Procurement Bill [HL]

Baroness Hayman of Ullock Excerpts

Report stage
Monday 28th November 2022 Lords Chamber

[Lord Greenhalgh (Con)]

My Lords, I rise because I was named by my noble friend Lord Moylan, and because this is a subject that I feel very passionately about, as someone who spent 16 years as a councillor and six years as a council leader. Indeed, I am very proud of the work we did to collaborate. It is something that came to me a little late in my local government career, because I used to believe in two things: competition and fear—that is, fear of failure—but collaboration is also important in local government.

My noble friend Lord Moylan pointed to the vision we had in west London to come together to collaborate to drive down costs. In fact, when it came to library services, it was very much in the back offices that we could make savings so that libraries could stay open and the public could be served by excellent libraries. We worked very carefully across a whole range of areas, such as highways and helping children across west London who needed safeguarding and support to find potential parents who could look after them, in a way that would not have been possible without collaboration.

I am also a huge fan of mutualisation. I know that is coming up in group 6, but I want to say that as someone who was a pathfinder of the work that my noble friend Lord Maude brought forward. The organisation that was spun out of the council to provide school support services exists today and is trading very well with officers I had as senior officers in Hammersmith and Fulham. They preferred a life outside the council. I pay tribute to that movement. It had real vision behind it. It did not involve competition and was really about empowering people to provide the services that they were already providing in a better and more comprehensive way. I think that was a tremendous pathfinder and I only wish that it could have been rolled out more widely across local government and the public sector.

I probably should have declared my business interests as set out in the register before starting to speak. However, I can honestly tell noble Lords that I have absolutely nothing to do with public procurement in my business life because today it takes a long time. It is really difficult and the barriers to entry are very great. I am sure the purpose of this Procurement Bill is to make sure that public procurement works for the benefit of those services and we can use competition in a sensible way and it can be streamlined. I think the purpose of the amendment from my noble friend Lady Noakes is to ensure that, where local trading companies exist, they will not fall foul of the reasonableness test and things have to be put out to competition. In fact, as a council leader I bought a communications service from the City of Westminster because of the expertise it had in comms. That was an expertise that existed only in Westminster City Council, and I did not think that that needed to go out to competition. So I think we need to be sensible.

As a true loyalist, I support the Government if they can point out how a reasonable test can work to ensure that there is not unnecessary tendering in this instance. Provided I get those reassurances, I am happy to support the Minister in her endeavours to ensure that we sort out these areas and preserve areas such as local authority trading companies that provide an important part of services in local government.

[Baroness Hayman of Ullock (Lab)]

My Lords, I thank the noble Baroness, Lady Noakes, for her introduction to her amendment which was very clearly laid out. Again, I would like to join with other noble Lords who talked about the number of government amendments, not just here but in Committee. People who were here on the first day will probably remember that I was a little bit cross about it. But in response, the Minister has really grappled with our concerns in the lead-up to Report and I appreciate the time that she has spent doing that.

I will be brief. I will just say that we strongly support the noble Baroness, Lady Noakes, with her amendment. She clearly laid out why this is important for local authorities and by including her amendment you increase the efficiency of the public sector when it is structuring the way it delivers its services, much of which do not need to include the procurement laws that we see before us. All I would say is that it is important that we can ensure that local authorities and other public sectors bodies within this area can continue to deliver better public services and make savings, as the noble Lord just mentioned, by collaboration, working together and sharing services. That makes eminent sense, and I would hope that the Minister will be able to reflect on that.

[Baroness Neville-Rolfe (Con)]

My Lords, Amendment 9 tabled by the noble friends Lady Noakes and Lord Moylan—whom I am very glad to see back in this place—seeks to preserve the rules which currently apply to public service collaborations at paragraph 2 and 3 of Schedule 2. It was also very good to hear from my noble friend Lord Greenhalgh with his extensive local government experience.

I agree that the Bill needs to preserve these rules but believe that we have already done so. Paragraph 1(2)—to which the noble Baroness referred—says that a contract is not exempted if the main purpose of the contract could reasonably be supplied under a different contract, and that contract would not itself be an exempted contract. This provision serves to close a loophole where contracts that are mixed—that is that they contain both exempted activities and not exempted activities—might be inappropriately exempted from the regime.

