Procurement Bill [HL]

Lord Coaker Excerpts

2nd reading
Wednesday 25th May 2022 Lords Chamber

[Lord Coaker (Lab)]

My Lords, I start by thanking the noble Lord, Lord Wallace. It is a privilege to follow him and say that I agree with much of what he had to say and the way he said it. I also thank the Minister for the customary way in which he introduced the Bill and tried to explain the various parts of it—I think the whole House was grateful to him for doing that. The thrust of the debate has shown that most noble Lords are basically in favour of much of the Bill and the direction in which it is going. However, we seek to improve and develop it, and to test what the Government really mean in certain aspects of it. I hope that the Minister will take my remarks in that context.

To the noble Lord, Lord Moylan, I say that I support the Government’s endeavour. I guess that makes the Minister a semi-capitalist, whereas I am a full-blown anti-capitalist in what I am going to say, so I apologise to the noble Lord in advance for that. I hope he will manage to stay in his seat and not get too upset by some of the things I am going to say. It appears to me that, so far as he is concerned, his own Government are treading down a dangerous path—whereas, for me, they are very much treading down a welcome path.

My noble friend Lord Whitty hit the nail on the head when he said that the importance of all this is that law sets the context, the priorities for a Government and the way in which you would wish a Government to act. This is the importance of the Bill before us. As my noble friend Lady Hayman pointed out in her excellent opening speech, this is the opportunity for us as a country—but also for this Government, pushed and supported in many ways by many of us in this House—to actually change direction. I think that is what the country wants. Coming out of the pandemic, the country does not want a return to things as they were and to business as usual. I believe that that is why the Government have done this. Of course, they have been consulting on it, but they mentioned it in the last Queen’s Speech in 2021 and did not do anything. Now they have mentioned it in 2022 and come forward with it—so I think they themselves recognise that there is a need to act. The public want something better, we want something better, and now is the time for us all to move forward.

On the £300 billion-worth of public spending, I would be interested to learn what the actual figure is with the exemptions. If the Minister cannot give it to us now, can he write to us with the actual figure: is it £300 billion or will it be less than that with the exemptions and so on that are included in the Bill? If we accept that figure, £300 billion-worth of public spending can be used to drive forward the sort of country and businesses we want. As many noble Lords in this debate have said, this is the way we can move forward and the direction we can take. Whether it be on labour, climate, levelling up, anti-poverty or anything else, this is a real opportunity for us to change direction. That is what is at the heart of this Second Reading debate: have the Government gone far enough, could they go further and what other steps could they take in order to move forward?

The Government set out six principles in their Green Paper—

“the public good, value for money, transparency, integrity, fair treatment of suppliers and non-discrimination”—

so it is somewhat disappointing to find that, when we come to the actual Bill, we have four factors and no principles. I think it was the noble and learned Lord, Lord Thomas, who mentioned the importance of Clauses 11 and 12 taken together, where there are objectives but no principles. What we mean by that will be a subject for debate by all of us in Committee. Clause 11 is fundamental to the whole operation of the Bill. What are we going to require businesses to do? What are we going to expect of them? What will the public procurement push them to do?

At some point the Minister will also need to clarify Clause 12 and what the national procurement policy statement will be. My understanding is that the existing one will go and a new one will be produced following the passage of the Bill. I think we need to know what is said on that.

Many noble Lords mentioned the need for us to consider things such as social, environmental and labour clauses. That is why Clause 18 is really important. As the noble Baronesses, Lady Bennett and Lady Parminter, and very powerfully my noble friend Lady Young pointed out, the move from having the most economically advantageous tender to taking out the reference to “economic” and having in its place the “most advantageous tender” gives us the opportunity to include social and environmental issues. As my noble friends Lord Davies and Lord Hendy pointed out, we can look at labour proposals with respect to that and demand certain things of businesses, because that is the sort of model and the sort of change we want.

My noble friend Lord Mendelsohn, from his experience as a businessman, and others pointed out the importance of this for small businesses. What will it mean for them? How will it help them? As the noble Lord, Lord Fox, asked, how will the new digital portal work in a way that gives business access to the sorts of things the Government want? What about the late-payment provisions in the Bill? How will they help? How will it work? There are all sorts of questions to be answered, and obviously we can discuss the details in Committee.

Transparency is everything. You cannot do anything without transparency—without knowing what is happening and what is going on. As my noble friend Lady Young pointed out, we need the data to be able to do that. Otherwise, it will be like the analogy with football—not liking football and not even knowing the result because nobody has given it to you, so you cannot tell who has won or lost.

One of the really important things is how all this will be enforced. In the Green Paper there was a procurement review unit, which has now been downgraded to an “appropriate authority”, with no clarity on what that means. As far as I can understand from reading Part 10, the appropriate authority will be able to make recommendations and conduct an investigation, but there is no way that those recommendations, as a result of any investigation, will be binding. The Minister will correct me if I have this wrong, but if they are not binding, what difference does it make? How will the new appropriate authority that will enforce all these regulations work in practice and ensure that what we intend and want from the Bill actually happens?

How will we ensure that the benefits outlined in the Procurement Bill spill over into defence? Clause 105 deals with single-source contracts, which are worth approaching £10 billion. How will that work? As I understand it, there will be new secondary legislation to deal with that. All the Bill does is to introduce primary legislation to allow changes to be made to secondary legislation, which will deal with the single-source contracts that the Ministry of Defence operates in certain circumstances. I do not understand what difference that will make, and at some point we will need to understand that.

There is a huge problem with defence spending, which has bedevilled the department for a number of years. The noble Baroness, Lady Smith, and my noble friend Lord Hunt spoke about that. To take one example, 29 Ajax vehicles have been delivered to the Government at a cost of £3.5 billion so far. There are more on the way. We are supposed to have 569, which were supposed to have been delivered four or five years ago, so there is a huge problem around this. We need to know how the Procurement Bill will improve defence procurement and all that.

Secondary legislation is a huge problem. Large numbers of regulations are set out in Clause 110, so while we have the principle that we will debate and discuss, much of this will be done by secondary legislation. That will be a real problem because the devil will be in the detail. Indeed, the noble Lord, Lord Stevens, mentioned some of the problems with secondary legislation in respect of this Bill, including how it will interrelate and cross over with the Health and Care Act. He was right to point that out for the benefit of noble Lords.

I want to talk a little about Part 7. The noble Lords, Lord Alton and Lord Wigley, and the noble Baroness, Lady Brinton, all mentioned the importance of procurement in the context of our international obligations. I do not believe that the British public, or the vast majority of decent people, would want anybody to be procuring from companies or countries where there are huge human rights violations. We are all realistic about this. We all know that it is very difficult, but it cannot be right that, where we are absolutely certain that there are human rights violations, it is business as usual. I hope that when we discuss Part 7 with the Minister in Committee, it will become clearer that the requirement for our international obligations to have a greater human rights dimension—in who we procure from and what we procure—is a really important part of the Bill.

In conclusion, we have approximately £300 billion of public expenditure. The days of the lowest-cost rules must be over. That is the demand from the citizens of this country. Other factors can be, and should be, taken into account. The Bill is a huge opportunity and the Government have grasped it, but many of us are going to push them further for a change to how procurement works—to rework it and remake it in a way that reflects modern business practice, the modern economy and the modern society that people want. It is an opportunity that we have to take.

Procurement Bill [HL]

Lord Coaker Excerpts

Committee stage
Monday 4th July 2022 Grand Committee

[Lord Purvis of Tweed (LD)]

My Lords, I shall speak to my Amendment 19 and comment very briefly, because it was a pleasure to follow my noble friend, simply to emphasise the point that he and my noble friend Lord Scriven made about local authorities. I want to add just two other elements of that and combine it with a comment, since we started on this group with the noble Lord, Lord Lansley, about universities. In the case of my former constituency, Heriot-Watt University was part of a number of consortia with other universities and other organisations, which included charitable trusts, research trusts and other groups. Since they became procurement bodies themselves, it would be very useful for the Government to be very clear as to how this Act will consider an institution as a procuring body, including as part of a consortium of which the partners are not covered by this legislation.

On the point about local authorities, I would be grateful if the Minister would clarify for those local authorities that work cross-border. There is the borderlands consortium of local authorities in England and Scotland. In my understanding of how the Bill is drafted, that consortium would not come under the Bill because only local authorities, or local authorities in Scotland that operate on fully reserved matters, would do so. The consortium does not operate on fully reserved matters but it is a single consortium that receives a borderland deal from the Treasury and is a procuring authority. It would be very helpful if the Minister would clarify the status, under the legislation, of the border consortium of local authorities.

