Procurement Bill [Lords]

Florence Eshalomi Excerpts

Report stage
Tuesday 13th June 2023 Commons Chamber

[Alex Burghart]

My hon. Friend will know that is a length of a piece of string question. In setting up the unit and providing it with resource, we are mindful of the need for it to be able to respond swiftly to emerging threats and to new entities. The unit will not serve its purpose if investigations go on too long. I cannot give him any guarantees on maximum length of time for investigation, but I can assure him that those concerns are very much in our thoughts as we go about establishing this new way of working.

The new unit will also have a role in supporting and upskilling contracting authorities. By directly engaging with them and providing guidance, the unit will help contracting authorities confidently implement the national security exclusion and debarment regime correctly, maximising its effectiveness.

Amendments 26, 27, 29, 30, 31, 33, 35, 38, 53, 54 and 55 are minor and technical amendments to ensure that the exclusions and debarment regimes can function effectively.

I take this opportunity to thank all colleagues who have engaged with us on this, including my hon. Friend the Member for Rutland and Melton (Alicia Kearns), who is not in her place today. She has been instrumental in helping us to formulate these ideas in regard to national security and in particular our commitment to the national security unit for procurement.

The Government are taking national security extremely seriously, as the Bill and the amendments just mentioned make clear. Concerns have been expressed in the House regarding the use of surveillance equipment provided by entities subject to the national intelligence law of the People’s Republic of China, the risks of which we fully understand. I take this opportunity to remind the House that, in November, the Government published a written ministerial statement asking Departments to consider the removal of visual surveillance equipment from Government sensitive sites and to cease any future procurement of such equipment.

Today, we are going further. I commit to this House that, within six months of the Bill’s Royal Assent, the Government will set out the timeline for the removal of surveillance equipment supplied by companies subject to the national intelligence law of China from sensitive sites. I make it clear that we are taking firm and decisive action on this important matter and that we will be held to account for that action. That is why we will provide a clear plan for delivering on it, adhering to the timeline requested by my right hon. Friend the Member for Chingford and Woodford Green. I hope that addresses his and other Members’ wishes that the Government take appropriate action.

If I may, I will address two final points. First, I thank each of the devolved Administrations for their constructive engagement during the drafting and passage of the Bill. I am pleased that the Senedd and the Scottish Parliament have agreed to the procurement aspects of the Bill, which are the vast majority of the clauses. However, despite our best efforts and several amendments, we have been unable to secure full legislative consent motions for the concurrent powers in the Bill relating to the implementation of international obligations. That is disappointing, but not unexpected, given that it is consistent with the position taken by the Scottish and Welsh Governments on the recent Trade (Australia and New Zealand) Act 2023.

I reassure the House that, as with current practice, we will continue to engage and consult with the devolved Administrations if they choose not to legislate for themselves in implementing the UK’s international obligations, in so far as they relate to areas of devolved competence. In the absence of a Northern Ireland Executive, a legislative consent motion for Northern Ireland was not possible. However, the permanent secretary for the Northern Ireland Department of Finance has written to the permanent secretary of the Cabinet Office to welcome the Bill as drafted and the close working relationship that has developed between officials.

Secondly, I take the opportunity to clarify the rules for private utilities where they have been directly awarded rights, for example, through a directly awarded contract at the request of the Department for Transport. Private utilities are within the scope of the Bill only where they have been granted a special or exclusive right to carry out a utility activity, effectively creating a monopoly situation. Clause 6(4) clarifies that the right is not special or exclusive where the right is granted following a competitive tendering procedure under the Bill or otherwise on the basis of a transparent procedure and non-discriminatory criteria. That has the effect, for example, that, if a contract for a utility activity with an incumbent supplier is renewed or replaced without competition, the supplier will have been granted a special or exclusive right. The supplier would therefore be classed as a private utility under the Bill. An example would be where an incumbent train operating company awarded a contract following competition has been directly awarded a new contract under DFT legislation.

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

Three years ago, in the aftermath of the covid-19 pandemic, vital frontline staff across our NHS were struggling against dangerously low stocks of personal protective equipment. We all heard the stories of frontline workers in the early stages of the pandemic. These stories show us the impact of not procuring adequate reserves for a pandemic such as covid-19, and they show us why we need the right culture to rapidly respond to emergency procurement demands whenever they may show. Sadly, what we saw during the pandemic did not live up to standards. What followed, with the horror stories of frontline workers in the early stages of 2020, was a case study in wasteful and inefficient emergency procurement.

In January, the National Audit Office found that nearly £15 billion was wasted on unused covid supplies. That is £15 billion that could be going towards tens of thousands of full-time nursery places. It is £15 billion that could be going towards clearing the backlog in our NHS. It is £15 billion that could hand every single person in this country £220 and still have change left over. Instead, the incompetence we saw from this Government cost this country a fortune. In fact, the Government’s record keeping was so flawed that the Public Accounts Committee’s July 2022 report on the awarding of contracts to Randox during the pandemic stated it was

“impossible to have confidence that all its contracts with Randox were awarded properly.”

It is not just incompetence that costs the country. During the pandemic, the Government created a VIP lane for those offering to provide PPE. The system was extremely useful for some suppliers, with the Public Accounts Committee finding that one in 10 suppliers coming through the high-priority lane were awarded a contract. That compares with just one in 100 for the ordinary lane. The Cabinet Office and the Department of Health and Social Care also accepted that leads that went through the high-priority lane were handled better. Who was in that lane?

In the Public Account Committee’s report on PPE procurement, it stated

“The British Medical Association and the Royal College of Nursing told us that their organisations did not have access to the high-priority lane, even though they were being contacted by, and therefore would have been able to put forward, credible leads based on the knowledge of their members. The British Medical Association also noted that suppliers which had contacted them, including suppliers trusted by doctors, tried the normal channels of reaching out to the Government but had ‘hit a brick wall’. Care England told us that it had similarly shared the details of potential suppliers but there had been no follow-through.”

Instead, those with contacts with Government Ministers and officials, MPs and Members of the House of Lords were given access to this VIP lane. That included PPE Medpro, a company set up only a few days before but—surprise, surprise—with links to a Tory politician, which was awarded more than £200 million of public money. In total, £3.4 billion of taxpayers’ money in the form of contracts went to Conservative donors and friends. At a time when we were asking people up and down the country to come outside and clap, the Tory Government were giving cash to their donors. The Bill must be used to ensure that that never happens again.

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[Danny Kruger (Devizes) (Con)]

I applaud what the hon. Member is saying about SMEs. She is absolutely right that it is important that we support the small business sector. However, she has tabled amendments that would favour the insourcing of public services. She seems to think that we should require the public sector to deliver public contracts, rather than SMEs. Which is it?

[Florence Eshalomi]

The hon. Member is absolutely right: those SMEs will work with local councils in a local area, and they know the local area. In some cases the contracts that are outsourced are not value for money. This is about ensuring that, in public contracts, public money is spent in the right way. If we are to lower the risks faced by SMEs seeking to enter the supply chain, it is vital that the measures in the Bill have an impact.

[Sir Iain Duncan Smith]

One of the biggest problems during the pandemic, which came out of China and became a global pandemic, was the question of everybody scraping around trying to find PPE, most of which was manufactured in China. Is it therefore part of the hon. Lady’s argument that we should have strategic manufacturing of PPE—either here or certainly in democracies that we can trust—to which we get earlier access, or will we just leave it to be produced somewhere else?

[Florence Eshalomi]

I agree with some of the amendments the right hon. Member has tabled on the issue of China and national security. Throughout the Committee stage, we argued consistently for removing risks from countries with a high national security risk, but we have concerns about the approach of naming specific countries in the Bill. It is important that we work with the whole House to get the right framework. I urge the Minister to consider our amendment 17, which is a careful mechanism for assessing the impact of the new rules that he is championing.

Throughout the passage of the Bill, national security has been an issues of extreme interest to the House. On Second Reading, we heard a tour de force from the Chair of the Foreign Affairs Committee, the hon. Member for Rutland and Melton (Alicia Kearns), on national security. In Committee, I raised multiple concerns with the Minister about the place of national security as a discretionary exclusion ground and its role in the debarment system. I am pleased that the Minister was listening to all those points, and we welcome amendment 57 and similar Government amendments, which we believe will address many of the concerns raised in Committee. I welcome the amendments originally tabled by the hon. Member for Rutland and Melton, which will establish a list of high-risk suppliers as part of the Bill. Our amendment 15 would exclude suppliers identified as a security threat from public contracts. Although that offers some benefits over alternative proposals, there is a balance, so we are not minded to press amendment 15 to a Division.

Procurement practices affect not only our services, but the many workers who rely on procurement-related roles for their jobs and livelihoods. Public money, and the jobs that will create, should not be given to those who treat their workers unfairly. Our amendment 18 would give contracting authorities the power to exclude suppliers that have significantly and repeatedly breached the rights of their staff. It would affect only those who have not taken self-cleansing measures to correct their conduct and the causes of breaches. The amendment would ensure that authorities have the right to turn away the worst offenders on workers’ rights, and would ensure that publicly funded jobs are protected jobs.

It can only be right that those seeking public contracts in the UK are transparent about where they pay their tax. The public would not expect their hard-earned money to go to those seeking not to pay into the system themselves, but a study from the Fair Tax Foundation found that, between 2014 and 2019, one in six public contracts were won by companies with links to tax havens. Our new clause 10 would mean that multinational companies bidding for large public contracts need to provide information about their tax arrangements in the UK. That would be open to the public and create greater transparency on how public money is spent. Amendment 16 would create a discretionary exclusion ground for suppliers that have violated UK sanctions or export controls, ensuring that authorities have the power to exclude from the procurement system those who continue to profit off businesses in places such as Russia. New clause 11 would require authorities to undertake a public interest test whenever deciding to outsource public services, to ensure that it truly offers value for money. Finally, new clause 14 would allow public authorities to choose not to buy goods or services from countries on the basis of their human rights records. That would give authorities the power to set clear policies, not to hand public funds to those committing atrocities around the world.

I pay tribute to members of the Committee for their engagement on this very long Bill. We have definitely shone a light on it, and had many discussions about paperclips. In particular, I thank my hon. Friends the Members for Birkenhead (Mick Whitley) and for Brighton, Kemptown (Lloyd Russell-Moyle), who embellished the Committee with a wealth of examples of procurement practices from their constituencies. I hope the Minister will listen to us on why additional amendments are important to strengthen the Procurement Bill in the interests of all taxpayers across the country, and I look forward to hearing from other Members.

[Sir Iain Duncan Smith]

I rise to speak to the amendment in my name and those of 26 others in the House of all parties.

The real issue here is the existence of a specific law in China that makes pretty much all companies in China, but particularly those involved in technology, a public risk in procurement to the United Kingdom. Article 7 of the People’s Republic of China national intelligence law 2017 states:

“Any organisation and citizen shall, in accordance with the law, support, provide assistance, and cooperate in national intelligence work, and guard the secrecy of any national intelligence work that they are aware of.”

In other words, under the Chinese national intelligence law, they must completely comply with all demands and requests for information in the business they are in, and deny they have done that to any other country or authority that asks. We have had Chinese companies coming to the House and lying to Select Committees about what they are doing, all saying that they have no obligations under the national intelligence law. They do have obligations under that law and they will lie for their country as a result.

We need to start by understanding the problems, and I thank my hon. and right hon. Friends on the Front Bench for having listened to the arguments and changed the terms, first by referencing the national intelligence law, which is very important, because many Departments will play fast and loose unless what they must do is made very clear. We have been encouraging the Government, who came out with views on Hikvision, Dahua and other companies supplying surveillance equipment to the UK, knowing that they are a surveillance risk not because they are cameras in a particular fashion but because what they glean is available completely to the Chinese authorities under the national security laws.

We have heard from my hon. Friend the Member for Isle of Wight (Bob Seely) about the small devices—a growing threat that I have not referenced but which also gets caught by the national intelligence law. China is leading in this technology, which is one way in which it can keep track of its own people, but they are now using it more broadly. I had a suspicion and heard that the cars that my hon. Friend was referencing were Downing Street cars. There is a very good chance that the Prime Minister and others may have been tracked by the Chinese Government without our knowledge.

We must therefore remember that first and foremost China poses a significant threat to us, our interests and the way we live our lives. Until we all agree and come to those terms, we simply cannot move on; that is the key. Government Departments and the Government have dragged their feet over this because we do not want to upset the Chinese—but it takes a lot to upset the Chinese because they carry on as before. The amendment is intended to get the Government to accept that we should reference the national intelligence law because that defines all Chinese business and companies and therefore they are a threat.

There are other Chinese companies that are a problem that will not be named, and surveillance cameras are part of this. I must confess that when my brother-in-law went around an area of a farm looking at the surveillance cameras, he spotted that they were Hikvision cameras—they are not listed in the contract because the contract provider is a UK organisation, but we discovered that they are everywhere.

Once I heard the news that the Government clearly wanted Departments to get rid of those cameras, I made a set of freedom of information requests to all Departments about whether they had cameras, where they were, whether they were on their buildings, and what plans they had to get rid of them, having spotted that a lot of Departments still had them, including the Ministry of Defence. All Departments—bar I think the Wales Office, which came clean and said it did not have any or was getting rid of them—claimed that, under section 24 of the Freedom of Information Act 2000, they did not have to answer because it was a security risk. The security risk is having the cameras, not answering the damned question! Excuse my language, Mr Deputy Speaker. It is all about where the cameras are and what they are doing, and that is the point of the amendment.

I hope that Ministers will take this matter forward and tell Departments to stop obfuscating. If they are asked a direct question they should tell the honest truth and explain that under the new rules under the Bill they will be getting rid of those cameras, which is absolutely critical.

Oral Answers to Questions

Florence Eshalomi Excerpts

Thursday 11th May 2023 Commons Chamber

[Mr Speaker]

I call the shadow Minister.

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

Our civil servants are impartial, committed and hard-working professionals. They deserve our respect for keeping this country going during the pandemic. Instead, what we are getting from Ministers is unacceptable workplace behaviour and accusations of being responsible for Government failure. It is not civil servants who have put us through the Tory psychodrama and the disastrous Budget, so will the Minister take responsibility for the backlogs that constituents are facing up and down the country and stop shifting the blame on to hard-working civil servants?

[Jeremy Quin]

The hon. Lady will not find me criticising civil servants who are hard-working, who do their job, who are committed and who continue to provide tremendous expertise to our country, but I take issue with her earlier points. We take any allegations of bullying seriously, and we need to ensure that they are all followed up. I do not know if the same can be said of the Labour party—people in glass houses should not throw stones. I think there were more allegations even today about activity inside the Labour party. There was five years of antisemitism that was not addressed, and I do think the Labour party should sort out its own issues before trying to sort out the Government’s.

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[Mr Speaker]

I call the shadow Minister.

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

The Government may offer warm words on SMEs, but small businesses need those opportunities to thrive. Let us look at the evidence to see whether those warm words are backed up. In Brentwood, SMEs missed out on £3 in every £4 of viable suitable Government contracts in 2022. In Hertsmere, they missed out on 79%. In Horsham, SMEs got less than 5% of suitable public money. That amounts to £8.6 million. The Tories may talk about being a party of small businesses, but this Government have had 13 years to help small businesses—why have they not?

[Alex Burghart]

I am very pleased that the hon. Lady has been paying attention in the Committee stage of the Procurement Bill, where she has heard that we have done a great deal of work to overhaul the archaic regime that the EU left us with. It is precisely because of that Bill that small businesses will get contract pipelines, a single digital platform, prompt payments and a single regime that reduces bureaucracy and administrative burdens. With transparency, simplicity and fairness, this Government are delivering for small and medium-sized enterprises.

Oral Answers to Questions

Florence Eshalomi Excerpts

Thursday 16th March 2023 Commons Chamber

[Mr Speaker]

I call the shadow Minister.

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

In November, it was revealed in The Guardian that the company Infosys was still operating in Russia, eight months after it announced that it would withdraw. Just a month later, that company was awarded a lucrative contract worth £1.7 million of taxpayers’ money. Was the Minister aware of that when that contract was awarded, and do the Government believe that public money should be going to those who are operating in Russia?

[Jeremy Quin]

We set out in policy procurement note 01/22 our approach to public procurement and links with Russia. That PPN speaks for itself, and I am sure the hon. Lady is familiar with it. It requires contracting authorities to check from whom they are receiving goods and services. It is primarily aimed at those who are Russia or Belarus-based, or who have significant control. I do not know the particulars of the circumstances that she mentions, but the Government’s approach through PPN 01/22 is very clear.

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[Mr Speaker]

I call the shadow Minister.

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

The Fair Tax Foundation revealed that between 2014 and 2019, one in six public contracts were won by businesses connected to tax havens. That means that billions of pounds of taxpayers’ money is going towards those who try to avoid paying tax. It is fair that the public have a right to know how their money is spent, so will the Secretary of State support Labour’s measures to increase tax transparency in our procurement system?

[Oliver Dowden]

We already have high levels of transparency, and the Procurement Bill is going through Parliament. The most important thing is to crack down on tax avoidance through tax havens, which is what we saw in yesterday’s Budget and what we have seen previous ones—for example, by addressing the double Irish issue.

Civil Service Pay

Florence Eshalomi Excerpts

Tuesday 7th March 2023 Westminster Hall

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

It is a pleasure to serve under you, Mr Pritchard. I, too, pay a big tribute to my hon. Friend the Member for Cynon Valley (Beth Winter) for securing this really important debate. Her passionate opening remarks highlighted why we are having the debate. I want to go back to some of the points that she highlighted.

In the recent survey conducted by the PCS union, 85% of its members said that the cost of living crisis had had a big impact on their mental and physical health. If people are not in a fit position to go to work, how are they supposed to carry out even the basic functions that they are employed to do? When we talk about people using food banks, some Members of this House basically say that that is incorrect, but the figures do not lie: 40,000 of that union’s members say that they are using food banks. That should shame us. Those are staff members, people in work and with a salary, having to rely on food banks. That should not be happening in 2023. Of those PCS members, 18% said that they had missed work because of their inability to afford transport or fuel—the energy companies and fuel companies are making record profits but not passing the benefit down to people who are filling up at the petrol stations—and 40% said that they had had to use credit for essential shopping. We saw what happened a few years ago with the rise of loan companies and loan sharks. If we are not careful, the number of people who have to rely on credit for the basic necessities—for basic bills—will creep up. That is what is happening to people who are in work. In-work poverty should not be happening.

Many hon. Members have highlighted issues across their constituencies, and I think about my own constituency, just over the bridge, where a significant number of civil servants live. Many Members have highlighted how hard our civil servants worked during the pandemic. The hon. Member for Strangford (Jim Shannon) highlighted the fact that, if we are honest, a job in the civil service is no longer a job for life. I will be honest: when I graduated, I applied for the fast stream, but I failed at the first hurdle and I thought that that was the end of my career. A number of people who have worked in the civil service feel that they have no career progression. Their pay is stagnating, and they are leaving. He is right; it is no longer a job for life.

My right hon. Friend the Member for Hayes and Harlington (John McDonnell) highlighted the fact that the 2% increase is an insult—nothing more—because inflation is skyrocketing and the cost of everything is going up for our civil servants. My hon. Friend the Member for Liverpool, West Derby (Ian Byrne) highlighted the really big issue that civil servants are having to rely on food banks. I totally agree with him that the situation is grim. To repeat his words, we are forcing people into abject poverty because they are having to choose. That should not be happening. I also agree with the hon. Member for Aberdeen North (Kirsty Blackman) that as a result of what the Government are proposing and the fact that they are not negotiating, fewer people will be doing more work for less pay. That should not be happening, either.

My hon. Friend the Member for Swansea West (Geraint Davies) raised the issues with the DVLA, which we all remember, and the shameful way in which the former Secretary of State for Transport, the right hon. Member for Welwyn Hatfield (Grant Shapps), handled that situation, with hard-working staff not being treated right. These issues are happening while the Government refuse to negotiate with our civil servants. If we look back to the pandemic, civil servants kept the country going and on its feet, whether by putting emergency measures in place, adjusting to new realities or taking on the mammoth task of dealing with so many different schemes, including furlough. Let us be honest: even now, those civil servants are still working to clear up backlog Britain. We have all seen that backlog in our casework, whether it is with the Home Office, the DVLA or passports. The civil servants are still working to clear it up, and trying to fix the problems of the past 12 years that have been caused by the Government’s mismanagement.

Our public services are at breaking point. That is not the fault of the hard-working public sector staff; it is the fault of the Government, who have failed and let down our valued institutions—the Government who do not value our staff, and who have failed to recruit and retain staff across the public sector. We are now in a situation where civil servants feel that they have no choice but to go on strike. Like many people, they are seeing their bills and the cost of food rise. The hon. Member for Aberdeen North mentioned pasta, potatoes and rice; whenever I get updates from the food banks in my constituency, those are the key items that they want people to drop off. Those basic items are now so expensive, and the truth is that civil servants’ pay is not keeping up with those increases. The Government are more determined to scapegoat workers and avoid fixing a mess that they created than they are to get around the table and negotiate, including in the civil service.

We cannot expect the civil service to be attractive to external employees when civil servants are expected to withstand threats to their jobs. My hon. Friend the Member for Wirral West (Margaret Greenwood) highlighted the fact that just over a year ago, the Government threatened to cut 91,000 jobs across the civil service. That caused endless sleepless nights for those who were worried about the future of their jobs. Thankfully, those plans have been shelved, but given the merry-go-round of Ministers that we have had, how can anyone joining the civil service now be sure that that proposal will not come up again? That uncertainty and real-terms pay cuts are hindering the civil service’s ability to retain and recruit staff. Too often, that results in the false economy of having to rely on external contractors and consultants within the civil service. Year after year, public money is being spent on external consultants, rather than attracting the knowledge that we need in-house and training people to have that knowledge. We have simply outsourced the pay rise that our civil servants need to keep up with the cost of living to the profits of consulting firms. That is a horrific waste of money, resulting directly from 12 years of Government neglect and ideology-driven pay decisions.

When we consider civil service pay, we must look at its impact on equality. There are around half a million civil servants, who are responsible for delivering vast amounts of our public services. It is critical that our civil service is representative of our society as a whole, but we cannot expect it to be representative when pay across the civil service is unequal. My hon. Friend the Member for Cynon Valley mentioned the shocking issues that PACAC explored around racism in the civil service—I hope the Minister and his colleagues will be looking at that—and the shocking fact that the gender pay gap in the civil service increased drastically in 2022, with the median pay gap increasing by almost 70% in just one year. We cannot tackle inequality in society if inequality is entrenched in our civil service.

One point I would like the Minister to come back on is whether he agrees with the Women and Equalities Committee, which reported last year on the ethnicity pay gap—another key issue within the civil service. Does he agree that the first step in addressing the pay disparity is to ensure that ethnicity pay gap reporting is mandatory? I urge him to outline the measures he is taking to address the pay gap in the civil service.

The Government have a responsibility to ensure our public services are run well and our public sector workers are treated fairly. The next Labour Government’s mission will be to grow our economy, ensure that we have high-quality public services and ensure that our workers have better pay and conditions. Labour’s new deal for working people looks to deliver on this mission for the civil service and across society. The cost of living crisis is driving our civil servants to breaking point. It must be a priority for the Government to get to grips with this crisis and ensure that working people do not continue to suffer. Working people need a fair deal. The Government must get around the table to ensure that our public services are not ravaged by the outcomes of 12 years of Conservative failure and mismanagement.

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[Alex Burghart]

The hon. Gentleman will have heard me say that we consider there to be many advantages to this model.

The purpose of Westminster Hall debates is for the Minister to come and listen to what colleagues in the House have to say. It was interesting, listening to the hon. Member for Vauxhall, to hear that a lot of the positions from the Labour Back Benches do not necessarily accord with the position of the Labour Front Bench. I wonder whether one of the things that is happening in this Westminster Hall debate is an internal debate within the Labour party being aired in public. There was no position from the Labour Front-Bench spokesperson on collective bargaining, on the pay offer, or on PCS strike actions.

[Florence Eshalomi]

On this side of the House, we will make sure that we negotiate—sit around the table and address the concerns. It is not for me to say, “This is what we will offer.” It is about sitting down with the unions, outlining the concerns and then coming to a decision.

[Alex Burghart]

I respect the hon. Lady’s position. However, that is not the position that many of her colleagues have taken here today. It is important that the Labour party comes to an agreed position before the next election. If it does not, we will be sure to remind the public that the Labour party does not have a position on this, whereas the Government do.

Procurement Bill [ Lords ] (Ninth sitting)

Florence Eshalomi Excerpts

Committee stage
Tuesday 21st February 2023 Public Bill Committees

[The Chair]

I remind the Committee that Hansard colleagues would be grateful if Members emailed their speaking notes to [e-mail]. Please switch electronic devices to silent. Tea and coffee are not allowed during sittings.

Today, the Committee will consider new clauses tabled to the Bill. We will begin with the Government new clauses, all of which have already been debated.