However, unlike the exemptions for specific activities, all types of goods, services and works contracts are capable of being exempted under the vertical and horizontal exemptions, so the second part of the test at Schedule 2(1)(2)(b) is not met. The contract would remain exempt.

While I believe that we have preserved the rules, the Bill needs to be better understood by users and stakeholders. My noble friend Lord Greenhalgh also made some good points about unnecessary tendering. I met the Local Government Association, as I was concerned about this provision, and my officials are engaging with it following its representations to reach a common understanding. They will come back to me with an amendment that could be put forward in the House of Commons to clarify this provision, should one prove necessary. It will take a bit of time. Accordingly, I ask my noble friend to withdraw the amendment.

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[Lord Lansley (Con)]

My Lords, I am most grateful to my noble friend, not least because she referred to Amendment 169 in her helpful introduction to these amendments on utilities. Happily, we have reached the end of the Bill quite early on; that amendment relates to the very last page—page 118—where, in the present draft of the Bill, Commission decisions relating to public contract regulations, utilities and so on were to be repealed. Her explanation is interesting, in that it retains these European Commission decisions as retained EU law for the benefit of the Scottish regime. I am slightly perplexed as to why they were to be repealed in the first place since, presumably, the Scottish regime would have required them for this purpose regardless. However, that is just a question and it is only a matter of curiosity that I ask it.

My Amendment 23 is an amendment to government Amendment 22. As my noble friend made clear, the DPRRC said that this was a skeleton clause and was particularly unhelpful because it disguised the fact that policy had not been developed. I do not know whether that is the case or not; the point is that Ministers have come forward with a proposal for how these exemption decisions should work in relation to utility activities. I remind noble Lords that there are activities, and there are utility activities. The effect of Schedule 2 is to make it clear that certain activities should not be regarded as utility activities because they are in fair and effective competition and there are no restrictions on entry to that market. The decisions that were made were about electricity, gas and oil extraction, production and generation.

That being the case, the policy decisions in government Amendments 17 and 22, which my noble friend has explained, have the effect in Amendment 22 of saying, “These are the existing exemption decisions”. Government Amendment 17 says that, in future, Ministers can add to them or subtract from them by regulation. The point of my Amendment 23 is to ask, “When Ministers were reaching a view as to how these exemption decisions should be made in future, why did they not look at the Competition and Markets Authority, which we have as our own creature for the making of competition-related decisions, and put to it the job of determining whether a given activity in the utilities sector—actually, it would also be true in other sectors if exemption decisions were sought—is in fair and effective competition and there are no restrictions to the market?”

If my noble friend says, “Ah, but when Ministers make regulations, they will of course take advice from the Competition and Markets Authority”, I will be very happy. If she does not say that, however, I will be nervous, because what is the point of having the Competition and Markets Authority able to make such decisions in lieu of what used to be the European Commission’s responsibility if Ministers are going to pre-empt it themselves? I hope that she will be able to give me that reassurance about the use of the CMA for making competition-related decisions.

[Baroness Hayman of Ullock (Lab)]

My Lords, I thank the Government for tabling a lot of the amendments, which have helped to bring clarification around utilities; quite a bit of confusion was expressed in Committee. I also remind the noble Baroness, Lady Neville-Rolfe, who is not currently in her place, that she did say that we should be extremely careful about regulating private utilities in Committee. These amendments seriously have her stamp on them; I thank her for that. The noble Lord, Lord Lansley, made some important points. I hope that the noble Baroness, Lady Bloomfield, listened carefully and can give the reassurances that he requested.

