Public Procurement Processes

Hywel Williams Excerpts

Wednesday 25th January 2023 Westminster Hall

[Mick Whitley (Birkenhead) (Lab)]

I beg to move,

That this House has considered reform of public procurement processes.

It is a great privilege to serve under your chairmanship, Ms McVey, and I am grateful to Members for participating in this important debate.

The House is considering the Procurement Bill, and I stress that I and my party fully appreciate the need for legislation on the issue. That is why Labour did not oppose the passage of the Government’s Bill on Second Reading. Indeed, I had entertained the hope that the sentiment expressed in the Green Paper that preceded the Bill that social value

“is critical to ensuring the social, economic and environmental benefits are delivered”

would find a place in the Bill itself.

I do not believe that addressing the needs of our communities across the country by embedding a requirement for a measure of social value to be integral to every contract awarded is either unreasonable or beyond our powers. After all, we are talking about public contracts that account for £1 in every £3 of taxpayers’ money spent, totalling £300 billion of public funds every year. That spending should bring direct benefits to the people of this country, not primarily to the corporations that win most contracts, and still less to those in tax havens who utilise loopholes in the law to siphon taxpayers’ money into offshore accounts. However, the Bill does not match the scale or scope of reform to public procurement procedures required to ensure that it addresses the needs of the British people following the UK’s exit from the EU. Nor does it provide guarantees that the danger of corruption will be permanently removed from the process of awarding contracts.

My objective in today’s debate is to highlight the Bill’s shortcomings and to propose ways in which we could achieve a change in legislation that resulted in a public procurement legislative framework that could radically improve our public services, boost our local economies and deliver real benefits and hope for the future to the people of so many of our left-behind towns, such as Birkenhead, the constituency I am privileged to represent. Moreover, through root-and-branch reform of the process, we could ensure that the strides we need to take towards our net zero target were quicker and longer.

Let me begin with an issue close to my heart. The Mersey ferries are an iconic and world-famous symbol of Merseyside. After years of transporting tourists and commuters alike across the river, they need renewing. The Mayor of the Liverpool city region, Steve Rotheram, won a grant for one to be replaced and the other refurbished. That is to be warmly welcomed, and I am as grateful as Steve was for the opportunity to retain and refresh such an important and historic transport system, but what happened next goes to the heart of the public procurement process. Unfortunately, it is not addressed by the Bill.

Birkenhead is a shipbuilding town and home to the world-famous Cammell Laird shipyard. In any rational world, it would make perfect sense to build and refurbish the ferries in the shipyard that sits on the river they will be sailing on. Sadly, neither the existing procurement rules nor those proposed in the Bill provide us with the means to ensure that such a rational decision is the one that gets made. The reason for that is simple: there is no provision for vital issues such as the impact on social value, the local economy and the supply chain to be taken into account in the awarding of contracts. Quite the reverse: under the Public Contracts Regulations 2015, the primary consideration in accepting a bid has to be

“getting the right supplier and best tender in accordance with sound commercial practice.”

That so-called sound commercial practice tied the hands of the Mayor of the Liverpool city region regarding the tendering process for the Mersey ferries. The Mayor, the trade unions, Cammell Laird and I, as the local MP, worked hard to find solutions, and eventually a joint venture was agreed between a Dutch shipbuilding firm and Cammell Laird, but under the existing rules the allocation of the work—the amount of work that could be awarded to each site—could not be agreed or decided by the Mayor, despite him being the contracting authority.

[Hywel Williams (Arfon) (PC)]

I am glad the hon. Gentleman is making that point about participation. The Senedd in Cardiff is introducing a Welsh procurement policy under the Social Partnership and Public Procurement (Wales) Bill, which is part of the agenda to involve trade unions and others when delivering public projects with certain objectives. I think he shares that aim, but does he share my concern that the Government’s recent attacks on trade unions and the right to strike could undermine that approach of introducing a broader range of people into the process of public procurement?

[Mick Whitley]

Public procurement is for all, not just the Government or privateers. This is all about social value.

