Procurement Bill [HL]

Lord Best Excerpts

2nd reading
Wednesday 25th May 2022 Lords Chamber

[Lord Best (CB)]

My Lords, my contribution relates to the Bill’s impact on registered providers of social housing—bodies involved in contract procurement worth billions of pounds each year. The sector is a key contributor to easing the housing crisis by building tens of thousands of new homes, helping to fix the building safety disaster and undertaking day-to-day works to ensure residents in social housing have decent homes, while addressing the climate crisis and seeking to implement an ambitious decarbonisation strategy.

I want to raise one factual question, one issue of principle and one point of practical detail. First, am I right in assuming that the definition of public authorities, which clearly covers the non-profit registered providers of housing—housing associations, in common parlance—also covers the new breed of for-profit registered providers? The latter can obtain government grants and are subject to regulation by the Regulator of Social Housing. Indeed, their profit-making ethos may demand increased regulatory attention, compared with the non-profit providers, but are they classified for the purposes of this Bill as public authorities?

Secondly, my overarching point of principle concerns one way in which the procurement process can determine the success or failure of a contract. I have received excellent briefings from the specialist law firm Trowers & Hamlins. The view of experts in this field is that the use of current relative price models drives a race to the bottom. As many noble Lords have pointed out, a key objective of the Bill is to maximise the public benefit of contracts. But the current process actually leads to a narrow interpretation of best value which translates into awarding the highest marks to the tender with the lowest price and downplays the real benefits of other, more expensive but more advantageous bids. Even if the weighting split between quality and price favours quality, the evaluation model gives preference to the lowest price. In effect, the public sector asks bidders to guess the lowest price to win—not the actual price they think is necessary to perform the contract properly. Such an approach can undermine the relationship between client and contractor. From day one, the contractor must look to cut costs and retrieve its profit margin. This leads to conflict and loss of quality, innovation, investment, apprenticeships and safety.

The UK Construction Playbook already acknowledges the harm caused by such pricing models. This acknowledgement needs to flow into the Procurement Bill and its associated guidance. The Bill already requires scoring methodologies to be described in the tender documents. I suggest that this obligation incorporates provision to prevent these unhelpful “relative price models” from being used by public authorities when procuring contracts that should prioritise safety, quality and value.

My third and final point is about a grey area in the world of public procurement to which my noble friend Lord Aberdare has drawn attention. This relates to the fees charged by procurement consortia that offer a service to bodies such as housing associations that are not confident of their compliance with all the statutory regulations governing procurement. These organisations make sure that all the necessary requirements are met—for which they charge a fee that can add anything from 3% to 10% to the cost of the contract. While larger housing providers such as Places for People—which has explained the position to me—have in-house expertise to perform this role, smaller operators are spending millions of pounds hiring these intermediary bodies.

The practical point I want to leave with the Minister is that these procurement consortia should not be operating—as some are—under a cloak of commercial secrecy. Since taxpayers’ money is involved, surely the Bill should require these transactions to be fully disclosed, proportionate and used solely in the public interest.

In conclusion, are for-profit registered providers covered by the Bill? Can unintended preference for price over social value—currently built into most evaluation models—be prevented through this legislation for those contracts which have quality, safety and value at their core? Will the Minister look at mandatory transparency for the fees charged by procurement consortia to ensure that they are used solely in the public interest?