The purpose behind Amendment 19 is to develop that probing and to ask for consideration of the treaty state suppliers and the international agreements. What comes under the terminology of international agreements? The noble Lord, Lord Lansley, and I have raised questions on many occasions about what the Government consider to be a treaty for international agreement purposes. I understand entirely that the Government’s purpose behind this legislation is flexibility, but also transparency. I support those, particularly the transparency angle. We therefore need to look carefully at the areas that are exempted.

The noble Baroness, Lady Noakes, raised the point about ARIA; I will not intervene in the mutual relationship between her and my noble friend Lord Fox on the relationship with ARIA, and I know that UK Research and Innovation is not linked with ARIA. However, I found it interesting that UK Research and Innovation is included in our trade agreement with Australia under the procurement chapter by virtue of it being a listed body. If we need to look at which bodies will be included in this legislation, there are exhaustive lists—it says: “This list is exhaustive”—in our trade agreements, which are now in scope of this legislation but which many Members may think are not. For example, at 6.9, UK Research and Innovation is included.

Most interestingly, the Bill excludes Government Communications Headquarters, but it is included in the list of bodies in our FTA with Australia under the procurement chapter. I do not know how they will interact. We will come to this when we come to the elements of international trade, but where does GCHQ sit as regards procurement? We are obliged to cover it under the Australia FTA but we are seeking to exclude it under the Bill. I simply do not know the answer, so I look forward to the Minister clarifying that point.

The amendment on international agreements is to clarify what the Government consider an international agreement. Paragraph 19 of Schedule 2 states:

“A contract awarded under a procedure specified in an international agreement of which the United Kingdom is a signatory relating to … the implementation of a joint project between the signatories to that agreement.”


That could be extraordinarily wide, and if it includes agreements which are not under FTAs it could be enormously wide.

I just need to look at two contemporaneous cases under memoranda of understanding. These are agreements which the Government say are underpinned, with commitments to honour them. One is the Rwanda MoU on immigration—I visited the centre in Kigali two weeks ago. There is procurement that could be under that agreement, whether for the aircraft which have been brought from Spain to fly individuals out there, or indeed the Hope Guest House Ltd, a private limited company in Kigali that is to be the reception centre for these people and which I visited myself. I asked the authorities there: “If it is a limited company, how do I know what the details are—the terms and conditions?” They told me that it was under a one-year rolling contract but I have no idea how it was procured, and the same goes for the British side. This is a joint agreement with joint procurement, and I believe that it should be transparent, but under the Bill the Government are seeking to exclude that.

There are a number of different areas. There are international higher education partnership agreements. Even if the noble Lord, Lord Lansley, is successful with his amendment, it would be rendered useless under paragraph 19 of Schedule 2 because the Government will be able to say that it is under an international higher education agreement. We have signed between 15 and 18 agreements with China on preferential market access, including investments through UK pension funds, which potentially come within scope of this as well. We have an investment partnership with the UAE, the details of which have not been published; I have not been able to find them and the Library has asked the DIT for the text but it has not been forthcoming. However, these are potentially joint procurement agreements. Some may be beneficial; others I look at with a cautious eye. Depending on how they are defined and on how the Government wish to use them, the transparency elements of procurement could be bypassed because of paragraph 19 of Schedule 2. Therefore, I would like the Government to explain.

In closing, because it links to a number of international agreements and has been previously referenced on treaties, I recognise the 24 treaties listed in Schedule 20, but the impact assessment relates only to 20, so I do not know why there is that discrepancy. It would be helpful if the Minister could clarify the discrepancy between the two.

[Lord Coaker (Lab)]

My Lords, it is a pleasure to follow my noble friend Lady Hayman after her remarks. I apologise to the Committee for being a few minutes late; I was unavoidably detained on other business. I also thank the noble Lord, Lord True, for dealing with a really difficult situation with—as we might all agree—his normal courtesy. I think it was the best that could be done in the circumstances; withdrawing government Amendment 1 allowed us to move to this group of amendments. We all appreciate his offer of continuing discussions in the next day or so to consider how we take all this forward. It would be remiss to not start with thanks to the Minister for that, otherwise the Committee would have been a complete and utter catastrophe. As we can see, however, with this group of amendments we have got on to the real purpose of the Committee, which is to get to the real detail, as seen in the various contributions made by all noble Lords. All the amendments put forward have asked very reasonable questions, which seek to clarify the Government’s intentions. I shall certainly make those points in the few minutes that I speak for.

I start by saying that I was really interested in the amendment of the noble Baroness, Lady Noakes, because it goes to the heart of the issue. You can read “pecuniary” in all sorts of ways. I looked it up with the help of my noble friend Lady Hayman and it has to do with money, so I was quite pleased to read that—from a non-legislative point of view—because I thought it meant that it was about the supply of the contracts, the pecuniary interests would not matter and it was a “standards in public life” type of approach, but of course it is not. The amendment of the noble Baroness, Lady Noakes, has clarified that for me. What “pecuniary” means in this context is a really interesting point: why are the Government including it and why would the amendment of the noble Baroness, Lady Noakes, not be an improvement? Again, the details of some of these amendments are really worthwhile points to look at.

I wanted to raise some of the points that the noble Baroness, Lady McIntosh, started to get to in the debate on whether Clause 2 and Schedule 2 should stand part. There is also the question of where Schedule 1 takes us. The noble Lord, Lord Fox, will be interested in this, having asked who will police this. The Government use the term “estimated value” in Clause 2 and, to be fair to them, that is very important for this aspect of a public contract. Clause 3 deals with how estimated value is worked out; then, in Schedule 3, it is done by regulation. Schedule 3 lays out how the estimated value may be set, so I will not go through it. What I could not find out—a point also made by the noble Lord, Lord Fox—is who ensures that it is properly done; in other words, that the estimated value is a proper estimated value and that the system laid out in Schedule 3 works. If I understood the Minister, he said that it is a matter for the Minister—a matter for the Crown. Could he just clarify who polices this? Who ensures that the estimated value is indeed a proper estimated value? That would be helpful to the Committee.

Procurement Bill [HL]

Lord Coaker Excerpts

Committee stage
Wednesday 6th July 2022 Grand Committee

[Lord Purvis of Tweed (LD)]

My Lords, I hope the Minister will reflect on his comments. At no stage did I criticise officials for not receiving a letter. This is a ministerial responsibility. A Minister gives an undertaking to write to a Member in Committee. A Minister brings forward and moves amendments in Committee which are pertinent to the issue I raised when the Minister said that he would write to me. I was not criticising any officials. If any criticism to be laid, it is against the Minister. I simply said that, in the absence of the letter he promised to send me, I am asking these questions for clarification. That is reasonable.

On exemptions, there has been some reference to legal services. I understand the point that has been raised about making sure that there is a distinction from Scottish legal services as appropriate, and I certainly support the Government doing that. However, my understanding is that, for some of the treaty suppliers, there are obligations under some of the treaties on the mutual recognition of professional and legal qualifications. My understanding is that the exemption for legal services under this Bill will cover those other areas where the mutual recognition of professional qualifications in carrying out certain legal services will also be excluded. I understand that a body would be unable to procure legal services that are separate from those exempted, but they are then covered in other areas of professional qualifications. This will leave certain gaps in our treaty obligations.

I reviewed the Australia agreement on the carve-out on legal services. It is broadly the same, so I understand where the Government are coming from as far as these exemptions are concerned, but it is not exactly the same. Perhaps the Minister could give some further explanation as to what is likely to be allowed under the provision of legal services by certain providers of legal services that have mutual qualification recognition, because the position on legal services is still uncertain. If the Minister could respond to those points, I would be grateful.

[Lord Coaker (Lab)]

My Lords, I start by thanking the noble Lord, Lord True, those who have been working with him and the officials for the briefing we received this morning and for listening to the anger, frankly, that there was on Monday about the situation. We were where we were; we are grateful to the Minister for doing what he could to degroup the amendments and sort things out as best he could. Clearly, there are still a number of issues, and many of us are still struggling to put together the various mountains of paper we have to try to make sense of it.

