Procurement Bill [HL]

Baroness Neville-Rolfe Excerpts

Committee stage
Monday 18th July 2022 Grand Committee

[Baroness Neville-Rolfe (Con)]

My Lords, I have listened to the debate and rise to address the Question that Schedules 6 and 7 be agreed. I am grateful for the support of my noble friend Lord Moylan, although he cannot be here today.

As the Committee knows, I speak from the perspective of someone who has worked in business and as a company secretary and a chair of the compliance committee in a British multinational business employing half a million people in several regions of the world, as well as in smaller for-profit and not-for-profit operations. I have also worked in government as a civil servant and a Minister. I worry intensely about the perverse effects of these provisions. My fear is that they will exclude good, dynamic and honest operators from contracts and serving the public good through procurement. Some firms and social enterprises could be put out of business. Many others, especially SMEs, will be persuaded to have nothing to do with procurement; and of course this Bill is immensely wide-ranging and covers at least £300 billion-worth of UK value added, including most utilities, which I have argued against.

The lists in Schedules 6 and 7 are very wide. Some exclusions are entirely new compared to the EU law they replace. Others have been promoted from the discretionary category to become mandatory. The new mandatory exclusions include corporate manslaughter, theft and fraud, and failure to co-operate. Schedule 6 also brings into the Bill offences in areas including money laundering and competition law, which are dealt with perfectly well in existing and separate regulations. There have also been several extensions to the grounds for discretionary exclusions; for example, a breach of contract, poor performance and “acting improperly in procurement”—goodness knows what that means.

I ask the Minister to think again about every new item and consider whether this gold-plating is justified, as I think it may be in the case, for example, of national security, assuming that is not covered in other regulations. Each and every firm and social enterprise will be involved in more red tape in having to verify compliance with every item across their organisation.

Clause 54, defining excluded suppliers, is key, so I want to play devil’s advocate. First, it gives contracting authorities a lot of discretion, so they can be difficult if they want to favour a particular bidder. Secondly, a mandatory exclusion applies to a supplier or an associated supplier, so compliance checks have to be spread into the nooks and crannies of their supply chains, over which prime suppliers have no direct control—that will help the French, by the way, who have more integrated supply chains. Finally, if there is a contravention such as a tragic manslaughter on a major building project, a theft or a fraud, a single conviction for modern slavery, or a tax or cartel offence a firm is pushed into settling by the regulators, that firm will then have to operate a tick-box system across all its operations to demonstrate in the words of Clause 54 that the circumstances giving rise to the application of the exclusion are not “likely to occur again”. How will they be able to do that?

Of course, I am against most of the evils listed in the schedules, but they do not need to be in this statute. In trying to do the job of the policemen, we risk seriously undermining the procurement sector and choking it with red tape. If we want to nationalise procurement, we should be more honest about it.

For large companies in many climes, compliance with these two schedules will be a nightmare, so they could decide not to bid and stick to non-public sector activities. Firms focused on procurement alone will be in constant fear of a contravention which will write off the value of their company, as they would be excluded from bidding in future, although officials reassured me that they would be allowed in again after five years.

This is not the public sector; a company cannot hang around for five years without any new business. I know from my own experience that small firms may be put off completely. We will see the loss of small suppliers to prisons, local authorities, transport systems and even defence, as we have already seen in the City and in housing because of complex regulation in financial services and delays in planning. Small firms do not have the risk capital needed to operate in such high-risk environments. This negative behavioural change is not costed in the impact assessment, although there is a brief non-monetised discussion on page 36. My concerns about Schedules 6 and 7 are not discussed at all; more unscrutinised guidance is suggested as the answer.

I feel that this is cross-compliance of the worst sort. It is inconsistent with a productive economy, and the people who will flourish will be lawyers and their counterparts in the public sector trying to apply these complex, wide-ranging regulations. I think that the schedules will have chilling effect. I ask my noble friend the Minister to look at both schedules again in the light of my comments on practicality, and devise arrangements that will avoid the perverse effects I have outlined.

As regards the other amendments, as I think I am speaking last, we had a good debate on small business last week, for which the noble Lord, Lord Mendelsohn, was sadly absent. I think we all agreed that it is an area that needs to be looked at again. However, for the reasons I have stated, I am a little nervous about a further exclusion to achieve the noble Lord’s objective, as proposed in Amendment 174, but we must come back to this issue.