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Moved by

[Baroness Hayman of Ullock]

33: After Clause 10, insert the following new Clause—
“Procurement principles
(1) In carrying out a procurement, a contracting authority must pursue the following principles—(a) promoting the public good, by having regard to the delivery of strategic national priorities including economic, social, environmental and public safety priorities,(b) value for money, by having regard to the optimal whole-life blend of economy, efficiency and effectiveness that achieves the intended outcome of the business case, (c) transparency, by acting openly to underpin accountability for public money, anti-corruption and the effectiveness of procurements,(d) integrity, by providing good management, preventing misconduct, and control in order to prevent fraud and corruption,(e) fair treatment of suppliers, by ensuring that decision-making is impartial and without conflict of interest, and(f) non-discrimination, by ensuring that decision-making is not discriminatory.(2) If a contracting authority considers that it is unable to act in accordance with any of these principles in a particular case, it must—(a) take all reasonable steps to ensure it does not put a supplier at an unfair advantage or disadvantage, and(b) publish a report within 90 days setting out the principles with which it could not act in accordance and its reasons.”Member’s explanatory statement
This amendment would require contracting authorities to pursue a series of principles when carrying out procurements.

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[Baroness Hayman of Ullock (Lab)]

My Lords, I have a number of amendments in this group. First, Amendment 33 refers back to the principles that we debated at length in Committee; they were originally in the Government’s Green Paper and were consulted on. Our concern is that those principles were then left out of the Bill even though the objectives were included, so my amendment

“would require contracting authorities to pursue a series of principles when carrying out procurements.”

Amendments 35 and 36 in my name look to

“require social and public value to be considered in the procurement objectives.”

We believe that social and public value are important requirements for any contracting authority to consider, so I have asked for that to be put through to the procurement objectives. This would encourage anyone contracting, for example, to work with local suppliers; to encourage contractors to reduce their CO₂ emissions; to encourage the hiring of more apprentices; and to encourage greater diversity. If you are going to deliver the levelling up that the Government are so keen on and achieve net zero, it is important to include these principles.

We know that social value is included in the national procurement policy statement but it is not referred to in the Bill itself. We also know that public benefit is mentioned in the Bill, but that is a pretty vague concept. It is not clear to us how social value would sit within that framework.

I also have Amendment 46. We debated at length in Committee the national procurement policy statement. Many concerns were raised about the Government expecting Members to take at face value the fact that certain things can be included in the NPPS, but, of course, we have absolutely no guarantees other than that the Government are saying that they will be. Clearly, once the Bill becomes an Act, we will need to see a new NPPS, so we believe that the Bill should include the set of principles that need to be within that NPPS so we can have confidence that it will deliver what it needs to do.

My Amendment 48 aims to subject the NPPS statement and amendments to the affirmative procedure so that the existing one will remain in force if, for any reason, a new statement is rejected. We think this is an important fallback position.

Finally, my Amendment 96 creates a process to ensure contracting authorities safeguard the public interest when considering whether to outsource or recontract services. This is something that has been raised with us by a number of different contracting authorities that want that flexibility.

There are a number of other amendments in this group which we support, and I will just draw attention to a few. My noble friend Lord Hunt has an amendment on adding accessibility to the objectives. The noble Baroness, Lady Worthington, has an important amendment on defining public benefit. We know how strongly she feels about the environment and, again, we have debated that at length. It is really important that we do not lose that in the further discussions. The noble Lord, Lord Lansley, has a number of amendments that we support, and we look forward to hearing his introduction to them.

Finally, it is really important there is clarity around principles and objectives as this Bill goes through the process of becoming an Act. Good sentiment from the Government and the Minister are not sufficient to ensure that we actually have good procurement at the end of the day. That is what we want to see. I beg to move.

[Baroness Worthington (CB)]

My Lords, I will speak to Amendment 42 in my name in this group and in support of Amendments 46 and 47. I will keep my comments brief. We had a very good debate in Committee about what should go into the Bill in relation to the principles that will guide procurement. In my amendment, I sought to be as precise as possible and selected two specific issues relating to climate change and biodiversity loss. The reason for that is that it has been pointed out to me that society’s priorities shift over time and primary legislation should be regarded as very serious: you therefore should not put a long shopping list of things into it. However, on these two issues, I cannot imagine a time henceforth when we will not be concerned about the impacts of climate change or biodiversity loss. The Government have a huge lever for change to drive investments into solutions. It would be a great shame if we were not to make it very clear in the Bill that this lever is something that we are willing and want to use.