I congratulate the noble Baroness, Lady Noakes, on her extremely important Amendment 11A. I must say that, in my reading of Schedule 2, I had not picked that issue up, which shows part of the problem—I know that the Minister accepts this—of not having enough time. The noble Baroness’s point was on decisive influence and what that means. As the noble Lord, Lord Fox, said, the definition of particular words and phrases bedevils us at the present time. I pray in aid because, later on, I will point out one word in a couple of phrases that I think makes all the difference; I hope the Committee will bear with me and recognise that I am not being trivial—changing one word would make a significant difference to the meaning in the Bill. As well as pointing something out to us, the noble Baroness has made an extremely important point about what “decisive influence” means in paragraphs 2(2) and 2(3) of Schedule 2.

I would add to what the noble Baroness said. This is really important because is it not only

“a decisive influence on the activities of the person”;

it is also “directly or indirectly”. You then really get into the question of what on earth it means. To be frank, when you get into “decisive influence” and “indirectly”, it becomes extremely difficult. Again, I thank the noble Baroness. Like her, I look forward to listening to the answer the Minister gives with respect to that.

I agree with most of the remarks made by the noble Lords, Lord Purvis and Lord Fox, and others. I have decided not to read out my notes, because I want to try to get to the heart of this for the benefit of those who read our proceedings. If I get this wrong, the Minister will need to correct me. We need to understand where we are and what is happening.

My understanding is that the current procurement regime—not the regime envisaged by the Procurement Bill—operates under the existing Public Contracts Regulations 2015. Because we left the EU, the original Procurement Bill sought to transpose the 2015 regulations into British law. Unfortunately, in doing that, the Bill made a series of errors, and in particular around the Teckal exemption—however it is pronounced; I do not have the same mastery of languages as the noble Lord, Lord Moylan. That exemption was not actually in the original drafting. The Local Government Association and all the other bodies were horrified—from what I have seen of the statements they have made to the Government—because it meant that many of the things they were able to do under the 2015 regulations with the Teckal exemption would no longer be allowed and they would have to change their procurement processes. I apologise to the noble Lord, Lord Moylan, who gave the very good example of the transport initiative, of which he was proud, but the LGA and other bodies were worried that these sorts of arrangements would not be operational in the same way as was drafted in the original Procurement Bill.

The Committee will correct me if I am wrong, but this is the million-dollar question for me, and the reason I abandoned my notes: do the Government amendments in this group, led by Amendment 10, mean—as the noble Lord, Lord Moylan, other noble Lords, the LGA and many other organisations which have made representations to us are concerned it does—that the 2015 regulations have been transposed into the amended version of the Bill, along with the Teckal exemption to those regulations? That is what people will be looking for, because British law, as it will stand when this Bill becomes an Act, will mean that they can operate the various arrangements that they have either vertically with an entity in themselves, or horizontally with other local authorities or bodies.

If we look across the country, we see that in all the areas in which we live—including, I presume, Wales; I am not sure about Scotland, about which the noble Lord, Lord Purvis, may wish to say something—there are hundreds upon hundreds of models of procurement that have been adopted and worked on to deliver services in the way that a local authority, body or entity has decided to follow. The Minister will know this better than me, because of his experience. What they will be looking at is whether the Government’s amendments mean that their concerns have been met. That is why I decided to put down my amendment. I cannot debate law as well as many other noble Lords, but if I were someone from the outside looking at this, I would ask whether this means that I can carry on procuring in the way that I have been able to procure previously. That was my concern with the way that the Bill was originally drafted. That is the million-dollar question for the Minister.

--- Later in debate ---

I was asked about the Scottish legal point. I apologise, but I am not in a position to answer that specifically today—maybe it should be added to the letter which the noble Lord asked for on Monday, which is on the way. If I may, I will take that away. It is an important point that both noble Lords alluded to regarding what might happen in the future. I do not have access currently to the legal advice which would enable me to answer that, but I undertake to write to noble Lords, in common with all the other things that come up in Committee. I will not wait until the end of Committee to send letters, but there was just a particular point of pressure over the last 24 hours.

[Lord Coaker (Lab)]

I am sorry to do this, but may I pick up on the point the Minister was making to the noble Lord, Lord Moylan, about the letter he will write? The answer to the question that the noble Lord, Lord Moylan, posed is quite significant. It would be interesting for the whole Committee to know whether Regulation 12 of the Public Contracts Regulations 2015 applies in a way that would allow the noble Lord’s example organisation to continue as it is now, when the Procurement Bill becomes an Act. I apologise for intervening a bit late.

[Lord True (Con)]

Yes, indeed. I totally take that point. It is good practice, and I hope it will be our practice in this Committee, to circulate to all noble Lords who take part. I was not proposing to send a billet-doux to just the noble Lord, Lord Purvis of Tweed, or my noble friend Lord Moylan and not spread it round. I will address that, but I repeat that it is our expectation and hope that local authorities will be able to do as they did before. That is the fundamental point and I will pursue this in that spirit. In that light, I hope the noble Baroness will be prepared to not move her amendment.

--- Later in debate ---

[Lord Wallace of Saltaire (LD)]

My Lords, I hope the Minister is impressed by the cross-party consensus on a number of things on this issue. At the moment, this is very much a skeleton Bill. The demands to put more in the Bill come from all parts and relate to a number of different clauses. I hope that he will be able to respond outside Committee, between Committee and Report, to consider whether the Government might be able to come back to satisfy some of these requests with appropriate language. As we have already stressed, the language is already there in a number of government publications; it is just not in the Bill. I look forward to his response.

[Lord Coaker (Lab)]

My Lords, here we go. This is an important part of the Bill dealing with process, and some things have been incredibly difficult to understand. Now we get to things that we can feel. We are talking about purchasing, buying and procurement. We are saying that if we are going to do that, we have a real opportunity as a Parliament—and the Government have a real opportunity, to be fair, but it is going to be driven by some of the amendments here—to use procurement to produce the country and society that we want. Many Governments and local authorities have failed to use the power of that purchasing to drive social change. That is what these amendments are about. I think it is sometimes important to set the context for the various amendments here. I suspect that to an extent there will be a bit of a clash on that because, to be honest, some of us take a position that the free market should be interfered with more than it is. Others take the view that the free market will sort these things out because it will. That is a view, and I think there will be a clash.

Some of these amendments should be in the Bill. The Government will say what they are seeking to achieve. The amendments in this group on the pre-procurement phase are to legislate to enforce it and to make it a reality rather than an aspiration—something that we think would be a good thing to happen. I wanted to say that. I shall wax lyrical at different times to set the context of amendments because otherwise they get lost. Many of the points that have been made on amendments are very important. If I were the Government, I would make more of them. To be frank, the Government may need a bit of advice at the moment. I would not be the person to give it to them, but if I were doing that I would make more of it as a Government, saying that this is what the Government are seeking to achieve, and they will be driven by people in this Committee, and no doubt elsewhere, to go further.

I have a couple of things specifically on the amendments. The noble Baroness, Lady Noakes, will be pleased because this is about a word—I warned them. In Clause 14, which is about the pre-procurement phase, the word “may” is used on a number of occasions. We are discussing what should be in planned procurement notices, which is Clause 14, what should be in preliminary market engagement, which is Clause 15, and what should be in preliminary market engagement notices, which is Clause 16. Those clauses do not insist that the notices are published but say that they “may” be published. Why not have “will” or “must”? The word “must” is used in other clauses in this part, so somewhere along the line, whoever drafted the Bill said, “We will have ‘must’, but in these clauses, we will have ‘may.’” I am always told that this does not make any difference and that the intention is to do that, but why leave it to chance when many of the amendments in this group, ably spoken to by different members of the Committee, are dependent upon a planned procurement notice being published, a preliminary market engagement taking place or a preliminary market engagement notice being published? The amendment could be passed, but it would not make any difference because it only “may” be done, not “must” be done. I hope that is as conflated and convoluted as I get and that the Committee takes the point. I think it would be helpful to the Committee to understand why the word “may” is used in certain clauses and not “must”.

All sorts of really good amendments in this group have been presented to us. I want to make a couple of points about them. My noble friend Lord Hunt, the noble Lord, Lord Aberdare, and the noble Baroness, Lady Boycott, made a point about the role of charities and small businesses, as did the noble Lord, Lord Lansley. Everybody agrees that we have to do more to help small businesses, that we cannot let the big players dominate, that we have to get new entrants and to support them, and asks why we cannot grow business in this area and do more about young people trying to start something. Here is the opportunity. Here is the chance to use procurement to drive the sort of change and make the social difference that we want it to make. The noble Lord, Lord Lansley, is absolutely right that we should use procurement to do it. Other noble Lords who have spoken have made the same point, so it goes all the way through.

