on the annunciator. I rushed to ask a question about this topic. Forgive me.

On the issue of organ harvesting, I understand the difficulties with this particular amendment, so while I am instinctively supportive of what the Lords are trying to do, I understand the Government’s arguments. However, there is a way to tighten this up. Organ harvesting is taking place in China—it is a regular occurrence—but I would not rely too much on declarations from supply chains. We have already unearthed the problem that supply chains are under no obligation to do the due diligence that would enable them to know whether companies, or the people they are trading with, have any involvement with organ harvesting. Tightening that up would be great.

On that basis, does my hon. Friend accept that we now have to make sure that China is on the enhanced tier of the foreign agents registration scheme? That would really put power in the Government’s hands to make sure that supply chains were properly checked. Will he say to our right hon. Friend the Prime Minister and to all those concerned that it is time we did so? China is a genuine threat to us, industrially as well as politically.

[Alex Burghart]

My right hon. Friend is an expert on these matters. I thank him for his intervention—I have to say that I was quite surprised that he was not sitting behind me when I stood up in the first place, but I am delighted to see him in the Chamber now. I am sure that my right hon. Friend the Prime Minister will have heard his remarks and will consider them carefully. This is obviously a procurement Bill, and we are doing our best to create the post-Brexit framework that will give us an enhanced ability to improve all aspects of procurement in our society.

In Committee and on Report in this House, we thought it was necessary to tighten up national security considerations to make sure that foreign hostile actors could not get involved in public procurement. We have—as my right hon. Friend knows, because he gave us good advice—taken steps to make sure that we remove technologies that come from those hostile actors from sensitive sites. On the broader point he made at the end of his comments, that is beyond my pay grade, but I have no doubt that those above my pay grade have heard what he has said.

This is an excellent Bill. It is a tribute to the officials who have worked on it and to my predecessors who worked on it in the Cabinet Office. I therefore urge the House to reject the amendment made by the other House and support the Government’s motion.

[Mr Deputy Speaker (Mr Nigel Evans)]

I call the shadow Minister.

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[Ms Marie Rimmer (St Helens South and Whiston) (Lab)]

In this week of all weeks, the House needs to show that our democracy is strong and that we are not intimidated by other nations. The Chinese Communist party has shown that it holds our democracy in contempt. Today we have an opportunity to put tough talk into action.

Forced organ harvesting is a systemic trade that is taking place on an industrial scale in China. Up to 100,000 of its citizens are butchered each year for their organs. This is a state-sponsored crime against humanity. The two or three organs harvested from a healthy young adult are worth over £500,000. Evidence of this crime has been extensively investigated by the China and Uyghur tribunals chaired by Sir Geoffrey Nice KC, the former lead prosecutor at The Hague. At the tribunals, evidence was heard of systematic medical testing of thousands of prisoners of conscience, allowing the oppressive regime to create an organ bank.

I have spoken extensively on the horrors that have occurred due to forced organ harvesting in previous stages of the Bill, so now I will address some of the concerns that the Government expressed in the other place when opposing the amendment. The Government claim that forced organ harvesting will be covered by existing provisions of the Bill. Certain conduct will absolutely not be covered by the existing provisions on professional misconduct. Supply chains can be complex, and improper conduct may often be one step too far removed from the crime for professional misconduct elements to be made out. Trying to cover all the different ethical and professional misconduct regulations across a multitude of industries is not practical. Only by having a specific provision for forced organ harvesting will we ensure that British taxpayers’ money is not funding this horrific trade. Otherwise, it will be all too easy for companies to hide behind complex supply chains.

The second issue that the Government raised in the other place was that there was no evidence of UK organisations facilitating forced organ harvesting, yet there are companies with substantial operations in the UK providing immunosuppressive drugs for transplants in China. There is evidence of companies dramatically raising their stake in the Chinese market over the past few years. Sources on the ground claim that CellCept, an immunosuppressive drug, has been used on Chinese prisoners for transplants. There is no evidence that those individuals consented.

That is why a clear and direct provision relating to forced organ harvesting is necessary. UK taxpayers’ money should not inadvertently be supporting this inhumane trade perpetrated by the Chinese Communist party. There must be the ability or at least the option to stop it. The amendment is not asking for draconian action. It simply gives discretionary powers to exclude a supplier from a procurement contract if there is a connection to forced organ harvesting. That would give the Government the ability to act to prevent the complicity of UK taxpayers in forced organ harvesting.

The amendment must be seen in the context of our country’s wider relationship with China. The Government have extensively talked tough about standing up for our values against China. China is a trading partner that we cannot ignore or close ourselves off to, but that does not mean that we should not take such opportunities as this amendment to do right by our values and by humanity. Only a couple of days ago, the Prime Minister told the Chinese Prime Minister that attempts to undermine British democracy are completely unacceptable and that we will defend our democracy and our security. The amendment gives us the opportunity to use our democracy—the democracy that they seem to hold in contempt—to stand up for our values against China.

I urge colleagues across the House to take this opportunity to send a clear message to the Chinese Communist party, in this week of all weeks, that this House will stand up for our values by keeping Lords amendment 102B in the Bill.

[Alex Burghart]

With the leave of the House, I thank all Members who have made points in this important debate. Let me remind colleagues that the exclusion grounds in the Bill have been selected in the areas of greatest risk to public procurement. I return to the point I made at the start: there is fortunately no single known instance of such practice in the UK public procurement chain. We do not see it as a great risk to public procurement. I welcome the hon. Member for Llanelli (Dame Nia Griffith) to her place and her new role, and I look forward to debating with her and working with her in the weeks and months ahead.