The more the public purse can create markets and drive investment, the more we can rely on the private sector to come forward with innovation. It will bring down the cost over time. If we do not use public procurement, we will be expecting more from our private sector, and it will debatable whether it will be able to enter into markets that are highly mature and overcapitalised. We are not talking about a level playing field here. If you want private solutions to come in, you have to support them either through government policy, through taxation or through procurement. This Bill is a huge lever that I hope we will pull.

Although I would be delighted to test the will of the House of Amendment 42, it is actually more important that we put these principles in on the operational aspects of this Bill, in which case Amendments 46 and 47, which relate to national policy planning guidance, are hugely important, and I support both of those amendments. I look forward to hearing those who speak to them and to the Government’s response.

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This has been a long debate. I believe that I have made a strong case for keeping the framework of the Bill as it is, but obviously it will also be important that the NPPS contains the right policy provisions. I respectfully request that these various amendments be withdrawn following the reassurances I have been able to give.

[Baroness Hayman of Ullock (Lab)]

My Lords, I must say that I am pretty disappointed with the Minister’s response to my amendments, particularly to those on the NPPS. I give notice that I intend to test the opinion of the House on Amendment 46, when we reach it. I also let the noble Lord, Lord Lansley, know that, if he chooses to test the opinion of the House on his Amendment 47, we will support him. In the meantime, I beg leave to withdraw Amendment 33.

Amendment 33 withdrawn.

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Moved by

[Baroness Hayman of Ullock]

46: Clause 12, page 9, line 8, at end insert—
“(aa) give due regard to the following principles—(i) promoting the public good, by having regard to the delivery of strategic national priorities including economic, social, environmental and public safety priorities,(ii) value for money, by having regard to the optimal whole-life blend of economy, efficiency and effectiveness that achieves the intended outcome of the business case,(iii) transparency, by acting openly to underpin accountability for public money, anti-corruption and the effectiveness of procurements,(iv) integrity, by providing good management, preventing misconduct, and exercising control in order to prevent fraud and corruption, (v) fair treatment of suppliers, by ensuring that decision-making is impartial and without conflict of interest, and(vi) non-discrimination, by ensuring that decision-making is not discriminatory,”Member’s explanatory statement
This amendment would require a Minister to consider a set of principles before publishing the national procurement policy statement.

[Baroness Hayman of Ullock (Lab)]

I would like to test the opinion of the House on Amendment 46.

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This Bill presents a vitally useful tool for maintaining or raising standards and preventing good employers being undercut by bad ones. I hope that the Government will take at least something from my proposed amendment.

[Baroness Hayman of Ullock (Lab)]

My Lords, this has been a short debate, but this group contains some very important amendments that the Minister should consider carefully.

I turn first to the amendment in the name of the noble Lord, Lord Fox. He introduced it extremely clearly and explained why he considered it necessary. He made an important point: if you give a contract to somebody who, not a very long time afterwards, is found guilty of the offences outlined in the noble Lord’s amendment, what recourse is there for other people who have bid for that contract and behaved perfectly properly? We know that contracts are often given for a number of years, so this is likely not to be something that happens once in a blue moon; it could become a problem. If the Minister is not inclined to accept the noble Lord’s amendment, I ask her to take his concerns back to her department to see whether there is another way to have some kind of recourse or review if such a situation were to arise.

My noble friend Lord Hendy’s amendment is incredibly important because, as he rightly said in introducing it, we have Clause 29, which looks at excluding suppliers for improper behaviour—he listed many of the improper behaviours that are included in this—but what is not included is what happens if the rights of an employee or worker are breached. Surely the rights of those who work on contracts and work for people should be fully supported by the Government. We have laws on employment rights for a purpose. Surely, in looking at procurement and who to give what are often extremely lucrative contracts to, this Bill should consider employees’ rights and ensure that companies that have behaved improperly by breaching employment rights are excluded.

This seems a very straightforward amendment to add to the Bill. It would give employees more confidence and would give people who are looking to employ people confidence that they are treating their workforce in the way the law of our country dictates. I urge the Minister to support this amendment.