New Clause 9

Debarment decisions: interim relief

“(1) A supplier may apply to the court for suspension of the Minister’s decision to enter the supplier’s name on the debarment list.

(2) Proceedings under subsection (1) must be brought during the debarment standstill period.

(3) The court may make an order to—

(a) suspend the Minister’s decision to enter the supplier’s name on the debarment list until—

(i) the period referred to in subsection (3)(b) of section 64 (appeals) ends without proceedings having been brought, or

(ii) proceedings under that section are determined, discontinued or otherwise disposed of, and

(b) if relevant, require that an entry in respect of the supplier be temporarily removed from the debarment list.

(4) In considering whether to make an order under subsection (3), the court must have regard to—

(a) the public interest in, among other things, ensuring that public contracts are not awarded to suppliers that pose a risk,

(b) the interest of the supplier, including in relation to the likely financial impact of not suspending the decision, and

(c) any other matters that the court considers appropriate.

(5) In this section—

‘the court’ means—

(a) in England and Wales, the High Court,

(b) in Northern Ireland, the High Court, and

(c) in Scotland, the Court of Session;

‘debarment standstill period’ has the meaning given in section 62 (debarment list).”—(Alex Burghart.)

This new clause, to be inserted after clause 62, would allow a supplier to apply to suspend a Minister’s decision to add their name to the debarment list. If the decision is suspended, the supplier will not be able to be excluded from procurements on the basis of that entry until the suspension is lifted.

Brought up, read the First and Second time, and added to the Bill.

New Clause 10

Debarment proceedings and closed material procedure

“Part 2 of the Justice and Security Act 2013 (disclosure of sensitive material) applies in relation to proceedings under sections (Debarment decisions: interim relief)(1) (interim relief) and 64 (appeals) as if, in each of the following provisions, each reference to the Secretary of State included a reference to the Minister for the Cabinet Office—

(a) section 6(2)(a), (7) and (9)(a) and (c);

(b) section 7(4)(a);

(c) section 8(1)(a);

(d) section 11(3);

(e) section 12(2)(a) and (b).”—(Alex Burghart.)

This new clause, to be inserted after clause 64, would allow the Minister for the Cabinet Office to apply in place of the Secretary of State to allow closed material applications to be made to the court in proceedings for interim relief or an appeal against a debarment decision.

Brought up, read the First and Second time, and added to the Bill.

New Clause 11

Trade disputes

“(1) This section applies where there is, or has been, a dispute relating to procurement between the United Kingdom and another state, territory or organisation of states or territories in relation to an international agreement specified in Schedule 9.

(2) An appropriate authority or the Scottish Ministers may by regulations make such provision relating to procurement as the authority considers, or the Scottish Ministers consider, appropriate in consequence of the dispute.

(3) Any provision made by the Scottish Ministers under subsection (2) must relate to procurement—

(a) carried out by devolved Scottish authorities, or

(b) under devolved Scottish procurement arrangements.

(4) Regulations under this section may include provision modifying primary legislation, whenever passed (including this Act).

(5) In subsection (1), the reference to an international agreement specified in Schedule 9 does not include a reference to the Trade and Cooperation Agreement between the United Kingdom of Great Britain and Northern Ireland, of the one part, and the European Union and the European Atomic Energy Community, of the other part, signed at Brussels and London on 30 December 2020.”—(Alex Burghart.)

This new clause, to be inserted after clause 90, would provide that an appropriate authority or the Scottish Ministers could make provision to deal with the procurement consequences of a trade dispute under a treaty implemented by way of Schedule 9 (other than the Trade and Cooperation Agreement with the European Union, which is dealt with under existing legislation).

Brought up, read the First and Second time, and added to the Bill.

New Clause 12

Part 9 proceedings and closed material procedure

“Part 2 of the Justice and Security Act 2013 (disclosure of sensitive material) applies in relation to proceedings under this Part as if, in each of the following provisions, each reference to the Secretary of State included a reference to the Minister for the Cabinet Office—

(a) section 6(2)(a), (7) and (9)(a) and (c);

(b) section 7(4)(a);

(c) section 8(1)(a);

(d) section 11(3);

(e) section 12(2)(a) and (b).”—(Alex Burghart.)

This new clause, to be inserted after clause 103, would allow the Minister for the Cabinet Office to apply in place of the Secretary of State to allow closed material applications to be made to the court in proceedings under Part 9.

Brought up, read the First and Second time, and added to the Bill.

New Clause 13

Power to disapply this Act in relation to procurement by NHS in England

“(1) A Minister of the Crown may by regulations make provision for the purpose of disapplying any provision of this Act in relation to regulated health procurement.

(2) In this section—

‘regulated health procurement’ means the procurement of goods or services by a relevant authority that is subject to provision made under section 12ZB of the National Health Service Act 2006 (procurement of healthcare services etc for the health service in England), whether or not that provision is in force;

‘relevant authority’ has the meaning given in that section.”—(Alex Burghart.)

This new clause would be a substitute for clause 116 and allow a Minister of the Crown to make provision excluding from the scope of this Bill procurement that is within the scope of regulations under section 12ZB of the National Health Service Act 2006.

Brought up, read the First and Second time, and added to the Bill.

New Clause 15

Debarment decisions: appeals (No. 2)

“(1) A supplier may appeal to the court against a decision of a Minister of the Crown—

(a) to enter the supplier’s name on the debarment list,

(b) to indicate a particular date as part of an entry in respect of the supplier under section 62(3)(b), or

(c) not to remove an entry in respect of the supplier from the debarment list, or revise a date indicated as part of such an entry, following an application under section 63 (application for removal).

(2) Proceedings under subsection (1)—

(a) may only be brought by a United Kingdom supplier or a treaty state supplier,

(b) may only be brought on the grounds that, in making the decision, the Minister made a material mistake of law, and

(c) must be commenced before the end of the period of 30 days beginning with the day on which the supplier first knew, or ought to have known, about the Minister’s decision.

(4) Subsection (4) applies if, in proceedings under subsection (1)(a), the court is satisfied that—

(a) the Minister made a material mistake of law, and

(b) in consequence of the mistake, a contracting authority excluded the supplier from participating in a competitive tendering procedure, or other selection process, in reliance on section 57(1)(b) or (2)(b).

(5) The court may make one or more of the following orders—

(a) an order setting aside the Minister’s decision;

(b) an order to compensate the supplier for any costs incurred by the supplier in relation to participating in the procedure or process referred to in subsection (3)(b).

(6) Otherwise, if the court is satisfied that the Minister made a material mistake of law, the court may make an order setting aside the Minister’s decision.

(7) In this section—

‘the court’ has the meaning given in section (Debarment decisions: interim relief) (interim relief);

the reference to a supplier being excluded includes a reference to—

(a) the supplier’s tender being disregarded under section 26;

(b) the supplier becoming an excluded supplier for the purposes of section 41(1)(a), 43(1) or 45(6)(a).”—(Alex Burghart.)

This new clause would be a substitute for clause 64 and replace the power to make provision about appeals relating to debarment with detailed provision for their operation.

Brought up, read the First and Second time, and added to the Bill.

New Clause 3

Public interest

“(1) Where a contracting authority is considering outsourcing public services that are at the time of consideration delivered in-house or where contracts are due for renewal, the contracting authority must ensure that outsourcing or recontracting passes a public interest test and provides greater public value than direct service provision.

(2) As part of the duty in subsection (1), the contracting authority must demonstrate to the public, service users and its employees that it has thoroughly assessed the potential benefits and impact of outsourcing the service in question against a public sector comparator with assessments being based on criteria to be set by the Secretary of State from time to time, including taking a five year consideration of—

(a) service quality and accessibility;

(b) value for money of the expenditure;

(c) implications for other public services and public sector budgets;

(d) resilience of the service being provided;

(e) implications for the local economy and availability of good work in relevant sub-national labour markets;

(f) implications for public accountability and transparency;

(g) effect on employment conditions, terms and standards within the provision of the service to be outsourced and when outsourced;

(h) implications for public sector contributions to climate change targets;

(i) implications for the equalities policies of the contracting authority and compliance with the public sector equality duty.

(3) The contracting authority and the supplier of the outsourced service must monitor the performance of any contracted service against the public interest test and the stated objectives set by the contracting authority pre-procurement to demonstrate that outsourcing the service in question has not resulted in a negative impact on any of the matters mentioned in subsection (2)(a) to (i).

(4) The Secretary of State must from time to time set budget thresholds for when a public interest test would be required.”—(Florence Eshalomi.)

The new clause would create a process to ensure that contracting authorities safeguard the public interest when considering whether or not to outsource or recontract services.

Brought up, and read the First time.

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

I beg to move, That the clause be read a Second time.

It is a pleasure to serve under your chairship again, Mr Mundell. It is good to see all hon. Members back and raring to go on our favourite subject, the Procurement Bill. The new clause, which we think is really important, would introduce a public interest test when contracting authorities are considering outsourcing public services that are currently in-house, and when contracts are up for renewal.

The Opposition strongly believe that there is a place for the delivery of public services by private companies. Many private companies deliver services efficiently, save the taxpayer money and represent the best of our procurement network. When outsourcing is done well, both the public and companies benefit. I highlight to the Minister that the new clause is not intended to stop good outsourcing practice, nor is it intended to harm suppliers providing public services. However, we have to remember that we are talking about public money and it is critical that we outsource only when it offers value for money for the public—not just in relation to the contract, but for the wider public sector.

When it is done wrong, outsourcing has the potential to offer poor value for money, erode rights and deliver poorer services. In effect, more public money can go to companies that are just making a profit off the taxpayer, while services could be delivered to the same or a better standard in-house, without the profit premiums. Decades of relentless outsourcing have seen hundreds and thousands of staff transferred from employment by local councils, NHS trusts, police authorities, universities, colleges, schools and utility services to external providers, such as companies or charities.

[Lloyd Russell-Moyle (Brighton, Kemptown) (Lab/Co-op)]

My hon. Friend is making very good points about outsourcing. It is quite right that we support outsourcing to good companies that pay good and fair wages and offer good terms and conditions, but savings are far too often made by treating workers poorly, by undercutting their pay and terms and conditions, and by trying to offload workers who are needed for the service. This test would allow councils to check whether they could do it better in-house.

[Florence Eshalomi]

I thank my hon. Friend for that really valid point. It is important that we look at what has happened. Over the years, there have been many examples of outsourced services in which staff working conditions have been eroded and staff pay has not kept in line with inflation. The situation that we are seeing now is that staff are walking—they are voting with their feet and choosing to lose a day’s pay by going on strike. That is a result of some areas of outsourcing. From catering to social care, from cleaning to IT and HR services, almost no area of public services has been left untouched.

Too often, outsourcing is accompanied by deterioration in the pay, pensions and terms and conditions of the staff delivering the service. That almost creates a two-tier workforce of directly employed staff working alongside contractor staff, as well as a two-tier workforce within the contractor. The Transfer of Undertakings (Protection of Employment) Regulations can offer some limited protection for staff who are transferred to an outsourced contract, but staff recruited by the contractor after transfer have no such protection. Those inferior conditions can translate to lower costs for contractors, which can play a crucial role in their offering a cheaper tender and winning contracts.

A major flaw of this model is that it creates a false economy. The cost of the service is superficially low, but over time, staff have to claim universal credit. People retire without enough to live on and have to claim pension credit. Lower pay and insecure work have a negative impact on mental health. The decline in the number of decent public sector jobs in the community has a chilling effect on the local economy. The dots are not joined and the wider economic costs not considered.

In some regards, the supposed benefits of outsourcing have been eroded by the reality of contracting out services in recent years. There has been a notable turn towards insourcing—the process by which a public authority takes a service that has been contracted out and brings it in-house to be delivered by directly employed staff. However, we are still a very long way from the presumption that services should be outsourced only if it can be shown that the work cannot be delivered just as effectively in-house. Hundreds of thousands of carers, cleaners, porters, security staff and catering staff in our public services workforce are among the worst-off and most insecure workers in the UK.

Creating a check on such practices should be an objective of the Bill. That could be achieved through a public interest test to require contracting authorities to think holistically and outsource public services only when it is demonstrably in the public interest and when a robust assessment provides clear evidence that the services could not be better delivered in-house.

If a contracting authority is considering outsourcing public services that are currently delivered in-house, or where contracts are due for renewal, it should ensure that outsourcing or re-contracting passes a pre-procurement test and provides greater public value than direct service provision. The new clause would require the contracting authority to

“demonstrate to the public, service users and its employees that it has thoroughly assessed the potential benefits and impact of outsourcing the service in question against a public sector comparator with assessments being based on criteria to be set by the Secretary of State from time to time, including taking a five year consideration of—

(a) service quality and accessibility;

(b) value for money of the expenditure;

(c) implications for other public services and public sector budgets;

(d) resilience of the service being provided;

(e) implications for the local economy and availability of good work in relevant sub-national labour markets;

(f) implications for public accountability and transparency;

(g) effect on employment conditions, terms and standards within the provision of the service to be outsourced and when outsourced;

(h) implications for public sector contributions to climate change targets;

(i) implications for the equalities policies of the contracting authority and compliance with the public sector equality duty.”

Importantly, the public interest test would take place pre-procurement, and not all services subject to the test would eventually go to market. To increase transparency around those services that enter into the procurement process, the Bill should mandate information about outcomes of the associated public interest test to be published.

Under the new clause, the contracting authority and the provider of the outsourced service would also be required to

“monitor the performance of any contracted service against the public interest test and the stated objectives set by the contracting authority pre-procurement to demonstrate that outsourcing the service in question has not resulted in a negative impact on any of the matters mentioned in subsection (2)(a) to (i).”

Labour is clear that we would run the biggest programme of insourcing for a generation. We recognise the value offered by those delivering outsourced services, but we have concerns about the current scale of outsourcing. New clause 3 would lay out a clear test for outsourcing, ensuring it is done only when it is in the interests of the public, and that we do not hand out public services on the cheap.

We must create a culture of value for money throughout the public sector and avoid waste wherever we can. We believe that the new clause would help to create that culture. I hope that the Minister will give it due consideration and support it.

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

It is a pleasure to serve under your chairmanship once again, Mr Mundell. I can feel an air of excited sadness in the room because there is a possibility that the Committee may finish its consideration of the Bill today.

May I begin with a small correction relating to remarks that I made on 2 February when discussing dynamic markets? I stated that the current regime for dynamic markets does not remain open for new suppliers to join at any time. I was confused when I was talking about that; I was talking about the new provisions that we are making for open frameworks, where it is now possible for people to jump on. I just wanted to put that on the record.

New clause 3 would require contracting authorities always to undertake a public interest test when considering whether to outsource or continue to outsource a public sector service. Following the collapse of Carillion in January 2018 and the ongoing difficulties of some companies in the outsourcing sector, the Government’s commercial function undertook a review of what we outsource, why we outsource and how we outsource. It concluded that

“when done well, the private sector can bring efficiency, scale and fresh thinking to the delivery of public services.”

In February 2019, we published the first sourcing playbook, which captured key policy reforms for better outsourcing that contracting authorities should follow when considering how best to deliver Government services. This applies whether the contracting authority decides to outsource and deliver a service in partnership with the private and third sector, insource and use in-house resources, or do a mixture of both. That includes carrying out a make-versus-buy assessment, now referred to as a delivery model assessment, which is mandatory for central Government services in certain situations, such as the introduction of new public services or where there is a need to re-evaluate an existing service, for example because of a deterioration in the quality of delivery. It is important to emphasise that the playbook supports a range of delivery models that should be carefully considered as part of a mixed-economy approach to service delivery.

As well as in-house delivery and outsourcing, different models, such as grant making, may also be available. Hon. Members will recall that when I spoke on clause 3, I referred to the types of contracts regulated by the Bill. In particular, contracts must be for pecuniary interest, which can encompass monetary and non-monetary consideration. Contracts merely for the reimbursement of costs and without further remuneration or other direct benefit to the supplier are not covered. We do not, for example, intend the regime to capture contracts for the deployment of grants.

The sourcing playbook, which is now in its third iteration, builds on policies set out in the first sourcing playbook and is a more agile and appropriate place for this type of provision. I recently met the Business Services Association, which was extremely supportive of the playbook approach.

The tests set out in the new clause would be hugely burdensome for any contracting authority every time it is considering outsourcing or re-letting an already outsourced service. For that reason, I ask that the new clause be withdrawn.

[Florence Eshalomi]

I understand the Minister’s hesitancy about supporting the new clause, which he claims is because of bureaucracy. Does he recognise that many local authorities and others are conducting a big wave of insourcing, including my local authority, Lambeth Council, which decided last year to bring back its cleaning and maintenance service? The feedback from residents was that the contractors providing the outsourced service were not delivering, so the council has now brought it back in-house.

A number of local authorities under different political parties are following in the same vein. The new clause would help us to help them to look at the key issue of value for money and ensure that every pound spent on contracts delivers value for money. The new clause is not about extra bureaucracy, but about taxpayers’ money being spent on the right contracts. Does the Minister agree that the new clause would help those organisations to do that?

[Alex Burghart]

The hon. Lady gives a very good example of how the existing regime allows for outsourcing. We are building on that: the playbook that I described is there to help all contracting authorities to make better decisions about whether they want to outsource or to keep things in-house. She is quite right that there are circumstances in which keeping things in-house is a very good thing, but we feel strongly that the new clause would create a series of unnecessary requirements when the tools to insource are already at the disposal of authorities.

Question put and negatived.

New Clause 5

Carbon reduction plans

“(1) Subject to subsection (4), contracting authorities must obtain, assess and publish a carbon reduction plan from all suppliers under consideration for qualifying contracts before entering into a public contract with any supplier.

(2) In this section, ‘qualifying contract’ means—

(a) a public contract with an average value of more than £5 million per annum (excluding VAT) over the duration of the contract,

(b) any contract to be awarded under a framework agreement anticipated to be greater than £5 million per annum (excluding VAT) in value, or

(c) any contract to be awarded by reference to a dynamic market which is anticipated to be greater than £5 million per annum (excluding VAT) in value.

(3) For a qualifying contract of the type referred to in subsection (2)(a), a ‘carbon reduction plan’ must contain—

(a) the supplier’s current greenhouse gas emissions,

(b) confirmation of the supplier’s commitment to achieving net zero greenhouse gas emissions by 2050 for their UK supply chain, operations, products and services,

(c) intermediate targets for reductions in their greenhouse gas emissions at no more than 5 year intervals, beginning with the date of award of the contract,

(d) as far as they are able, the greenhouse gas emissions attributable to performance of the contract,

(e) as far as they are able, targets for reductions in those greenhouse gas emissions, and

(f) other environmental management measures in effect which will be applied when performing the contract.

(4) For the qualifying contracts of the type described in subsection (2)(b) and (2)(c), a carbon reduction plan should contain the matters specified in subsection (3)(a), (b) and (c) only.

(5) In complying with requirements imposed by the regulations, a contracting authority must have regard to guidance prepared from time to time by an appropriate authority.

(6) ‘Greenhouse gas’ has the meaning given in section 92 of the Climate Change Act 2008, and ‘emissions’ has the meaning given in section 97 of that Act.”—(Florence Eshalomi.)

This new clause would require company-level carbon reduction plans for bidders for certain larger contracts, including information and targets from suppliers on the emissions attributable to the performance of the contract. It also specifies that the Carbon Reduction Plan must be a key performance indicator for certain contracts.

Brought up, and read the First time.

[Florence Eshalomi]

New clause 5 would introduce carbon reduction targets for certain large contracts, in general those worth £5 million or more. The new clause is inspired by the Government’s own procurement policy note 06/21, which outlines their intention to take into account suppliers’ plans to reduce carbon emissions when considering large contracts.

Climate change is the biggest threat we face as the human race. Everyone in this room must recognise and agree that we need to reduce emissions urgently if we are to avoid this crisis. We must not ignore or under-appreciate the impact that reforms to our procurement system will have on our carbon emissions. However, I fear that the Bill is a missed opportunity to deliver real change in environmental standards in the procurement system.

That is particularly true considering what the Government have already chosen to remove from the Bill. Removing amendments on social value and the procurement policy statement, for example, that would have incorporated emissions will do nothing to tackle climate change in our procurement system, and there is hardly anything else in the Bill to drive real progress on carbon emissions.

--- Later in debate ---

Brought up, and read the First time.

[Florence Eshalomi]

I beg to move, That the clause be read a Second time.

The new clause would disapply section 31(2A) of the Senior Courts Act 1981 where a breach of non-discrimination occurs under clause 89 and is caused by a representation to the contracting authority by a Member of Parliament, a Member of the House of Lords or a senior civil servant. In practice, this would ensure that relief is granted in the case of a court finding that there has been unequal treatment between traders as a result of the type of lobbying seen in the VIP lane scandal during the covid-19 pandemic.

In the debate on amendment 103, tabled by the hon. Member for Aberdeen North, the Minister said:

“We understand—indeed, we agree with—the intent behind the amendment, but the Bill already covers such a scenario via robust requirements for contracting authorities to ensure equal treatment and address conflicts of interest. The bottom line is that if a conflict of interest puts a supplier at an unfair advantage, they must be treated as an excluded supplier and cannot be given a direct award.”––[Official Report, Procurement Public Bill Committee, 7 February 2023; c. 139.]

I do not doubt that VIP lanes would breach provisions relating to equal treatment of suppliers, and I do not doubt that those provisions were broken during the VIP lane scandal. In fact, that was at the heart of Mrs Justice O’Farrell’s ruling in the PestFix case last year, in which she stated that the operation of a high-priority VIP lane was

“in breach of the obligation of equal treatment”.

Despite that finding, the plaintiffs in the case were not awarded remedy, and it is unclear what checks and balances are in place to ensure that a future Government will not rely on VIP lanes, even when they know that their application will fall foul of the law. That is summed up by Mrs Justice O’Farrell’s closing remarks:

“In these proceedings, the Claimants have established that operation of the High Priority Lane was in breach of the obligation of equal treatment under the PCR. However, the court has found that, even if PestFix and Ayanda had not been allocated to the High Priority Lane, nevertheless they would have been treated as priority offers because of the substantial volumes of PPE they could supply that were urgently needed. Although there is public interest in the outcome of this challenge, the contracts in question have been performed (or expired) and it is sufficient that the illegality is marked by this judgment. Therefore the granting of relief does not meet the test in section 31(2B). In those circumstances, the court must refuse to grant the relief sought.”

I believe that, at its heart, that ruling shows the flaws in the current system. In debates on other amendments and clauses, I have argued for more transparency in the Bill in relation to conflicts of interest. The Minister knows that the Opposition believe that shining a light on proceedings as early as possible helps to limit the time in which illegal activities can occur. Surely, however, as the Government rejected our earlier amendments, they must see the need to tighten up the consequences of acting against the law. We know that the use of the VIP lane was illegal, and we know that companies that got into the VIP lane were 10 times more likely to win a contract, but the fact is that we do not know whether there have been any real consequences associated with the use of the illegal VIP lane.

I hope the Minister will agree that the public are rightly angry about the use of the VIP lane. They are angry that billions of pounds were wasted on personal protective equipment that was not up to standard. They expect to see justice when illegal activities are carried out. What is the point of putting laws in place if there are no consequences? New clause 6 would tighten up action against activity that breaches rules on conflicts of interest by ensuring that the courts are able to grant relief when lobbying by MPs, peers or senior civil servants results in unfair treatment. I hope the Committee will support the new clause.

[Alex Burghart]

New clause 6 would, in circumstances where a breach of the non-discrimination principle in clause 89 was caused by a representation to the contracting authority by an MP, lord or senior civil servant, disapply section 31(2A) of the Senior Courts Act 1981 in the context of any judicial review.

Section 31(2A) essentially prohibits a court from granting relief, including awarding damages, where it is highly likely that the conduct complained of did not make a significant difference to the contracting authority’s decision. In other words, the intention of the new clause is to enable a court to grant relief when lobbying for a contract to be awarded to a particular supplier has led to alleged unequal treatment, even where the contracting authority can demonstrate that it would have selected the chosen supplier regardless of any lobbying.

While I understand that the new clause is motivated by a desire to ensure consequences if an MP, lord or senior civil servant lobbies a contracting authority to award a contract to a certain bidder, resulting in the unequal treatment of other suppliers, the Bill is crystal clear with respect to conflicts of interest, and there are consequences if those statutory duties are breached. Clause 81(3) states that if

“a conflict of interest puts a supplier at an unfair advantage”

and if steps to mitigate cannot avoid that advantage, the supplier must be excluded.

Under part 9, suppliers may seek legal remedies, including relief, if they have suffered or are at risk of suffering loss or damages as a result of a breach of statutory duties. Suppliers that have lost out on contracts as a result of such unlawful behaviour are best placed to hold contracting authorities to account.

Additionally, in respect of suspected non-compliances with the Bill, including conflicts of interest that put a supplier at an unfair advantage, an appropriate authority can investigate upon the request of any party, using part 10 of the Bill or other powers, and issue recommendations if commercial practices do not comply with the Bill’s provisions. There is simply no need for the Bill, which has additional remedies for breach of statutory duty, to start interfering with the rule of law applicable to judicial review claims. As a result, we respectfully ask that the new clause be withdrawn.