The noble Lord, Lord Wallace, is absolutely right about the delivery model for outsourcing that he talked about. One of the disgraces of the last 20 or 30 years is the way in which some things have been forced to be outsourced. I am not an ideological puritan about this; I understand that sometimes it might be the right thing to do—I have got in trouble with my own party for saying that. It is the compulsion to do it that is the problem; where it defies common sense, that is the problem. In those circumstances, the noble Lord, Lord Wallace, and those who support him are quite right to address that.

I was also particularly pleased with the noble Lord’s proposed new subsection (1)(c) in Amendment 81, which I thought he might have emphasised. It talks about outsourcing being able to be brought back in where it is not delivering what it said it was going to deliver. That has been the plague of many things: when something is outsourced and it seems that it is impossible to do anything about it. That is what the amendment seeks to do—another noble Lord in the debate made the point about what you do in those circumstances.

I will just say quickly that I support what the noble Baronesses, Lady Worthington, Lady Verma, Lady Boycott and Lady Parminter, and other noble Lords said on climate change and environmental protection. We need to wake up to this. People say that people are not interested in politics, but they are interested in climate change and environmental degradation, and they cannot understand why something is not being done—why billions of pounds are not used to drive change. This is a real opportunity to do that, and I hope that the Government will take it. No doubt the Government will say that they have all sorts of policies around climate change—Acts, regulations and other things—and that of course they support tackling it. Who does not support trying to do something about climate change and environmental degradation? Everyone supports it. But sometimes the actual will is not there to deliver it through practical policy which will make a real difference. That is the point of the amendment before us.

Lastly, on my noble friend Lord Hunt’s point about disability, I cannot remember the figure from the RNIB briefing—I had a quick look but I cannot remember what it was—but millions of people were potentially impacted.

[A noble Lord]

It was 14 million.

[Lord Coaker (Lab)]

Some 14 million people were potentially impacted according to the briefing that we had on the limitations on access ability and all those sorts of things. That should be a wake-up call to us as well, and again, it is something that we can use. I thank my noble friend Lord Hunt and those who have supported him for bringing that forward.

I will finish there. This is a wake-up call to this Committee. This debate should be in the Chamber. This is a massive debate about billions of pounds which can be used to generate social change and to change the direction of the country in a way that there is probably a consensus about in many ways. Sometimes in Committee we forget how important it is. We are legislating in a way that will have an impact on the lives of millions of people in this country—and people across Europe and so on, without going into it too much. The impact is enormous, and that is what we are doing in this Room, and why we are bothering to stay here on a Thursday night without finishing.

[Noble Lords]

It is Wednesday.

[Lord Coaker (Lab)]

Is it, my Lords? I am that excited and I have been speaking that long—is it still Wednesday?

[Lord True (Con)]

My Lords, if that is an offer to come back tomorrow and carry on, I do not know how popular that will be.

There are many things that I like about the noble Lord opposite. First, he is very likeable and fun to be with. Secondly, he has a long connection with the great city of Nottingham, which he will know is something that I share. Thirdly, there is what Mr Baldwin would call his awful frankness. However, there is something of a philosophical divide that will come through in this discussion. I will reply in detail to the amendments, but what we have heard from the noble Lord is that the Labour Government that he envisages would want to use the powers under this Bill to constrain individual private companies that sought to provide public services to conform to the will of whatever the Labour Party’s wishes in power might be.

Procurement Bill [HL]

Lord Coaker Excerpts

Committee stage
Monday 11th July 2022 Grand Committee

[Baroness Bennett of Manor Castle (GP)]

My Lords, I rise to make my first contribution in this Committee, so I declare my position as vice-president of the Local Government Association. I must also, slightly belatedly, thank the Bill team for last Wednesday morning’s briefing, which was very helpful in trying to come to grips with the complexity of the Bill. There are many people with a great deal more experience than me who are also wrestling with the complexity.

I rise to speak chiefly to Amendment 34 in the name of the noble Lord, Lord Wallace of Saltaire, who has just very ably introduced it. I also support Amendment 33. As the noble Lord, Lord Wallace, was speaking, I was thinking of the case study of the Dutch firm Randstad and the disaster of the Covid tutoring. That was a very large and important contract that I think the Government would now acknowledge went horribly wrong and should clearly never have been let overseas in the first place. The noble Lord also referred to care homes. Financialisation and hedge fund or overseas ownership of care homes is something I have been very concerned about since a brilliant report, which is highly relevant, from the Centre for Research on Socio-Cultural Change in 2016. It put that issue on the agenda and it has been focused on since by, for example, the Financial Times.

On Amendment 34, I perhaps come at this from a slightly different philosophical position from the noble Lord, Lord Wallace, in that I would like to get rid of all financialised provision and see it all in non-profit hands. I believe that is what is appropriate for this. This amendment is probing to ensure that organisations such as local social enterprises, not-for-profit companies and charities are able to apply for contracts. I would like to go stronger on that. I would like to see a preference for those organisations having many of these contracts. I think I am going to anonymise this case study because I have not had the chance to check with the people concerned, but a number of years ago I knew an excellent local rape crisis service that had been providing provision in a city for a number of years. Eventually I found out a month or so after a new contract was supposed to have started that it had been handed to a large national organisation. It was a total mess.

We have seen far too many cases like that where excellent local provision, which may not be expert at putting in tender documents but is expert at providing services, is swept aside under our current arrangements. I mentioned the Financial Times. There is very general agreement across the political spectrum that we need to stop that happening and ensure that good local services and social enterprises are able to continue, have stability, surety and certainty and do not need to put so much of their resources into the endless cycle of bidding and bidding again. I am not sure whether this amendment exactly gets to where I want to go, but it is certainly heading in the right direction. That is why I wished to speak in favour of it.

[Lord Coaker (Lab)]

My Lords, good afternoon. When the noble Baroness, Lady Noakes, leads a group of amendments, I often end up agreeing with her; it is a bit of a surprise sometimes. Amendment 30, which the noble Baroness has moved, goes to the heart of it, as do all the amendments, because of the lack of clarity about what Clause 8 really means and what is meant by light-touch contracts. It is a really important job of this Committee to try to tease out a little bit more detail.

As the noble Baroness, Lady Noakes, probes in her amendment, why are they not more narrowly defined? There is also an argument for asking why they are not more widely defined. I think the noble Baroness—she will no doubt correct me if I am wrong—is seeking to understand the Government’s thinking and how they have arrived at their conclusions. I think that is what all the various amendments from the noble Lord, Lord Wallace, the noble Baroness, Lady Bennett, and so on, are about.

In speaking to these amendments, I too am seeking clarity from the Government on what this clause means. I will start with the most obvious point. I have read the Library briefing, which refers to the Government’s own memorandum to the Delegated Powers and Regulatory Reform Committee on light-touch contracts, and will quote a couple of things that I think are relevant to all the amendments in this group, including lead Amendment 30 from the noble Baroness, Lady Noakes:

“The light touch regime is a facet of the existing rules … and has fewer rules regulating how a procurement is conducted for these contracts. This is reflected in the bill by a series of exceptions of obligations under the procurement regime for the relevant contracts.”


I will be frank: what does that actually mean? Which rules are not applied? There was one set of rules before, under the light-touch regime, which at one point the Government were not going to include in the Bill. That then moved to light-touch contracts, but we are told by the Government that there are fewer rules.

It would be helpful to know what the difference is. What are the fewer rules which the Government have explained to the Delegated Powers and Regulatory Reform Committee? The noble Lord, Lord Wallace, made the point that what we are all struggling with is that Clause 8(1) says what “light touch contract” means and then that it will all be done by regulation. In fact, it is a bit like knitting fog to try to understand exactly where we are coming to and what we are doing.

The Government also said in their memorandum to the Delegated Powers and Regulatory Reform Committee, which, again, is relevant to all these amendments:

“Whilst the scope of what is to be included in the power is known, it is not practicable for the bill to include a long list of detailed CPV codes to indicate which categories of contracts may benefit from the light touch regime. In addition, both CPC and CPV codes may evolve over time, which would … require amendment to the bill. The power will be used to ensure that the scope of what is included with the light touch regime does not extend beyond what is permitted for the UK by reference to the GPA and/or other international trade agreements.”