The fact that a vital local employer in Birkenhead, a deprived constituency, was at the mercy of a Dutch company is a very good reason why the public procurement process needs to be reformed. Social value is not an empty phrase. Cammell Laird is the largest employer in my constituency. Birkenhead has an above-average number of benefit claimants, who struggle to survive, so work flowing into Cammell Laird is vital to turn despair and poverty into hope and prosperity, yet the opportunity to create such work was hindered by the legal restrictions surrounding the existing procurement process. That problem is not addressed by the Procurement Bill, because it excludes social value—a key measure of the overall value of any contract.

Value for money has come to mean the cheapest bid, not the best bid. As a result, Cammell Laird and the workers in my constituency suffered a blow. The bulk of the work of the ferries contracts goes through a Dutch company, which I have been told will be keeping its costs low and its profits high by outsourcing work on Mersey Ferries to Romania. That is a glaring example of how public money has not served the public good. I am pleased for the workers of Belfast and Devon that Harland & Wolff and BMT were included in a winning Team Resolute bid, but there is no guarantee of the amount of work they will get as a result of the contract.

--- Later in debate ---

[Kirsty Blackman (Aberdeen North) (SNP)]

Thank you for chairing this meeting so admirably this morning, Ms McVey. I congratulate the hon. Member for Birkenhead (Mick Whitley) on securing the debate. I also thank all those who have spoken for having such easy-to-pronounce constituency names. I very much appreciate that none of them is a mouthful; that has worked out very well for me this morning.

I want to talk about a number of things that we are concerned about in the Procurement Bill, and that we are concerned about more generally in how public procurement works. Public procurement is devolved in Scotland; we are able to set our own procurement rules and legislation. None the less, the Bill impacts Scotland. Also, while we are part of this place and while we are part of this United Kingdom, for however short a period of time that may be, we very much want to improve the situation and ensure the utmost levels of fairness and transparency in the public procurement regime, whether or not we continue to be involved in it.

[Hywel Williams]

Of course, Scotland can chart its own course on this matter. Does the hon. Lady share my surprise that the Welsh Government have consented to the UK Government’s legislating on their behalf?

[Kirsty Blackman]

I absolutely do. It is disappointing, especially given some of the excellent things that are happening in Wales, particularly around the work of the Future Generations Commissioner and how that is embedded in what the Welsh Government do. To hand that over to Westminster seems a real dereliction of duty, and I am concerned that that is the direction that has been chosen.

The biggest concern that we have about the Procurement Bill is its significant impact on Scotland in relation to devolution and the implementation of trade deals, including the Australia and New Zealand trade deals. We agree that trade deals are reserved. Obviously, we want to be independent, and we will be signing our own trade deals then, but while they are reserved, we agree that that is what the devolution settlement looks like. However, the implementation of trade deals in Scotland touches on devolved areas. We should be able to implement the procurement rules that come out of trade deals ourselves. The Procurement Bill will allow UK Ministers to implement, through secondary legislation, procurement practices in Scotland, as well as in the rest of the UK. That should be the responsibility of the Scottish Parliament and Scottish Ministers, and the UK Government should put that in the Bill rather than reserving that additional power.

--- Later in debate ---

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

It is a pleasure to serve under your chairship, Ms McVey. I pay tribute to my hon. Friend the Member for Birkenhead (Mick Whitley), who not only managed to sit through Second Reading of the Procurement Bill, but clearly came out thinking he wanted more. Who can blame him? He spoke passionately about the importance of the wider social and economic considerations. He also highlighted the need for procurement to help promote British businesses and invest in places such as his constituency.

I also thank other Members, who have spoken with a lot of knowledge on this issue. On the face of it, it can seem quite dry and clunky, but it is important, as all Members have highlighted. My hon. Friend the Member for Hemsworth (Jon Trickett) mentioned that almost £300 billion is spent on procurement, yet the OECD has highlighted concerns about fraud or corruption in many areas. It is important that we look at which companies are getting contracts and ensure that enough procurement officers are reviewing them. How about we insource instead of outsource, and work with local councils to get those contracts? I am pleased that many local authorities, including mine in Lambeth, are looking at insourcing.

