Procurement Bill [HL] Debate

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Department: Cabinet Office
Moved by
30: Clause 8, page 6, line 28, at end insert “and which are health or social care services supplied for benefit of individuals”
Member’s explanatory statement
This amendment probes why light touch contracts are not more narrowly defined in Clause 8.
Baroness Noakes Portrait Baroness Noakes (Con)
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My Lords, I shall also speak to Amendment 207 in my name. My noble friend Lord Lansley has Amendment 35 in this group but is unable to be with us in Committee this week. At his request, with the leave of the Committee, I shall be speaking to his amendments on both Committee days this week.

At Second Reading, I noted that the definition of light-touch contracts is extremely wide since it concerns the supply of services of any kind, provided that they have been specified by regulations under Clause 8(2). It is my understanding that light-touch contracts are currently for health and social care services—indeed, that is implied by the reference to those services in Clause 8(4)(b). The wide scope given by the lack of restriction in Clause 8(2) means that, notwithstanding the “have regards” in Clause 8(4), it would be possible, for example, for the Government to specify legal services, accountancy services or any other kind of services. The “have regards” are simply not an effective curtailment of the very wide power in Clause 8(2).

My Amendment 30 seeks to confine light-touch contracts to health or social care services provided to individuals, on the basis that, it is my understanding, that is how they are used at the moment. However, if the Government believe that there should be a wider concept than that, they should put that in the Bill. Open-ended regulation-making powers should not be necessary and are not desirable.

My noble friend Lord Lansley’s Amendment 35 would add another “have regard” to Clause 8(4): whether suppliers of light-touch services consist of small and medium-sized enterprises and few larger enterprises. The other three “have regards” seem to be designed to reflect the current scope of light-touch contracts: they do not generally involve overseas suppliers, they are generally for the benefit of individuals and they involve suppliers that are close to service recipients. Another feature of current service provision is the presence of small and medium-sized service providers in both the private sector and the voluntary sector.

If the supplier market features large suppliers, including overseas ones, there really is no good policy reason for the light-touch regime to be applied; the full-fat version of the procurement rules should be in place for them. A light-touch contract should not become a convenient escape from the procurement regime for contracting authorities. They should be focused on the supplier end of the market, where a lighter regime would be appropriate.

Amendment 207 is rather different. It tries to tease out the Government’s intentions for contracts under Clause 33, which covers the reservation of certain light-touch contracts to public sector mutuals. A qualifying public sector mutual is one that has not been awarded a contract in the previous three years, under Clause 33(5). So if I am a public sector mutual and I am awarded a contract on 1 January 2022, that means that I may be excluded from tenders under subsection (2) for the three years until 31 December 2024, and under subsection (3) a contracting authority must exclude me from tenders assessed under Clause 18 until the same date—that is, the end of 2024.

If my earlier contract is for five years, which is the maximum allowed under Clause 33(1), I think that I would not be excludable from retendering when the contract came up for renewal, because the retendering process would almost certainly have started after the end of December 2024. If, however, my initial contract was for three years, I would almost inevitably be excluded from bidding for its renewal because the retendering process would by definition have to start before the end of December 2024.

My amendment proposes changing the period in subsection (5) from three years to five, but that is for probing purposes. I do not understand whether the Government are trying to allow or prohibit public sector mutuals from carrying out consecutive contracts, if indeed they were awarded them under a competition. It seems bizarre that a shorter contract could prohibit the public sector mutual from retendering while a long one would not.

In addition, I am less than clear on how contract award and commencement dates are supposed to interact, given that a contract could be awarded some considerable time before it is intended to commence. I know that my noble friend the Minister has Amendment 206 to Clause 33, which is not in this group and would slightly alter its wording, but I do not think that that will answer the basic question that I have posed. I beg to move.

Lord Haskel Portrait The Deputy Chairman of Committees (Lord Haskel) (Lab)
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My Lords, the noble Baroness, Lady Brinton, is taking part remotely. I invite the noble Baroness to speak.

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Baroness Scott of Bybrook Portrait Baroness Scott of Bybrook (Con)
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My Lords, it is up to the organisation that is procuring. That is exactly what we are saying; we are freeing up that procurement process.