Again, we are trying to understand what that really means for the light-touch regime which the Government are seeking to bring in as a result of Clause 8 and associated regulations. Some clarity on that would help to answer the questions from the noble Baroness, Lady Noakes, about why it is not more narrowly defined and why it is defined in the way it is. That would help us to understand the Government’s thinking behind much of the clause.

The amendment from the noble Baroness, Lady Noakes, gets to the heart of what we are discussing: how the Government have arrived at their position. However, in particular, Amendment 34 from the noble Lord, Lord Wallace, and the noble Baroness, Lady Bennett, raises a very important point about ensuring that light-touch contracts will involve various other services and bodies and that they are properly considered for such contracts.

Time and again, at the heart of previous groups, this group, and no doubt groups of amendments to come is a general debate on what a Procurement Bill should or should not include and how far the Government should or should not interfere with the operation of the market. What the noble Baroness, Lady Noakes, is trying to get at, and what I believe is really important, is some of the ways in which this clause has been put together, so that we understand what exactly a light-touch contract is and the difference between the light-touch regime and the light-touch contracts in this Bill, and the Government’s thinking on what regulations may come forward in due course so that, as a Committee, we can consider whether they have got the balance right and whether this makes sense. The noble Lord, Lord Wallace, made the point that this clause is wishy-washy—one bit says this and another says that—and the Government’s get-out clause all the time is that it will be sorted out by regulation. This really is not the way forward for primary legislation.

[Baroness Scott of Bybrook (Con)]

My Lords, I will start with a question from the noble Lord, Lord Coaker. I will probably not answer it in a way he understands, but I will give it a go and we will probably have more discussions on this as we go forwards.

The services currently identified via these CPV codes, as the noble Lord talked about, are outside the scope of the GPA, albeit within scope of some national treatment provisions in certain international agreements. As such, these could arguably be subject to even less regulation, but we think we have the balance right to ensure competition where possible, value for money, and appropriate transparency and fairness. That is the background to this. The Green Paper proposed removing the separate light-touch provision entirely, but it was clear that this was a popular concept, recognising that these types of services warrant special treatment with a light touch. If they were subject to the full regime, we would be adopting a more stringent approach than that taken by any other European country. That is why we have put them in, and we think that is correct. I am sure we will have more discussions on that.

Before we turn to the amendments, because they were slightly separate, I will answer the questions of the noble Baroness, Lady Brinton, and the noble Lord, Lord Wallace, on how this Bill interacts with the Health and Care Act. At Second Reading, concern was raised regarding the interaction between the Health and Care Act 2022 and the Procurement Bill. I hope that my noble friend’s letter of 8 June allays these concerns. To confirm, the intention is that the provisions in the Procurement Bill will be disapplied for a tightly defined subset of healthcare services that will instead fall within the provider selection regime. The provider selection regime has bespoke rules which commissioners of healthcare services in the NHS and local government will follow when procuring healthcare services in their area, and only where delivered directly to patients and service users.

The scope of the provider selection regime will be supported by reference to the common procurement vocabulary—CPV—codes, which will help procurement personnel to determine which regime applies. As the provider selection regime will sit alongside the reforms introduced by the Procurement Bill, DHSC and the Cabinet Office are working together to ensure that the two regimes remain clear and coherent. The Procurement Bill, and therefore the light-touch contract provisions, will continue to apply to healthcare or health-adjacent services that are not delivered to patients but support the infrastructure of the NHS. Light-touch contracts will also continue to include all services procured by authorities other than NHS bodies and local authorities. I hope that helps.

There was another question from the noble Baroness, Lady Brinton, about how the PSR interacts with the new reforms in the Procurement Bill. The PSR will cover the procurement of healthcare services that are delivered to patients and service users, as I have said, and only when they are arranged by relevant healthcare authorities, including NHS bodies and local authorities. The Procurement Bill will not apply to these but will cover all other goods and services.

--- Later in debate ---

[Lord Coaker (Lab)]

My Lords, this has been another interesting debate, with that clash of views the noble Lord, Lord True, reminded me about over how far the state should interfere with the market. Some think it should interfere more; some think it should interfere less. No doubt, the noble Lord will pursue the Government’s objective of ensuring that we have a social market which operates for the benefit of the many. We look forward to continuing that debate, and I am sure he will respond in due course.

On a serious point, I will start this slightly back to front in terms of the amendments. The really important amendment—apart from my noble friend’s Amendment 75B, which I will speak to in a moment—is Amendment 534, which looks at reviewing the procurement rules to see whether they have made any difference or not. You can argue what those rules should be and how far something should go, and the Government will say, “Of course we will have a review; it is a matter of course. We keep under review all the legislation that is passed and look to see how effective it has been”, but this is really important.

The amendment refers to the awarding of contracts to small and medium-sized businesses. I appreciate that it does not deal with all the various points that have been raised, but the general point of reviewing what takes place and whether what is passed by the Bill has the impact we think it should have—or any impact at all—is an important principle that we should not lose sight of. However, Amendment 534 is much more narrowly drawn than that, and I suggest that six years is too long.

I will try to be reasonably brief in closing the debate, but I thought there were some really interesting suggestions in Amendment 38 from the noble Baroness, Lady Neville-Rolfe. They went to the heart of what the Government need to do; there has clearly been a procedural problem, but the Committee is trying to address and support the Government to achieve their own objectives. The noble Baroness, Lady Bennett, supported the point about 30 days in Clause 63(2). Is it immediate payment or late payment? Is it sufficient? Is it too long or not long enough? It raises the point that there are a whole series of measures about supporting small and medium-sized businesses with public procurement that need to be looked at and addressed. That is one example.

The point that there are thresholds in Schedule 1 and that below-threshold contracts can be reserved for small contracts was really interesting—if I have understood what the noble Baroness said. She raised the possibility of whether there was the opportunity to have a below-threshold business amount. That is quite an interesting concept for the Government to address and look at.

As the noble Lord, Lord Wigley, pointed out, we are trying to look at how we can expand this and ensure that small and medium-sized enterprises—as the noble Baroness, Lady Noakes, argued—will benefit from the public procurement provisions in the Bill. Everybody wants that, but is it going to happen? Will the measures on public procurement make any difference or not? It is in everybody’s interests that they should.

Procurement Bill [HL]

Lord Coaker Excerpts

Committee stage
Wednesday 13th July 2022 Grand Committee

[Baroness Boycott (CB)]

I just wanted to add something to my amendment; I thank Members of the Committee for their support. I have very little time for Brexit, as probably everybody knows, but when the French attempted to do this, they were stopped under EU rules as it was to do with restrictive trading. Now that we are out of the EU, we have a chance to produce a fantastic procurement Bill that favours small and medium-sized enterprises, local procurement, local health and local sustainability. If we do not take that chance, frankly we will have missed one of the great opportunities that Brexit gave us.

[Lord Coaker (Lab)]

My Lords, I wish the noble Lord, Lord True, well. I hope that he feels better than he did. I will speak to Amendment 68 in my name and that of my noble friend Lady Hayman, and Amendment 80 in our names and that of the noble Baroness, Lady Bennett. I recognise that there has been a plethora of really good amendments that we support; it would be impossible to go through everybody’s amendments, but I am particularly pleased to see those in the names of my noble friends Lady Thornton and Lord Hunt.

I praise the noble Baroness, Lady Noakes, again for the brilliance of her “may”s to “must”s and “must”s to “may”s. I feel for her, because I do that sort of thing all the time. The change of one word is astonishingly important. I recognise how difficult it was for her to move the amendment tabled by the noble Lord, Lord Lansley, which changes “may” to “must”, when all of her amendments to later parts of the Bill change “must” to “may”. I can see the split in the Conservatives between those who wish to see greater market involvement, the Minister in the middle with his socialist bent, and the others seeking to restrict the role of the state.

Our amendments, particularly Amendment 68, which builds on Amendment 74 tabled by the noble Baroness, Lady Parminter, are about the process, which is particularly important. But first, to pick up the point from the noble Lord, Lord Scriven, Amendment 60 from the noble Lord, Lord Lansley, is crucial, as otherwise the rest of the amendments are pointless. We will have the most brilliant national procurement policy statement that is not published and is not mandatory. I agree with all the points and comments that have been made about environmental principles, the very important points raised by the noble Baroness, Lady Boycott, about food, what the noble Lord, Lord Wigley, said about Wales, and all the different things that everyone has mentioned, but the Government are not required to publish the statement.