Question put, That the clause be read a Second time.

--- Later in debate ---

[Florence Eshalomi]

I beg to move, That the clause be read a Second time.

The new clause would enable a future procurement system to mandate that procurement transactions be carried out in a specific way. It would build on the powers in clause 95 relating to procurement transactions, but take those powers further to ensure that everyone undertaking procurement under this regime uses a well-designed, specified system that is common throughout.

It is rare in a Bill Committee for the Opposition to propose giving unrestrained and optional power to the Government via an amendment or new clause, so I hope the Minister is delighted by our new clause. It is almost a knockout clause, I would say. We understand, and indeed welcome, the measures to introduce some degree of commonality across procurement through methods such as a single online system. Commonality within the procurement system brings many advantages. It can save contracting authorities the time, effort and money of running individual systems; boost the public’s understanding of procurement data and mechanisms, indirectly boosting transparency; and make our procurement system easier to navigate for suppliers, helping SMEs to bid for contracts efficiently, rather than having to shape-shift around the application process.

Around the world, increased commonality has been seen to increase efficiency and create a system that is the envy of the world. The Minister need only speak to one of his own party’s MPs, the hon. Member for West Worcestershire (Harriett Baldwin), about Ukraine’s ProZorro procurement system. Systems such as ProZorro and the Republic of Korea’s procurement system bring in a specified system that is used by everyone and that uses cutting edge digital technology to reduce bureaucracy. That was referenced in the Government’s Green Paper on procurement, which said:

“This lack of standardisation, transparency and interoperability is preventing the UK from harnessing the opportunities that open, common and shared data could bring. The ability to analyse spend, manage suppliers, counter fraud and corruption and see inside the supply chain to ensure compliance with government policies. The experience of other nations (e.g. Ukraine and South Korea) is that driving forward with a clear digital procurement strategy focused on transparency results in greater participation and increased value for money driven by competition.”

There is already international precedent for the introduction of a specified procurement system, and the Government have stated these lofty aims, so why should the Bill not make provision to go further?

Our new clause would not mandate immediate action, because we know that this would be complex and take time to set up. However, should this Government or a future one want to introduce a Ukraine-style system, it would be a shame if they found that difficult under the Bill. I therefore hope that the Minister will agree with us and support the new clause.

[Alex Burghart]

The hon. Lady’s new clause is on the procurement transaction system. We are absolutely delighted with the Opposition’s enthusiasm for our online system.

The Bill already contains provisions for the establishment of the online system for the purpose of publishing notices, documents and other information under clause 93. It also requires the online system to be free of charge and accessible for people with disabilities. Furthermore, as the Committee will remember, clause 95 requires certain information to be shared in a particular way, including through a specified online system, and requires contracting authorities to keep records of any communication between the authority and a supplier that is made for the purposes of, or in connection with, a covered procurement.

The online system will enable everyone to have better access to public procurement data, in particular because the detailed input received during the early design of the Bill from countries such as Ukraine and South Korea, which have specialist knowledge of designing procurement transparency systems. I am honoured to be able to say that my next meeting after this sitting is with the Deputy Prime Minister of Ukraine, at which we will discuss this very issue. I will thank him for his country’s input to our work going forward in the Cabinet Office.

[Florence Eshalomi]

Does the Minister not feel that the meeting would be even more beneficial and fantastic if he were to tell the Deputy Prime Minister that he had accepted the new clause?

[Alex Burghart]

I will be delighted to tell our friends in Ukraine that, because of the advice they gave us earlier, there is no need for the new clause. We have a great partnership with Ukraine, which straddles many areas, and a growing number of them. We have benefited from the Ukrainians’ expertise, and from that of colleagues in South Korea, which has very advanced digital government and economy.

As a result of the work we have done and are doing, citizens will be able to scrutinise spending decisions, suppliers will be able to identify new opportunities to bid and collaborate, and buyers will be able to analyse the market and benchmark their performance against others on spending with SMEs. The Government have already committed to sharing procurement information through the online system, and the new clause would simply replicate requirements that are in the Bill already.

The hon. Member for Vauxhall asked how we know whether future Governments will be bound, but the proposal will happen within the lifetime of this Government. The Government are committed to it, to delivering on it and to learning from the experiences of colleagues abroad. We therefore respectfully ask that the new clause be withdrawn.

Question put, That the clause be read a Second time.

--- Later in debate ---

Brought up, and read the First time.

[Florence Eshalomi]

I beg to move, That the clause be read a Second time.

New clause 16 would ensure that contracting authorities give mind to social value when considering violence against women and girls services. Throughout the course of the Committee, we have spoken at great length about social value. I remain concerned that the Bill does not give social value the prominence it needs. There are many areas that would benefit from the consideration of social value, but there is a particular case for it to be fully considered in violence against women and girls services.

--- Later in debate ---

[Lloyd Russell-Moyle]

I rise to support new clause 16 because of what happened in Brighton, which showed that it is important to have overall guidelines rather than discretionary guidance on this issue. In that case, there were multiple contracting parties, including Brighton and Hove City Council. I have no doubt that, had it contracted the service on its own, it would have seen the value of the important work that RISE has done for decades in the city. RISE is led by women, for women. It fights domestic violence, saving and supporting women who have undergone it, and provides refuge as well as counselling support for the women and their children. However, the contract was given jointly by Sussex police, East Sussex County Council and, partly, West Sussex County Council, and the social provisions in Brighton and Hove City Council’s guidelines did not match up with the social provisions in East Sussex’s guidelines. My understanding is that there were no provisions in the Sussex police guidelines.

When the contract went out for joint tender, the sections that were not compatible with each other were removed, because they were voluntary. This new clause would prevent that from happening again. In the case of RISE, it would have enabled the service to be provided. Instead, the contract was given to a housing association. I am sure it is a lovely, well-meaning organisation, but it is a housing association, not a specialist domestic violence organisation or a women-led organisation. It is not an organisation that has any roots in the city.

[Florence Eshalomi]

I thank my hon. Friend for giving such a powerful reminder of why this new clause is so important. He said that the contract was given to a housing association. Does he agree that the women who need this specialist service may not feel comfortable going to a housing association, because part of their issues and problems arise from housing?

[Lloyd Russell-Moyle]

Quite right. This housing association had no footprint at all in Brighton and Hove and a very limited footprint in East Sussex. The women who were in that organisation’s housing might find it more difficult to go to them, because it is not a truly independent service.

Whether that is the case or not, what then happened was that the refuges and some of the counselling services that are provided in the city were sub-contracted out to some of the RISE people. So RISE picked up some bits of work, but not all of it. It could not offer the women wraparound support, just support in some very specific areas, so the service potentially became worse for women. A top-slice of the money has been taken out of the area for management and bid-writing fees and costs, which such organisations all take, and given to an organisation that is based nowhere near Sussex and does not have that specialism.

When women then complained and protested during covid, through covid-compliant protests, they were threatened by the police and told their protest was wrong and that they should not be protesting. Interestingly, the police allowed my hon. Friend the Member for Hove (Peter Kyle), the hon. Member for Brighton, Pavilion (Caroline Lucas) and me to address the covid-compliant demonstration. There was no problem with that; it was only as we left that the police pounced on the women organisers, in front of their children, and tried to fine them. That was particularly egregious. I represented those women and said that I would give statements to support them, and in the end the police dropped the case.

Even when women tried to speak up, they were abused and harassed by the police—they were women who have come through domestic violence and who have been RISE service-users. It was important to commission RISE, but it was also important that women themselves had their voices heard. At all stages—in the commissioning and the outcome—women’s voices were removed and shut down. New clause 16 would give that protection.

Even if the Minister does not support the new clause—I would like him to, but I assume he might not—I hope he will reassure us that he will strengthen the section in the guidelines on women-specific services, such as those who have suffered domestic abuse, and place additional emphasis put on ensuring that local women’s voices are heard, while also allowing some of the competitive tendering to be waived. That is already possible, but we need stronger guidelines, particularly for multi-authority procurement. We will push the new clause to a vote, but I hope the Minister provides those reassurances, as I suspect we all broadly agree on the issue.

[Alex Burghart]

New clause 16 seeks to ensure that authorities have regard to social value when carrying out procurement for services to support victims of violence against women and girls. Before I discuss the specifics, I should say that the Committee has debated over several days the centrality to this legislation of the fact that we are moving from a world of most economically advantageous tender to most advantageous tender—from MEAT to MAT. That gives contracting authorities the opportunity to make decisions that are not based solely on economic advantage. That will cover all areas, not just the specific area outlined in the new clause.

There is already a legal requirement in this area. Contracting authorities are already required to consider how social value might be improved for all types of service contracts under the Public Services (Social Value) Act 2012. That Act requires the authority to consider when placing a public service contract

“how what is proposed to be procured might improve the economic, social and environmental well-being of the area where the authority primarily exercises its functions, and how, in conducting the process of procurement, it might act with a view to securing that improvement.”

[Florence Eshalomi]

I thank the Minister for his remarks, but does he understand the concerns raised by local and national women’s charities? They say that the current guidance does not go far enough and, in their experience, they feel the guidance is ignored in many cases or given very little weighting in the contracts that are then awarded. Does the Minister agree that those organisations have valid concerns?

--- Later in debate ---

Brought up, and read the First time.

[Florence Eshalomi]

I beg to move, That the clause be read a Second time.

As we have discussed at length, we feel that public procurement can be a hugely important tool in using the power of the state to drive specific outcomes. That is why the rules and framework that the Bill sets out are so important, and why it is right that the Committee scrutinises them.

Often, we think of the power of procurement simply in terms of outcomes, or perhaps in terms of the economic benefit that can be delivered by the right procurement decisions, but we must not lose sight of procurement’s ethical dimension. Ethical considerations should, and inevitably will, arise during discussions about procurement.

The power of procurement can be used to send a message that we as a country do not condone certain actions or wrongdoing by another country. It should be a totally legitimate position for our country not to procure goods from countries that have committed human rights abuses or war crimes. However, as it stands, the Bill fails to account for that.

New clause 18 seeks to set out a framework for ethical considerations during procurement decisions. It would enable public authorities to choose not to buy goods or services from countries based on their human rights records. In that respect, the new clause would allow for human rights abuses, specifically, to affect procurement decisions.

Human rights abuses are crimes of a different order, and I am sure that colleagues on both sides of the Committee agree that our country should condemn them. We have a proud history in the development of modern international humanitarian law, from the ashes of world war two and the creation of the United Nations, to the role we continue to play on the world stage. We have always defended the fundamental and absolute rights of all human beings. The new clause would further that endeavour and embed its principles in procurement law.

However, if procurement decisions made in respect of human rights are to have the greatest impact, it is vital that they are applied across the board. Indeed, it would be contrary to the spirit and letter of the proposed provisions if they were used to single out individual nations. Therefore, the new clause clearly states that contracting authorities must produce a document to set out their policy on procurement and human rights, which must be developed in accordance with guidance published by the Secretary of State. This will ensure that there is consistency in how contracting authorities decide on these matters.

The practical effect of that will be to make it clear and unambiguous that if a contracting authority does not wish to procure goods from Russia because of President Putin’s abhorrent human rights abuses in Ukraine, the law will be on its side. Equally, if the same authority does not wish to procure services from China because of the appalling treatment of Uyghur Muslims in Xinjiang, the law will be on its side. However, if an authority acted only against a particular state, while turning a blind eye to human rights abuses elsewhere, the new clause would make such actions illegal.

Our party is clear that actions that seek to isolate and target particular states are wrong and should not be tolerated. The new clause would therefore prohibit such actions. Human rights considerations must be applied fairly and consistently, and that is what the framework set out in the new clause would provide for.

The provisions of the new clause are reasonable and proportionate. They would embed our country’s proud humanitarian principles in procurement law. I hope that all Members will agree that this is a serious issue, especially given what is being played out across the world, and I hope that they and the Minister will support the inclusion of the new clause in the Bill.

--- Later in debate ---

[Alex Burghart]

Thank you, Mr Mundell, for chairing so ably and excellently. I thank the Clerks for their fantastic work. I thank my tireless officials, without whose expertise I would not know what to do. I thank Committee members on both sides of the divide. It is only fair to record in Hansard that the Committee has been good-natured, intelligent and at times almost enjoyable. I thank His Majesty’s loyal Opposition for supporting the overall thrust of the Bill, although they do not agree with every detail. We left it in better shape than when it arrived, and I look forward to working with everyone to take it through Report and to Royal Assent.

[Florence Eshalomi]

I echo the Minister’s comments. I formally thank the Clerks—Sarah, Chris and Huw—for their endless emails and helping me to understand the groupings and procedure. I will be honest and let hon. Members know that this is my first time leading on a Bill Committee. Many years ago, trying to tell a girl from a council estate in Brixton that she would be leading for the Opposition on such a technical Bill would have been out of the question.

The issues that we have discussed are so important. I hope the Minister will see from some of the points that we have made and the amendments that we have tabled that we have an opportunity to ensure that procurement works for everybody, including those from council estates, who may not understand it but will see the impact on their everyday lives. I look forward to discussing the Bill robustly with the Minister again as it goes through its next phases.

[The Chair]

Thank you. Of course, Ms Blackman put her thanks on the record on Thursday 9th. The great disappointment for me is that I am debarred from taking part in any future proceedings on the Bill. I, too, thank Committee members for the way in which they have engaged. I am sure we would also like to convey our thanks to Mr Efford for his chairing. I know that he will be deeply disappointed that there will not be a sitting this afternoon.

Question put and agreed to.

Bill, as amended, accordingly to be reported.

Procurement Bill [ Lords ] (Eighth sitting)

Florence Eshalomi Excerpts

Committee stage
Thursday 9th February 2023 Public Bill Committees

[Alex Burghart]

It is a pleasure to open this afternoon’s proceedings with this substantial grouping. I will begin with amendments 66 and 67. The Bill provides Welsh Ministers with various powers, and clause 107 sets out the parameters for their exercise by specifying the bodies that Welsh Ministers may regulate. Welsh Ministers may exercise powers under the Bill only in relation to devolved Welsh authorities and procurements covered

“under a devolved Welsh procurement arrangement.”

The Bill adopts the definition of a “devolved Welsh authority” found in section 157A of the Government of Wales Act 2006 and extends it, for the purposes of the Bill, to include certain public undertakings and private utilities, and other contracting authorities that ought reasonably to be regulated by Welsh Ministers for pragmatic reasons.

As the Bill was introduced, we recognised that the competence was ill-defined with respect to Welsh contracting authorities, and that it would have the effect of requiring devolved contracting authorities that operate principally in Wales but have some operations in England to follow two sets of rules. We have been working closely with the Welsh Government to include a pragmatic approach to the definition in the Bill. As such, we have agreed with the Welsh Government to include in their competence, for the purposes of the Bill, any contracting authority that is a private entity or utility that operates

“wholly or mainly in relation to Wales”

and whose activities

“do not relate to reserved matters”.

For example, Welsh Water, a not-for-profit private company providing water services in Wales, would fall into that category.

Finally, we have also agreed to extend Welsh Ministers’ competence in relation to a contracting authority that is not a devolved body for the purposes of the 2006 Act, but the functions of which are exercisable “wholly or mainly” in Wales and, wholly or mainly,

“do not relate to reserved matters”.

I am pleased to introduce the amendments and recognise that this is a pragmatic solution for many public bodies who operate, for example, in Herefordshire and across the border in Powys.

Turning to amendment 68, clause 109, which we will cover in a moment, establishes that

“A Minister of the Crown may exercise a power under this Act for the purpose of regulating a contracting authority that is a devolved Welsh authority only in relation”

to certain areas. The Welsh Government raised concerns that, as drafted, clause 121 would give an appropriate authority—in this instance defined as a Minister of the Crown—the power to

“by regulations make supplementary, incidental or consequential provision in connection with any provision of this Act.”

The provision set out in clause 121 is used to amend other legislation, where necessary, to ensure the functioning of the Bill, and it is right that Welsh Ministers should be able to agree to any subsequent amendment to legislation within their competence. I am pleased to change this so that any power for Ministers of the Crown to make consequential provision requires consent. That respects the devolved competence of procurement and makes practical sense for the Bill. I thank Welsh Government officials and Ministers for working closely to agree these important amendments.

As we have discussed, clause 107 sets out the parameters for the exercise of powers provided to Welsh Ministers by specifying the bodies that they may regulate. The Bill provides a Northern Ireland Department with various powers, and clause 108 sets out the parameters for their exercise by specifying the bodies that a Northern Ireland Department may regulate. A Northern Ireland Department may exercise powers under the Bill only in relation to “transferred Northern Ireland authorities”, as defined in the Bill, and any

“procurement under a transferred Northern Ireland procurement arrangement.”

For example, the Northern Ireland Department sets up a framework for services that could be used by UK or Welsh contracting authorities.

The starting point of the competence of Northern Ireland Departments is that conferred on them by the Northern Ireland Act 1998, which is that they are competent in respect of a public authority whose functions are exercisable only

“in or as regards Northern Ireland”

and are wholly or mainly transferred functions—that is, neither reserved nor excepted.

In addition, we have agreed with the Northern Irish Government to include within their competence, for the purposes of the Bill, any public or private utility that operates only in, or as regards, Northern Ireland and whose activities do not relate to reserved matters. For example, Northern Ireland Water Ltd, a company providing water services in Northern Ireland, would fall within that category.

Clause 109 sets out certain restrictions on how a Minister of the Crown may exercise powers created by the Bill, taking into account that public procurement is largely a devolved matter in Wales and Northern Ireland and that, as such, certain functions fall within the regulatory ambit of Welsh Ministers or a Northern Ireland Department. The clause sets out how, where two bodies can both exercise powers, those concurrent powers are to be exercised.

The clause establishes that a Minister of the Crown may exercise a power under the Bill for the purpose of regulating a devolved Welsh authority only in relation to procurement under a reserved procurement arrangement or transferred Northern Ireland procurement arrangement. In respect of Wales, this means that if a Welsh devolved authority uses a framework or dynamic market established by a reserved body such as the Crown Commercial Service, it must do so in accordance with reserved rules. That means, for example, that they must have regard to any national procurement policy statement issued by a Minister of the Crown, rather than a policy statement issued by Welsh Ministers.

That restriction, however, does not extend to clause 66 on electronic invoicing or to clause 106 on the issuing of guidance following a procurement investigation. Instead, these powers, and the powers in clause 121 on consequential provision, can be exercised in respect of devolved Welsh procurement only with the consent of Welsh Ministers. No such consent is required if the regulations or guidance relate to a devolved Welsh authority’s participation in a reserved or a Northern Ireland procurement arrangement.

Clause 109 also establishes that a Minister of the Crown may exercise a power under the Bill for the purpose of regulating a transferred Northern Ireland authority only with the consent of a Northern Ireland Department, unless the regulations relate to procurement under a reserved or a devolved Welsh procurement arrangement authority. As in the Welsh example, this means that, if a transferred Northern Ireland authority procures via a reserved framework or dynamic market, for example, it must follow regulations made by a Minister of the Crown. Similarly to the position on devolved Welsh procurement, a Minister of the Crown may not publish guidance under clause 106 that would regulate a Northern Ireland Department without consent, unless the guidance relates to reserved procurement or devolved Welsh procurement.

Finally, clause 109 provides that the restrictions on the powers of a Minister of the Crown in respect of devolved Welsh procurement and transferred Northern Ireland procurement do not apply in relation to certain named powers, including the powers to update schedule 9 to the Bill to ensure the application of new or amended free trade agreements and to ensure their implementation in respect of devolved Scottish procurement, and the power to make provision to allow the UK to respond to trade disputes.

Clause 110 defines the different types of “procurement arrangement” referred to in the Bill. The term is used primarily in clause 111, which provides powers to ensure that all UK bodies, devolved and reserved, can continue to work with one another and across the UK’s internal borders when undertaking procurements under one another’s procurement arrangements.

I turn to amendments 70 to 73. As the Committee is aware, procurement is a devolved matter, and Scotland already has its own procurement rules. Hon. Members may not be aware that Scottish devolved bodies are presently able to access commercial deals set up in the rest of the UK, and vice versa. Therefore, to enable devolved Scottish bodies to continue to use commercial tools such as frameworks established under the new regime, and to provide access for reserved contracting authorities to Scottish frameworks, the Scottish procurement regulations will need to be amended. As the Bill is drafted, a Minister of the Crown, as well as Scottish Ministers, can amend Scottish regulations for that purpose.

For context, having the power for a Minister of the Crown to amend Scottish regulation was a contingency power, should we be unable to agree with the Scottish Government on how the Bill would be implemented. I am pleased to say that we have an agreement in principle on how to proceed, subject to the normal parliamentary arrangements in both Parliaments, and there is therefore no requirement for the UK Government to be able to amend the Scottish procurement regulations. We are therefore amending the Bill to remove that power for Ministers of the Crown.

At the same time, the UK Government will lay regulations to ensure that devolved Scottish contracting authorities can access frameworks and other commercial tools established under the new regime. When that happens, it will be necessary for Scottish Ministers to disapply their regulations, as they have agreed to do. We propose amending clause 111 to ensure that they can do so and expanding it slightly to ensure that the power covers all Scottish procurement rules.

Clause 111 therefore sets out a series of regulation-making powers that will be used to ensure that procurement bodies across the UK can continue to work with one another and across the UK’s internal borders when undertaking procurements. First, the clause provides powers for a Minister of the Crown to regulate procurements by devolved Scottish authorities under purchasing arrangements set up by reserved authorities or by devolved Welsh or Northern Ireland authorities. That will ensure that devolved Scottish authorities can make use of frameworks and dynamic markets established by other UK authorities, benefit from procurements undertaken by centralised procurement authorities, and jointly procure with other UK authorities acting as the lead authority. In those circumstances, devolved Scottish authorities will be required to follow certain rules in the Bill, details of which will be set out in secondary legislation.

The clause also provides powers for a Minister of the Crown to disapply the Bill’s provisions for reserved authorities, devolved Welsh authorities and devolved Northern Ireland authorities when they are procuring under purchasing arrangements established by devolved Scottish authorities. That will allow those authorities to benefit from arrangements put in place under the Scottish regulations and to undertake joint procurement with devolved Scottish authorities acting as the lead authority.

The clause also creates new powers giving Scottish Ministers the competence to amend Scottish procurement legislation to apply it to reserved authorities subject to the Bill when procuring under purchasing arrangements established by devolved Scottish authorities. Scottish Ministers are also given a power to disapply devolved procurement regulations where a devolved Scottish contracting authority procures using commercial tools set up under the Bill. That arrangement was reached after lengthy consultation with the Scottish Government, and I am delighted to say that they are pleased with the results.

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

I thank the Minister for outlining the discussions with Scottish and Welsh colleagues. As he said, clauses 107 to 110 set out the devolutionary roles and responsibilities of the Welsh, Northern Irish and UK Ministers. Although Wales and Northern Ireland have opted to be part of this procurement system, they will still keep the appropriate regulatory powers within the Bill.

I will not repeat the excellent speech from my Front-Bench colleague, my hon. Friend the Member for Islwyn, on clause 14—it is fair to say that he has had more exposure to Welsh procurement than I have. However, we Labour Members are very proud of our colleagues in Wales and their strong record on procurement.

We are pleased that the Welsh and Northern Irish Governments are adopting the Bill. As my hon. Friend mentioned on clause 14, this is about respect for devolution and for the will of the people of Wales and Northern Ireland. These clauses are about enshrining that respect into law, ensuring that all authorities under the Bill discharge their powers in the right and appropriate manner, and giving everyone involved the flexibility to set the system that their people want. As such, and following the Minister’s remarks, we do not find the clauses disagreeable and will not oppose them.

Lastly, amendments 66 to 68 and 70 to 73 make minor tweaks to the balance of this part of the Bill. Again, we feel that the amendments are fine and are not disagreeable, so we will not oppose them.

Amendment 66 agreed to.

Amendment made: 67, in clause 107, page 70, line 12, leave out paragraph (b)—(Alex Burghart.)

This amendment would mean that a contracting authority whose functions are exercisable “wholly or mainly in relation to Wales” will be treated as a devolved Welsh authority regardless of the subject-matter of a particular procurement.

[Alex Burghart]

I beg to move amendment 113, in clause 107, page 70, line 14, after “section” insert “and section 123 (commencement)”.

This amendment is consequential on Amendment 115.

--- Later in debate ---

We are happy to make this amendment and we trust that Welsh Ministers will be pleased with the outcome. I emphasise that procurement is a special case for this kind of consent mechanism; the Bill is complex, and the devolved and reserved position is intertwined within its provisions, so it should not be taken as a default precedent for future legislation. My officials will continue to work closely with officials from the Welsh Government in rolling out this important regime.

