Government Procurement Policy

Lord Anderson of Swansea Excerpts

Thursday 24th November 2011 Lords Chamber

[Lord Anderson of Swansea]

My Lords, my noble friend Lord Sugar made a typically robust and wise opening speech, drawing on his vast commercial experience, and what a reservoir of experience throughout the House has been revealed by this debate. My only interest to declare is that I am a Welsh Peer and I tend to look at elements of public procurement in terms of the fairness in the regional spread, including to my own nation. The aim of procurement generally of course is to obtain the best value for money. In the private sector, that is done in a fairly narrow way; in the public sector, the procurement has to meet a number of other objectives, including regional policy. This is one area that I wish to touch on in one narrow corner of the vineyard.

I draw your Lordships’ attention to one distinct area, the procurement for the 2012 London Olympics. I am grateful to the Financial Times Newcastle correspondent, Chris Tighe, for the figures that she gave me, which she reproduced in the Financial Times on 14 November. My conclusion, which I invite the Government to share, is that the figures that are available display a deep cause for concern, and a failure on the part of government since the initiation of the Olympics to ensure that the Olympic Delivery Authority spread the contracts widely throughout the country. It is now, of course, too late, because the greater part of the contracts have been allocated.

The amount spent by the ODA is substantial: so far it is about £6.5 billion. The total will be just over £7 billion, with a £2 billion contingency. Overwhelmingly that is taxpayers’ money, which could have been used for broader public purposes. Clearly, the Games authorities were aware of their public responsibilities. The noble Lord, Lord Coe, gave this pledge, in 2005, that the Games would,

“provide a unique opportunity for businesses across the UK”.

The chairman of the ODA, John Armitt, said in 2008,

“businesses from all over the UK are already winning ‘economic gold’ with millions of pounds worth of London 2012 work … We want to work with the best of UK plc to successfully deliver the games—the largest project this country has seen for generations”.

So the commitment is there from the leaders and the amount of public funds is substantial, but what is the result—the record? The ODA has agreed thus far 1,500 direct tier 1 contracts—that is, with main suppliers; it estimates that another 50,000 will have been or will be generated through the supply chain. The only contract figures available are therefore for tier 1. That has not been volunteered by the ODA with some excess of transparency but has been made clear by parliamentary Questions in another place. As a percentage of the total value, London has received 54 per cent of contract value; London, the south-east and the east of England together account for 83 per cent of contract value. Scotland has received 0.4 per cent, while Northern Ireland has received 0.28 per cent, the north-east 0.19 per cent and bottom of the table is Wales with 0.01 per cent. That means that less than 0.9 per cent of the total value is accounted for by expenditure in Scotland, Northern Ireland, the north-east and Wales.

I can imagine the Government’s response. “Ah”, they will say, “you are deluding yourself. Look at the cascade down the supply chain; there will be many firms in the north-east, in Wales and Northern Ireland that benefit”. But there are no more robust figures available to support this assertion that there is a spread or cascade to the nations and regions of this country. It seems logical to conclude that the overall percentage of the subcontracts is broadly similar to that of the tier 1 contracts; how could it be otherwise? Only the first tier is within government control, and on the figures available they have surely massively failed on the broader public policy criteria and interests. It has hardly helped us in Wales to receive 0.01 per cent of the spend at a time of massive public expenditure cutbacks and high youth unemployment, when Wales has been largely neglected.

The Government may try to put a gloss on these figures and take refuge in anecdotal evidence and the cascade effect, but the figures that are available are clear and the overall conclusion must surely be that there is a major missed opportunity and it is now too late to redress it. How can I begin to persuade businessmen, unions and the public in Wales that the Government have ensured that they have a fair slice of the cake, particularly when National Lottery funds were diverted to the Olympics—funds that might otherwise have led to projects within Wales? So the result is totally contrary to the professed regional policies of the Government. Surely there is no way in which to hide the manifest failure, save by obfuscation, pious hopes and platitudes.