The first question the Minister needs to answer is: what has happened since June 2021, when the Government published the national procurement policy statement that can be found on their website and the accompanying note that says they will legislate to ensure that when people procure, they must have regard to the statement? The Government stated that they would provide a legislative vehicle that would ensure that the national procurement policy statement was adhered to by business, or whoever the contracting authorities are. Yet, in the Bill, there is a legislative vehicle of sorts, but it is nowhere near what was envisaged in June 2021. Why has BEIS or the Cabinet Office changed its mind between what was going to be required in June 2021 and what is now in this legislation? I am pleased that there is a legislative vehicle, but the changing of “may” to “must” by the noble Lord, Lord Lansley, is absolutely fundamental and crucial, because it will require all these other things that we have discussed over the past hour—so ably and with great effect, I think—to be in the Bill.

I just say this, because I know that the noble Lord, Lord True, will say that it is a mixture of Lord Coaker the socialist, other liberals, Greens and goodness knows who else—some wet people on his own side and so on. He will say it is completely and utterly ridiculous and dismiss it. However, I am a bit of an anorak and I look at what the Government publish and what you can find if you look on the internet and google things. The Government very helpfully provide all sorts of information. The letter of 7 June that the noble Lord, Lord True, had from the Constitution Committee was published; helpfully, so was his response of 27 June. The serious point that I make is that all the points that have been made in Committee about changing “may” to “must” and the mandatory requirement that many of us think is essential are supported by the Constitution Committee. The Minister will know that, because he was written to on 7 June by its chair, my noble friend Lady Drake.

I will not read the whole of the letter, just the final paragraph:

“The Committee would be grateful for clarification as to why the statement of priorities is not mandatory, given that it is considered important enough to require consultation and Parliamentary approval. Further information you can provide as to the justification for this approach would be welcome.”


In other words, the cross-party Select Committee is saying to the Government that they have got it wrong. In Clause 12(1), it should not be

“A Minister of the Crown may publish a statement”;


it should be that a Minister of the Crown “must” publish a statement. The Select Committee agrees with the amendment that has been tabled, and so I think do a large number of this Committee. The Minister, however, has already made his mind up because, on 27 June, he wrote back to say that the Government do not agree. For the benefit of the Committee, it is important for us to understand why the Minister thinks that the movers of these amendments, such as the noble Lord, Lord Lansley, and those of us who support them are wrong and why he wrote the letter back on 27 June to the Select Committee chair, my noble friend Lady Drake, explaining why she was wrong. I think that is really important.

--- Later in debate ---

[Lord True (Con)]

My Lords, obviously my right honourable friend will consider everything in his engagement with the Welsh Government. If the noble Lord wishes to bring forward an amendment, I will also consider and respond to it. By the way, I was not waving at my officials or my absolutely brilliant colleague; one of those wretched moths was just about to fly into my ear and prevent me hearing the noble Lord’s charming and persuasive words.

Further amendments cover compliance, reporting requirements and review. I know that this is an area that the Committee is interested in and will probe as the Bill goes forward. Amendment 75, tabled by the noble Lord, Lord Wallace, provides for a compliance review within three years, with a particular focus on small businesses and social enterprises. I fully understand the importance of social enterprise. The noble Lord is not in his place any more but I myself created social enterprises when I was the leader of a local authority; I think that their contribution to our national life is immense.

I assure noble Lords that the Government are committed to breaking down barriers for small businesses and new entrants in supply chains. We had a good debate on that on Monday; my noble friend, among others, made very strong points. Our position is that, although we agree that compliance in this respect is important, it would not be appropriate to legislate and place additional burdens on contracting authorities for this. Small businesses and other suppliers will continue to have access to the Public Procurement Review Service, which will form part of the procurement review unit, to raise any concerns that they have in respect of contracting authorities’ compliance with the Bill, including the duty to have regard to the NPPS. The Bill also provides the Minister with the power to investigate these cases. I am sure that this will provide small businesses with good recourse to challenge non-compliance with the NPPS but we have undertaken to give further consideration to and engagement on the interests of that group in relation to small businesses; I will add the noble Lord’s suggestion to that engagement.

Finally, we return to the question of social value, which was addressed in the previous group. Amendment 75A would require the Secretary of State to provide guidance to contracting authorities on how to implement social value in line with the NPPS. Again, the noble Lord, Lord Hunt, was kind enough to read out the current draft document, where social value is fully represented. As I argued in the debate on the previous group, we believe that this amendment is not necessary. The Government and the Government for Wales will publish procurement policy statements containing their priorities, which all contracting authorities must have regard to when carrying out a procurement or exercising functions related to it. As these priorities may change from one NPPS to another, we do not believe that it would be appropriate to specify on the face of the Bill that guidance on a given issue must always be produced.

Amendment 80, tabled by the noble Baronesses, Lady Hayman of Ullock and Lady Bennett, and the noble Lord, Lord Coaker, concerns the inclusion of a new clause for requiring carbon reduction plans from suppliers for contracts above £5 million. I have already referred to a procurement note but, as I have mentioned, we do not see this type of criterion being suitable for inclusion in the Bill. While central government has policies for this on complex procurements, the amendment would be a burdensome addition to the workloads of contracting authorities across the UK and could potentially inhibit new entrants.

[Lord Coaker (Lab)]

Excuse me for interrupting the Minister but I do not understand what he just said. Amendment 80 would make mandatory what the Government have already said procurement is required to do. Procurement Policy Note 06/21, which the Government have published on their website, is titled:

“Taking account of Carbon Reduction Plans in the procurement of major government contracts”.


All the amendment does is clarify the legal status of 06/21, which is the Government’s own policy. Given the line the Minister has taken, I would be parading 06/21 as a good example of what the Government are doing. That is all this amendment seeks to change in the Procurement Bill. The Minister may need a note on this—I appreciate that—but that was the purpose of this amendment. I wonder whether the Minister could clarify what he has just said in reference to Procurement Policy Note 06/21, which we have included in the explanatory statement as the purpose of Amendment 80.

[Lord True (Con)]

I deliberately referred to Procurement Policy Note 06/21. It is something that the Government have done; however, the line I am taking and the position of the Government is that we do not wish to encrust the Bill with statutory requirements. I am glad that the noble Lord opposite follows the policy—I reminded him of it as I was going through my speech—but, if I yield one, I will yield 125. It was kind of the noble Lord to say that he was pleased that the Government published Procurement Policy Note 06/21 but I wish he would be satisfied.

I recognise that Amendment 80 replicates the £5-million threshold but we think that taking this policy forward would potentially be a burdensome addition for SMEs, which are required to produce and maintain such documents—not only if they are small SMEs but if they want to be part of a consortium for a larger government procurement project. Despite what the noble Lord said, I do not believe that this changes the overall position of the Government that we should not add to the Bill, to primary legislation, the encrustations that he requests.

[Lord Coaker (Lab)]

I am sorry to pursue this. Procurement Policy Note 06/21 helpfully has some frequently asked questions at the end. One asks when it should be applied. It says that the note

“applies to all Central Government Departments”.

What does that mean? Does it apply or not? Is the Minister saying that it applies to them but the Government do not really mean it and departments can choose whether to do it? What is its status? Is it worth the Government putting in their own documents that it

“applies to all Central Government Departments”?

They might as well just say, “Do it if you want”. What is the purpose of publishing it if it is very loose and can apply only if the departments want? I do not know.

[Lord True (Con)]

That is the point. Currently, 06/21 refers to “Central Government”, as the noble Lord said, but his amendment applies to “all contracting authorities”, as I read it. If that is not the case, I will stand corrected and we will write a letter to explain that it applies to everybody, as he proposes. I am advised that his amendment goes further than the current procurement arrangements but, if that is incorrect, I will write a note.

[Lord Coaker (Lab)]

I thank the Minister for that. It is helpful. If I get a letter back saying that the amendment goes further than 06/21, with that information, I can change the amendment before Report or be satisfied and not need to. It would be very helpful of the Minister to clarify that in a letter; I wonder whether he might think of sharing that with other Members of the Committee.

[Lord True (Con)]

Yes, I hope that letters that are sent out are shared with other Members of the Committee and, if not, I will make sure that they are. I would not want to encourage the noble Lord too much in the hope, because the Government’s position is that we do not think it is advantageous to encrust the primary legislation with the range of aspirations that we have heard from many sides in this Committee. The noble Lord can have another try, but I cannot promise that it will be different. But I will write to him and circulate the letter anyway.