Baroness Noakes Portrait Baroness Noakes (Con)
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My Lords, I am not sure that we have advanced very much on either of the clauses. I thank all noble Lords who have taken part in the debate, particularly the noble Baroness, Lady Brinton, who raised a number of good points about the interaction with NHS contracts, which I had simply not appreciated, not having followed the most recent NHS legislation. I agree with her that the interaction of the two codes is likely to be confusing to all those who come across it and, with respect, I do not think that my noble friend made that any clearer in her answer. Nevertheless, we will come to that later on in the Bill and I am sure that it will be teased out again.

On Clause 8, the main thrust of my amendments was to try to find out what was likely to be covered under light-touch contracts. I am still no clearer at all. I have heard that the “have regards” in subsection (4) are appropriate as drafted but have not heard any argumentation as to why. I have heard quite a lot about how it is really up to the contracting authority to decide what it wants to take account of, and that whether it is good or bad to have overseas suppliers is up to the contracting authority.

I am quite unclear what the Government are intending by this light-touch contract regime. I have no idea at all what they are going to allow to be specified under the regulations, which is what I was trying to tease out by saying that it should be confined to health and social care. That was a placeholder to say, “Tell me what you’re going to put in them”—but I am afraid my noble friend did not tell me what she is going to put in them.

So I am left probably slightly less satisfied with Clause 8 than I was when I tabled my amendments to probe what was in it. I will of course consider very carefully what the Minister has said between now and Report, and we may have further conversations about it, but I politely suggest to her that the Government appear to be in a bit of muddle about what they are expecting from light-touch contracts. Are they simply saying, “We’ll create this power and let contracting authorities tell us what they want to do, and then we’ll have some regulations and do what we like with it”—because that is what the clause allows—or are they intending to restrict the scope in some way and, if so, in what way? That is all still waiting to be teased out, in addition to the issues raised about interaction with the NHS.

I turn to my Amendment 207, which is in connection with Clause 33. I think I heard the Minister say that the Government’s intention was to prevent repeated contracts. That is not necessarily what this measure achieves, except that it tends to prevent a repeated contract if it is of shorter duration. If the initial contract is for three years, they almost certainly do not have a time window to be involved in tendering for a repeat of three years, because of the three-year prohibition—whereas, if they take a contract for five years, that three-year prohibition on retendering will have expired before the retendering comes up again. My noble friend simply did not answer that question, so again I am no clearer about what the Government are really trying to do. Are they trying to stop repeated contracts or allow them? They are allowing them for longer contracts but not for others, which does not seem to make sense.

We have all summer and quite possibly a lot of the autumn between Committee and Report to consider what we need to probe further on Report, but I hope the Minister will be taking back the Hansard of this discussion to her officials and looking at the points that have been raised but not dealt with in her response. However, this is Committee, so I beg leave to withdraw the amendment.

Amendment 30 withdrawn.
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Baroness Watkins of Tavistock Portrait The Deputy Chairman of Committees (Baroness Watkins of Tavistock) (CB)
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Lady Brinton, we believe that you are speaking to the wrong group at the moment. Is that correct? I am not sure. We are just clarifying.

Baroness Noakes Portrait Baroness Noakes (Con)
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It is the right group, but I have not introduced the amendment. The noble Baroness, Lady Brinton, is speaking before all the amendments have been spoken to.

Baroness Watkins of Tavistock Portrait The Deputy Chairman of Committees (Baroness Watkins of Tavistock) (CB)
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The rules are—I can see the problem—that remote speakers speak before the other amendments. Lady Brinton, it is quite difficult in that the amendment has not yet been spoken to; would you rather proceed, as per the current regulation, or wait and speak at the end of the group?

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It is not just a political consensus; businesses are also backing social value. The Confederation of British Industry, the Federation of Small Businesses, Social Enterprise UK and many other business groups are championing greater use of social value in public procurement. Charity representatives such as the NCVO are also calling for greater use of this. The reason there is a consensus behind social value is because of the huge opportunities that exist—
Baroness Noakes Portrait Baroness Noakes (Con)
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I am sorry to interrupt, but I am struggling a little as to which amendment the noble Baroness is speaking to. Amendment 75B, which deals with market stewardship, is in this group, but Amendment 75A, which is about social value, is not.

Baroness Thornton Portrait Baroness Thornton (Lab)
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I beg your pardon. I was trying to give the basis as to why this amendment is down and then the other amendments that will be in the groups following this one, but I take the noble Baroness’s point and will just address this amendment.