As to further extending exclusions by SI, as proposed in Amendment 184, this is far too wide-ranging and vague, and could be abused. It could also cast yet a further chill on procurement by honest and good organisations and lead to retaliation against our own UK exporters. The more political we make procurement, the less vibrant the sector will be, hitting our growth and productivity, which already sadly lags behind that of many other countries. I hope that the noble Lord, Lord Hain, can find another way forward at his prospective meeting with the Minister of State.

My questions about compliance and resources also apply to Amendment 353, however well intentioned. I worry a bit that we are over-influenced by our experience on PPE, which was poor. However, we are now looking forward, of course, not backward. I am sorry to be critical.

In conclusion, there are many problems with this Bill. The easiest and best thing would be for it to be withdrawn, to look at the various points that have been made in recent days, and for the new Government to think again. In the meantime, I stand by the points that I have made as a practitioner.

[Baroness Stroud (Con)]

I just want to respond to my noble friend’s comments about Amendment 353 and underline a comment that my noble friend Lord Alton made. Actually, this is something that has already been done in the United States of America; there is already an Act that has been passed there. There has no chilling effect at all on government procurement. In fact, their Act is significantly stronger than anything we are proposing here. I ask my noble friend to be mindful of that. Companies are appreciating more and more being able to be confident and to tell their customers that they are in fact free of slavery in their supply chains.

[Baroness Neville-Rolfe (Con)]

The point is well made. I would be interested to know how long that Act has been in operation in the United States. One of the concerns I have had, looking at these various provisions in all their complexity, is that we are actually continuing relatively new EU requirements; they came into our law between 2014 and 2016 with a directive and a number of regulations. I am not clear to what extent they have been reviewed to be effective. You need them to be fair and effective, and you need to consider the people who are excluded as well as those who happily champion them—as one does if one works for a big multinational; I have worked for one. My comments are intended to encourage the Committee to look at the detail to ensure that perverse effects are minimised and excluded where they can be.

[Lord Scriven (LD)]

My Lords, this has been a fascinating discussion on a number of amendments that are grouped around what I would call value-based procurement. The values should allow £300 billion of taxpayers’ money to be used to create good business and a solid foundation. We wish to see public money spent in a way that is based on the values we hold as a nation, not just in the UK but elsewhere.

It was interesting listening to the noble Baroness, Lady Neville-Rolfe, who just said very distinctly that a value-based approach could have the effect of destroying competitiveness and productivity for certain companies and exclude them. All the businesses I have worked with—big ones, small ones, social enterprises, small and medium-sized enterprises—want a nudge from government at times to be able to do the right things. When the Government nudge in their procurement, they send a signal to the market that enables business to make decisions based on things other than the bottom line. I tend to find that that is a useful thing for them, rather than a negative thing. Therefore, I think that value-based procurement is really important.

I start by speaking to Amendment 331, signed by my noble friend Lord Fox—as you can see, I am struggling so I will not go on at great length, like the Minister did last week. Clause 59 creates a centralised debarment list that allows Ministers to prohibit suppliers from contracting with public bodies if they fall under the certain exclusionary grounds in Schedules 6 and 7. However, a supplier’s involvement with serious human rights abuses is not listed even as a discretionary ground for exclusion. I am sure that that is an omission by the Government and not a deliberate exclusion. Human rights abuses should be on the face of the Bill as a reason for debarment. You can argue whether it should be mandatory or discretionary—personally, I would like it to be mandatory—but it has to be at least discretionary. The purpose of this amendment is to allow Ministers to debar companies that have proven involvement with serious human rights abuses. I hear what the noble Lord, Lord Alton, said about listing genocide there.

I have a particular interest in Gulf states, particularly human rights abuses in Bahrain. I could keep the Committee for hours on the significant human rights abuses in that country. A number of companies in the UK, both large and small, trade with some of the organisations that are directly linked to human rights abuses in Bahrain. However, under this Bill on public sector procurement, there would be no way of debarring them, even though these companies are sponsoring or are directly involved in working with organisations that are implicated in death, torture and the deprivation of liberty—for at least 20 years, in some cases. So I ask the Minister: why is this exclusion there? Has there been an oversight in not having human rights abuses on the face of the Bill?