I respectfully request that these amendments be withdrawn or not moved.

Procurement Bill [HL]

Lord Coaker Excerpts

Committee stage
Monday 18th July 2022 Grand Committee

[The Minister of State, Cabinet Office (Lord True) (Con)]

My Lords, this group seeks to deal with amendments relating to the process for excluding suppliers and with the debarment list. I recognise that there is considerable interest in this topic. Amendments relating to the grounds for the exclusion of suppliers will be dealt with separately in a later group. I look forward with interest to submissions from noble Lords, but there are a number of government amendments in this group.

Amendment 89 ensures that suppliers which gained an unavoidable unfair advantage through involvement in preliminary market engagement are excluded from the procurement in question.

Amendment 148 is consequential on Amendment 93, which was debated last week. Amendment 93 clarifies that the authority’s requirements and award criteria are two separate concepts.

Amendment 154 broadens the concept of an entity associated with the supplier for the purpose of the exclusion grounds. This concept covers entities which are being relied on to meet the conditions of participation and is expanded by this amendment to also cover entities which may not be involved in the delivery of the contract. An example would be a consortium member providing financial backing to the supplier in order to meet conditions of participation relating to financial capacity. This aligns the concept of associated entities with the existing concept in Clause 21. An exception is made in respect of exclusions for guarantors such as banks, where it would be inappropriate to consider the exclusion grounds.

Amendment 150 is the lead of 21 amendments which all serve to change the term “associated supplier” to “associated person” for the purposes of the exclusions regime. This is consequential on Amendment 154 because the entities being relied upon to meet the conditions of participation may not be involved in the actual delivery of the contract. It is therefore accurate to refer to them as “persons” rather than “suppliers”.

Amendments 151, 159 and 166 require contracting authorities to notify suppliers when they are considered to be excluded or excludable by virtue of an exclusion ground applying to an associated person or subcontractor. These amendments are linked to Amendments 168 and 171, which require ministerial consideration before a supplier is notified and given the opportunity to replace an associated supplier or subcontractor when they are considered by the contracting authority to be a threat to national security.

Amendment 162 requires contracting authorities to ask for details of intended subcontractors and to check whether any intended subcontractors are on the debarment list, as part of determining whether the supplier is excluded or excludable. Amendments 163, 164, 165 and 398 are consequential.

Amendment 169 corrects a drafting error which incorrectly described suppliers subject to the exclusion ground on national security as being “excluded” when they are in fact “excludable”. Amendment 170 is also a technical amendment.

Amendments 175, 182, and 414 clarify what it means to treat a supplier as an excluded supplier in relation to the award of a public contract. They make it clear that contracting authorities are required to disregard tenders from such suppliers and prevent such suppliers from participating in, or progressing as part of, any competitive tendering procedure.

Amendments 176 and 178 provide for the list of improper behaviour at subsection (4) of Clause 30 to be an exhaustive list. It is important to be clear on the circumstances in which a supplier has acted improperly, given that the consequences are exclusion. Amendment 339 removes financial and other resources of suppliers from the list of the matters that contracting authorities may have regard to in setting proportionate requirements for suppliers to provide particular evidence or information as to whether exclusion grounds apply and whether the circumstances giving rise to any application are likely to occur again. Proportionality is sufficiently and more appropriately achieved by having regard to the nature and complexity of the matters being assessed, which is also listed. This amendment aligns with the matters that contracting authorities must have regard to in considering whether a condition of participation is proportionate, as specified in Clause 21.

Amendment 349 is made at the request of Northern Ireland and provides that transferred Northern Ireland authorities should make notification of exclusion to a department in the Northern Ireland Executive that the authority considers most appropriate, rather than a Minister of the Crown. This is necessary to provide information to the relevant department, for example to consider a potential investigation of suppliers under Clause 57. Amendment 352 requires that a Minister of the Crown must consult with the Northern Ireland department that the Minister considers most appropriate —rather than any Northern Ireland department—before entering a supplier’s name on the debarment list or removing an entry from the debarment list following an application for removal under Clause 60.

Amendment 399 extends the circumstances in which there is an implied right for a contracting authority to terminate a contract where a subcontractor—which the supplier did not rely on to meet the conditions of participation—is an excluded or excludable supplier. The amendment includes circumstances where the authority checked the debarment list or asked for information about the subcontractor but did not know that the subcontractor was excluded or excludable prior to award.

Finally, Amendment 402 requires contracting authorities to seek the approval of a Minister of the Crown before terminating a contract on the basis of the discretionary exclusion ground of national security. This is necessary to align with the other circumstances in which ministerial approval must be sought before relying on this particular ground. I beg to move.

[Lord Coaker (Lab)]

In keeping with the obvious mood of the Committee, I actually do not want to say very much either on this particular group. The interest I had was in the amendment from the noble Lords, Lord Wallace and Lord Fox, in this group, on how excluded suppliers demonstrate their reliability following the application of an exclusion order, and the process of self-cleansing. I was particularly interested in what this process of self-cleansing means. I am presuming—from the Minister’s helpful introduction—that the company is excluded for X reason, and is told that in the notice that goes to an excludable supplier, and then it goes back to the Government and says, “We’ve undertaken the process of self-cleansing and therefore the problems that you highlighted with us are no longer applicable”. So, I wondered whether the Minister could say a little bit more about the process of self-cleansing, which was the element that I found a little bit vague, if I am honest, and goes with many of the problems we have: the Minister talks about a “proportionate response” from the Government, and those sorts of phrases, and again we get into the problem of definition.

The other point I will make concerns what the Minister rightly pointed out: Schedules 6 and 7 outline the grounds rather than the process. There are the mandatory grounds in Schedule 6 and the discretionary grounds in Schedule 7, both of which a contracting authority might think applies to it. On the grounds in these schedules, can the Minister give us an example of what the process or timescale will be and an example of how it would work? Presumably the Minister sends this to the contracting authority and says, for example, “We think you should be excluded because of this in Schedule 6”, and if the company says, “No, this isn’t the case”, a discussion takes place. It would be helpful for the Committee to understand this process.

Finally, can the Minister confirm that, as I read it, there is also an appeals process? If the Government decided that a firm or supplier should be excluded, am I right in saying that this decision could be appealed? If it is appealed, who is it appealed to—presumably not the same person who made the decision to exclude them in the first place? I am querying the independence of that appeal process and the amount of time that this would take. A little more detail would be useful on the matter of an “excluded supplier” and an “excludable supplier”.

I do not want to keep the Committee any longer on this group of amendments, because the Minister’s helpful outline clarified some of the points I would have made about why “person” changes to “supplier”. I look forward to the Minister’s response to my questions.

[Lord True (Con)]

My Lords, I think that in a test match that is called putting the spinner on early when the batsman is better at fending off fast bowling.

The noble Lord asked a number of questions, which I am not in a position to answer at this juncture. We believe that self-cleansing is an important process because exclusion is a risk-based measure as perceived; it is not a punishment. As such, suppliers should be encouraged to clean up their act and given the right to make the case that they addressed the risk of misconduct, or the other issues, occurring again. It is for contracting authorities to decide whether the evidence they have seen is sufficient to reassure themselves that the issues in question are unlikely to occur again. The noble Lord asked a further question about what happens should there be a difference of judgment. The formal position is that it is for the contracting authorities to decide whether self-cleansing has occurred.

It is not our intention to make the exclusion of suppliers more difficult for contracting authorities, because many noble Lords, on a number of subjects, have asked for the opportunity to exclude suppliers. The Bill seeks to ensure that all the relevant issues can be considered. We believe that suppliers will thereby be encouraged to take as much comprehensive action as possible to avoid recurrence if they seem to fall foul of these risks. I repeat: the decision must be made by the contracting authority, and the burden to present remedial evidence to avoid exclusion is on the supplier. The lack of remedial evidence—or if the remedial evidence is inadequate—may give the contracting authorities sufficient reason to conclude that the issues in question are likely to occur again. However, I will look very carefully at this flighted ball that the noble Lord has sent. We accept the need for guidance on self-cleansing to accompany the legislation, and can assure the noble Lord opposite that this will be published as part of the implementation package for the Bill.

I cannot ask the noble Lord, Lord Wallace, not to move his amendments, as he is not here, but I hope that is something of an answer to the noble Lord, who has amendments in this group.

[Lord Coaker (Lab)]

That is quite helpful. Further to that and to make sure I have understood, would an excluded or excludable supplier be put on a debarment list? I refer to Clause 61, which is titled “Debarment decisions: appeals”. Am I reading this right or have I got it wrong?