Social enterprises report higher levels of staff engagement. The Bill does not place any duty on contracting authorities to consider the impact of their decisions on the range of providers, such as social enterprises or SMEs, but there is a risk in ignoring these organisations. There may not be the providers that the public sector needs for the future and this may reduce innovation in our supply chains. That is what this amendment addresses.

Baroness Noakes Portrait Baroness Noakes (Con)
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My Lords, I have added my name to Amendments 38, 50, 97 and 100 in the name of my noble friend Lady Neville-Rolfe and, as she has already said, she has added her name to Amendment 534.

I will come to that in a moment, but I start with Amendment 86 in the name of my noble friend Lord Lansley. This returns to the question of preliminary market engagement and fostering the involvement of SMEs about which my noble friend spoke on our last Committee day in relation to his Amendment 88. Clause 15(1)(f) makes building capacity among suppliers a permitted purpose for preliminary market engagement. My noble friend’s amendment adds some words of emphasis so that capacity building should be particularly for small and medium-sized enterprises.

I know that noble Lords need no reminding of the importance of SMEs to the UK economy. They account for around 60% of employment and over half of turnover in the UK. Not all small businesses achieve scale and not all want to, but most large and successful businesses were small businesses once. We have a responsibility to ensure that SMEs are given every opportunity to thrive and grow. That is why we should be looking at this Bill on the important area of public procurement and its role in the economy and considering the way that can be used to foster SMEs.

SMEs find engaging with public procurement daunting. They simply do not have the time and resources to get involved in complex tenders, let alone things like dynamic markets. It has to be in the interests of both the individual contracting authorities and the economy as a whole to foster as much competition as possible and to assist SMEs in growing their businesses. Building capacity among SMEs is a good thing to do and this Bill should recognise that. It may occasionally be important to build capacity among larger businesses and my noble friend’s amendment does not preclude this. But large businesses have the kind of resources that make participating in public procurements pretty straightforward. SMEs, not large businesses, should be the focus of policy in this area.

My noble friend Lady Neville-Rolfe’s Amendments 97 and 100 also recognise that getting involved in public sector procurement is hard for SMEs. The complexity of procurement processes makes it quite likely that an SME might not satisfy all the participation criteria and even more likely that they will mess up on an aspect of the procedural requirements. They need to be cut some slack, which is what my noble friend’s amendments would do.

I am, as my noble friend knows, less convinced by her Amendments 290 and 295 because there are some serious issues in Schedules 6 and 7 which rightly debar businesses from public tenders. On the other hand, Schedules 6 and 7 are very heavy-handed and there may well be a case for further discretion to allow some of the matters in those schedules to be disregarded in the case of SMEs.

I now come to Amendment 534 to which the noble Baroness, Lady Brinton, spoke so eloquently earlier. It is rather different from the other amendments in this group because it requires a report every year. It is relevant to SMEs because the first area of the report is about how procurement rules have impacted the award of contracts to SMEs. I think we are agreed that we want to see awards of contracts to SMEs growing, and that means making it easier to include SMEs in the process and helping them to win.

There have been some changes to the previous EU rules on which this Bill is largely based which could make it easier for SMEs, but I suspect that the overwhelming effect of the procurement rules as we have them in this complex Bill and the secondary legislation that will follow will continue to deter SMEs from participating fully in public procurement. We really ought to be keeping this matter under review. The noble Baroness, Lady Brinton, raised the issue of whether the health procurement rules are covered. I drafted the amendment with the intention that it should cover health, but I recognise that this is a very complex area and will need to be teased out later in Committee.

A second area covered by my suggested report is whether there is scope to simplify the rules while remaining consistent with the procurement objectives set out in Clause 11. This will also be relevant to SMEs because I believe the complexity of the public procurement code is a major barrier to entry for small and medium-sized businesses. I am sure that large businesses, large tenderers, are quite comfortable with having barriers to entry for small and medium-sized entities, but government and Parliament should not be comfortable with that, and we should at least be striving for greater simplicity and keeping it under regular review.

Lord Wigley Portrait Lord Wigley (PC)
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My Lords, I am delighted to follow the noble Baroness. I support Amendment 38 moved by the noble Baroness, Lady Neville-Rolfe, and support very strongly the points that she and, more recently, the noble Baroness, Lady Noakes, have made. They relate to the pressing need to ensure that the burden on small businesses tendering for public contracts is addressed. This issue has arisen under other amendments, and I have no doubt that we need to get this nailed one way or another on Report. It is an important question.