[Florence Eshalomi]

It is reassuring to hear the Minister’s additional update from the Welsh Government and that they support the arrangements. The amendments mandate the consent of Welsh Ministers while making procurement, and allow for the exclusion of Welsh procurement from the provisions of the Act. In essence, they mean that Welsh Ministers have to consent to the Act, but that UK Ministers can exclude Welsh procurement from the regime. In practice, I assume that the proposals will ensure that Wales consents to the Act but that, should it not, a UK Minister can remove it from the system and then commence the Act without the consent of Welsh Ministers.

This is a sensible amendment that underlines the respect for the Welsh Government, and we are right to expect that from the Bill. As the Minister outlined, it is good that there is support. We are content with the amendments and will not oppose them.

Amendment 113 agreed to.

Clause 107, as amended, ordered to stand part of the Bill.

Clause 108 ordered to stand part of the Bill.

Clause 109

Minister of the Crown: restrictions on the exercise of powers

Amendments made: 68, in clause 109, page 71, line 12, after “section 66” insert “or section 121”.

This amendment would mean that a Minister of the Crown could not make consequential provision for the purpose of regulating a devolved Welsh authority without the consent of Welsh Ministers.

Amendment 69, in clause 109, page 71, line 32, at end insert—

“(ba) section (Trade disputes) (trade disputes);”.—(Alex Burghart.)

This amendment would allow a Minister of the Crown to exercise the trade dispute power under NC11 in relation to devolved Welsh authorities and transferred Northern Ireland authorities.

Clause 109, as amended, ordered to stand part of the Bill.

Clause 110 ordered to stand part of the Bill.

Clause 111

Powers relating to procurement arrangements

Amendments made: 70, in clause 111, page 73, line 4, leave out—

“A Minister of the Crown or”.

This amendment would remove the power of a Minister of the Crown to amend Scottish procurement legislation to apply it to procurement under devolved Scottish procurement arrangements by contracting authorities.

Amendment 71, in clause 111, page 73, line 5, leave out from “of” to end of line 7 and insert—

“(a) applying it in relation to procurement carried out by contracting authorities under devolved Scottish procurement arrangements;

(a) disapplying it in relation to procurement carried out by devolved Scottish authorities under—

(i) reserved procurement arrangements,

(ii) devolved Welsh procurement arrangements, or

(iii) transferred Northern Ireland procurement arrangements.”

This amendment would give the Scottish Ministers power to amend Scottish procurement legislation to disapply that legislation where procurement by devolved Scottish authorities may be regulated by provision made by a Minister of the Crown under subsection (1).

Amendment 72, in clause 111, page 73, line 8, at end insert—

“(za) the Procurement Reform (Scotland) Act 2014 (asp 12),”.

This amendment would extend the definition of “Scottish procurement legislation” to include the Procurement Reform (Scotland) Act 2014.

Amendment 73, in clause 111, page 73, line 13, leave out “those regulations” and insert “that legislation”.—(Alex Burghart.)

This amendment is consequential on Amendment 72.

Clause 111, as amended, ordered to stand part of the Bill.

Clause 112

Disapplication of duty in section 17 of the Local Government Act 1988

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

[Alex Burghart]

The clause ensures that authorities to which section 17 of the Local Government Act 1988 applies are not prevented by that section from complying with their obligations under the Procurement Bill. It also enables a Minister of the Crown or Welsh Ministers to make regulations to disapply, when required, a duty under section 17 of the Act.

The clause ensures that authorities covered by the 1988 Act can take advantage of domestic procurement policies. As stated in the other place, we intend to use clause 112 for the first time, once enacted, to make regulations so that local authorities may take advantage of the policy of December 2020 so that below-threshold procurements may be reserved to UK suppliers only, or to UK small and medium-sized enterprises or voluntary, community and social enterprises in a particular region or county of the UK.

As section 17 of the Act precludes local authorities from awarding public supply or works contracts by supplier location, tabling regulations under the clause will ensure that local authorities can take advantage of that permitted flexibility, already available to central Government Departments, in respect of lower value contracts.

[Florence Eshalomi]

The clause interacts with section 17 of the Local Government Act, which placed a duty on certain authorities not to consider non-commercial elements when awarding or managing certain contracts. The amendment to the section is necessary for the new procurement regime, in particular given the move from most economically advantageous tender to most advantageous tender. The clause will also give Ministers the power to disapply the Act via regulations. That could be used, to give an example from the explanatory notes, to allow relevant authorities to reserve below-threshold procurements by location and/or small and medium business size status. We support and welcome the measures and will not oppose clause stand part.

Question put and agreed to.

Clause 112 accordingly ordered to stand part of the Bill.

Clause 113

Single source defence contracts

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

--- Later in debate ---

[Alex Burghart]

The clause makes it clear that certain restrictions on the legislative competence of the Senedd do not apply in relation to powers granted to Welsh Ministers under the Bill. That ensures that Welsh Ministers can exercise the legislative powers granted to them under the Bill, and amendments to the Government of Wales Act 2006 are not uncommon in Westminster legislation that grants powers to Welsh Ministers.

[Florence Eshalomi]

As the Minister said, the clause contains provisions about the Welsh Government and actions that they can and cannot take on procurement. The clause makes a short and technical amendment that removes the prohibitions on the Senedd to legislate on qualified devolved functions in this area. We see no reason to oppose the removal of the prohibition, so we are happy for the clause to stand part.

Question put and agreed to.

Clause 114 accordingly ordered to stand part of the Bill.

Clause 115

Repeals etc

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

--- Later in debate ---

[Alex Burghart]

The clause and schedule 11 between them set out the legislation that will be repealed, revoked and disapplied once the Bill comes into effect. That includes the Public Contracts Regulations 2015, the Concession Contracts Regulations 2016, the Utilities Contracts Regulations 2016 and the Defence and Security Public Contracts Regulations 2011, which make up the existing procurement regime for England and Wales, and for Northern Ireland.

[Florence Eshalomi]

The clause repeals a number of pieces of primary and secondary legislation, as outlined in schedule 11. In practice, the clause and schedule will repeal the current procurement system under the likes of the Public Contracts Regulations 2015.

It is a little unusual that, under schedule 11, we will repeal part of a Bill that is matching this Bill stage for stage in its passage through this House. In fact, I believe that the Trade (Australia and New Zealand) Bill had its Second Reading in the other place just hours before we had Second Reading of this Bill. I know from the Minister’s references that he is fond of boxing, and I wonder which one of those two titanic pieces of legislation will win the bout against the rigmarole of getting a Bill through Parliament? We need to get the Bill through, but perhaps the trade Bill will be one of the fastest enacted pieces of legislation to pass through the House. Labour Members understand why the measure is necessary, however, to ensure that there are no gaps should this Bill take longer to pass through Parliament.

We also understand why we cannot have two procurement systems in place at the same time. As previously stated, we feel that the Bill is a step forward in addressing some of the issues in our procurement system that were introduced by the likes of the public contracts regulations. Many provisions that are part of those regulations have been brought into the Bill, and others have been improved on. We feel that the Bill could have gone further in many ways, and we will continue to argue for amendments in those areas for the rest of our proceedings in Committee and on Report, but we share the view that it will bring benefits to our procurement system as a whole. We will therefore not oppose the repeals alongside the enactment of the Bill.

Question put and agreed to.

Clause 115 accordingly ordered to stand part of the Bill.

Schedule 11 agreed to.

Clause 116 disagreed to.

Clause 117

Power to amend this Act in relation to private utilities

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

[Alex Burghart]

The clause provides a power for an appropriate authority to make regulations to reduce the regulation of private utilities under the Bill. That power may be used, for example, to disapply particular provisions or to modify them to reduce the regulatory burden, such as to reduce financial costs or administrative burdens.

In the UK, regulators such as Ofgem and Ofwat have promoted competition in many utility markets and provided a proxy for competition, with protection of consumers’ interests at its heart where that is not feasible. That oversight of private utilities justifies minimising the regulatory burden on them to avoid passing costs to customers.

As the Bill provides in clauses 89 and 97 that contracting authorities owe a duty to “treaty state suppliers”—that is, suppliers entitled to the benefit of international trade agreements—to comply with a substantial part of the Bill, the power can be exercised to make amendments only where they do not put the UK in breach of its obligations to those suppliers. The Bill already includes a number of measures that reduce the regulatory burden for private utilities, such as the transparency requirements being pared back to the minimum required by international trade agreements.

Parliament and interested parties will have ample opportunity to scrutinise any amendments proposed to be made under the power, as clause 117 requires consultation prior to making regulations. Parliament will rightly be able to scrutinise the regulations under the affirmative procedure.

[Florence Eshalomi]

The clause pertains to the ability to reduce regulations in relation to private utilities. It is important that the Bill does not create regulatory burdens where they are not necessary. The clause gives powers to ensure that the Bill can be amended to disapply parts of it in relation to private utilities.

Several exceptions for private utilities already exist throughout the Bill: for example, on the policy statements, the publication of certain information and assessing contract performance. Of course, that does not mean that private utilities do not go unregulated. It is important that groups such as Ofgem regulate the gas and electricity market, but it would be burdensome to have several different frameworks of regulation applying to bodies where they are not needed. That can end up duplicating regulation and creating unnecessary bureaucracy, and simplifying frameworks is one of the main reasons that the Bill is before us.

We believe that our private utilities should be regulated, particularly at a time when we see so many people up and down the country feeling the pain of skyrocketing energy bills this winter, but it must be done via the appropriate channels. For that reason, we are minded not to oppose the clause. However, I hope the Minister can briefly justify when the clause will be necessary and say that the powers will not be used overzealously.

In its report on the Bill, the Delegated Powers and Regulatory Reform Committee said:

“The Committee considered that there was inadequate justification for taking a power to make regulations for the deregulation of private utilities under the Bill. They considered that Ministers should explain more fully the proposed use of the power and unless the Government can fully justify it, the breadth of the power should be narrowed.”

In their response, the Government said:

“The power is limited by our international obligations. This means that we must retain some regulation of private utilities in order to comply with our trade agreements such as notice requirements and rules on conditions for participation and award criteria.”

How does that limitation play out in practice? What parts of regulation will be hard-locked into the system by it, and what parts will be open to amendment by the clause? In addition, does a mechanism exist to reapply regulation where it has been disapplied by the clause? It seems wrong for it to be the case that we could disapply bits of the Bill quickly but, should we realise that it was a mistake or maybe want to disapply the provisions only temporarily, the bar to reapply an existing regulation under the Bill would be a lot higher. Can the Minister inform me how that can be done, and what can be done in those cases?

As I mentioned, we are minded not to oppose the clause, but I would be grateful if the Minister could address some of those points.

[Alex Burghart]

Under the Bill, we have already reduced the regulatory burden for all types of contracting authorities, not just private utilities. Because the four sets of regulations will be streamlined into a single regime, it will be clearer for public authorities, which may currently need to use two or three of these sets of regulations, what rules they need to follow. All contracting authorities will benefit from a simpler, more flexible and commercial system that better meets our country’s needs while remaining compliant with our international obligations. We think it is right to go further for private utilities, as they operate in markets that are regulated in other ways—for example, by regulators such as Ofgem—and are more competitive and commercial.

As the hon. Member for Vauxhall said, the UK is party to trade agreements—for example, the UK-Switzerland trade agreement and the UK-EU trade and co-operation agreement—that require us to ensure that private utilities allow suppliers from those countries to participate in procurements covered by the relevant agreement. Under those agreements, suppliers from those countries have access to procurements by private utilities operating in sectors such as gas and heat, electricity, water, transport services and ports and airports. It is right that we are deregulating utilities, because they operate in different markets and we must have a pragmatic approach.

Question put and agreed to.

Clause 117 accordingly ordered to stand part of the Bill.

Clause 118

Regulations

Amendments made: 75, in clause 118, page 75, line 21, at end insert—

“(da) section 52 (key performance indicators);”.

This amendment would apply the affirmative procedure to an exercise of powers by a Minister of the Crown under clause 52.

Amendment 76, in clause 118, page 75, line 23, leave out paragraph (f).

This amendment is consequential on the Government‘s intention to replace the power in clause 64 with the substantive provision in NC15.

Amendment 77, in clause 118, page 75, line 29, at end insert—

“(la) section (Trade disputes) (trade disputes);”.

This amendment would apply the affirmative procedure to an exercise of powers by a Minister of the Crown under the new trade disputes clause in NC11.

Amendment 114, in clause 118, page 75, line 39, at end insert—

“(ua) section 123(6) (exclusion of devolved Welsh authorities);”.

This amendment would subject the power added by Amendment 115 to the affirmative procedure.

Amendment 78, in clause 118, page 76, line 21, at end insert—

“(ca) section 52 (key performance indicators);”.

This amendment would apply the affirmative procedure to an exercise of powers by the Welsh Ministers under clause 52.

Amendment 79, in clause 118, page 76, line 26, at end insert—

“(ha) section (Trade disputes) (trade disputes);”.

This amendment would apply the affirmative procedure to an exercise of powers by the Welsh Ministers under the new trade disputes clause in NC11.

Amendment 80, in clause 118, page 76, line 47, at end insert—

“(ca) section 52 (key performance indicators);”.

This amendment would apply the affirmative procedure to an exercise of powers by a Northern Ireland department under clause 52.

Amendment 81, in clause 118, page 77, line 1, at end insert—

“(da) section (Trade disputes) (trade disputes);”.

This amendment would apply the affirmative procedure to an exercise of powers by a Northern Ireland department under the new trade disputes clause in NC11.

Amendment 82, in clause 118, page 77, line 15, leave out from “under” to end of line 16 and insert “any of the following provisions”.

This amendment is preliminary to Amendment 83.

Amendment 83, in clause 118, page 77, line 18, at end insert—

“(a) section 90 (treaty state suppliers: non-discrimination);

(b) section (Trade disputes) (trade disputes);

(c) section 111 (powers relating to procurement arrangements).”—(Alex Burghart.)

This amendment would apply the affirmative procedure to an exercise of powers by Scottish Ministers under the new trade disputes clause in NC11.

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

[Alex Burghart]

Clause 118 sets out the relevant procedures associated with the making of regulations under the Bill. They must be exercised by statutory instrument or equivalent powers in relation to Scotland and Northern Ireland.

Where a power is exercised by a Minister of the Crown, the powers listed in subsection (4) are subject to the affirmative procedure, those made under clause 42 are subject to the made affirmative procedure and, with the exception of commencement regulations, the rest are subject to the negative procedure.

Where powers are exercised by Welsh Ministers, those set out in clause 118(10) are subject to the affirmative procedure and all other powers are subject to the negative procedure. Similarly, where powers are exercised by a Northern Ireland Department, those set out in subsection (12) are subject to the affirmative procedure, and all others to the negative. Regulations made by Scottish Ministers under clauses 90 and 111 are subject to the affirmative procedure applicable in proceedings of the Scottish Parliament.

[Florence Eshalomi]

Clause 118 outlines the powers and restrictions related to regulations that can be passed under the Bill. We all understand the point of secondary legislation. We do not oppose its use in this Bill, nor do we oppose the clause. However, we share the concern of the Delegated Powers and Regulatory Reform Committee about the scale of the use of delegated powers. Its report states:

“This report identifies multiple failures in the Memorandum to adequately explain and justify very broad delegations of power which enable implementation of significant policy change by delegated legislation. This would give us cause for concern at any time but is particularly disappointing as it comes so soon after the publication of our report, Democracy Denied? The urgent need to rebalance power between Parliament and the Executive, in November 2021, and of revised guidance for departments on the role and requirements of this Committee.”

The DPRRC’s concern was shared by Chris Smith, e-procurement and procurement consultant at CA Procurement Consulting Ltd. In his written evidence to this Committee, he said:

“The latest version of the Bill relies heavily on secondary legislation, which has not yet been published, and I am concerned that the level of compliance of Contracting Authorities with transparency regulations and policies will not be improved by this Bill as it is currently worded.

Currently, there remains a significant gap in transparency and the data captured in the existing online systems that not only undermine accountability and scrutiny of the use of public funds but also means that the government cannot rely on obtaining accurate data from these systems, for example, on SME participation. The same goes for the private sector.”

I think it is fair to say that I have made my feelings clear to the Minister throughout the Committee’s proceedings about the use of secondary legislation. I will not go through all those points again—I am sure he can refer back to them—but I still have concerns about how heavily the Bill relies on secondary legislation.

It is not that we object to the use of secondary legislation, nor do object strongly to an instance of its use throughout the Bill. At the end of the day, it is an option that the Government can use to legislate. However, as the Minister knows, it was well within the Government’s gift to set out more information in the Bill so that we could scrutinise further what some of the powers will mean in practice. They could have either set out the scope of what regulations should do, or scrapped the need for regulations entirely and spelled out the provisions in the Bill. Instead, we have had hypothetical debates—some powers may be granted, and some may not; they may transform our procurement system, or they may go unused. It is a bit frustrating to produce legislation in that way.

--- Later in debate ---

[Alex Burghart]

Clause 119 defines words and phrases of general application in the Bill that are not listed elsewhere—for example, “appropriate authority” is defined as a Minister of the Crown, Welsh Minister or Northern Ireland Department. Importantly, the clause also sets out the definition of “small and medium-sized enterprises”, and provides that an appropriate authority may amend by legislation the definition of an SME. The clause includes some concepts of wider application in the Bill, setting out, for example, that value of money thresholds are inclusive of VAT.

Clause 120 sets out where in the Bill the definitions of certain concepts of wider application can be found.

[Florence Eshalomi]

Clauses 119 and 120 relate to interpretation and definitions. Clause 119 defines terms, such as SME, that are common in the Bill but are not defined in individual clauses where they are mentioned; clause 120 contains a useful index of defined terms and where their definition appears in the Bill. We believe that the clauses are necessary and useful for navigating the many different terms that appear in the Bill, and we do not intend to oppose them.

Question put and agreed to.

Clause 119 accordingly ordered to stand part of the Bill.

Clause 120 ordered to stand part of the Bill.

Clause 121

Power to make consequential, etc, provision

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

[The Chair]

With this it will be convenient to discuss the following:

Clauses 122 and 123 stand part.

Government amendment 84.

Clause 124 stand part.

[Alex Burghart]

Clause 121 provides a power to make regulations that make supplementary, incidental or consequential provision. It is a standard clause that means that the Government can make regulations that ensure that the Procurement Act—as it will be—works effectively with the rest of the statute book. It includes the power to amend primary legislation.

Clause 122 explains the extent of the Bill—that is to say, the jurisdictions in which it will form part of the law. The Bill’s provisions extend to each of the jurisdictions of the UK. The majority of provisions apply to all procurement by contracting authorities in England, Wales and Northern Ireland, including matters that we agree are within the scope of devolved competence. The Bill also extends to Scotland and applies, in limited respects, to procurement by devolved Scottish contracting authorities.

Clause 123 is a standard clause setting out when the Bill’s provisions will have effect as law. Some provisions will commence when the Bill is passed and some will commence upon regulations being made by a Minister of the Crown. As we have discussed, however, and following agreement with the Welsh Government, that power can be exercised in relation to devolved Welsh procurements only with the consent of the Welsh Ministers.

We have committed to provide six months’ notice of the new regime coming into force from when the Bill is passed. We expect that to be spring 2024 at the earliest. The existing legislation will apply until the new regime goes live, and it will also continue to apply to procurements started under the old rules. Frameworks, dynamic purchasing systems and qualification systems let under the old rules can remain live for their planned lifespan.

Clause 124 is mainly for citation purposes, and does not necessarily cover all aspects of the Bill. Once the Bill receives Royal Assent, it will be cited as the Procurement Act 2022. Amendment 84 will remove the amendment made in the other place in respect of the financial privilege of the House of Commons.

[Florence Eshalomi]

Amendment 84 is a privilege amendment. It is added to Bills by convention to avoid the violation of the privilege that the House of Commons rightly enjoys over the ability to charge people and public funds. The amendment is a quirk of our constitution for Bills beginning in the Lords, and we are, of course, happy to affirm the privilege of this House.

Clauses 121 to 124 are standard parts of Bills in this House. Although there can sometimes be contention about when Bills should commence, it is welcome that, on this occasion, there is no such controversy and the Bill will commence on the day it passes. Of course, we do not object to that, or to the other provisions of the clauses. We are happy for them to stand part of the Bill.

Procurement Bill [ Lords ] (Seventh sitting)

Florence Eshalomi Excerpts

Committee stage
Thursday 9th February 2023 Public Bill Committees

[The Chair]

Before we begin, I remind you that Hansard colleagues will be grateful if Members could email their speaking notes to [e-mail]. Please switch electronic devices to silent. Tea and coffee are not allowed during sittings.

Clause 80

Conflicts of interest: duty to identify

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

I beg to move amendment 116, in clause 80, page 54, line 32, after “who” insert “directly or indirectly”.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 117, in clause 80, page 55, line 2, at end insert—

“‘person who directly or indirectly influences’ includes but is not limited to—

(a) civil servants;

(b) government contractors or consultants and their employees;

(c) special advisers;

(d) parliamentarians; and

(e) political appointees.”

Clause stand part.

Clauses 81 and 82 stand part.

[Florence Eshalomi]

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

Clauses 80 to 82 concern cases where a conflict of interest may arise during the procurement process. In particular, the clauses place obligations on contracting authorities to identify and mitigate against conflicts of interests where they may arise. The clauses are important, and it is correct, alongside the principle of non-discrimination, to ensure that suppliers that may be able to unduly influence the decisions of contracting authorities are excluded from the procurement process.

It is critical that taxpayers’ money is spent in the right way. We cannot and must not have a repeat of the back-room deals that we saw during the covid pandemic. The public expect their money to be spent in an open and transparent way, and they expect the value for money that comes with openness and transparency.

We know what happens when that is not the case. I have referred to this figure before, but it is important to keep stating it: the Government have written off £10 billion of public money spent on personal protective equipment that was unusable, unsellable, overpriced or undelivered. With £770,000 a day being spent to store unused gloves, goggles and gowns, that is not acceptable. The companies that got into the VIP lane were 10 times more likely to win a contract, and Ministers have now admitted that many did not go through the so-called eight-stage process of due diligence.

We know, therefore, that much more needs to be done to stand steadfast against conflicts of interests in procurements. We believe that clauses 80 to 82 may offer a step forward, but we also think that we could go even further to capture the wide range of influence on procurement decisions that may give rise to conflicts of interest.

Our amendments 116 and 117, taken together, would achieve that. They were suggested by Spotlight on Corruption in its written evidence to the Committee. We feel that they strike the right balance to increase scrutiny in the procurement system. In justifying the amendments, Spotlight on Corruption stated:

“As the Mone affair and the VIP lane as well as other COVID procurement scandals have shown, indirect influence over procurement decisions pose a real risk to public perceptions about the fairness and integrity of procurement. The fact that a minister, special adviser, or politician referred a company for emergency covid procurement appears to have been at least entertained as part of the decision-making process by procurement officials in awarding contracts. While this was an emergency procurement context, it has exposed the vulnerabilities in the UK procurement regime and the potential for those in political office to influence procurement decisions.

Sir Nigel Boardman’s reviews specifically recommended that conflicts of interest in procurement should be identified in relation to a broad range of actors, including: civil servants, special advisers, contractors, consultants and political appointees. The ‘VIP lane’, as well as the Owen Paterson affair, show that members of parliament, who may have private interests, can also seek to influence government procurement decisions in favour of those interests.

As it is not specified on the face of the Bill what the term ‘influences’ may include, it is not clear whether the term will be interpreted narrowly or more widely by contracting authorities. To ensure that it is interpreted widely, in our view, the Bill should contain specific language to reflect indirect influence (which might include lobbying or financial interests), and the wide range of people who may exert such influence.”

The Opposition agree with Spotlight on Corruption’s arguments and believe that it makes a strong case for the inclusion of such language in the Bill.

If we are asking the public to trust us with their money, we must never let the VIP lane scandal happen again. I hope the Minister will agree that the amendments would strengthen our defence against undue influence, and I urge him to support them.

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

It is a pleasure to serve under your chair-personship again, Mr Mundell. It is good to be back for the fourth day of deliberation in Committee.

Clause 80 is clear that a contracting authority must take all reasonable steps to identify conflicts or potential conflicts of interest on the part of those acting in relation to a procurement. Amendment 116 is impractically broad. The Bill already provides safeguards in clause 82(4), which could lead to the contracting authority taking steps in relation to a person with an indirect influence on a procurement, where the contracting authority believes that such a circumstance would be likely to cause a reasonable person to believe there to be a conflict.

Extending conflicts of interest to be identified in respect of any individual with only an indirect influence over the decisions of contracting authorities, as the amendment seeks to do, would go too far. It would add unnecessary administrative burdens on contracting authorities and potentially make it impossible for them to comply with the requirements of the Bill. It is not reasonable for a procurement officer to be expected to identify all individuals who may indirectly influence a procurement decision, let alone their potential conflicts of interest, in respect of every supplier tendering for every procurement. For example, it could lead to a school, when undertaking any public procurement, having to identify and consider the interests of all senior civil servants and Ministers in the Department for Education and the Treasury. That would be neither practical nor desirable.