I come to a couple of the other amendments that noble Lords have addressed. Amendments 174 and 179 on payment are really interesting and quite important, because cash flow is king, particularly for small and medium-sized enterprises. Within the Bill are assumptions about 30-day payments to public sector organisations. There is an implied assumption in the Bill that the same subcontracting arrangements will take place between the major contractor and the subcontractor, but there is no mechanism for sanctions if that does not happen. That is why I think Amendments 174 and 179 are an interesting way of saying that there will be sanctions, in debarring people from getting public sector contracts.

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[Lord Coaker (Lab)]

My Lords, I will try to be reasonably brief in summing up some of the points made. I start by welcoming my noble friend’s Amendment 174 about late payment. It is a point he has made continually and this important amendment should not get lost in these great debates about serious international issues. His point about trying to support small and medium-sized businesses through dealing with late payments deals with the point that my noble friend Lady Hayman and I are also trying to deal with in Amendment 179. I would not want that to get lost.

In speaking to Amendment 329, in my name and that of my noble friend Lady Hayman, and Amendment 331, in my name and those of my noble friend Lady Hayman, and the noble Lords, Lord Bethell and Lord Fox, I want to wrestle with whether the group is too big or not. At its heart it has the discussion and debate we have had through the Committee—and no doubt will have again on Report, when there will be votes on it—which is on what the Government are trying to achieve through their procurement policy. We are saying that, as well as being efficient, effective, value for money and all those things, there are certain social, economic and other objectives that the Government should also pursue. When we look at this group of amendments, which is about exclusion grounds, a whole range of different issues can be raised to say that, if a firm or supplier does this, it should be excluded from consideration when the contracting authority comes to make its procurement decisions.

Maybe the Government will say that these amendments are not necessary and that they do not want to add them to the Bill. A question then arises for the Minister—I do not believe he believes in accepting serious human rights abuses. If that is not going to be put in the Procurement Bill, how will the Government pursue their objective of trying to do something about serious human rights abuses through the Bill or will they not? Will they just leave it to the market to do?

That is the point of Amendment 331, which my noble friend Lady Hayman, the noble Lords, Lord Bethell and Lord Fox, and I have put down. We have listed just some of the grounds, and we think that, if a supplier is guilty of those human rights abuses as listed in the amendment, and others, the contracting authority should not procure from them. If that is not the right way of going about it, how will the Government ensure that contracting authorities do not purchase from those who have been guilty of serious human rights abuses such as war crimes, crimes against humanity, genocide, forced sterilisation and so on? I take the point made by the noble Lord, Lord Alton, that perhaps genocide needs taking from that; that may be helpful and is obviously something that can be looked at.

It is not just us in this Committee; the Foreign Affairs Committee has also said that the Government and the contracting authority need to take these things into account when it comes to purchasing. The Government’s response to the Foreign Affairs Committee’s report, published in November, says:

“The forthcoming Public Procurement Bill will further strengthen the ability of public sector bodies to disqualify suppliers from bidding for contracts where they have a history of misconduct, including forced labour or modern slavery.”


There is a lot of pressure from lots of different bodies to do something about this.

I thought my noble friend Lord Hain made a brilliant speech on his Amendments 184 and 187. He talked about Bain with respect to South Africa. If his amendments are not the right way of going about things, what will the Government do about it? These are the Committee’s questions.

The noble Baroness, Lady Boycott, made a very important point about environmental considerations in Amendment 310 and so on. The Government will say, “We are very concerned about the environment; we agree with the thrust of the amendment.” If that is true, and the amendment is not going to be accepted and go into the Bill, how will that aim be achieved? That is certainly the frustration that I feel, and I want the Minister to answer on how it will be achieved if this is not in the Bill.