We all draw on our experience. My experience, immediately before coming to the House of Lords after I had left elected politics, was when I chaired the board of Bangor University’s Bangor Business School. It related to the small business sector. These issues arose time after time. Some colleagues may be aware that way back, before entering full-time politics, I was involved in the manufacturing industry. I had two incarnations, the first of which was with large supernational companies, Ford, Mars and Hoover, when I was financial controller. Although those three corporations were not generally involved in public sector contracting, their approach to any question of contractual relationships was highly professional with relevant legal advice in-house and with the resources to buy in specialist advice when needed.

My second incarnation, which I undertook as a serving MP in the 1980s, was to chair a small company from its creation to when, after 11 years, it merged with a larger American-owned company to form a significant new entity employing 200 people at Llanberis in my constituency. We built—the hard way—the acorn from which that grew, raising our own capital locally and starting up by employing just one person full-time, an engineer to build automated diagnostic equipment for the medical sector.

In competing for contracts, we had to beat competitors that were much larger and with far greater resources and in-house expertise. A small company such as ours had a serious uphill struggle to compete on anything like a level playing field. We did so by being fleet of foot, resilient and flexible and by engaging proactively with potential customers. But it is unrealistic to expect SMEs to be in a position to compete on a level playing field with suppliers which have professional resources in depth. The danger is that such SMEs will be scared away from tendering for public sector contracts where the bureaucratic imposition is totally unreasonable for such small-scale operators.

In this context, the amendment is particularly relevant. If our company had not succeeded with the early contracts, we would not have grown to employ some 50 people, as we did at the point when the merger took place. Had we fallen by the wayside in that highly competitive situation, we would not now have the Siemens company that took over our successful company now employing more than 400 people at Llanberis, and with a further expansion a real possibility soon.

I support these amendments because I feel that there needs to be some mechanism written into the Bill to counterbalance the inevitable bureaucratic safety net which public sector bodies build with their procurement procedures. Providing some lower level of bureaucratic imposition on SMEs could make the difference between those companies, on the one hand, being suffocated out of the competitive arena by impositions that they cannot handle and, on the other hand, securing contracts which enable them, in the fullness of time, to grow, given the impact that that might have on our economy.

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Baroness Worthington Portrait Baroness Worthington (CB)
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My Lords, I rise to speak to Amendments 49 and 58 in this group referring to Clause 11 on procurement objectives. I am very grateful for the support of the noble Baronesses, Lady Verma, Lady Young of Old Scone and Lady Parminter, on these amendments.

We have just had a very interesting debate about the need to support small and medium-sized businesses as a more explicit goal within the Bill. I am here on this group of amendments to make the case for more explicit support for future generations. We have a climate crisis on our hands. We are potentially facing temperatures of 43 degrees this weekend. This is not a pleasant situation to be in; it is going to cause people to die. This is not something we should turn away from, and we must future-proof every single piece of legislation that passes through the House during our watch. This Bill offers an opportunity for us to do just that. The Government have not introduced anything in the Bill that goes beyond guidance other than simply the words “public benefit”. This needs to be given much more clarity, and my amendments seek to do that.

It was stated at Second Reading, and I apologise for being unable to attend it, that we need to improve the existing drafting. Therefore, I am looking forward to hearing from the Minister and, I hope, to meeting the Minister as I have to echo the words of the noble Lord, Lord Hunt. It feels that there is a huge amount of cross-party support for being clearer in this Bill about our intentions and that somehow or other we need to see something more explicit in the Bill, so a meeting on this topic would be most welcome.

Amendment 49 seeks to add more specific targets and a list of matters that the contracting authority must have to regard to including the importance of contributing to targets on our carbon budgets, the natural environment, air quality and other matters. I do not think anybody here is wedded to precise wording, and a number of noble Lords have come forward with different wordings in this group. Obviously, this is not an amendment I would seek to make final, but there must be a form of wording we could all agree on.

We have talked at length about the opportunity the £300 billion per year spent on government procurement offers in terms of driving forward the agenda we wish to see and increasing Britain’s productivity, innovation and the diversity of the companies able to engage in the transition we need to see. Business as usual is no longer tenable. We need to drive change, and we know that procurement is a hugely important lever for doing that.