Amendment 117 would add a list of certain individuals for contracting authorities to consider when identifying conflicts of interest. Such a list of individuals is better kept in guidance rather than legislation. All the persons listed in the amendment, where they have influence in respect of the relevant procurement decision, will already be caught by the current provision but may not be relevant in every single procurement by every single contracting authority. We therefore respectfully request that the amendments be withdrawn.

Clause 80 sets out the obligations on a contracting authority to take all reasonable steps to identify and keep under review potential or actual conflicts of interest. It is followed by clause 81, on duties to mitigate, and clause 82, on conflicts assessments. When conflicts of interest are not properly identified and mitigated, there can be far-reaching consequences, which can lead to accusations of fraud, bribery and corruption, legal challenges and the undermining of public confidence in the integrity of our public institutions.

Clause 80 details the individuals in respect of whom conflicts, or potential conflicts, should be identified. That includes people acting for, or on behalf of, the contracting authority in relation to the procurement; a person with influence on the decision making; and a Minister acting in relation to the procurement. The clause also defines what constitutes an interest, which can be a personal, professional or financial interest, either direct or indirect.

Clause 81 sets out obligations on a contracting authority to take all reasonable steps to mitigate conflicts of interest. As a rule, it is important that we treat all suppliers the same in our procurements. That is critical for us to ensure fair and open competition and deliver the best value for money. At the same time, a conflict of interest relating to a supplier should not automatically lead to their exclusion. We must therefore ensure that where conflicts of interest are identified, contracting authorities can first attempt to put mitigations in place to avoid a given supplier having an unfair advantage or disadvantage. A contracting authority must take all reasonable steps to do so and may require a supplier to take reasonable steps too. However, to ensure open competition and genuine fairness in the procurement, if a conflict of interest does lead to an unfair advantage that cannot be avoided, or the supplier refuses to take certain steps to avoid it, that supplier must be excluded.

Clause 82 places specific duties on contracting authorities in relation to conflicts assessments. In large part, those duties are to ensure compliance with clauses 80 and 81. A conflicts assessment is a document that includes the details of both the conflicts of interest identified and any steps taken to mitigate them. The structure or format of such a document will remain within the discretion of the contracting authority, and is likely to depend on the procurement. A contracting authority must prepare a conflicts assessment at the start of the procurement and keep it under review, revising it where necessary. When publishing a relevant procurement notice, the authority must confirm that those actions have been undertaken. This is a new duty on contracting authorities that strengthens the existing requirements relating to conflicts.

It is important to clarify that there is no duty to publish the conflicts assessment; rather, contracting authorities must publish confirmation that the assessment has been prepared or revised. Conflicts of interest can adversely impact procurements at any point of the commercial lifecycle, and the Committee will note that the definition of “relevant notice” in clause 82(8), which specifies when there should be confirmation that the conflicts assessment has been revised, reflects that fact.

I respectfully request that the amendment be withdrawn, and commend the clauses to the Committee.

[Florence Eshalomi]

I understand the Minister’s concern about additional bureaucracy, but we should aim to make sure that there is no interpretation regarding undue influence. There is a view that the Bill should contain specific language to reflect indirect influence. I hope the Minister agrees that the notion of transparency and making sure that no perceived conflicts arise should be fully addressed in order to ensure that we restore public trust, especially as it relates to Government money—taxpayers’ money—and large contracts. We need to stamp out some of the concerns that many people rightly highlighted about what happened during the covid-19 pandemic. Yes, there were some cases in which emergency contracts had to be procured, but as I have already mentioned, on numerous occasions, the proper procedure was not followed. I hope the Minister agrees that the Bill should contain specific language reflecting what is termed indirect influence.

Question put, That the amendment be made.

--- Later in debate ---

Clause 87 will apply the rules concerning 30-day payment terms to below-threshold regulated contracts.

[Florence Eshalomi]

I thank the Minister for outlining the clauses, which, as he highlighted, deal with below-threshold contracts. While such contracts do not meet the threshold for inclusion in many parts of the Bill, they will still need to follow some bits of regulation in how they are processed. In particular, a contract details notice must be published for contracts above £12,000 or £30,000 —known as notifiable below-threshold contracts—after they are entered into. Below-threshold contracts must follow the procedures relating to the 30-day payment rules.

The clauses are almost identical to current regulations, and we support their inclusion in the Bill. We feel that the extra scrutiny is welcome for groups such as SMEs, which may find that these contracts are the right size for their enterprise to deal with. It is important to strike the right balance. In general, we are happy with the clauses and will not oppose them, but I would ask the Minister what protocol will be followed when the threshold figures are altered.

[Alex Burghart]

It will be in secondary legislation.

Question put and agreed to.

Clause 83 accordingly ordered to stand part of the Bill.

Clause 84 ordered to stand part of the Bill.

Clause 85

Regulated below-threshold contracts: duty to consider small and medium-sized enterprises

Amendment proposed: 2, in clause 85, page 57, line 27, after “enterprises” insert “and co-operative societies”.—(Florence Eshalomi.)

See explanatory statement to Amendment 1.

Question put, That the amendment be made.

--- Later in debate ---

[Alex Burghart]

A contracting authority is required to publish a pipeline notice if it reasonably expects that, in the coming financial year, it will pay more than £100 million under relevant contracts. The pipeline notice in clause 91 is designed to set out details of public contracts that a contracting authority proposes to enter into in the forthcoming 18 months with an estimated value of more than £2 million. It provides potential suppliers with advance notice of upcoming opportunities and allows them to plan for future work. The notice must be published within 56 days of the first day of the relevant financial year. Private utilities and transferred Northern Irish contracting authorities are not required to publish pipeline notices.

[Florence Eshalomi]

The clause introduces pipeline notices, which mandate large contracting authorities to publish a pipeline of contracts worth over £2 million every year for the upcoming year. We question why it is £2 million when the Government have altered the other thresholds of that value to £5 million elsewhere in the Bill. Will the Minister clarify that for us? However, we do not oppose the lower number or the pipeline notices in general, so we are happy for the clause to stand part of the Bill.

[Alex Burghart]

The threshold of £2 million was set following the determination that that was the best balance of realising the benefits of transparency against the efforts made by contracting authorities in providing the information.

Question put and agreed to.

Clause 91 accordingly ordered to stand part of the Bill.

Clause 92

General exemptions from duties to publish or disclose information

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

--- Later in debate ---

[Alex Burghart]

Clause 92 sets out when contracting authorities may withhold—for example, by way of redaction—information that they are otherwise required to publish or disclose under the Bill. The two exemptions are for national security and sensitive commercial information. “Sensitive commercial information” is defined as information that “constitutes a trade secret” or would be likely to prejudice commercial interests if published or disclosed. The exemptions are modelled on their equivalents in the Freedom of Information Act 2000 and are intended to be understood and interpreted in the same way.

However, the FOIA is a scheme for responding to requests for information, whereas the Bill is about proactive publication by contracting authorities. The sensitive commercial information exemption is subject to an overriding public interest test, while the national security exemption is absolute. If the contracting authority relies on either of the exemptions to withhold or redact information, it must notify anyone to whom the information would have been provided that information is being withheld or redacted and why. The latter requirement is suspended if it would be contrary to the interests of national security to make such a notification.

[Florence Eshalomi]

The clause relates to a small number of reasons why information may not be published where it would otherwise be required under the Bill. Of course, we agree that some information is particularly sensitive and should not be disclosed to the public. I welcome the Minister’s assurance on ensuring that national home security is absolute. The reasons for non-publication in the clause are proportionate and sensible. We do not feel that this is controversial, and we will not oppose its addition to the Bill.

Question put and agreed to.

Clause 92 accordingly ordered to stand part of the Bill.

Clause 93

Notices, documents and information: regulations and online system

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

[Alex Burghart]

In support of the Government’s drive towards ensuring greater transparency in procurement, there are many provisions in the Bill that place requirements on contracting authorities to publish information. Clause 93 confers a power to set out the form and content of the information to be published or provided as well as the place it is to be sent. That is a broad but necessary power. The World Trade Organisation GPA sets out the core of the detail of many of the notices that we have described in the Bill, which will give hon. Members a clear indication about the sorts of information that will be required to be published using these powers. 

However, the Government wish to push further and create additional transparency to that required by the GPA. For that reason, we have created new transparency obligations and proposed the power to set out the detail in clause 93. The flexibility inherent in taking that power allows us to tailor the transparency regime over time to ensure that we can benefit from greater transparency across the procurement landscape. The power allows us to set different requirements for different types of contract or different industries, depending on the needs and benefits of different areas. 

Clause 93 also puts an obligation on the Government to establish and operate an online system for the purpose of publishing notices, documents and other information under the legislation. The online system must make notices, documents and other information published under the legislation available free of charge and accessible for people with disabilities.

[Florence Eshalomi]

Clause 93 is perhaps the most referenced throughout the Bill; it has been mentioned about 24 times. We did not expect the legislation to be all-encompassing, but we are now at clause 93 and we are seeing a little more deflection and can kicking. We support the implementation of a new digital system, but the reality is that we do not have any idea what it will look like based on the clause.

We have high hopes for the system, and it has the potential to be transformative for procurement, which we will get to during the debate on new clause 14. We believe it can be taken even further, as was the case in Ukraine. We can take inspiration from what is happening in Ukraine, and their heroic fight against Putin’s barbarism, as we heard during President Zelensky’s address yesterday. We must also take inspiration from their procurement system, even in the midst of what is going on.

I was pleased to hear the Minister say on Second Reading that he was pleased to let the House know that Ukraine was on our advisory panel and has informed the work on our single digital platform, which takes a lot from what Ukraine has done with ProZorro. The platform will enable everyone to have better access to public procurement data. Citizens will be able to scrutinise spending decisions, suppliers will be able to identify new opportunities to bid and collaborate, and buyers will be able to analyse the market and benchmark their performance against others on spending with SMEs, for example. That will provide better transparency, which will be better for taxpayers. Those are welcome words from the Minister, but at this stage, they are just words.

On Second Reading, the Minister also said:

“The platform is based on a system that we already have. We are confident that we will be able to introduce it in line with bringing this Bill into force. Obviously, we have to pass the legislation and get Royal Assent, and then there will be a settling-in period. But it is going to be functional very soon.”—[Official Report, 9 January 2023; Vol. 725, c. 383.]

How soon will that be? When is that target? We all agree the system has huge potential, but, as we have already seen in the promised version of the Bill and the version before us today, we cannot be certain about anything until it is in the statute book. Will the Minister commit today to introduce the regulations under the clause as soon as possible? I hope that he will deliver on the promises he made on Second Reading.

[Alex Burghart]

The hon. Lady will have already heard in our debates in Committee, on Second Reading and in Westminster Hall the huge range of areas in which we are bringing in additional transparency. The online digital platform will be the repository of sunlight that she is understandably so interested in. It is necessary at this stage for us to keep the primary legislation broad, so that there will be flexibility for Governments over time.

We intend to bring forward the online digital platform in 2024, bringing the Bill into force and allowing us to see the benefits. It will be a major step change in how we see evidence of public procurement. I hope the Opposition will welcome that.

Question put and agreed to.

Clause 93 accordingly ordered to stand part of the Bill.

Clause 94

Electronic communications

--- Later in debate ---

[Alex Burghart]

We are introducing amendments 61 to 64 to clarify the use of electronic communication systems and the application of other systems in various commercial circumstances. Clause 94 currently requires that electronic communication systems must be

“free of charge and readily accessible”.

Our intention is to allow businesses, particularly SMEs, to easily access the necessary documents and systems to bid for contracts, ensuring that access is open to all. However, the term “electronic communication systems” is broad, and concerns have been raised with us that it could inhibit certain practices that are currently commonplace, thereby making the Bill overly burdensome. For example, it could constrict the ability of utilities dynamic markets to charge for membership, and of the Ministry of Defence to make use of systems that charge to preserve secure payments.

Amendment 62 therefore limits the free-of-charge obligation beyond the point when the public contract is entered into and disapplies it to utilities dynamic markets. We have also tabled amendments 61, 63 and 64, which ensure that the clause only applies to covered procurement, and that the security exception in clause 94(3) extends to the whole clause.

Clause 94 sets out how communications relating to a procurement should be undertaken. Electronic communications can help reduce procurement process costs for suppliers and contracting authorities; reduce procurement timescales; encourage access to opportunities for suppliers; facilitate compliance with the rules; and promote traceability and auditability in the procurement process. As such, for covered procurements, we want contracting authorities to, so far as practicable, communicate with suppliers electronically and ensure suppliers do likewise. Electronic communication systems must be free of charge and readily accessible to suppliers, generally available and interoperable with other systems, and accessible to people with disabilities. There is an exemption from the requirement to communicate electronically if doing so would pose a particular security risk.

[Florence Eshalomi]

These amendments tidy up this part of the Bill by limiting requirements that relate to covered procurement, limiting the obligations on information after the awards of contract or in dynamic markets, and ensuring that all parts of the clause are excluded in the case of security risks. I am pleased to say that we do not feel the amendments are controversial, and that they sensibly fix a gap that could otherwise have caused problems, so we will not oppose them.

Clause 94 concerns electronic communications. In today’s modern world, electronic and digital communication is the norm, and we should expect all suppliers to have access to electronic communication methods. Such methods are the norm in wider society. It is right that information is freely available. We must ensure that it is accessible to everybody, so we welcome subsection (2), which puts some principles of communication in the Bill. We are happy for the clause stand part of the Bill.

Amendment 61 agreed to.

Amendments made: 62, in clause 94, page 62, line 42, at end insert—

“(2A) Subsection (2)(a) does not apply in relation to an electronic communications system used, or required to be used—

(a) after the award of the public contract, or

(b) in relation to a utilities dynamic market.”

This amendment would create an exception to the requirement for electronic communications systems to be free of charge and readily accessible to suppliers where those systems are used after award of a public contract or in relation to a utilities dynamic market.

Amendment 63, in clause 94, page 63, line 1, leave out “Subsection (1)” and insert “This section”.

This amendment and Amendment 64 would extend the exception in subsection (3) to any requirement in clause 94 the contracting authority considers poses a security risk.

Amendment 64, in clause 94, page 63, line 2, after “communication” insert “, or the use of an electronic communication system meeting the requirements of subsection (2),”.—(Alex Burghart.)

This amendment and Amendment 63 would extend the exception in subsection (3) to any requirement in clause 94 the contracting authority considers poses a security risk.

Clause 94, as amended, ordered to stand part of the Bill.

Clause 95

Information relating to a procurement

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

[Alex Burghart]

Clause 95 provides that regulations may be made requiring certain information to be shared in a particular way. The power will be used to specify that contracting authorities and suppliers must use the central online platform, to be established under clause 93, and to provide detail on the proposed register of suppliers.

As part of the central digital platform, the register of suppliers will allow suppliers to submit the common data needed for procurements, such as their full name and registered office address, date of registration, VAT number and so on, in an evidence locker, so that they can “tell us once” across the public sector. All contracting authorities will be required to use data from the register of suppliers in their procurements.

Clause 95 also requires contracting authorities to keep records of any communication between the authority and a supplier in relation to a covered procurement. All data published on the central digital platform will be aligned to the open contracting data standard, or OCDS. Adoption of the standard will significantly improve data quality and sharing.

[Florence Eshalomi]

The clause puts in place similar provisions to clause 93, and has huge potential to make our procurement system more efficient—for example, by standardising how information is shared. That would simplify the procurement system for SMEs, which would not have to navigate the surprising number of ways in which the information in the Bill could be presented.

I will not reiterate my points on clause 93, but I have similar concerns that these provisions are just words, before we have seen the regulations laid, but I hope the Minister will make good use of them as quickly as possible.

Question put and agreed to. 

Clause 95 accordingly ordered to stand part of the Bill. 

Clause 96

Data protection

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

[Alex Burghart]

Clause 96 sets out that the Bill does not authorise or require a disclosure of information that would contravene the data protection legislation. It defines the data protection legislation as being the same as the meaning set out in the Data Protection Act 2018. The effect of the provision is that there is no requirement to publish information that would otherwise be prohibited from disclosure under the Data Protection Act 2018.

[Florence Eshalomi]

This clause, as the Minister outlined, considers data protection and ensures that the Bill does not work contrary to the Data Protection Act 2018. It is entirely correct, and we do not object to it.

Question put and agreed to.

Clause 96 accordingly ordered to stand part of the Bill. 

Clause 97

Duties under this Act enforceable in civil proceedings

[Alex Burghart]

I beg to move amendment 65, in clause 97, page 64, line 6, at end insert—

“(6A) A supplier may not bring proceedings under this Part on the grounds that one or more of the following decisions of a Minister of the Crown was unlawful—

(a) a decision to enter a supplier’s name on the debarment list;

(b) a decision relating to the information included in an entry on the debarment list;

(c) a decision not to remove an entry from the debarment list, or revise information included in such an entry,

(see section 64 (debarment decisions: appeals)).”

This amendment would ensure that challenges to debarment decisions are all dealt with under clause 64 (debarment decisions: appeals).

--- Later in debate ---

[Alex Burghart]

Clause 97 provides that, where a UK or treaty state supplier has suffered, or risks, loss or damage in consequence of a contracting authority’s failure to comply with certain parts of the Bill, that supplier can hold the contracting authority to account through civil proceedings for breach of statutory duty.

The relevant parts of the Bill govern the award, entering into and management of public contracts—namely, parts 1 to 5, 7 and 8. Clause 97(5) lists the few exceptions, however, where any compliance failure is best challenged through judicial review. Those are a failure to have regard to barriers facing SMEs, which is required by clause 12(4), and a failure to have regard to the procurement policy statements in clauses 13(9) or 14(8). Suppliers can also raise concerns with the procurement review unit, which may engage with the contracting authority on a non-statutory basis to resolve any issues.

Further, proposed new subsection (6A), courtesy of Government amendment 65, will ensure that, where a claim is on grounds that can be challenged through the debarment appeals process—under clause 64—the supplier cannot also bring a claim under part 9 on those grounds. Debarment decisions are taken by a Minister of the Crown, and not a contracting authority, thus it is appropriate for the Minister to respond to that claim. I invite hon. Members to accept the amendment. 

Clause 98 says that if a contracting authority has been notified during a standstill period that a claim has commenced in relation to the procurement, the contracting authority is prevented from proceeding with the public contract until the claim is resolved. That is called automatic suspension. However, it is important that the court has a discretion to lift the automatic suspension on application by the contracting authority, and permit the contract or modification to be entered into, where that is necessary, despite a legal challenge. The factors for the court’s consideration when deciding whether it is appropriate to lift the suspension are laid out in clause 99 on interim remedies.

Interim remedies are, by their nature, applicable before the determination of any legal claim, at whichever point it is raised in the procurement—pre or post contract signature. Types of interim remedy under clause 99 may therefore include suspending the procurement process or performance of the contract.

An important aspect of clause 99 is the new test for lifting the automatic suspension. Unlike the current test derived from the 1975 American Cyanamid patent case, the test on the face of the Bill is specific to public procurement disputes, and enables the court to consider the merits of the case with reference to factors that ensure that the interests of the contracting authority, the claimant, the successful supplier and the public are considered in a fair and balanced way. The test will also apply to injunctions made to prevent the contracting authority from entering into the public contract where there is no automatic suspension. 

Clause 100 deals with pre-contractual remedies. Suppliers bringing claims to the court at this time are most often seeking a fair opportunity to bid for the public contract. Accordingly, clause 100 includes remedies such as reversing a decision made by the contracting authority, or requiring an action such as the re-evaluation of tenders. The court may also award damages or make any other order it deems appropriate in the circumstances.

Clause 101 sets out the post-contractual remedies—that is, those that apply once the contract or modification has been entered into. For the most egregious breaches, such as failing to honour a mandatory standstill period, where the supply has been denied the opportunity to seek pre-contractual remedies the contract may be set aside by the court. This is currently known as the remedy of ineffectiveness, and an order of this kind makes the contract or modification invalid. Where a set aside ground applies per clause 102, the court must set aside the contract or modification unless there is an overriding public interest in maintaining the contract, in which case the court may instead reduce the scope or duration of the contract, and award damages.

In common with the existing regime, the award of damages to a supplier following a breach of statutory duty is discretionary, and judges can continue to make an appropriate assessment on the award of damages, including quantum, taking into account all the circumstances of the case, including the nature of the breach and its consequences. As I mentioned, clause 102 sets out the conditions that, if met, may result in the contract or modification being set aside, where the supplier has been denied the opportunity to seek pre-contractual remedies.

Clause 103 sets out the timescales in which a supplier must raise a claim under the Bill for breach of statutory duty. For all claims except some for set aside under clause 102, this will be within 30 days from when the supplier knew—or ought to have known—about the breach. For set aside claims, after the contract has been entered into, the time limit is 30 days from the date of actual or deemed knowledge, unless a contract details notice was not published, in which case the 30 days applies up to a long stop date of six months from contract signature. The six month cut-off also applies to claims for set aside of contract modifications. The court may extend the 30 days up to three months, but may not extend the six month cut-off. The timescales aim to give suppliers adequate time to raise legal challenges to the procurement, while also enabling contracting authorities to manage the risk of delay and disruption to their public procurements.

The Government have proposed new clause 12 to be inserted after clause 103 to allow the Minister for the Cabinet Office to apply for a declaration permitting closed material procedure applications in procurement challenge proceedings, as we discussed the other day. Closed material procedure involves the non-Government parties leaving the courtroom while sensitive material is heard.

[Florence Eshalomi]

Amendment 65 shifts the responsibility for the debarment list remedy to clause 64, rather than being under this part of the Bill. New clause 12 is a simple amendment that extends the power to the Minister for the Cabinet Office, rather than just the Secretary of State. Both amendments make sense and we do not oppose them.

Clauses 97 to 103 relate to remedy against contracting authorities when duties under parts of the Bill are breached. It is right that suppliers have remedy when contracting authorities do not follow due process while carrying out procurement. I listened to the Minister’s explanatory remarks about having a fair and balanced remedy for tenders and contractors, about discretionary damages, and about legal challenges and timescales, but has he given thought as to whether employees or contracted workers, or subcontracted organisations involved in delivering public contracts, can seek a remedy if the employment terms and conditions agreed as part of a contract are not delivered?

At the point of tender or contract, a supplier may commit to providing certain employment conditions—for example, the living wage. However, if the supplier in that example, having won the contract, does not implement an annual increase in the living wage, I hope the Minister agrees that there is little recourse for workers employed under the contract. There is no clear, robust mechanism for workers or parties such as trade unions to complain, or for workers affected to receive remedy if there is a failure to comply. There may be a redress mechanism or a point of contact for them in the contracting authority, but there is no certainty that complaints will be investigated, let alone remedied. We are concerned about that, as workers may miss out on long-term remedies. I would be grateful if the Minister responded to that point, either now or later in writing.

--- Later in debate ---

[Alex Burghart]

Clause 104 enables the appropriate authority—a Minister of the Crown, a Welsh Minister or a Northern Irish Department—to investigate relevant contracting authorities’ compliance with the requirements of the Bill. It also obliges the relevant contracting authorities to provide reasonable assistance to the investigation within notified time periods, and allows the findings of investigations to be published.

Although the legislative definition of a relevant contracting authority in clause 104(5) excludes Departments, they may be subject to investigation; it is simply that Ministers do not require statutory powers to do this. Ministers already have the authority to investigate the procurement activities of Departments and ensure that any recommendations resulting from an investigation are duly taken into consideration. The Cabinet Office has established routes for co-operation with such investigations within Government. The new procurement review unit will utilise the statutory powers afforded by clauses 104 to 106, as well as non-statutory powers, on behalf of Ministers of the Crown.

Clause 105 allows the appropriate authority to make statutory recommendations as a result of an investigation under clause 104, where the investigation has identified that a contracting authority is engaging in action giving rise, or likely to give rise, to a breach of any requirement of the Bill. Clause 106 allows the appropriate authority to issue statutory guidance to contracting authorities, following an investigation under clause 104. This guidance will share the lessons of matters considered in the procurement investigation where those lessons are relevant to a larger number of, or indeed all, contracting authorities, including Departments, not just those that were the subject of the investigation. Contracting authorities are required by clause 106 to have regard to the published guidance when carrying out their public procurements and considering how to comply with the requirements of this Bill. It is left to the discretion of the appropriate authority to determine which contracting authorities would benefit from having regard to the guidance.

Subsection (3) highlights clauses 107 to 109, which restrict a relevant authority’s ability to issue guidance to particular contracting authorities. A Minister of the Crown can, with express consent from the devolved Administrations, issue guidance to all authorities, including devolved and transferred contracting authorities.

[Florence Eshalomi]

Clauses 104 to 106 concern oversight of procurement. Compliance with such is critical and it runs through the Bill.