[Baroness Neville-Rolfe (Con)]

My Lords, I thank the noble Lord, Lord Fox, for Amendment 89 on financial and economic misconduct. The amendment would permit the exclusion of suppliers where there is evidence of certain economic and financial offences. Of course, suppliers who commit fraud, bribery and money laundering and have failed to self-clean have no place winning government contracts. There are already mandatory grounds for exclusion that cover the most serious offences of this nature, as set out in Schedule 6. It is worth noting that the scope of economic and financial offences covered is significantly wider than in the EU regime that it replaces, including a broader range of theft, fraud and money laundering offences.

However, the mandatory grounds in Schedule 6 rightly require the supplier or a connected person to have been convicted. By providing for exclusion without the requirement for a conviction, the amendment would require authorities to make a judgment as to whether there is sufficient evidence that offences have been committed in order to apply the ground. They would need to make this judgment at a point when the investigating authorities have not reached a view, which would be very difficult. The exclusions regime requires all grounds to be considered in respect of every bidder in a procurement, so authorities would have no choice about whether to consider these matters.

I thank the noble Lord for drawing our attention to the review of finance and corruption in local government. The recommendation in that review was that we consider whether this proposal is feasible. We have given it careful consideration but are not taking it forward, for the reasons I have already touched on. However, I would add that the very fact pointed out by the noble Lord—that investigations by the authorities into these matters, which can apply to many different areas of regulation, often take considerable time—speaks to the complexity of making these judgments within the contracting authorities. There is no reason to think that they would find this any easier than the relevant and proper authorities. In fact, they would find it harder, so it would be a new burden on those investigating suppliers—it could be a significant one—and on suppliers themselves, which I am unwilling to impose.

I turn now to Amendment 91A, tabled by the noble Lord, Lord Hendy, which introduces a discretionary exclusion for “significant” breaches of workers’ rights. I pay tribute to the noble Lord’s work in this area. In my view, the exclusion grounds already cover the most serious breaches of workers’ rights, so the mandatory grounds in Schedule 6 include slavery and human trafficking offences, offences relating to employment agencies and gangmasters, and refusal or wilful neglect to pay the national minimum wage. These are based on the serious labour offences within the purview of the director of labour market enforcement.

The amendment begs the question of what constitutes a “significant” breach. Unless there is a settled consensus on this point, which I am not aware of, it will be difficult for both suppliers and contracting authorities to interpret. We should remember that suppliers will need to self-declare whether they are subject to any of the grounds, and that contracting authorities will need to consider whether suppliers meet the grounds in each procurement that they run. That is quite wide-ranging in relation to employment rights. Questions of whether a breach is significant, and, indeed, whether it relates to rights derived from statute, common law or international obligations, will consume a disproportionate amount of time and resources. I do not doubt that there are a number of behaviours in different areas which the exclusion grounds we have set out might or might not cover; but the purpose of the exclusions regime is to protect against suppliers that may be fundamentally unfit to compete for public contracts. It is not a means to enforce employment rights, or a lever to incentivise certain behaviours.

What we have introduced in this Bill is a much tougher regime of debarment, with central resources devoted to assessing suppliers and deciding centrally on debarment. This is tough for direct and indirect suppliers, as one bad apple in a company can cause them to be debarred—a very strong incentive to ensure that bad behaviour does not occur in the first place, of course; or, where it does, to take remedial action. However, expanding the exclusion grounds, as proposed in this amendment, will have a chilling effect on engagement in procurement, as I explained from a business perspective before I became a Minister and turned into the gamekeeper. We must be fair and remember that we have an interest in more competitive markets that improve value for money, innovation and productivity. I am grateful to those who have spoken for raising these issues. However, I believe we have done enough in Schedule 6, and I respectfully ask the noble Lords, Lord Fox and Lord Hendy, not to press their amendments, given the lateness of the hour.

The noble Baroness, Lady Hayman, raised a new point about the carry-on consequences of the issues we have discussed in this group. I am not sure that we can do anything about that, but I will certainly have a look at that as the Bill progresses. I beg to move.