Procurement Bill [Lords]

Bob Seely Excerpts

Report stage
Tuesday 13th June 2023 Commons Chamber

[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.

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[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.

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I conclude with a final question to the Minister: can he assure the House that companies owned by individuals linked to repression, detention and extreme human rights abuses will not be given access to Government contracts?

[Bob Seely]

It is a pleasure to follow the hon. Member for Poplar and Limehouse (Apsana Begum), and I think that some of the things she said will be echoed on the Government Benches.

I want to speak, in the time I have, to new clauses 1, 13 and 16, and I will try to theme them. Before I do so, I want to thank the Parliamentary Secretary, Cabinet Office, my hon. Friend the Member for Brentwood and Ongar (Alex Burghart), for his excellent work on the Bill. People moan about Parliament, but we have a Government bringing forward this legislation and Back-Bench MPs from across the House trying to shape it for the betterment of the nation. There is a lot of good in the Bill and I thank the Minister for listening, as he has clearly and obviously done.

I want to talk about the strategic, political and human rights ramifications of supply chain dependency. I thank the Government for their excellent work and the fact that they are moving on this. We will have a national procurement centre, which will look at high-risk firms not only from China but potentially elsewhere. I congratulate my right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith) and my hon. Friend the Member for Rutland and Melton (Alicia Kearns) on their really good work on this.

However, my criticism is that while the Bill is a start, the new clauses that I am speaking to would allow us to go further, and I want to explain why that is. We urgently need to understand the UK’s economic dependence on systemic threats or competitors—namely China, but not only China—and the political, economic and ethical ramifications and risks of that dependency. Not to do so is to betray our national interests. I am concerned at the lack of urgency on this issue, which has become significantly more pressing in the last five years. I thank the Government for focusing more on it, but more needs to be done. I think we are at the starting gate. The reality is that we have high levels of dependency and they are increasing, not decreasing.

Here are some facts. First, as an act of state policy, China is aiming to become less dependent on others, while encouraging others to be more dependent on it. It is decoupling from us, but making sure that we are coupled to it. The Made in China 2025 plan had the goal of raising the domestic content of China’s core components and materials to 70% by 2025. In 2020, it set a goal to become largely self-sufficient in technology by 2035. At the same time, the belt and road initiative means that China is now the largest lender to developing countries and is effectively encouraging debt dependency, which we have talked about in the past. President Xi, at the seventh session of the Chinese Communist party’s finance and economy committee, said that China must develop “killer technologies” to strengthen the

“global supply chain’s dependence on China”.

So this is not a case of, “Gosh, is this happening?” It is stated policy. We do not need to debate whether it is happening; we are being told by the leader of the Chinese state and the Chinese Communist party that it is.

China is already the largest importer to the UK and many other countries. We import more than 50% of our supplies from China in 229 categories of goods. Some 57 of those categories are in sectors critical to the UK’s national security. I therefore agree entirely with what my right hon. Friend the Member for Chingford and Woodford Green was saying only a few minutes ago. It is difficult to say what is strategic and what is not. In the US, it might be agricultural production. Here it might be the details of 20 million people on the DWP’s databanks. The 57 categories of goods cover communications, energy, healthcare, transport, critical manufacturing, emergency services, agriculture, Government facilities and information technology.

I do not care that we are 85% dependent on China for plastic Christmas trees—although, I do worry about the environmental impact—but I do care that we are 96% dependent on China for phenylacetic acid, which is a basic building block for many drugs; 83% dependent for TV receivers and decoders; and 68% dependent for laptops. China controls near 90% of rare earth processing, which we are now beginning to worry about. And the point about solar panels was well made.

I asked the Foreign Secretary yesterday about having an annual statement on dependency, not just on China but on states in general. He said that one was not needed. With great respect to the Foreign Secretary, I profoundly disagree. We argued during the passage of the National Security and Investment Act 2021 that we need an annual statement of dependency. New clause 13 is about establishing an understanding of the nature of our extreme dependency. I did a report with the Henry Jackson Society a couple of years ago. We found that although we are the least dependent of all the Five Eyes nations, we still have a critical dependency on China in 230 areas of our industry, manufacturing, information technology and so on.

[Sir Iain Duncan Smith]

Just to add to my hon. Friend’s list, as we move to electric vehicles we are about to make ourselves even more dependent. Even battery factories in China are turning themselves into car factories selling to the UK.

[Bob Seely]

I agree completely and I thank my right hon. Friend for that point. I would not even like that dependency on our allies. Would I like that level of dependency on the United States? No. On Australia? No. But to have that level of dependency on a Communist dictatorship that is investing massively in AI and big data to spy on their own people and increasingly on us as never before, to threaten peace in the Pacific, and to have a stated aim of dominating while freeing itself from dependency on the west, is really an extraordinarily dangerous position for us to find ourselves in.