As stated previously, the success of things such as the 30-day payment will ultimately come down to compliance with the Bill at all levels. We do not oppose these clauses, but we are concerned about the lack of ambition compared with what was outlined in the Green Paper. To take the Minister back to those proposals, the Green Paper states that the Government propose

“establishing a new unit, supported by an independent panel of experts, to oversee public procurement with powers to review and, if necessary, intervene to improve the commercial capability of contracting authorities. This unit would aim to improve capability and practices for the benefit of all contracting authorities and suppliers rather than provide remedies for an individual supplier on a specific procurement. This will be facilitated through greater information about purchasing and supply markets and behaviour, allowing targeted interventions to be implemented, optimising policy delivery and driving improvements in capability, behaviour and practice.”

We understand that proposals change between Green Papers and Bills—the Minister has touched on that before—but will he explain the reason for this reduction in ambition? What is proposed now?

There is a genuine question about to who will oversee compliance, especially as, despite the promises in the Green Paper, nothing has been done to reform the remedies system. The Bill contains little information on how the system will be overseen. It does not mention a procurement review unit, and refers only to an “appropriate authority”. Worryingly, the remit of the unit does not extend to central Government, Welsh Ministers or Northern Irish Departments, among other things. That seems like a large and inexplicable gap, which means that the unit will not be able to investigate compliance by any central Government Departments.

The “appropriate authority” has power to carry out an investigation of compliance by an authority under the Bill, and to make a recommendation; but it cannot make recommendations on compliance with a multitude of matters, including compliance with the national procurement policy statement, the national objectives in clause 12, or a specific procurement. On the face of it, that is relatively toothless, leaving the unit with limited remit and no enforcement powers. It also does not seem to be independent. That replicates the existing position, which we have discussed.

The Bill offers an opportunity to go further and to deliver better procurement systems across the country. Clearly, the Government do not wish to make the PRU into an appellate body, but the court system is an expensive and random way of enforcing compliance, tilted against challengers and small and medium-sized enterprises. While reforms of the court system belong outside the Bill, there is no evidence that any such reforms are being brought forward. We will not reject clauses 104 to 106, nor have we proposed amending them, but I hope that the Minister will address my concerns. I will welcome any feedback he can offer.

Procurement Bill [ Lords ] (Fifth sitting)

Florence Eshalomi Excerpts

Committee stage
Tuesday 7th February 2023 Public Bill Committees

[The Chair]

I remind the Committee that Hansard colleagues will be grateful if you could send your speaking notes to [e-mail]. Please switch all electronic devices to silent. Tea and coffee are not allowed to be consumed during sittings.

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

I beg to move amendment 13, in clause 41, page 28, line 27, at beginning insert “Subject to subsection (4A),”.

This is a paving amendment for Amendment 14, which would prevent the award of direct contracts to excludable suppliers when the supplier was excluded as a threat to national security.

[The Chair]

With this it will be convenient to discuss amendment 14, in clause 41, page 28, line 38, at end insert—

“(4A) If the supplier is an excludable supplier by virtue of the discretionary exclusion ground in paragraph 14 of Schedule 7 (threat to national security), the contracting authority may not award the contract to that supplier.”

This amendment would prevent the award of direct contracts to excludable suppliers when the supplier was excluded as a threat to national security.

[Florence Eshalomi]

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

Amendments 13 and 14 reiterate our amendments 15 to 19 to clause 29, which we debated last week. We think that competitive and due process should be followed as much as possible, and that the bypasses enabled by clause 41 should be used as little as possible. Although we understand why direct awards might be needed, we believe that they must be used with caution.

One element of the clause that we find troublesome is the provision on excludable suppliers and the public interest test. The rationale for direct awards can be related to defence, as under paragraph 18 of schedule 5, and the matters listed in the “overriding public interest” test in clause 41(5) are serious. We understand why the Government may look to bypass many of those grounds should the issues be serious enough, but we do not believe that it should ever be the case that threats to national security are awarded contracts, in particular under direct awards.

Previously in Committee, we attempted to move national security concerns from discretionary to mandatory grounds. We feel that the necessary amendment would require us to go beyond the public interest test for excluded suppliers and exclude suppliers with national security concerns across the board. The fact is, as we go further up the food chain of security sensitivity, the risk to our country from exposing our supply chain to national security threats becomes more severe.

To take the public interest test on constructing, maintaining or operating critical national infrastructure, we understand that that is of the utmost importance for the country, but we should not expose our network to security threats if the need for such a test is so great. The risk of doing so is catastrophic. It could mean malign surveillance in vital infrastructure undermining our entire security system and the fundamental safety of the state. In such cases, there must be a clear instruction for contracting authorities to look for alternative provisions that do not put the state at risk.

We feel that our amendments address such proportionality concerns. They would ensure that we never turn to national security threats for procurement, preventing the threat that those could cause to critical infrastructure. The Minister will say that we need flexibility in the system and that decision makers can assess the threat where necessary, but the reality is that we cannot expect procurement officers to be national security experts and to spot every threat that could be present with a supplier with national security concerns.

It is worth bearing in mind that, in high-pressure situations when wrong decisions can have hugely damaging unintended consequences, proper and strong legal checks and balances are critical, even at urgent times. Again, we may want to remember what happened during the covid pandemic. The National Audit Office investigation into Government procurement during covid-19 found:

“General guidance issued by the Crown Commercial Service recommends that awarding bodies publish basic information about the award of all contracts within 90 days of the award being made. Of the 1,644 contracts awarded across government up to the end of July 2020 with a contract value above £25,000, 55% had not had their details published by 10 November and 25% were published on Contracts Finder within the 90-day target.”

The result was that £10 billion-worth of PPE was written off, with auditors rebuking the Department of Health and Social Care for its management of taxpayers’ money during the pandemic. The Government are now locked in legal battles with the companies that failed to deliver on their contractual obligations. In the first quarter of 2022-23, the Government are still disputing 176 contracts worth nearly £3 billion. It is fair that even in an emergency we must abide by solid procurement principles if we are to avoid unintended consequences that put public finances and our national security at risk.

I think it is fair to say that we cannot be so arrogant as to assume that this would not be done inadvertently. During her speech on Second Reading, which I have alluded to already, the hon. Member for Rutland and Melton (Alicia Kearns) highlighted several issues that point to the need for tightening up in this area. She said:

“At the moment I have local authorities from around the country writing to me saying, ‘Alicia Kearns, can you please give me advice on whether or not we as the local council should procure from this company?’ That cannot be the way we do this. We must ensure local government is not the entry point for hostile states.”

She added:

“Finally, on supply chains, public authorities need to be able to investigate, and we must ensure that this goes high enough up the chain. Canadian Solar is looking to build a solar plant in my constituency. It sounds lovely—'Canadian Solar? What a great company’—but when we actually look into it, it is GCL-Poly, a Chinese-owned, Chinese-run company that is complicit in Uyghur genocide. We must ensure that the burden to investigate is properly addressed.”—[Official Report, 9 January 2023; Vol. 725, c. 363.]

I do not want to say that all these companies are necessarily a national security threat and need to be addressed by the Bill, but the points made by the hon. Member for Rutland and Melton and others show how easy it is for suppliers that may be of concern to the state to slip through the cracks. All these things concern us, and they should concern the Minister. With such risks present, I do not think there can ever be a proportional use of a national security threat in direct award procurement.

[Lloyd Russell-Moyle (Brighton, Kemptown) (Lab/Co-op)]

My hon. Friend is making very good points. We have the Committees on Arms Export Controls, which scrutinise not just Government sales but commercial sales abroad. Is there not a case for a similar Committee, or for the existing Committees to have a wider scope, to look at imports that might be national security threats? Would that not be a way to shine some light on this?

[Florence Eshalomi]

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

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

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

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

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

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

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

Question put, That the amendment be made.

--- Later in debate ---

[Kirsty Blackman]

I do not think that that is the case. We should not have such an issue that we need journalists, such as those at Sky, to shine a light and make those links. There should be a requirement for that transparency to be in place. Although we have the registers of Members’ and Ministers’ interests, they stand alone and are separate from the procurement contracts. If we end up in situations where people are benefiting significantly, having that in the transparency notice is important.

[Florence Eshalomi]

The hon. Member makes a valid point. Does she agree with my concern that only the other week the Paymaster General said that Ministers’ interests will be updated, but not until May, whereas we as Members have to update our entry in the Register of Members’ Financial Interests within 28 days? Why the delay?

--- Later in debate ---

[Kirsty Blackman]

I absolutely agree. Each former Prime Minister is able to put forward whoever they want to the House of Lords, so we end up in this situation of having 850 peers and counting. The numbers are increasing drastically because the Government keep putting in more people to balance the politics in that place.

On the amendment, it is important for the Government to be willing to consider how best to improve transparency. So far, they have shown no willingness to improve transparency or to accept that there have been issues and that mistakes have been made. We need to change the system.

The UK has fallen in Transparency International’s corruption index, which has nothing to do with the Financial Action Task Force one. The FATF index is about corruption when it comes to money laundering, but Transparency International’s is about corruption in the public sector. It looks specifically at such issues as breaches of the ministerial code—in particular, ones that have not been investigated—and the scandals we have seen and continue to see.

The Prime Minister cannot keep sacking people who breach the code; we need to change the system so that they never get to that position in the first place—so that they can never commit the egregious breaches of trust we have seen and can never profit as individuals as a result of their position in this place or the other place. If the rules and systems are changed—which they clearly need to be—the Prime Minister will not need to sack people, because they will never be able to breach the rules and will never be able to profit as individuals simply as a result of their links to this place.

I will push amendments 103 and 104 to a vote when we come to that point and am happy to support amendment 111, tabled by the Labour Front-Bench team.

[Florence Eshalomi]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[Alex Burghart]

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

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

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

--- Later in debate ---

[Alex Burghart]

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

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

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

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

[Florence Eshalomi]

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

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

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

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

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

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

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

Question put and agreed to.

Clause 41 accordingly ordered to stand part of the Bill.

Schedule 5 agreed to.

Clause 42

Direct award to protect life, etc

[Florence Eshalomi]

I beg to move amendment 108, in clause 42, page 29, line 29, at end insert—

“(5) Subject to subsection (6), regulations made under section (1) may remain in force for no longer than three months.

(6) A Minister of the Crown may by regulations provide for the continuation in force of regulations made under subsection (1) for a period of no longer than a further three months.

(7) A Minister of the Crown may exercise the power in subsection (6) more than once in respect of the same regulations made under subsection (1).”

This amendment would restrict the time in force of regulations allowing direct award of contracts to protect life or public order to no more than three months, but provide a power to extend their time in force, by three months at a time, by further regulations (which would be subject to approval by Parliament under clause 118(7)).

[The Chair]

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

--- Later in debate ---

[Florence Eshalomi]

Clause 42 permits a Minister of the Crown to award a contract during an event that is deemed to be a threat to life, health, or public order or safety. The explanatory notes state:

“The purpose of this clause is to ensure procurements during an emergency event (like the Covid-19 pandemic) can be conducted as quickly and transparently as possible, even if the circumstances leading to the event are foreseeable (which may rule out the extreme urgency justification for direct award contained in Schedule 5).”

We all understand that emergency powers were needed during covid-19, and we do not oppose the sort of power that is in the Bill to keep the country as safe as possible in the event of another pandemic or a major emergency. As alluded to in the explanatory notes, the power builds upon the extreme urgency justification in schedule 5, and covers the gaps where events cannot be covered under that schedule. During the covid-19 pandemic we saw that removing the scrutiny of the non-direct procurement procedure can bring major problems. It is worth reiterating the figures that are clear for all of us to see: almost £10 billion of public money went towards PPE that was written off. In answer to a written question in November, the Government confirmed that they are paying £770,000 a day—the figure that I quoted earlier—to store PPE in places such as China. Think what we could all do with such an amount of money in our respective constituencies.

We should not treat procurement during the pandemic as a model of good practice; we should look at learning from those mistakes. As the Bill is introduced, we should not let those patterns continue and just conduct current practices in the same way. It is critical that the use of these powers should not be the norm. Competitive awards must be the default under the direct procurement system, and these powers should be exercised only in the most severe circumstances. Therefore, we have questions about the meaning of subsection (2) and the limits of what is deemed necessary.

The explanatory notes say:

“Subsection (2) provides a definition of what would be deemed “necessary” (i.e. to protect life or public safety). This intentionally limits the discretion afforded to the Minister in subsection (1). Additionally any regulations made under this section would need to be compliant with the United Kingdom’s international obligations, which will in practice ensure that the interpretation of ‘necessary’ is not too broad.”

What does that mean in practice, though? What international obligations would govern how broadly the clause should be applied? On a cursory reading,

“necessary to … protect human, animal or plant life or health”

could be as trivial as tackling the scourge of cats getting stuck up trees. I am sure that, as the explanatory notes say, the interpretation of “necessary” should not be too broad. I hope that the Minister can outline the Government’s explanation and give hon. Members some guidance, to help to put our minds at ease for Report stage.

I question, too, whether the clause is limited to tackling novel or temporarily sensitive issues, or whether it could be used to apply to problems we face constantly and are well known. We all understand that situations may arise in which we may need these powers—in response to a national emergency or a disease such as covid. However, we would be sceptical about their use for something such as a standard winter flu, where surges and needs can be predicted and procured for well in advance. We note that the higher bars are put into place to protect against misuse, and they may tackle some of the problems we have already touched on. For example, regulations must be made via clause 118 affirmative procedures and must be agreed by Parliament. Although these raised bars are welcome, our experiences from covid-19 show us that we can and should go further to ensure that these powers are not abused. In particular, the temporal measures involved in this clause can be beefed up. That is essentially what amendments 103, 104 and 108 would do. Amendment 108 would add a sunset clause to the powers under clause 42 and ensure that every three months Parliament had to approve the use of these powers.

Subsection (4) states:

“A Minister of the Crown must—

(a) keep regulations made under subsection (1) under review, and

(b) if the Minister considers that direct award under section 41 is no longer necessary, revoke the regulations.”

We saw during the pandemic how emergency powers were in place for far longer than some deemed necessary, and prevented extra layers of scrutiny of direct awards. As I have already highlighted, that had consequences in terms of taxpayers’ money, which is still being spent on PPE that is not needed. As the explanatory notes explain, procurement may need to be carried out quickly in an emergency; but after three months, we should be far more aware of the problems we face. Although emergencies may stay unpredictable, the knowledge available to Parliament and to decision makers at the start of an emergency will be significantly less than what we will know later. Parliament should have a say when more knowledge is available about that emergency. It should have a say on whether the powers are still necessary and proportionate to the emergency. The answers can change, so it is right that the House has the ability to respond. In addition, the further we go into an emergency, the more aware we are of the needs of our services to tackle the problems presented and the more confident we can be in carrying out our procurement.

--- Later in debate ---

[Alex Burghart]

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

[Florence Eshalomi]

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

Question put and agreed to.

Clause 43 accordingly ordered to stand part of the Bill.

Clause 44

Transparency notices

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

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

(i) registered political party,

(ii) Ministers of the Crown, or

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

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

Question put, That the amendment be made.

--- Later in debate ---

[Alex Burghart]

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

[Florence Eshalomi]

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

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

[Alex Burghart]

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

Question put and agreed to.

Clause 44 accordingly ordered to stand part of the Bill.

Clause 45

Frameworks

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

--- Later in debate ---

An open framework can be with a single supplier, but if that is the case, subsection (6) limits the term of that framework to four years. That effectively ensures that the framework reverts to being a closed framework, to avoid restricting the market to a single supplier for longer than would be permitted under a closed framework.

[Florence Eshalomi]

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

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

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

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

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

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

However, clause 47 states:

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

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

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

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

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

[Alex Burghart]

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

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

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

Question put and agreed to.

Clause 45 accordingly ordered to stand part of the Bill.

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

Clause 50

Contract award notices and assessment summaries

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

[Alex Burghart]

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

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

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

[Florence Eshalomi]

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

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

Question put and agreed to.

Clause 50 accordingly ordered to stand part of the Bill.

Clause 51

Standstill periods on the award of contracts

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

[Alex Burghart]

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

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

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

[Florence Eshalomi]

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

Question put and agreed to.

Clause 51 accordingly ordered to stand part of the Bill.

Clause 52

Key performance indicators

--- Later in debate ---

[Alex Burghart]

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

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

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

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

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

[Florence Eshalomi]

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

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

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

Amendment 34 agreed to.

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

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

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

This amendment would define terms used in Amendment 34.

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

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

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

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

This amendment would define a term used in Amendment 34.

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

Clause 55

Procurement termination notices

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

[Alex Burghart]

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

[Florence Eshalomi]

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

Question put and agreed to.

Clause 55 accordingly ordered to stand part of the Bill.

Clause 56

Technical specifications

[Alex Burghart]

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

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

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

[Alex Burghart]

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

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

[Florence Eshalomi]

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

Amendment 37 agreed to.

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

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

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

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

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

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

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

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

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

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

[Florence Eshalomi]

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

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

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

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

“accessible to people with disabilities”,

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

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

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

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

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

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

[Alex Burghart]

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

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

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

[Florence Eshalomi]

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

[Alex Burghart]

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

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

Question put, That the amendment be made.

Procurement Bill [ Lords ] (Sixth sitting)

Florence Eshalomi Excerpts

Committee stage
Tuesday 7th February 2023 Public Bill Committees

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

I beg to move amendment 23, in clause 57, page 39, line 22, after “mandatory” insert “or discretionary”.

This amendment would make a supplier or an associated person on the debarment list for a discretionary ground an excluded supplier.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 24, in clause 57, page 39, line 29, leave out subsection (b).

This amendment is consequential on Amendment 23.

Clause stand part.

Clause 58 stand part.

[Florence Eshalomi]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Excluded suppliers are defined in subsection (1) as those to whom a contracting authority considers that

“a mandatory exclusion ground applies”,

as set out in schedule 6. The contracting authority must also consider that

“the circumstances giving rise to the application of the exclusion ground are likely to occur again,”

or that the supplier is

“on the debarment list by virtue of a mandatory exclusion ground.”

Excludable suppliers are defined in subsection (2) as those to whom a contracting authority considers that

“a discretionary exclusion ground applies”

as set out in schedule 7. The contracting authority must also consider that

“the circumstances giving rise to the application of the exclusion ground are likely to occur again,”

or that the supplier is

“on the debarment list by virtue of a discretionary exclusion ground.”

In both cases, the supplier is excluded or excludable if they are on the debarment list. Private utilities can treat mandatory exclusion grounds as discretionary; that is set out in subsection (3).

Clause 58 sets out how contracting authorities should assess the risk of the re-occurrence of the circumstances that gave rise to the application of an exclusion ground to a supplier. Contracting authorities may have regard to the range of factors set out in subsection (1) when evaluating that risk. Subsection (2) imposes a duty on the contracting authorities applying the exclusions regime to give suppliers an opportunity to submit evidence to show that the circumstances are not likely to recur—that is, that they have “self-cleaned”. Suppliers are also entitled to make the case that they are not subject to a ground for exclusion, and to make representations more generally.

The self-cleaning evidence must be sufficient to satisfy the contracting authority that the circumstances that gave rise to potential exclusion are not likely to occur again. Importantly, subsection (3) stipulates that contracting authorities must not make disproportionate requests for information or remedial evidence. That protects suppliers by ensuring that contracting authorities focus on the most important aspects of self-cleaning relevant to the particular circumstances.

The hon. Member for Vauxhall understandably takes us back to the issue of discretionary versus mandatory exclusions, which we debated the other day. One thing we need to bear in mind—perhaps with regard to more rarefied objects than paperclips—is that there may be circumstances in which particular substances or items can be procured only from certain suppliers. That may be essential for the operation of certain processes or the response to certain emergency situations.

[Florence Eshalomi]

As I said, I understand why the Minister says that there should be some discretion, and that it should lie with the contracting authority. However, does he agree that such discretion should not stretch to the point at which an organisation is on the debarment list, and there is an issue of national security?

[Alex Burghart]

There is absolutely the issue of national security. However, it is important that we retain an element of flexibility, so that in extremis, if there is only one provider of an essential good, the public authorities that need it still have access to it, even if there are concerns about other activities performed by a certain company. Although I completely understand the hon. Lady’s desire to prevent companies whose practices we disagree with from unduly benefiting from the public purse, we have to retain a degree of flexibility so that, in extremis, public authorities can get what they need.

Question put, That the amendment be made.

--- Later in debate ---

[Alex Burghart]

Schedule 6 sets out the mandatory grounds for exclusion. They consist of criminal offences and other misconduct serious enough to merit exclusion if the circumstances in question are likely to reoccur.

[Florence Eshalomi]

As the Minister highlighted, the schedule covers the grounds on which a supplier can be excluded, with some general provisions on how the suppliers are treated. I have touched on our concerns about excluded suppliers and excludable systems, and we will say more about that when we come to schedule 7. However, we believe that the scope of schedule 6 could be widened to cover issues of national security, to ensure that suppliers who are a risk to national security are not included in our supply chain, even when contracting authorities want paperclips. We support the increase in the scope of the schedule, so that it excludes suppliers who have committed serious offences, and who represent a concern to the authorities in the delivery of services. We are pleased to support the schedule.

Question put and agreed to.

Schedule 6 accordingly agreed to.

Schedule 7

Discretionary exclusion grounds

[Alex Burghart]

I beg to move amendment 87, in page 110, line 33, schedule 7, leave out paragraph 15.

This amendment would leave out the discretionary exclusion ground relating to forced organ harvesting.

Amendment 87 removes an amendment made to schedule 7 in the other place. It created a discretionary exclusion ground for suppliers with connections to forced organ harvesting, which is, of course, an utterly abhorrent practice. However, serious unethical behaviour particular to a certain industry is already covered by the ground of professional misconduct. The Bill is not the appropriate place to address the issue.

Every exclusion ground, whether mandatory or discretionary, must be considered for each and every supplier for each procurement. I am sure the Committee can appreciate how burdensome that would be when there are thousands of contracts every year. We want to make public procurement simpler and less burdensome for suppliers, particularly those that are small and medium-sized enterprises, and to drive value for money for the public. Adding additional exclusion grounds costs contracting authorities time and money. It is therefore crucial that we limit exclusion grounds to those that pose a major risk to public procurement. No supplier to the UK public sector has been involved in forced organ harvesting, as far as I am aware.

I am, however, pleased to say that the Government have already taken significant steps to make it explicit that the overseas organ trade, or complicity in it, will not be tolerated. Under the Health and Care Act 2022, it is already an offence to travel outside the UK to purchase an organ. That is why I believe that the amendment is necessary to overturn a well-meaning but, in practice, very challenging change to the Bill.

[Florence Eshalomi]

As the Minister highlighted, amendment 87 would sadly overturn Lords amendment 91, made on Report, in relation to forced organ harvesting. I agree with the Minister that there can be no doubt that organ harvesting is an abhorrent practice, but we should be careful when saying that this measure would just result in additional bureaucracy and time in contracts and procurement.

The practice of forced organ harvesting involves the removal of organs from a living prisoner, which results in their death or near death. It is something that none of us should stand by and watch. Linking this back to taxpayers’ money, no taxpayer would expect a single penny of their public money to go to a company explicitly linked to this practice. Tragically, there is evidence that forced organ harvesting may not be a particularly niche issue.

The Minister highlighted that the measure, although well intended, would add more time and another layer of bureaucracy. I want to go back to the debates in the other place, and some of the powerful words from Lord Alton of Liverpool and Lord Hunt of Kings Heath, who moved the amendment that led to our discussion today. Both made moving and compelling arguments for the inclusion of the measure against forced organ harvesting, providing examples of evidence that the practice is taking place on an extremely depressing scale in China.

The excellent speeches made by Lord Alton and Lord Hunt have been backed up by the Office of the UN High Commissioner for Human Rights, which stated that serious human rights violations have been committed in the Xinjiang Uyghur Autonomous Region,

“in the context of the Government’s application of counter-terrorism and counter-‘extremism’ strategies. The implementation of these strategies, and associated policies in XUAR has led to interlocking patterns of severe and undue restrictions on a wide range of human rights. These patterns of restrictions are characterized by a discriminatory component, as the underlying acts often directly or indirectly affect Uyghur and other predominantly Muslim communities.”

The OHCHR also stated that the treatment of persons held in the system of so-called vocational education and training centres—VETC facilities—is,

“of equal concern. Allegations of patterns of torture or ill-treatment, including forced medical treatment and adverse conditions of detention, are credible, as are allegations of individual incidents of sexual and gender-based violence. While the available information at this stage does not allow OHCHR to draw firm conclusions regarding the exact extent of such abuses, it is clear that the highly securitised and discriminatory nature of the VETC facilities, coupled with limited access to effective remedies or oversight by the authorities, provide fertile ground for such violations to take place on a broad scale.”

That is damning. It shows there is evidence of this already happening. In an April 2022 paper published in the American Journal of Transplantation, Matthew P. Robertson and Jacob Lavee stated:

“We find evidence in 71 of these reports, spread nationwide, that brain death could not have properly been declared. In these cases, the removal of the heart during organ procurement must have been the proximate cause of the donor’s death. Because these organ donors could only have been prisoners, our findings strongly suggest that physicians in the People’s Republic of China have participated in executions by organ removal.”