It is always a pleasure to see the hon. Member for Strangford (Jim Shannon) in these debates. He spoke with a lot of passion about some of the things happening in Northern Ireland. As a former London Assembly member and chair of its transport committee, I know that Wrightbus is doing fantastic work to produce buses that are going up and down London. Last year, the Mayor of London went to County Antrim to visit the Wrightbus depot and look at more buses coming on to London streets. That is why it is important to invest in local UK businesses that help the whole of the UK.

The hon. Member for Aberdeen North (Kirsty Blackman) highlighted the glaring omission that we are seeing from this Government. Climate change must be front and centre of everything that we do. Yesterday, my hon. Friend the Member for Hemsworth and I had the honour of meeting some fantastic young people who had come to see my hon. Friend the Member for Nottingham East (Nadia Whittome) about the Climate Education Bill. It is so important that we teach our young people, who are so passionate about the climate emergency, yet we are seeing an omission here.

[Hywel Williams]

The hon. Lady will recall that I mentioned the Social Partnership and Public Procurement (Wales) Bill, which is focused on achieving some socially responsible outcomes. Does she share my concern that the aims of that Bill might be in conflict with the Government’s current legislation, which is—as far as I can see—much more concerned with process?

[Florence Eshalomi]

I thank the hon. Gentleman for raising that important point. As my hon. Friend the Member for Bootle (Peter Dowd) highlighted, key issues were raised in the other place that now seem to have disappeared from the Bill. That is one of those many areas, and I will come on to it later.

We have heard that procurement makes up around a third of public spending. If it is done right, procurement can have such a transformative impact on our whole economy. My hon. Friend the Member for Birkenhead highlighted that social value should not just be an empty phrase. Social Enterprise UK found that between 2010 and 2020, the UK may have missed out on £700 billion-worth of economic, social and environmental opportunities. We are missing out on so much. That is a staggering amount of money. It is crucial that we address some of the problems in the Procurement Bill as it passes through the House.

As I mentioned on Second Reading, Labour supports the introduction of the Bill and recognises the genuine steps forward that it takes. That is why we want to work constructively with the Government to produce a Bill that is fit not just for today, but for the next Government and the Government after that. The Minister has heard my concerns about the Bill a number of times—we have sat through urgent questions and Second Reading—and we will be spending the new few weeks in Committee, which I am sure he is looking forward to, but I want to raise some of the problems that we see with it. I hope that he will think carefully before tomorrow’s deadline for tabling amendments and look at how he can make genuine improvements to the Bill. I am sure that he has had the chance to look at the amendment paper and that none of our concerns are novel to him, so I hope that he will be able to provide full and frank answers to the House on the issues that I raise.

First, I have deep concerns about the workings of the excluded, excludable and debarment systems in the Bill. My hon. Friend the Member for Hemsworth highlighted the practice of companies winning contracts and then doing down staff wages. The right hon. Member for Orkney and Shetland (Mr Carmichael) highlighted the CCTV cameras that councils are sourcing from Hikvision and the fact that we should be worried about some of the companies we are seeking contracts for. Labour is clear that we do not want to see those who act improperly, who abuse their workers or who are a threat to this country being awarded public contracts.

We therefore welcome the purpose of the powers in the Bill, but we can see loopholes in the system, which must be closed while the Bill is before the House. It is concerning that references to excludable contracts seem to give the contracting authorities discretion about whether to disregard a tender. Can the Minister please explain why excludable suppliers are not automatically disregarded in the same way as excluded suppliers?

While I understand that there may be some need for flexibility on discretion grounds, there is no mechanism in the Bill to decide where that flexibility should stand. That is extremely troubling given that grounds as serious as national security can be discretionary—that is outrageous. Can the Minister assure us that companies that are considered national threats will be excluded from contracts under the Bill? Will he ensure that contracting authorities will never be able to bypass this judgment and not disregard such suppliers during the process?