We know that Chinese Communist party companies such as Huawei actively seek to gain a monopoly position by systematically destroying economic rivals. That is not fair trade; it is trade as a weapon for a Communist party dictatorship. It did it with Huawei, undercutting and deliberately destroying rivals on price through cheap subsidies. It is now doing the same with cellular modules, seeking to dominate and take control of the market. It does that through IP theft, economic espionage, subsidy, access to super-cheap finance, shared technology and other forms of state support.

Companies such as Quectel and Fibocom—the manufacturers of cellular modules—will, like Huawei, claim to be private. They are not. Nothing is private, as my right hon. Friend the Member for Chingford and Woodford Green said, in a Communist state. It was profoundly depressing for me, a couple of years ago, to hear two former senior Conservative Ministers, who should know better, say that Huawei was a private company. That is a rather more serious way of accidentally misleading the House than whether somebody ate cake or not, but that is another matter.

What are the dangers? We know that the Chinese leadership see themselves as being in competition with the west. Why? Because they tell us. A 2013 “Document No. 9” concludes that western constitutional democracy and universal values were a fundamental threat to the PRC. Of course our values are a threat to dictatorships. Our values are always a threat to communists. Earlier this year, a work report delivered to the National People’s Congress set out the belief that

“external attempts to supress and contain China are escalating”,

and the term “self-reliance” appeared multiple times. Again, the idea is to create dependency on China for us, while at the same time freeing China from dependency.

What is the worst-case scenario? Frankly, it has happened in Russia, so we should at least be alive to the idea that the worst-case scenario may be happening in the Pacific.

President Xi has told his army to be ready to re-take Taiwan by 2027. As I said, let us please stop pretending that dictators do not mean what they say, because they have a depressing habit of meaning what they say. I wish they did not; I wish they would overpromise and underdeliver, but they tend to do what they promise.

Either the UK is militarily involved or it is not. Either way, an assault on Taiwan, either by slow strangulation—a sort of Berlin scenario—or direct invasion, would profoundly alter the state of the world. We would have to put on the mother of all sanctions. The minute we do that, we will risk not only a global economic meltdown, but an economic meltdown probably worse than covid. It will strain to breaking point our relationship with the United States, the European Union and Australia—and not just our relationship but the interdependent relationships.

I am not saying that will happen—although, I think we are heading in that direction—or that we should stop trading with China; I am saying that it makes a great deal of common sense, frankly, to know what our levels of dependency are. That is why I would love the Minister to commit to at least developing an understanding of what our trade dependency is.

There is another reason to be concerned about supply chains: what is happening in the Xinjiang Uyghur autonomous region, which other Members have rightly mentioned. A 2022 UN report found serious human rights violations in the region. They seem to be about the most significant human rights abuses currently happening in the world, whether we use the “G” word or not—genocide. The Xinjiang Production and Construction Corps alone produces 8% of the world’s cotton. China overall produces 20% of the world’s supply of cotton. Effectively, this is a new slave trade in cotton, as shocking as that sounds. It is not happening 200 hundred years, in the 19th century, in the southern United States; it is happening now, in the early 21st century, in Chinese-controlled central Asia.

There are many other things coming out of the Xinjiang province that tell the story of using forced labour, as both Opposition and Government Members have eloquently spoken about. There is forensic technology available, which we could be using in this country, that can pinpoint the region of origin for items tainted by modern slavery, such as cotton. When it comes to new clause 60, on eradicating slavery and human trafficking in supply chains, I ask the Government to set an example by saying that we will, at the very least, commit—a good Government word—to bringing in that forensic technology within a period of time. That would enable us to understand whether western companies are using slave cotton—an incredibly horrible phrase to use in this age—in their manufactured goods.

Finally, we have spoken about Chinese surveillance technology, and I speak again in support of new clause 1. We have got to get this stuff out of the country for a start. As my right hon. Friend the Member for Chingford and Woodford Green says, with all the dual-use capabilities and new styles of conflict, not just in conventional military but in data domination, it is really difficult nowadays to say where security starts and finishes.

In summation, we need to understand, as a critical matter of national importance, our supply chain dependency on any country, but specifically China. I implore the Government to use the Bill, even at this late stage, to bring in a statement of dependency so that we can begin to understand and to take measures to work out not how to stop trading with China, but how to trade more safely. That way, if we need to take sanctions in future, and for the health of our relationship with that superpower, we can begin to work out how to diversify our supply chains in future and, at the same time, do something about the horrors happening in Xinjiang.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

I rise to speak to my new clause 12 on the protection of subcontractors’ payments under construction contracts. As the explanatory statement describes, the new clause

“ring-fences moneys due to subcontractors in construction supply chains through mandating the use of project bank accounts and ensuring that retention moneys are safeguarded in a separate and independent account.”