As a country, we must stand steadfast against these practices and ensure that any supplier with ties to forced organ harvesting is not allowed anywhere near our procurement system. I do not think taxpayers would expect anything less. No one wants to be linked to these horrific practices.

I fully understand and appreciate that the Minister may have covered these and other concerns in his remarks, but we may want to consider that there is no doubt this practice is an exclusion ground. In Committee in the Lords, the Minister, Baroness Neville-Rolfe, said it was almost certain that it would be covered by paragraph 12, but I think we have to ask ourselves, how many times have we heard that something is almost certain, only for it not to be covered when the Bill passes? We cannot and should not take chances on this issue. It is a fundamental and critical issue of human rights. If the Committee is to do its job, we cannot support the attempts to remove forced organ harvesting as a discretionary exclusion ground. For those powerful and valid reasons, I will not be supporting the amendment.

[Kirsty Blackman (Aberdeen North) (SNP)]

It is tempting to think that forced organ harvesting is so far removed from anything that we consider human, or a normal occurrence, that it does not happen—but it does. As the shadow Minister laid out, the issue was discussed in significant detail in the other place. We know it occurs.

The Minister has given some level of assurance that other parts of the Bill cover this practice. Could he be explicit that he does not believe that any supplier involved in forced organ harvesting would be eligible to receive a public contract through the procurement framework set out in the Bill? If he can give that explicit assurance that he believes the practice is covered elsewhere in the Bill, and that provisions elsewhere in the Bill adequately do the job of this provision, I would be happy not to oppose the amendment. That assurance from the Minister would give us a measure of reassurance and comfort that the Bill covers everything that he intends and expects.

--- Later in debate ---

Amendment 87 agreed to.

[Florence Eshalomi]

I beg to move amendment 106, in schedule 7, page 111, line 4, at end insert—

“Failure to consider sanctions regime

16 A discretionary exclusion ground applies to a supplier if a decision-maker determines that the supplier or a connected person has failed to adhere to sanctions imposed by the United Kingdom.”

This amendment would add a discretionary exclusion ground based on the failure to adhere to UK sanctions regimes.

Amendment 106 would add a discretionary ground to give contracting authorities the power to disregard tenders from suppliers who do not comply with the UK sanctions scheme. The amendment takes inspiration from the international reaction to Putin’s illegal and barbaric invasion of Ukraine. We know that many companies did the right thing in response to that invasion and swiftly pulled out from Russia. They withdrew funding, marketing and development, and they all took a stand not to finance Putin’s actions against the people of Ukraine. Sadly, however, some did not.

For example, research from Yale has identified the status of more than 1,000 companies in Russia, rating them from A to F on what presence they still have in the country. I will not go into specific cases, but it noticeable that companies rated D—defined as “continuing substantive business”—have been awarded lucrative public contracts since the invasion of Ukraine.

--- Later in debate ---

Division 26

Ayes: 5

Noes: 8

[Florence Eshalomi]

I beg to move amendment 112, in schedule 7, page 111, line 4, at end insert—

“Labour law infringements

15A (1) Subject to paragraph (2), a discretionary exclusion ground applies to a supplier if a contracting authority determines that a supplier, within the three years leading to the date of tender—

(a) has been found by an employment tribunal or court to have significantly breached the rights of an employee or worker engaged or formerly engaged by it,

(b) has admitted that it significantly breached the rights of an employee or worker engaged or formerly engaged by it, or

(c) has made a payment to an employee or worker engaged or formerly engaged by it in respect of a significant breach by it of the employee or worker’s rights,

and the contracting authority may treat the supplier as an excluded supplier in relation to the award of the public contract.

(2) Where a contracting authority determines that a supplier fulfils one or more of sub-paragraphs (1)(a), (b) or (c), the contracting authority must determine that the supplier is not an excluded supplier in relation to the award of the public contract if the contracting authority is satisfied that the supplier has provided convincing evidence to the effect that measures taken by the supplier are sufficient to demonstrate that it is in the public interest and in the interest of the contracting authority that the supplier should not be excluded from the procurement procedure.

(3) The evidence referred to in sub-paragraph (2) must include proof that the supplier has—

(a) paid or undertaken to pay without delay compensation in respect of any damage caused by the breach of rights,

(b) clarified the facts and circumstances in a comprehensive manner by actively and without delay collaborating with any relevant employment tribunal or court process and the parties thereto, and

(c) taken concrete technical, organisational and personnel measures appropriate to prevent further breaches of rights of a similar kind.

(4) Any such measures taken by the supplier must be evaluated taking into account the gravity and particular circumstances of the breach or breaches of rights.

(5) Where the contracting authority considers such measures to be insufficient, the contracting authority must give the supplier a statement of the reasons for that decision.

(6) ‘Rights’ in paragraphs (1) to (4) means any entitlement or benefit of an employee or worker engaged or formerly engaged by the supplier or of a trade union of which he or she is a member deriving from common law (including contract and tort) or statute, or protected by the international obligations of the United Kingdom referred to in Article 399 of the Trade and Cooperation Agreement (within the meaning of section 37 of the European Union (Future Relationship) Act 2020).”

This amendment is intended to give contracting authorities the discretion to exclude suppliers who have significantly breached the rights of staff in the last three years unless they have “self-cleansed”.

We hope that amendment 112 will be a step toward recognising that being granted public money via a public contract is a privilege, and that in return for this privilege suppliers should be upholding high standards in the workplace. The Bill provides us with an opportunity to drive up standards and ensure public procurement is used as a means to promote decent work throughout the supply chain and to reward businesses that treat their workers right, so we can raise standards right across the economy. We must all back the workers and employers who are creating Britain’s wealth. We must use procurement as an opportunity to raise the bar for all on working conditions. We believe this is a strong amendment. It seeks to include good work and the promotion of quality employment as a strategic priority.

--- Later in debate ---

[Alex Burghart]

Amendment 88 is a technical amendment that inserts a definition of “event” for the purpose of the five-year look-back period in schedule 7. It mirrors the same definition already included in schedule 6, but refers to an event by virtue of which a discretionary exclusion ground applies to a supplier.

Schedule 7 sets out the discretionary grounds for exclusion. Discretionary grounds involve a range of circumstances, some of which are potentially less serious and might not merit exclusion. It might depend on the circumstances relating to the exclusion ground, the type of contract being procured such as its urgency or criticality, or facts specific to the procurement—the number of bidders, for example.

Similar to the mandatory exclusion grounds, the discretionary grounds are subject to a five-year, look-back period, as set out in paragraph 16, whereby only convictions or other events that the decision maker was aware of within the past five years count when assessing whether grounds apply. Again, that is subject to a transitional regime to avoid the unfair retrospective effect of new exclusion grounds for events that would not have given rise to exclusion prior to the coming into force of the Bill.

The discretionary grounds generally apply to misconduct or circumstances involving either the supplier or a connected person of the supplier. Connected persons are defined in paragraph 44 of schedule 6, as I explained earlier. As with schedule 6, I hope that we have achieved our objective of making the exclusion grounds both clearer and more consistent.

[Florence Eshalomi]

As the Minister outlined, the amendment seeks to define the events, with reference to the relevant paragraph of the schedule on determining temporal cut-off points for events that may make a supplier excludable. We believe that it is a tidying-up amendment to ensure that the event is defined in the schedule, so we do not wish to oppose it.

More widely, there are some faults with the schedule and its implementation, but the Opposition view it as a step forward in procurement versus the Public Contracts Regulations 2015. We recognise the importance of clauses on matters such as labour markets and environmental misconduct, but the appropriateness of the scope of schedule 7 will depend on how stringent the rules on excludable suppliers are applied by contracting authorities. We should consider that when assessing how well the terms of the schedule will work in a few years’ time.

I would be grateful if the Minister explained why different timescales have been used in different parts of the Bill, as set out in paragraph 16. How were the decisions made for different grounds? We do not seek further amendments to the schedule, which we are happy to support.

[Alex Burghart]

I thank the hon. Lady for her comments and support of the schedule. She asked about the look-back periods in paragraph 16 and why they differ—perhaps she could intervene to clarify her question.

[Florence Eshalomi]

I asked about the different timescales outlined in paragraph 16. I would like a better understanding of how those decisions were reached.

[Alex Burghart]

I am embarrassed to say that my memory is failing me, but I will let the hon. Lady know later in the afternoon.

[Florence Eshalomi]

Thank you.

Amendment 88 agreed to.

Schedule 7, as amended, agreed to.

Clause 58 ordered to stand part of the Bill.

Clause 59

Notification of exclusion of supplier

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

[The Chair]

With this it will be convenient to discuss the following:

Clauses 60 and 61 stand part.

Government amendments 42 to 44.

Clause 62 stand part.

Government amendments 45 to 47.

Clauses 63 and 64 stand part.

Government amendment 76.

Government new clause 9—Debarment decisions: interim relief.

Government new clause 10—Debarment proceedings and closed material procedure.

Government new clause 15—Debarment decisions: appeals (No. 2).

--- Later in debate ---

I urge the Committee to support the Government amendments and new clauses, and allow clauses 59 to 63 to stand part of the Bill. I do not support clause 64 stand part.

[Florence Eshalomi]

This group of amendments and new clauses pertains to the debarment regime and a new interim relief scheme that suppliers can use when they wish a decision to be put on the debarment list. We support the addition of a debarment list to the Bill. It is right that suppliers that represent a significant risk to contracting authorities and the public are identified. Clearly, this is a strong step and represents a higher bar than simply excluding a supplier from a procurement tender process.

That high-bar intention for the list has been made clear by the Government and in the Minister’s remarks. I refer back to the letter of the then Minister Lord True to Minister Baroness Neville-Rolfe:

“I should start by explaining that the debarment list is intended to focus on the most serious cases of supplier misconduct, where suppliers may pose a significant risk to contracting authorities or the public.”

Ministers must also consider whether the circumstances that led to the application of the exclusion ground are likely to occur again. However, the Government might have changed their mind since then. Will the Minister confirm whether that is still the intention in that case?

Clarity is needed. The need for clarity highlights a potential flaw in the existing clauses: there is still some ambiguity about what the bar actually is to be placed on the debarment list. As drafted, any supplier deemed to be an excluded or excludable supplier can, in theory, be added to the list. It is also possible that no suppliers, even those with egregious cases, are added to the list.

The only other issue that I will raise is that of the threshold. Will there be additional guidance for suppliers and contracting authorities? The list can involve severe reputational and financial damage, so it is right to have safeguards. We will support the measure if the Minister can outline the additional safeguards.

[Alex Burghart]

The hon. Lady is right that Lord True wrote to a Member of the House of Lords about this, and we do not believe that the Government’s position has changed since then. I am afraid I cannot remember her second point—if she is happy to intervene on me, that will refresh my memory.

[Florence Eshalomi]

I will write to the Minister.

[Alex Burghart]

I look forward to receiving the hon. Lady’s letter.

Question put and agreed to.

Clause 59 accordingly ordered to stand part of the Bill.

Clauses 60 and 61 ordered to stand part of the Bill.

Clause 62

Debarment list

Amendments made: 42, in clause 62, page 43, line 30, leave out from “section” to end of line 39 and insert

“and, as part of that entry, must—

(a) state the exclusion ground to which the entry relates, and whether it is a mandatory exclusion ground or a discretionary exclusion ground, and

(b) indicate the date on which the Minister expects the supplier to cease to be an excluded or excludable supplier by virtue of the stated exclusion ground (and, accordingly, expects the entry to be removed from the list).

(4) A list kept for the purposes of this section is the ‘debarment list’.”

This amendment would make it clearer that each entry will relate to one exclusion ground and, as such, could be challenged individually.

Amendment 43, in clause 62, page 43, line 44, at end insert—

“(5A) The Minister may not enter a supplier’s name on the debarment list before the end of the period of eight working days beginning with the day on which the Minister gives notice to the supplier in accordance with subsection (5) (the ‘debarment standstill period’).

(5B) The Minister may not enter a supplier’s name on the debarment list if—

(a) during the debarment standstill period—

(i) proceedings under section (Debarment decisions: interim relief)(1) (interim relief) are commenced, and

(ii) the Minister is notified of that fact, and

(b) the proceedings have not been determined, discontinued or otherwise disposed of.”

This amendment would ensure that an application for interim relief under the new clause inserted by NC9 would suspend the Minister’s decision to add a supplier’s name to the debarment list.

Amendment 44, in clause 62, page 44, line 1, leave out from “review” to end of line 5 and insert—

“(b) may remove an entry from the debarment list at any time, and

(c) may revise a date indicated under subsection (3)(b).

(7) If a Minister of the Crown voluntarily removes an entry from the debarment list in connection with proceedings under section 64 (debarment decisions: appeals), a Minister of the Crown may reinstate the entry only after the proceedings have been determined, discontinued or otherwise disposed of.

(7A) A Minister of the Crown must remove an entry from the debarment list if the Minister is satisfied that the supplier is not an excluded or excludable supplier by virtue of the ground stated in the entry.”—(Alex Burghart.)

This amendment would restrict modifications that could be made to the debarment list, provide for the Minister to voluntarily suspend a decision to add an entry to the debarment list in connection with proceedings, and clarify that the Minister must remove an entry where a particular ground no longer applies.

Clause 62, as amended, ordered to stand part of the Bill.

Clause 63

Debarment list: application for removal

Amendments made: 45, in clause 63, page 44, line 16, leave out from “for” to end of line 17 and insert—

“(a) the removal of an entry in respect of the supplier from the debarment list, or

(b) the revision of the date indicated as part of such an entry under section 62(3)(b).”

This amendment would ensure that a supplier can apply to change the date indicating when it will cease to be an excluded or excludable supplier.

Amendment 46, in clause 63, page 44, line 21, leave out from “since” to “, or” and insert

“the entry was made or, where relevant, revised”.

This amendment would allow for the fact that a supplier may make different applications in respect of the same or different entries.

Amendment 47, in clause 63, page 44, line 23, after “subsection (1)” insert

“in relation to the entry or, where relevant, revision”.—(Alex Burghart.)

This amendment is consequential on Amendment 45.

Clause 63, as amended, ordered to stand part of the Bill.

Clause 64 disagreed to.

Clause 65

Timeline for removal of suppliers

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

[Alex Burghart]

Clause 65, which was added to the Bill in the other place, requires the Government to publish a timetable for the removal of Government surveillance equipment where there is evidence that a provider has been involved in modern slavery, genocide or crimes against humanity. That would require the Government to undertake a review of evidence that existing surveillance suppliers or subcontractors have been involved in those matters. Given the size and complexity of technology supply chains, any review of that nature would be costly and resource-intensive; it would need to cover hundreds, if not thousands, of companies.

The measure is intended to target Chinese suppliers, but it is not guaranteed to lead to action against them. The evidence surrounding the complicity of surveillance suppliers in the oppression of Uyghurs in Xinjiang is highly contested, and it would likely be difficult to show that any supplier had been involved in the matters set out in the clause. Although it is unclear what precisely is meant by “established evidence” that a provider has been “involved” in the specified abuses, proving that those suppliers knowingly provided technology for use in human rights abuses would be especially difficult. Even if there were sufficient evidence to do so, the cost and disruption of removing such surveillance equipment from across the entire Government estate would be significant. For that reason, public procurement policy has tended to focus on preventing unfit suppliers from participating in future procurements, rather than requiring the termination of existing contracts.

However, the Government are deeply concerned by both the accusations of modern slavery and the national security implications posed by such equipment, and they are taking action. In November, they announced that all Government Departments will be expected to remove such equipment from sensitive sites and to avoid procuring it in the future. We are also strengthening our powers in the Bill by introducing an exclusion ground for suppliers considered to pose a threat to the national security of the United Kingdom. Combined with the new powers for a centralised debarment list, that will mean that where the risk is sufficiently serious, Ministers can act quickly to ensure suppliers that threaten national security face exclusion from all contracts across the public sector.

I believe that we have taken decisive action in this area, both in the written ministerial statement and in the Bill. However, we are mindful of the concerns raised in both Houses, and we will continue to reflect carefully on those views as we move forward with the legislation and its implementation.

[Florence Eshalomi]

I thank the Minister for his closing remarks on that and the need to address some of the concerns. The clauses mandate the eventual removal of physical technology or surveillance equipment from the Government’s procurement system supply chain, where there is substantiated evidence of modern slavery, genocide or crimes against humanity.

--- Later in debate ---

[Florence Eshalomi]

I thank the Minister for introducing the amendment. As he highlighted, the clause mandates contracting authorities to accept non-disputed electronic invoices as an implied term in every contract. The amendment provides clarity that contracting authorities can require the use of a particular system for electronic invoicing, with extra provisions relating to defence contracts. We think that neither the original clause nor the amendment are disagreeable, and they are not controversial. We support their addition to the Bill.

Amendment 50 agreed to.

Clause 66, as amended, ordered to stand part of the Bill.

Clause 67

Implied payment terms in public contracts

[Florence Eshalomi]

I beg to move amendment 110, in clause 67, page 46, line 32, at end insert—

“(10A) Within six months of the passage of this Act, the Secretary of State must prepare, publish and lay before Parliament a report on the effectiveness of this section in ensuring prompt payment of small and medium-sized enterprises.

(10B) Not later than 6 months after the report has been laid before Parliament, a Minister of the Crown must make a motion in the House of Commons in relation to the report.”

This amendment would require the Government to report to Parliament on the effectiveness of this section in ensuring prompt payment of SMEs.

The amendment would add provisions to mandate that, within six months of passing this Act, the Government produce and publish a report on the effectiveness of implied payment terms in public contracts in ensuring the prompt payment of small and medium-sized enterprises.

One of the problems we see in procurement is the failure to promptly pay suppliers down the supply chain. Many of those suppliers are small and medium-sized enterprises, which require prompt payments to pay wages and bills, and, in some cases, to keep their company going. Failure to pay SMEs the money that they are owed can lead to serious repercussions.

The Government talk about improving the chances of SMEs when it comes to procurement, but for far too long, this has just been a lot of talk and no action. The statistics for SMEs and procurement are truly shocking. Analysis by the Spend Network found that big corporations still win the lion’s share—more than 90%—of contracts worth £30 billion a year that are deemed to be suitable for bids from smaller businesses.

Research from the British Chambers of Commerce and Tussell found that just over one in every five pounds, or 21%, spent by the Government on public sector procurement in 2021 was awarded to SMEs. They also found that SMEs now receive a relatively smaller amount of reported direct Government procurement spending than they did five years ago.

As a proportion of the overall procurement budget, direct spend with SMEs by local government bodies was the highest at 38%. NHS bodies across England spent 22% of their procurement budget with SMEs, while central Government was significantly lower than the average, awarding only 11% of contracts to SMEs.

We have touched on the issue of subcontractors and why they should be paid on time by those contracting out their services, whether that is a contracting authority, a prime supplier or a supplier three or four rungs down the supply chain. We are pleased to see terms to protect the 30-day payment standard between contracting authorities and prime suppliers, but, as the Bill stands, we have concerns about its ability to properly protect subcontractors down the supply chain.

On Second Reading, the Paymaster General said:

“On the prime, that is easy: we will be paying the prime contractor within the 30-day period. People in the supply chain will be aware of the contract under which they are supplying to the prime, and we expect that 30-day payment to trickle all the way down the chain. It is the first time that such a measure has been incorporated. It really will be for primes to be held to account. I say to hon. Members of this House that if partners to a contract are not being paid without good cause, it will call into doubt the contract with the prime supplier, so it will be very much in the interest of the prime supplier to deliver. Every effort the Government have made to improve the payment terms through the supply chains has so far been adhered to pretty well by industry. Across Government, we have seen a significant improvement in payments out to industry, and we are expecting a ripple-down effect as a result of the Bill.”—[Official Report, 9 January 2023; Vol. 725, c. 347.]

Although we recognise what the Paymaster General was saying, we are left with some concerns, especially for the SMEs that are waiting for that vital payment. I do not think we can expect these terms to ripple down the supply chain, and it may take a while for a ripple-up effect to take place if a subcontractor down the line misses payments to another subcontractor in the supply chain, which could be serious. The Government say that that would reflect badly on the prime contractor, but what methods will the Minister use to track this? How will he be able to tell whether it is effective?

Our amendment would add a requirement to assess the effectiveness of the Government’s claims about the ripple-down effect within six months of the Bill passing. As the Paymaster General highlighted on Second Reading,

“This is the first time that such a measure has been incorporated.”—[Official Report, 9 January 2023; Vol. 725, c. 347.]

Surely the Minister owes it to suppliers across the supply chain to check whether this method is effective. This should not be an arduous report to comply with, but it could provide a crucial stress test for the new system and feed into tweaks that go even further to ensure that all suppliers are paid on time. I hope that the Minister will agree with us about bringing SMEs into the procurement system and that those SMEs need to be paid in a timely manner. I urge him to support our amendment.

[Alex Burghart]

Amendment 110 would require Ministers to report to Parliament within six months of the Bill’s passage, detailing how effective the implied payment terms in clause 67 have been in ensuring prompt payment of small and medium-sized enterprises. The new regime will not come into force immediately on passage of the Bill; secondary legislation will be needed prior to the go-live, as will the comprehensive programme of learning and development and the digital platform to support the increased transparency obligations. I am afraid, therefore, that the time period in the amendment is impractical.

In addition, there is already a requirement for contracting authorities to publish payment information, set out in clause 68 on payments compliance notices, which requires reports to be published on the speed of invoice payments one month after the end of each successive six-month period. Those reports will enable interested parties, including taxpayers and suppliers, to see for themselves how prompt payment performance has changed as a result of the new regime without the need for additional reporting. The reports will address payments to all suppliers of a contracting authority, rather than just SMEs, and will be publicly available for all to inspect. I therefore respectfully request that the amendment be withdrawn.

Question put, That the amendment be made.

--- Later in debate ---

[Alex Burghart]

Amendments 51 and 52 are technical amendments. Amendment 51 clarifies that clauses 67 and 66 mean the same thing when they refer to “electronic invoice” and “required electronic form”. Amendment 52, similar to amendment 50, ensures that contracting authorities can require the use of a particular system in relation to the processing of electronic invoices.

[Florence Eshalomi]

The two amendments are uncontroversial and clarify points covering the terms of use. We will not oppose them.

Amendment 51 agreed to.

Amendment made: 52, in clause 67, page 46, line 36, after “address” insert

“, or through an electronic invoicing system,”.—(Alex Burghart.)

This amendment would clarify that a reference to a contracting authority receiving an invoice for the purposes of clause 67 includes receiving an electronic invoice through a system specified in the contract.

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

[Alex Burghart]

Briefly, clause 67 will set the standard by which all contracting authorities will be expected to pay their suppliers. The clause will imply 30-day terms into public contracts. Any attempts to override those payment terms will be without effect, unless the arrangements are to pay quicker than 30 days. Ministers may, by regulations, vary the number of days, provided that the number of days to pay suppliers does not exceed 30 days. SMEs will benefit from 30-day payment terms on a much broader range of public sector contracts, including those previously covered by public utilities and defence. The clause does not apply to concession contracts, utilities contracts awarded by a private utility or contracts awarded by a school.

Question put and agreed to.

Clause 67, as amended, accordingly ordered to stand part of the Bill.

Clause 68

Payments compliance notices

--- Later in debate ---

[Alex Burghart]

Amendment 53 will exempt concession contracts, and payments made under them, from the scope of payments compliance notices. This minor technical amendment aligns with the scope of clause 67 on implied payment terms in public contracts, from which concession contracts are excluded, and brings consistency across the payment clauses. It will also save contracting authorities from additional bureaucracy, as they will no longer have to produce a payments compliance notice where concessions are the only payments they are making.

Clause 68 will require contracting authorities to publish a payments compliance notice—specified information detailing how quickly they have paid suppliers—every six months. We are strengthening payment legislation to ensure that the public sector is held to account on its own performance. We are aligning how the public and private sectors report on their payment performance, and we will report against the same set of metrics. By creating a central repository of Government payment information, we will increase transparency of public sector payment performance and make external scrutiny of that performance easier. The clause does not apply to private utilities, contracts awarded by schools or Northern Ireland contracting authorities.

[Florence Eshalomi]

The amendment will exclude concession contracts from the provisions of the clause. Given that the nature of these contracts is to give the right to exploit a developed resource, it makes sense to exclude them from this part of the Bill. We will not be voting against the amendment and we welcome the provisions in clause 68. Contracting authorities should report on their compliance with the 30-day payment term. As we have touched on previously, sunlight is the best disinfectant, and the clause shines a light on whether contracting authorities are complying with payment terms.

As I highlighted in the debate on clause 67, however, I have concerns as to whether this will lead to a ripple-down effect, although benefits may arise from suppliers feeling some level of scrutiny when they are responsible for paying subcontractors, many of which, as I mentioned, will be SMEs—the same SMEs that are currently struggling in the procurement system. I have touched on the value of those contracts and the fact that the big corporations continue to win the lion’s share of them, as shown by research from the British Chambers of Commerce. That research also found that direct spend is still quite a small proportion of the overall procurement budget.