A similar problem exists with the debarment list. In his letter to Baroness Neville-Rolfe on 4 August, the Minister in the other place, Lord True, wrote 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.”

However, the Bill outlines no such qualification for ascension to the debarment list. As it is currently drafted, the only firm qualifications beyond the Minister’s wishes are mandatory and discretionary grounds for exclusion. Given the merry-go-round of Ministers we have seen over the past year, does the Minister not believe that it is right to put a mechanism in the Bill to provide clarity about the scope of the debarment list?

Will the Minister confirm that the Government’s intention for the debarment list is as Lord True laid out in his letter to Baroness Neville-Rolfe? If only the most serious cases of misconduct go on the debarment list, how can it be fair that those put on the list for discretionary reasons are still treated as excludable suppliers? If the Minister believes that a supplier poses a significant risk to the public, that supplier must be disregarded automatically from the process as an excluded supplier.

I have a further concern about the 30-day payment period down the supply chain. On Second Reading, the Paymaster General said that

“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”.—[Official Report, 9 January 2023; Vol. 725, c. 347.]

Many small and medium-sized enterprises in all our constituencies rely on prompt payment to keep afloat; they cannot rely on expectations of a trickle-down effect. The Minister may say that it will call into doubt the contract of the prime supplier, but how long will this take?

--- Later in debate ---

[Alex Burghart]

The hon. Gentleman heckles me with a smile on his face, but the fact is that those decisions were made by highly capable and competent civil servants whose decisions have been upheld in court. It is wrong to suggest that they were in any way corrupt when they were trying to serve the country at a time of utter crisis in order to get, as every Member of the House wanted, as much PPE as possible when the NHS needed it most. I have listened on a number of occasions to Opposition Members speaking in such a way that suggests that Ministers handed out the contracts. That is not the case, and it would be much better for the public discourse if Opposition Members did not suggest to members of the public that that had been so.

Let me move on to the remarks made by the hon. Member for Strangford (Jim Shannon). It has been a pleasure to be able to work on the Bill with people in Northern Ireland, and the Bill is stronger as a result. We look forward to businesses of all sizes in England and Northern Ireland, and in Wales, benefiting from the new procurement legislation.

The hon. Member for Arfon (Hywel Williams) chastised the Welsh Government for allowing Westminster to legislate for them. Me and my officials have had the most productive working with the Welsh Government and these mischaracterisations imply that this is Westminster telling Wales what to do. This has been a partnership between Westminster and Cardiff and between Westminster and Belfast. It is a wonderful example of nations working together.

[Hywel Williams]

The Minister will know better than I that the Welsh Government are yet to recommend that the Senedd grants consent to the Procurement Bill due to two outstanding issues. The first is the presence of concurrent, rather than concurrent-plus powers. Concurrent- plus powers mean that both legislatures give their consent. The second is the lack of commencement powers for Welsh Ministers. Will the Minister give me an update on any progress on those two points?

[Alex Burghart]

The hon. Gentleman will get a final answer in Committee, but I can tell him that we have had nothing but productive and courteous conversations with our counterparts. I believe that we are going to end up in a mutually beneficial place, which is great news for people in Wales, England and Northern Ireland. The hon. Gentleman can join us in Committee if he wishes to hear the final read out on that. I look forward to seeing him there.

The hon. Member for Strangford is right: Northern Ireland must be included in these important opportunities. We are sad that our colleagues in Scotland have, unlike counterparts in Wales and Northern Ireland, not chosen to be part of the Procurement Bill. They are entitled to make that decision, but it is a shame. It adds a layer of complexity within the British Isles that need not be there, but c’est la vie.

The hon. Member for Aberdeen North (Kirsty Blackman) asked about trade deals and implementation. Trade deals are a reserved area. It is important that they are able to be implemented because otherwise we might find that the UK was in breach of an international agreement and that would be wrong. Yesterday, we made an amendment following discussions with the Scottish Government to narrow powers in this area and we will continue to work closely with them on implementation and, likewise, I look forward to discussing it with her in Committee; I do believe it will be her in Committee.