I come to Amendment 353 in the name of the noble Baroness, Lady Stroud, supported by the noble Lord, Lord Alton of Liverpool, the noble Baroness, Lady Smith of Newnham, and me. The noble Earl, Lord Dundee, also came in on that. I thank him for his kind remarks about my report at the Council of Europe; I appreciated that. That amendment is, again, about supply chains and how we ensure that contracting authorities do not contract with those who have modern slavery, exploitation and all those things that we would object to within their supply chains. If the Government do not agree with Amendment 353 and think it is unnecessary, how are they going to achieve what that amendment seeks to achieve? That is an important question for the Government to answer.

In other words, why are all the amendments in this group unnecessary? Why do they not matter? Why are they irrelevant? Why do we not need them in the Bill? How will the Government achieve all these objectives if they are going to say that all these amendments are not acceptable?

On the point that the noble Baroness, Lady Neville-Rolfe, made—she also picked up one or two of the points that the noble Baroness, Lady Noakes, made—Schedules 6 and 7 are massive. To be frank about it, whatever the rights and wrongs of those schedules, they have huge implications. All I want to ask the Minister is: how have the lists in Schedules 6 and 7 both been arrived at?

You could pick up a number of examples. Why, for example, does Schedule 7(15) set out a discretionary ground for exclusion for threats to national security? I find that quite difficult to understand. No doubt there is a good reason for it but you would have thought that a national security threat would be a mandatory ground for exclusion. The reason is probably in there somewhere but I could not find it. If you look at Schedule 7, there is a whole list of slavery and trafficking offences that are discretionary. It might be that they should be so but you would have to do a lot to convince the noble Earl, Lord Dundee, and me—let alone the noble Baroness, Lady Stroud—that they should be discretionary.

As the noble Baroness, Lady Neville-Rolfe, noted, whatever the rights and wrongs of these schedules and whether they should be there or not, how have the lists been arrived at? The purpose of Committee is to try to understand what the Government are doing so that, on Report, we can make our minds up on whether amendments that can be voted on should be taken forward.

[Baroness Neville-Rolfe (Con)]

I thank the noble Lord for taking up the point about the extent of the schedules and the shared detail that people who are procuring—they are sometimes quite small organisations —will have to comply with. We have also heard that there will be guidance, so not only do you have the nightmare of a complicated Bill with rules that are different from the EU ones that, with great difficulty, people have become used to; you also have extra guidance that I do not suppose will be scrutinised by Parliament. That creates further difficulties for the people on the receiving end who are trying to do a good job. I emphasise that I am as keen as anybody to have companies doing the right thing but we have to find a way of getting this through, in not too complex a fashion, so that this can go forward smoothly.

[Lord Coaker (Lab)]

That is a point well made. Indeed, the whole issue of the increase in the use of regulations by the Government is something that various Select Committees and other committees have commented on. It is a real difficulty because you do not know what the regulations will be. The legislation just gives the power to the Secretary of State to make regulations; you then wonder what they will be.

If I understood her amendment right, the noble Baroness, Lady Noakes, asked why some provisions in the schedules, perhaps really important ones, do not apply if a supplier contravenes them before the Bill becomes an Act. It strikes me that the self-cleansing we talked about earlier would have to be pretty dramatic if, on 26 February 2023, a firm was found guilty of breaking some of the mandatory conditions laid out in Schedule 6 then, on 3 March, it said it had dealt with those but you could not take into account the five days before when it had broken a lot of the conditions because it was before the Bill become an Act. Is that really what the Government intend? I am not sure because, when I read it, I could not quite make this out. I think that the point of the amendment from the noble Baroness, Lady Noakes, is to try to understand exactly what the Government are getting at. What does “before” mean? There are a range of things in that.

The central point I want to make in speaking to our various amendments is that, if all these things are unnecessary around all these things that are really important, how are the Government going to achieve these objectives, many of which are part of their own policies? Many of us wish to see the Procurement Bill used as the vehicle to achieve that but the Government are resisting, and will resist, that. How will they be achieved if not through this Bill?

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However, I point out to my noble friend that we have also narrowed the scope of certain grounds where appropriate. For instance, the current discretionary ground for violations of applicable obligations in the fields of environmental, social and labour law is so broad that suppliers face exclusion for relatively trivial breaches. We have boiled this down to target the most serious cases of labour and environmental misconduct. That may not please all, but the Government are seeking to find a balance. Overall, Schedules 6 and 7, in our submission, represent a significant refresh of the grounds in the EU directive, and we contend it was a much needed one. However, I say to my noble friend that we are obviously ready to engage on the details in the schedule between now and Report.