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[Tim Loughton]

My right hon. Friend is, of course, right. He and I and others in this place who have been sanctioned in China and beyond have drawn attention to how effectively respectable global British companies are becoming complicit in the suffocation of the democratic principles, freedoms, liberties and rule of law that we all take for granted, and they need to answer for it. Are they on the side of the rule of law, of international freedoms and liberties in all the areas we have described, or have they thrown in their lot for a mess of pottage—or whatever we want to call it—with the Chinese Communist Government, notwithstanding their complete abrogation of any pretence to democratic accountability and freedoms for the individuals who not only happen to live within its borders but against whom they are increasingly able to extend their tentacles globally, not least in this country?

Hikvision and Dalua are both subject to China’s National Intelligence Law, which stipulates that

“any organisation or citizen shall support, assist, and cooperate with state intelligence work according to law”.

The law also permits authorities to detain or criminally punish those who “obstruct” intelligence activities. The presence of vendors who are subject to extrajudicial directions from a foreign Government which conflict with UK law may risk failure by the carrier to adequately protect networks from unauthorised access or interference.

In the UK, Uyghur people face a sustained campaign of transnational repression in the form of threats, harassment, cyberattacks, and online and in-person surveillance. LBC and the Financial Times have recently reported instances of Uyghur people seeking refuge in the UK being offered thousands of pounds a month and blackmailed by Chinese security officers to spy on Uyghur advocates. In that context, the Government must take seriously the threat posed by the presence of this equipment to British national security and the safety of exiled and dissident populations seeking refuge in the United Kingdom. Without urgent action, the UK risks facilitating a system of surveillance designed to extend Chinese domestic policy across borders.

The evidence, which is presented by reputable sources such as IVPM, Axios, The Intercept, The Guardian and the BBC, is deeply troubling. These and other reports paint a harrowing picture of the situation in Xinjiang and provide substantial evidence of Hikvision’s involvement. IVPM’s investigation reveals that Hikvision, a leading provider of surveillance technology, has actively contributed to the surveillance state in Xinjiang, where more than a million Uyghurs are estimated to be held in what we now know to be internment camps. Hikvision’s technology is reportedly used to monitor and control the Uyghur population, facilitating its repression. Worse, it is credibly accused of constructing the surveillance state in Xinjiang in close partnership with the Xinjiang Production and Construction Corps, a report corroborated by The Guardian, which published leaked documents outlining Hikvision’s close collaboration with Chinese authorities in developing and implementing surveillance technologies in Xinjiang. The evidence suggests a concerted effort by Hikvision to profit from this oppression.

Axios, in its comprehensive reporting, explains that Hikvision’s surveillance cameras are integrated with sophisticated artificial intelligence systems to track, profile and identify individuals in Xinjiang. Let me be clear: this technology is trained to recognise Uyghur-looking faces with a view to profiling them, flagging them when they are doing things of which the Chinese Government do not approve, and then facilitating their persecution through mass surveillance and control with the aim of suppressing their cultural, religious, and political freedoms.

The scale and sophistication of Hikvision’s surveillance technology exacerbate the already dire human rights situation in the region. The Intercept’s exposé provides damning evidence that Hikvision’s technology has been directly used in the internment camps, enabling the Chinese Government to monitor and suppress the Uyghur population. One source revealed that Hikvision’s cameras were installed throughout the camps, capturing every move and expression of the detainees. This raises alarming questions about the company’s complicity in the perpetration of human rights abuses that our own Government have described as

“torture…on an industrial scale”.

The evidence leaves no room for doubt. Hikvision’s involvement in the surveillance and control of the Uyghur population in Xinjiang is deeply troubling, and, even without the security concerns so ably highlighted by my right hon. Friend the Member for Chingford and Woodford Green, would warrant the company’s removal from our supply chains, consistent with our modern-day slavery commitments. We cannot turn a blind eye to the suffering of millions of innocent people, and help those who persecute them fill their pockets with public money.

[Bob Seely]

I have a genuine question for my hon. Friend, who is making a brilliant speech, and for the Minister. Given Hikvision’s frankly repugnant role in the ethnically based oppression of an entire people, why on earth is it not covered by our Modern Slavery Act 2015 and how did we let such a repugnant company into this country under any guise?

[Tim Loughton]

My hon. Friend poses a very good question. Whether it is on moral grounds, on the basis of what this House has voted for in the past or on the basis of legislation that is topical in many areas around modern day slavery at the moment, we should not be anywhere near that company or similar companies. Our Government, our public bodies and our procurement agencies need to take much more notice of what Governments do and say. Much more must be done, and urgently so.

It is incumbent on the House to call for a comprehensive investigation into Hikvision’s activities and its complicity in the suspected atrocities against the Uyghurs. We must work alongside our international partners to hold Hikvision and the Chinese Government accountable for their actions. Most importantly, we should use the purchasing power that we have as a Government and the interest we have in public bodies to disincentivise companies from behaving in the way Hikvision has towards the Uyghurs. At the moment, we are not merely failing to hold these companies to account; we are actually making them richer. The Government’s decision to remove Chinese state-owned surveillance at sensitive sites is welcome, but not sufficient. The widespread use of Hikvision equipment by police forces, hospitals and local councils risks providing malign states—