I am disappointed that the Government did not see the sense of our amendment 110. I hope that will take action to ensure that suppliers are acting in the spirit of the clause.

--- Later in debate ---

[Alex Burghart]

Clause 69 requires contracting authorities to publish specified information about any payment of more than £30,000 made by the authority under a public contract. That information must be published before the end of the period of 30 days beginning with the last day of the quarter in which the payment was made. The financial threshold and time limit for publication may be amended by regulations.

The clause does not apply to public contracts awarded by private utilities or schools, or to concession contracts. Its purpose is to bring transparency to the expenditure of public money, and to allow interested parties to ascertain the value that was specified in the tender, the value of the contract at the point of award, and how the contract spend is progressing. The Northern Ireland Executive have decided to include a derogation from this publication obligation.

[Florence Eshalomi]

As the Minister outlined, the clause relates to the publication of information on payments of over £30,000 by contracting authorities. Its impact will be heavily affected by the ultimate state of the online system, as specified in clause 93. It is frustrating that many aspects of the Bill are to be set out in secondary legislation: we will not know whether this is a sensible and proportionate measure until we know how the online system promised by the Government will work. However, we believe that this is an important provision of the Bill, and as such we do not intend to oppose it.

Question put and agreed to.

Clause 69 accordingly ordered to stand part of the Bill.

Clause 70

Assessment of contract performance

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

[Alex Burghart]

Clause 70 has two main functions. First, it requires contracting authorities that have set key performance indicators in their public contracts under clause 52 to assess performance against each KPI, and to publish the results at least once every 12 months. The exact nature of the information required in each case will be set out in regulations made under clause 90. The purpose of this provision is to bring greater transparency to the performance and management of public contracts.

Secondly, the clause requires contracting authorities to publish a notification in certain circumstances relating to breach of contract or poor performance by a supplier. The circumstances are equivalent to those that constitute the discretionary exclusion ground for breach of contract and poor performance in paragraph 13 of schedule 7. The purpose of the provision is to provide verifiable information for contracting authorities on suppliers that meet the exclusion ground for breach of contract or poor performance. Clause 70 does not apply to private utilities, and the subsections relating to poor performance do not apply to light-touch contracts.

[Florence Eshalomi]

As the Minister outlined, the clause relates to key performance indicators and lays out how they will be assessed in the system. Subsection (2) mandates an annual assessment of the key performance indicators and the publication of information in this area. Again, this subsection makes reference to clause 93 in terms of how information relating to the key performance indicators is to be published. It might be useful to consider what information should be part of that system.

There could be merit in having an obligation to publish information on performance workflows and the relationships between contracting authorities and suppliers. The obligation could mean that contracting public bodies must publish the following on a six-monthly basis in respect of service contracts: operational performance against contracts; changes to staff terms and conditions; financial performance and payments made to contractors; costs of client contract management; any financial penalties or service credits; and details of meetings between decision makers. They could also publish the contracts within three months of them being let.

Subsection (5) relates to information that must be published within 30 days where a contracting authority believes a supplier has breached a contract to the point of termination or remedy. It also covers instances where suppliers provide an unsatisfactory service following a proper opportunity to improve performance. The powers are important to ensure that the process is properly followed when a supplier is not delivering for the public. It is right for the supplier involved and for the public that the information is published. We therefore support the inclusion of the clause in the Bill.

Question put and agreed to.

Clause 70 accordingly ordered to stand part of the Bill.

Clause 71

Sub-contracting: directions

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

[The Chair]

With this it will be convenient to discuss clause 72 stand part.

[Alex Burghart]

Clause 71 covers subcontracting, which is an important part of the delivery of public contracts. It enables businesses to use specialist suppliers to increase their overall effectiveness and efficiency. It also encourages SMEs to participate in public sector procurement, which helps to encourage innovation and deliver value for money for the public. The clause applies when a contracting authority either requires or permits a supplier to subcontract, and also where that subcontractor has been relied on to pass conditions of participation. In such circumstances, a contracting authority may direct a supplier to enter into a legally binding agreement with the proposed subcontractor, failing which the contracting authority can refuse to enter into the public contract, require an alternative subcontractor, or terminate the contract if already commenced.

Clause 72 will ensure that the 30-day payment terms set out in clause 67 will apply throughout the public sector supply chain, regardless of whether they are written into the contract. That will ensure that businesses in the supply chain that substantially contribute to the performance of a public contract benefit from the prompt payment and the liquidity benefits it brings. Unlike the equivalent provisions in the Public Contracts Regulations 2015, clause 72 includes defence and public utility contracts, benefiting SMEs in the supply chain across a much broader range of public sector contracts. Those rules do not apply to utilities contracts awarded by a private utility, concession contracts and contracts awarded by a school.

[Florence Eshalomi]

Clauses 71 and 72 relate to the treatment of subcontractors in the system. We welcome the clauses as a step forward in the attempt to ensure the prompt payment of subcontractors. The Bill makes a slight alteration from the current system by making a 30-day payment an automatic term for subcontractors rather than requiring the contracting authority to include an obligation on its suppliers to flow down. We have spoken at great length about the issue of subcontractors being paid on time, and the fact that many smaller businesses rely on prompt payment. We do not see any issue with the clauses, which we are happy to support.

Question put and agreed to.

Clause 71 accordingly ordered to stand part of the Bill.

Clause 72 ordered to stand part of the Bill.

Clause 73

Modifying a public contract

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

[The Chair]

With this it will be convenient to discuss the following:

That schedule 8 be the Eighth schedule to the Bill.

Government amendment 54.

Clauses 74 and 75 stand part.

Government amendments 55 to 58.

Clause 76 stand part.

--- Later in debate ---

[The Chair]

We all like sunlight, Minister.

[Florence Eshalomi]

I thank the Minister for the points he has outlined. Amendment 54 is largely uncontroversial, removing an unnecessary provision from clause 74.

Amendments 55 to 58, taken together, would reduce the burdens on contracting authorities to publish contract modifications, requiring them to do so only where they are required to under clause 74, which does not cover changes that only change the value or length of the contract to a relatively small degree. Without the amendments, even minuscule contract amendments would be required to be published. Although these measures cover the larger contracts affected by the Bill—in particular, those valued over £5 million—it would be a disproportionate burden on contracting authorities to be required to publish every change to a contract. We understand the rationale for the amendments and we do not intend to oppose them.

On clauses 73 to 76 more widely, we understand that it is necessary, on occasion, to alter public contracts. It is important that the circumstances are justified, and we are pleased to see schedule 8 set out proportionate reasons to modify contracts. However, it is important to ensure that contracts are drawn up in a way that does not open this part of the Bill up to abuse.

As noted in paragraph 1 of schedule 8, modifications can be made if they are agreed in the contract and do not

“change the overall nature of the contract.”

However, there must not be a free-for-all. Contracting authorities must draw up contracts that provide the right flexibility for change. We should not expect service levels to vary massively because contracts are written in a way that would allow modification under this part of the Bill. For example, our engagement with stakeholders has revealed concerns that modifications are seen as an alternative to remedy and clawback, and that expensive legal fees put authorities off using clawback clauses, with those authorities instead opting to renegotiate terms with suppliers. That should not be the case.

We do not believe the best way to tackle that is necessarily through the Bill, but it is an important point. In an answer to a parliamentary question dated 20 December 2022, the Government admitted that money was wasted and that only £18 million had been clawed back from PPE contracts. That was only highlighted after the National Audit Office revealed that the Government had effectively written off quite a lot of that money, and auditors had rebuked the Department of Health and Social Care for its management of taxpayers’ cash during the pandemic.

It is a shame that the Government are still locked in legal battles with companies that failed to deliver on their contractual obligations. The public expect their money to be clawed back when contracts are broken, but if even the Government find it difficult to claw back money from contracts, it is little wonder that smaller contracting authorities apparently rely on contract alterations to seek remedy. The result is that suppliers that have not delivered for the public keep winning contracts to deliver services.

I understand why people may look at a supplier and say, “This supplier has failed to deliver services to an acceptable standard. Why are they still delivering our services? Why has this supplier not had this contract taken off them? Why have we not got our money back?” They are all valid questions. I hope that the Minister will outline his understanding of the use of contract modification as a substitute for clawbacks, and what steps he is taking to ensure we get our money back from suppliers.

We feel it is right that contract changes are published. Clauses 74 and 76 allow for the publication of a notice of change and, for larger contracts, publication of the changes and the altered contract. Those measures are proportional to the provisions of clause 53, relating to publication when a contract starts.

Clause 74 refers to the terms of clause 93. We agree with the introduction of a new online programme, but it is disappointing that we do not have the detail of what will be expected as part of that system. We should not leave future Governments with their hands tied, unable to go beyond what we can achieve today, but we do think that the Government could show some base level of ambition and outline the basic level of transparency that we think the system should allow. I hope the Minister will touch, even just briefly, on how the system will work and what information will be expected under clause 74, via the provisions of clause 93.

[Alex Burghart]

To the hon. Lady’s first point, we all accept that, in exceptional circumstances, contracting authorities may have to move very quickly to procure essential goods, services and works with minimal delay. Launching a new procurement procedure can take time. When time is of the essence and when a supplier has proven in-contract its ability to deliver to time, cost and the expected standard, it makes sense to take the modification route. To be clear, these are areas where the urgency and protection-of-life grounds must exist in the first place.

With the new transparency rules in clauses 74 and 76, taxpayers will be able to see exactly where we propose to spend their money, including where there is additional expenditure through use of modification grounds. The transparency rules will require contract change notices to be published in circumstances where the urgency ground is used and, where such modifications are made to contracts over the £5 million threshold, the modifications themselves will need to be published.

On the hon. Member for Vauxhall’s general point about what happened during the pandemic, she will have heard me say on a number of occasions that the Department of Health and Social Care, despite the circumstances in which it was working, had robust contracts in place. That means it is capable now, where it was given defective goods, to enter mediation. If that proves insufficient, it will be able to enter into litigation. The whole purpose of the exercise in which we are currently engaged—at length—is to ensure that we have better procurement processes in this country. That is what the Bill is going to deliver.

Question put and agreed to.

Clause 73 accordingly ordered to stand part of the Bill.

Schedule 8 agreed to.

Clause 74

Contract change notices

Amendment made: 54, in clause 74, page 51, line 5, leave out paragraph (c).—(Alex Burghart.)

This amendment would remove unnecessary provision, as light touch contracts are excluded from the whole clause under subsection (6)(b).

Clause 74, as amended, ordered to stand part of the Bill.

Clause 75 ordered to stand part of the Bill.

Clause 76

Publication of modifications

Amendments made: 55, in clause 76, page 51, line 40, after “modification” insert “—

(a) in respect of which the contracting authority is required to publish a contract change notice under section 74, and”.

This amendment would limit the requirement to publish a copy of a contract as modified or a modification to those modifications in respect of which the contracting authority was required to publish a contract change notice.

Amendment 56, in clause 76, page 51, line 43, leave out paragraphs (a) to (c).

This amendment is consequential on Amendment 55.

Amendment 57, in clause 76, page 52, line 3, leave out

“or a transferred Northern Ireland authority”.

This amendment is consequential on Amendment 55.

Amendment 58, in clause 76, page 52, line 7, leave out

“or a transferred Northern Ireland procurement arrangement”.—(Alex Burghart.)

This amendment is consequential on Amendment 55.

Clause 76, as amended, ordered to stand part of the Bill.

Clause 77

Implied right to terminate public contracts

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

--- Later in debate ---

[Alex Burghart]

Clause 77 sets out that it is an implied term of public contracts that a contracting authority can terminate a contract if one of a number of termination grounds apply. These are where a contracting authority considers that the contract was awarded or modified in breach of the Bill and regulations made under it, where a supplier has become an excluded or excludable supplier, or where a subcontractor is an excluded or excludable supplier.

These last two grounds considerably expand the implied right to terminate on exclusion grounds and are a good example of how we are tightening the rules on poor suppliers. Contracting authorities must still give suppliers that subcontract to an excluded or excludable supplier the opportunity to cease their arrangements. Contracting authorities must also communicate any intention to terminate the contract on these grounds before proceeding to terminate.

Clause 78 requires contracting authorities to obtain approval from a Minister before terminating a contract in reliance on the discretionary exclusion ground for suppliers that pose a threat to national security. Subsection (1) states that this requirement applies when contracting authorities are seeking to rely on the implied termination right in clause 77 where a supplier or subcontractor is excludable in respect of the national security exclusion ground. Subsection (2) says that this requirement applies to all contracting authorities other than a Minister, a Department or a corporate officer of the House of Commons or House of Lords.

The clause is essential to ensure that contract terminations on the basis of national security are not made without ministerial consideration of the risk posed by the supplier and the impact of the decision. The requirement to seek ministerial approval will allow for the views of those tasked with protecting national security, including the security services, to be taken into account.

Clause 79 sets out the mandatory transparency requirement that all contracting authorities must publish a contract termination notice on termination of all public contracts, with the exception of private utilities contracts and user choice contracts that have been directly awarded. It specifies the time period by which it must be published, which is 30 days after a public contract has terminated. It also sets out that contract termination notices will contain information that will be specified in the regulations made under clause 93.

Clause 79(3) makes it clear that a reference to termination includes: discharge, expiry, termination by a party, rescission, or set aside by court order, whether or not under part 9 remedies. That list does not exclude other references to termination, and a contract termination notice should be issued at the conclusion of a contract, however that contract has ended.

[Florence Eshalomi]

Clauses 77 to 79 relate to provisions that allow for the termination of contracts in specific circumstances. The implied circumstances include the contract being awarded or modified in a material way in opposition to this Bill, or a supplier becoming an excluded or excludable supplier. They also provide for termination when a supplier is subcontracting all or part of the contract to an excluded or excludable supplier.

The Opposition understand and support the need for these provisions, but we have some concerns about the meaning of the clauses. When a contractor becomes an excluded supplier, will the contract be terminated automatically? It would seem strange that, although a contract cannot be awarded to a supplier under those terms, an excluded supplier is not automatically stripped of a contract when they become excluded.

Some of the provisions included under the excluded schedule are extremely severe. They include human trafficking offences, slavery offences, corporate homicide and even terrorism. We must make it clear that, when suppliers are convicted of such crimes, they must not provide contracts for public services. I hope we all agree on that. Does the clause allow for contracts with excluded suppliers to be automatically terminated, or is that at the discretion of the contracting authority? That is a really important point, and I hope the Minister will be able to clarify it. The public would not expect a supplier that has been convicted of terrorism to still be carrying out public contracts, even if the contracting authority decides it is right.

We also have concerns about how discretionary exclusion grounds are treated in this part of the Bill. As I have previously said, we want consistency in the Bill on when these grounds are applied. We do not believe that it makes sense for a company to have its contract terminated by one contracting authority for, say, environmental misconduct, but in the same breath keep a similar contract with similar risk with another contracting authority based simply on the decision of the authority. A lot of that is inconsistent and confusing, which has been highlighted, and it means suppliers that fall foul of discretionary exclusion grounds to the degree that a contract can be stripped from them may still be providing services to the public in other areas. The Minister has highlighted the need for discretion, which we understand, but surely there should be some level of consistency.

I also raise the inconsistency between national security in clause 78 and how the Minister laid it out previously. We do not wish to vote against clause 78, and we believe that it is the right way to carry out public procurement when considering national security. As the name suggests, national security is a national issue. However, during the Minister’s remarks on our amendments 15 to 19, he said:

“Amendments 15 to 19 seek to make exclusion on national security grounds mandatory, rather than discretionary. Any risk to national security should of course be taken very seriously indeed, but it is right that we leave some scope for nuance and flexibility in the application of the exclusion ground. Suppliers may pose a risk in some contexts, but not in others.”

The Minister went on to say:

“It is important to note that contracting authorities must consider all exclusion grounds, mandatory and discretionary, against every supplier in each procurement.”

He also said:

“There would be a balance of risks. Not all security threats are proven. Of course, it is up to the authority to assess the concerns”.––[Official Report, Procurement Public Bill Committee, 2 February 2023; c. 113.]

Based on what the Minister said in response to our amendments, there is some inconsistency in this approach. We need verification to identify a national security threat on a national scale and to disregard a contract on that basis, but to say that awarding or terminating a contract for a national security threat is at the discretion of authorities is a little contradictory.

For example, let us take what happens when a contracting authority identifies a threat. If the authority decides not to terminate the contract regardless, the contract is awarded with no follow-up from the Government and no check that it is a threat. If the authority decides to terminate the contract, it needs to go through a check with the Minister and confirm whether it is a threat. We think that is the right course of action, but why should the decision effectively be taken at different levels? Surely there should be an obligation to check with the Government regardless of whether the contract is terminated or not. At the very least, the Government can advise on the decision not to terminate the contract based on the threat.

As I and those who submitted evidence have highlighted, we can see procurement departments in many organisations being overstretched. We cannot expect those very same contracting authorities we want to come forward to bid for public contracts to act as MI5 or national security experts.

[The Chair]

I call the Minister, mindful that there will be a vote in the House at 4.12 pm.

Procurement Bill [ Lords ] (Third sitting)

Florence Eshalomi Excerpts

Committee stage
Thursday 2nd February 2023 Public Bill Committees

[The Chair]

Before we begin, I remind Members that Hansard colleagues would be grateful if they could send their speaking notes via email to hansardnotes@ parliament.uk. Please switch all electronic devices to silent. No tea or coffee is to be consumed during the sitting.

Clause 16

Preliminary market engagement

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

I beg to move amendment 20, in clause 16, page 12, line 35, after “suppliers” insert

“, including small and medium-sized enterprises,”.

This amendment, with Amendment 21, seeks to ensure preliminary engagement explicitly refers to SMEs.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 21, in clause 16, page 12, line 38, after “suppliers” insert

“, including among small and medium-sized enterprises,”.

This amendment, with Amendment 20, seeks to ensure preliminary engagement explicitly refers to SMEs.

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

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

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

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

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

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

[Florence Eshalomi]

It is a pleasure to serve under your chairship this morning, Mr Efford. Taken together, amendments 20 and 21 would specify that small and medium-sized enterprises should be considered when carrying out preliminary market engagement. These amendments are the first of a number that we have tabled to try to improve the Bill’s support for SMEs, and we are pleased to see the progress made on SMEs in the other place. As I mentioned previously, Labour supports the amendments made in the Lords; we want SMEs to have fair access to public procurement, and the amendments would make a positive impact by including SMEs in the procurement system. Baroness Neville-Rolfe’s amendments in Committee have added a depth of support for SMEs. I believe the Bill will be a step forward even if those amendments are not accepted, but we should not have a poverty of ambition in this place, which is why we want to go further. The Government talk about improving SMEs’ chances when it comes to procurement, but for far too long that has been just talk. We have not seen enough action.

The statistics on SMEs and procurement are truly shocking. Analysis by the Spend Network found that big corporations still win the lion’s share—almost 90%—of contracts, worth £30 billion a year, that are deemed suitable for bids from smaller businesses. Research from the British Chambers of Commerce and Tussell found that over £1 in every £5—around 21%—spent by Government on public sector procurement in 2021 was awarded to small and medium-sized enterprises. The British Chambers of Commerce also found that SMEs are now receiving a relatively smaller amount of reported direct Government procurement spending than they were five years ago. As a proportion of the overall procurement budget, direct spend with SMEs by local government bodies was the highest, at 38%. NHS bodies across England spent 22% of their procurement budgets with SMEs, while the figure for central Government was significantly lower than the average—they awarded only 11% to SMEs.

That point was addressed in written evidence to this Committee. Anthony Booth from Bromford Housing Group stated:

“Please note that many SMEs do not have the capacity, IT capability, resource or knowledge to participate in the proposed single supplier onboarding / contract portals. Housing associations do rely on the use of smaller regional and local suppliers and a more effective and simplified process would be welcome to allow them to participate. The use of email trails and traditional spreadsheet analysis for simple tender exercises would support these instances rather than involving complex procurement systems such as precontract. This would encourage the flexibility in the supply chain that the Bill is…designed for and also allow an improved competitive position in order to achieve VFM which is also a core requirement of the bill.”

I think we would all agree with that. It is the kind of insight that pre-tender engagement could gather and feed into a more efficient procurement system.

Labour does not feel that SMEs are getting their fair share under this Government, and we believe that we must go further. Our amendments 20 and 21 would address some of the problems that SMEs face. By ensuring that they are engaged during the pre-tender market engagement, our amendments would help to break down some of the barriers that SMEs face in accessing procurement. Early engagement is vital. It can help with efficient contract design, to avoid any bias towards big and established firms that know how the system works. It also means that SMEs will feel more involved in the process and have the confidence they need to bid for programmes.

[Kirsty Blackman (Aberdeen North) (SNP)]

The shadow Minister is making a powerful and well-researched case that builds on the case she made in Committee on Tuesday. I do not want to test the Committee’s patience by making a speech on this, but I want to let her know that I am willing to support her amendment should she push it to a vote.

[Florence Eshalomi]

I thank the hon. Member for her support.

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

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

He continued:

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

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

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

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

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

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

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

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

--- Later in debate ---

[Alex Burghart]

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

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

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

[Florence Eshalomi]

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

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

[The Chair]

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

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[Alex Burghart]

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

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

[Florence Eshalomi]

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

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

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

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

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

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

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

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

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

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

[Alex Burghart]

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

Question put and agreed to.

Clause 16 accordingly ordered to stand part of the Bill.

Clause 17 ordered to stand part of the Bill.

Clause 18

Duty to consider lots

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

--- Later in debate ---

[Alex Burghart]

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

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

or

“provide reasons for not doing so.”

[Florence Eshalomi]

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

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

[Lloyd Russell-Moyle (Brighton, Kemptown) (Lab/Co-op)]

In a number of contracts awarded recently by my council, the overall contractor ended up subcontracting people who had made separate individual bids but did not have the capacity to take on the bigger contract and therefore were not awarded it on that basis. Having big contracts is just a way of diverting money away from the taxpayer and into shareholders’ pockets, is it not?

[Florence Eshalomi]

I thank my hon. Friend for that valuable point. What we want for SMEs, and what SMEs tell us they want, is fair access to Government contracts—public money that should be going back into local communities up and down the country. Unless we ensure that larger contracts can be broken up into smaller lots and awarded directly to smaller companies, there will be a repeat of what we see with those big contracts. No one wants those same practices to be employed all over the country. I want the Minister to stress what oversight will be put in place to ensure that the important provisions in the clause are carried out and to ensure that all our SMEs truly benefit from public contracts.

--- Later in debate ---

[Kirsty Blackman]

The hon. Gentleman is absolutely right that there is an issue with that, because the national living wage is set differently for apprentices. He is correct that the Living Wage Foundation’s rules on apprenticeships are different. I do not have the figures on whether the wages of our apprentices have risen as a result of the changes that have been made. However, I am sure that the fair work procedures and the rules around that—the inability to fire and rehire, for example—are applicable to apprentices and ensure that they have a higher level of protection than they did previously. In exactly the same way, we have greater requirements with respect to flexible working requests.

Although I cannot give the hon. Gentleman the exact details on figures and wages, I can say that working conditions are, as standard, better as a result. I am sure that many people who were putting procurement contracts out to tender required the real living wage and great working conditions. The amendments would mandate that, so that it is set in stone and everyone is brought up to that minimum standard, although some will well exceed that.

[Florence Eshalomi]

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

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

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

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

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

[Alex Burghart]

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

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

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

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

--- Later in debate ---

[Alex Burghart]

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

[Florence Eshalomi]

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

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

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

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

[Lloyd Russell-Moyle]

To some extent, has that not already happened again on the east coast franchise? Twice, unrealistic bids have been accepted and then collapsed, requiring the Government step in. It is not unusual for that to happen, so the amendments are good but probably not strong enough.

[Florence Eshalomi]

I thank my hon. Friend for highlighting that those lessons do not seem to have been learned.

The hon. Member for Harwich and North Essex went on to say:

“Public trust requires that outsourcing better reflects public service values. The Government must use this moment as an opportunity to learn how to effectively manage its contracts and relationship with the market.”

The amendments will not fully solve the problems associated with Carillion, or the problem just mentioned by my hon. Friend the Member for Brighton, Kemptown, and a culture shift in procurement should have taken place following the collapse of Carillion. However, they do provide a safeguard for authorities to use against abnormally low and unsustainable bids.

Finally, will the Minister outline the wider impact of changing “most economically advantageous tender” to “most advantageous tender”?

[The Chair]

Minister, do you wish to respond?

--- Later in debate ---

[Florence Eshalomi]

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

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

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

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

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

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

[Alex Burghart]

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

Question put and agreed to.

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

Clause 20

Competitive tendering procedures

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

[Alex Burghart]

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

[Florence Eshalomi]

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

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

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

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

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

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

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

--- Later in debate ---

[Alex Burghart]

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

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

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

[Florence Eshalomi]

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

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

--- Later in debate ---

[Alex Burghart]

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

[Florence Eshalomi]

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

[Alex Burghart]

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

Question put and agreed to.

Clause 22 accordingly ordered to stand part of the Bill.

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