[Baroness Neville-Rolfe (Con)]

As it is still Committee, can I just ask a question about tax and competition offences? I am not clear whether those are forward-looking or backward-looking, so if you are a company that, for example, has had a competition or a cartel offence—a minor offence in a subsidiary—are you saying that those groups will be on a debarment list and can no longer be engaged? Similarly, if somebody has had a tax argument, which people have had in the past, and that has been settled—I think there have been some big brands in the past, not that I have been involved, that have had such settlements—are we somehow now saying that those are pariahs, and they are not allowed to engage in procurement for the future? I would just like to be clear about this because my worry is about the perverse effects of this debarment list you are going to have.

[Lord True (Con)]

My noble friend makes an important point. There are elements in here which are looking back and there are elements which are about the present. Legal issues are raised here, and it is important that I come to my noble friend and the Committee with a very specific definition and response to her question in relation to tax and finances.

Amendments 174 and 317 proposed by the noble Lord, Lord Mendelsohn, and Amendment 179 from the noble Baroness, Lady Hayman, seek to bring matters related to prompt payment performance into scope of the supplier exclusion regime. Prompt payment is important; it is lifeblood, in many cases, to small enterprises. The Government are committed to ensuring prompt payment of suppliers, and there are a number of ways in which the Bill does this. For example, 30-day payment terms will apply throughout the public sector supply chain, regardless of whether they are expressly written into the contract. In addition, payment performance can be assessed as part of the award criteria, providing it is proportionate and relevant to the contract.

The Government encourage suppliers to sign up to the Prompt Payment Code. However, we submit that requiring every potential bidder to become a signatory to the Prompt Payment Code is too onerous on some suppliers and would discourage them from bidding, undermining the ability of contracting authorities to achieve value for money.

The noble Lord, Lord Hain, with support from others, proposed Amendments 184 and 187, which seek powers for Ministers to exclude suppliers which have acted in any way unlawfully or unethically. The noble Lord was abundantly clear about what he had in mind when he spoke to his amendments, although he did not stop there; he made broader points about multinational behaviour which I also listened to and took in. We believe that, in the way the proposal is drafted, the threshold is too low for such a serious measure of acting in any way unlawfully or unethically. Exclusion should be reserved for suppliers which pose a serious risk to contracting authorities or the public. We believe that it is also appropriate that the decision to exclude suppliers falls in general to the contracting authority running a procurement.

However, the exclusion grounds cover unethical conduct. Any serious breach of ethical or professional standards applicable to a supplier is deemed to be professional misconduct, whether or not those standards are mandatory. The noble Lord will be pleased to know that professional misconduct is a ground where a debarment case could be made, as drafted in Schedule 7, paragraph 12(1), although I make it clear that I am not commenting on any individual case. As the noble Lord, Lord Hain, told the Committee, I understand that he is meeting my right honourable friend the Minister to discuss this issue. The review led by Cabinet Office officials into the case that he asked for—and indeed the Prime Minister instructed to be done—is now complete and is currently being considered by the Minister. Unfortunately, I cannot say any more at this stage.

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[Lord True (Con)]

My Lords, I referred to the position where there may be no relevant national laws. The Government’s submission is that this Bill greatly strengthens the defences we have against modern slavery and the vile abuse of individuals in these circumstances. As I said, this will apply whether or not there has been a conviction or a breach of an international treaty.

[Baroness Neville-Rolfe (Con)]

On modern slavery, the Minister is surely saying that there has to have been a conviction for somebody to be on the debarred list. The first person prosecuted under the Modern Slavery Act—I almost hesitate to say this—was Sainsbury, so they had a case against them. Sorry, I am just trying to understand this; is the Minister saying that they would therefore be on the debarment list? I do not think that is the intention.

[Lord True (Con)]

No: I said that the current rules are too weak. They do require the supplier to have been convicted. I am saying that we are moving beyond that to a different evidential base and test. I recognise the strength of feeling among noble Lords on this issue. I commit to engaging further with my noble friend and other Members of the Committee on this prior to Report. On that basis, I respectfully request that these amendments are not pursued.