I asked some questions about precisely how much procurement is responsible for driving global carbon emissions, but I am told that that information cannot be given, so we have no way of knowing how well aligned government policy is to the achievement of these broader goal, which is regrettable. We want to see more clarity in the Bill so that we can, over time, know whether procurement is delivering on these multiple goals.

I am sure there will be responses from the Minister that call into question the sense of these amendments and suggest that somehow it would distort the hierarchy. I reassure the Minister that that is not what we are seeking to do. We are not trying to tie the hands but are simply trying to provide the clarity and direction for such an important lever. I am sure we will be told that the next clause on the national procurement policy statement should be relied upon to deliver this clarity. Yet—and we will debate this—there is not a requirement on the Government to produce a statement; it is simply a “may”. Also, there is no fixed timetable I can see about when that will be produced so, really, we have nothing. There are no reassurances at all that this very poorly defined concept of public benefit will be given more flesh and more detail.

There is a precedent for putting something in the Bill. I highlight Section 9 of the Health and Care Act 2022, on which this amendment is modelled, which amended the National Health Service Act 2006 to give similar duties to the NHS to have regard to climate change including in relation to procurement, so it is not incoherent or without precedent to put this in the Bill. It would be more consistent to have it in legislation. If we do not do it, people will say that it was done in the NHS Act and ask why it was not done in the broader framework Bill that came subsequently. There is well-established similar terminology in the Financial Services Act 2001 and the Skills and Post-16 Education Act 2022, so we must be consistent about the future-proofing of Bills to ensure that we are sending the right signals and bringing about this transition.

I hope I have explained why I think this approach should be taken. I highlight that public benefit being undefined is a problem, which brings me to Amendment 58. Of course it is legitimate for a Government not to seek to define every word in legislation, and some legislation can be unambiguously understood when the words have the ordinary meaning that you would find in a dictionary. The trouble with not defining a term that needs to be understood by all and for that meaning to be as consistently understood as it can be is that it will introduce a level of subjectivity and a lack of clarity. In a search through existing legislation, I have found no use or definition of public benefit, except in relation to charities law, but that cannot easily be read across into procurement decisions. Amendment 58 seeks to remedy that and to define it more clearly. It would include local priority outcomes as well as national ones.

I am sure the Minister will say that the understanding of public benefit will evolve over time and therefore a degree of a flexibility is required, but that is why we have selected only the issues which are enduring and which will be playing out of the long term. We have chosen three national and local priorities. Of course, that does not limit other priorities, but these will be enduring outcomes that will be with us for the long haul and will not change. The need to address the issues that we have highlighted here will get only greater. I think this amendment should be supported; I am not particularly wedded to this way of doing it, but there needs to be something in the Bill to provide the clarity that enables us to future-proof it. We need to take the current crisis and the responsibility we carry for future generations seriously in all legislation we consider, and I therefore look forward to the Minister’s response.

Baroness Noakes Portrait Baroness Noakes (Con)
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My Lords, this group includes my noble friend Lord Lansley’s Amendment 53. Like some of the other amendments in this group, it is defines “public benefit” in Clause 11, which the noble Baroness, Lady Worthington, has just covered in her speech. My noble friend Lord Lansley regards it as important that there is a definition in the Bill. Public benefit is a very elastic term, which is good in some ways because it allows us to future-proof the use of the language for changes in circumstances, but there should be more guidance in the Bill on the kinds of things that are intended to be encompassed by it.

Clause 11 should be the guiding star for procurement professionals and we owe it to them to make it as clear as possible what is expected from them in applying Clause 11 in their work. I think most people would understand that public benefit includes economic and environment benefits and social value, which is included in my noble friend’s definition, but my noble friend is concerned that innovation and levelling up, which he also includes in his definition, should be mentioned explicitly. They are important topics and central to government policy, and they might not be obvious to procurement officials as coming within the term public benefit. Omitting them from the Bill raises questions about how important the Government think they are. The Minister may well say it will all turn up in the national procurement policy statement, but that is not the same thing. If something is important, it can easily bear repetition.

Other amendments in this group—Amendments 58, to which the noble Baroness, Lady Worthington, has spoken, and 59—also seek to define public benefit. They reference innovation but both contain rather long lists. One problem with rather long lists is that they tend to raise questions about what is not included in them, which is why drafting a long list is often a dangerous approach to trying to explain what something means in statute.