[Lord True (Con)]

We will come on to the details of debarment on a later group—on Clause 61, I believe. A supplier may certainly appeal against the decision of a Minister, who ultimately places the debarment list. On the process of self-cleansing, which we were talking about, the contracting authority, not the Government, undertakes exclusion. It will notify the supplier that a ground for exclusion applies; the supplier may then make representations and submit self-cleansing evidence, as I previously discussed. The contracting authority then weighs it up and decides on exclusion.

This is the further wrinkle that I had not answered in saying rather more words than the succinct selection I have been given, but it confirms what I was saying: the supplier may challenge, but through the courts under the remedies regime, if it disputes the contracting authority’s judgment on self-cleansing.

We will come on to debarment decisions and permanent exclusion on amendments after Clause 61, but certainly a supplier may appeal against a ministerial decision.

In moving government Amendment 89 in my name, I request that the other amendments are not moved.

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[Lord Coaker (Lab)]

Can I just say—because sometimes these things pass by and they should be noted—that we are very pleased with that commitment from the Minister and thank him for it?

[Lord True (Con)]

Right. Unfortunately, the noble Lord will be disappointed by my response to the second part of the amendment, because I have already explained that contracting authorities will not be required to publish all information to the central platform.

I turn finally to Amendments 519A and 519B from the noble Lord, Lord Clement-Jones. The Bill exempts contracts for public passenger transport services under paragraph 17 of Schedule 2, as their award is regulated by Department for Transport legislation. We believe that it is more appropriate that the transparency provisions governing these arrangements are kept within their existing legal regime, and local authorities are therefore not placed under an unnecessary burden of trying to comply with two separate regimes simultaneously when placing such contracts. I have, however, asked my officials to engage with the Department for Transport to better understand how we can ensure that both regimes are aligned—I think that was one of the points behind the noble Lord’s remarks.

I thank the noble Lord for his generous remarks. Having been a bit flinty on a number of the others, I will none the less, as ever, study carefully Hansard and your Lordships’ very well-informed submissions. Against that background, I commend the government amendments in my name and respectfully request that other amendments in the group not be pressed.

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Moved by

[Lord Coaker]

101: Clause 18, page 12, line 31, at end insert—
“(3A) In the case of a defence and security contract, unless it would leave no tenders that satisfy all other award criteria, a contracting authority must disregard any tender from a supplier that—(a) is not a United Kingdom supplier or treaty state supplier, or(b) intends to sub-contract the performance of all or part of the contract to a supplier that is not a United Kingdom supplier or treaty state supplier.”

[Lord Coaker (Lab)]

My Lords, I welcome the noble Baroness, Lady Goldie, to her place and I thank her for carrying on the tradition in this Committee of briefing me on some of the points that I may raise in the way that other Ministers in this Committee have done.

For the benefit of the Committee, I start by saying that nothing I am going to say—which in some respects will be quite critical of the Government’s equipment programme—in any way suggests that any Member of this Committee, or anybody making these decisions, is not absolutely concerned with the proper defence of our country. I just wanted to make that clear. I think it is really important to state that we may have a difference of opinion and we may disagree about some of the equipment programmes and some of the decisions that have been made, but I would never question the commitment of any Member of this Committee or any Minister of this Government to defend our country and do their best for the security of our nation—particularly in the current circumstances. I think it is important to start with that, and I am sure that will be met with agreement by all Members of the Committee.

I wish to move my own Amendment 101—I am grateful for my noble friend Lord Hunt’s support for that—and Amendment 485, where, again, I am grateful for the support of my noble friend but also for that of the noble Baroness, Lady Smith. I will deal quickly with Amendment 101, which I think can be summed up by saying that it is just trying to encourage the Government to look at how we might use more of our defence procurement spending to support British industry and British suppliers. That is the extent of it.

I am sure the Minister will say that the Ministry of Defence does everything it can, that it works according to various international agreements, that it is not always possible to source certain contracts within the UK, et cetera, but many of us looking at contracts wonder why it appears so difficult for us to support British industry, when many countries do not seem to face the same difficulties. Given the freedoms we are now supposed to have, one would perhaps expect that to be easier than it was before.

I will give just one example to make this point. In 2018, the Government announced a £1.5 billion programme for fleet support ships to be built. They said they were going to build them in British yards but, as far as I am aware, not a single screw or bolt has been fastened. It is that sort of thing. When is that going to happen? When are the fleet support ships going to be built in British yards, as they were supposed to be? The Government said they were looking at a high proportion of this being done in the UK, but what does that mean? Some clarity would be helpful for the Committee and for those who read these deliberations on whether it is the Government’s intention to increase the amount of procurement that takes place in UK industry, so we can use our procurement to support that.

Before I move on to Amendment 485, this goes to the heart of what I am saying. Before us is a procurement Bill. It is an important government Bill that seeks to make a difference and use the hundreds of billions of pounds that are spent to deliver certain objectives for the Government. Why will this Bill, as it is drafted, make a difference to the defence equipment budget and programme? We could sit down now. How will this make a practical difference? What is in here? Some of this needs to be put on the record, so I am going to quote the Public Accounts Committee of the other place. It was not clear from the Government’s letter in response to that committee’s report, which said that the Procurement Bill was going to make a great difference, how it is going to do that. That is what I think is really important.

Noble Lords will recognise that Amendment 485 is a proposed new clause to be inserted after Clause 98, so it does not relate specifically to the defence clauses, as such. It relates to Clauses 96, 97 and 98. In other words, the Bill itself allows for procurement investigations, and the recommendations and guidance that follow them. My Amendment 485, supported by my noble friend Lord Hunt and the noble Baroness, Lady Smith, goes after that clause because it seeks to insert an audit of the equipment plans, and therefore investigate them and make recommendations. That is the whole point of doing the annual audit.

Why is this so important? I am not going to read all sorts of things, but I will use one or two examples, because this is really serious. The Public Accounts Committee of the other place, in October 2021, produced the report Improving the Performance of Major Defence Equipment Contracts. It said:

“There have been numerous reviews of defence procurement”—


this is why I am saying we all have an interest in this—

“over the past 35 years”.

I am making a defence-equipment point, not a party-political point. The reviews have

“provided the Department with opportunities to take stock and learn from experience. We are therefore extremely disappointed and frustrated by the continued poor track record of the Department and its suppliers—including significant net delays of 21 years across the programmes most recently examined by the National Audit Office—and by wastage of taxpayers’ money running into the billions.”

If you go through this report, you see that it logs detail after detail of problems that the committee believes the Government need to urgently address. The Government’s response is that they are dealing with this, but I think the Committee would want to know how. What are they doing on all of those points?

Using the work of the Defence Select Committee again, it talks about problems in aviation and an inquiry it has just launched. We read in the Sunday Telegraph at the weekend about procurement problems with the type of aircraft purchased for aircraft carriers and whether the F-35B will actually be suitable. It will be suitable in terms of being launched off the aircraft carrier, but will all that have to be changed and will there be another procurement difficulty with that?

The report on the Army’s armoured vehicle capability published a few months ago says:

“This report reveals a woeful story of bureaucratic procrastination, military indecision, financial mismanagement and general ineptitude, which have … bedevilled attempts to properly re-equip the British Army”.


I understand that the noble Lord, Lord Alton, was at a committee meeting in your Lordships’ House last week where this was discussed in the context of the Ajax contract. The Public Accounts Committee published a report on 3 June 2022 which pointed to a £5.5 billion contract with General Dynamics, with an initial order for 589 Ajax armoured fighting vehicles that were supposed to be in service in 2017. But by December 2021, at a cost of £3.2 billion, the department had received 26 vehicles, none of which can be used. Maybe now the Government will have to scrap that and move to a Warrior replacement.

So, all these different things are going on, and, again, the Government say that they have sorted these issues. However, I had a quick look and found The Treatment of Contracted Staff for the MoD’s Ancillary Services, another recent report by the Defence Committee from May of this year, which said:

“Outsourcing ancillary services has become commonplace in the Ministry of Defence … If an activity is not a core part of the MoD it is liable to be outsourced. For example, catering, vehicle maintenance and firefighting are liable to be outsourced. However, despite the billions of pounds spent on outsourcing, this is a relatively unscrutinised area. The MoD’s outsourcing practice is not exemplary. Outsourcing appears to be the default position, with little consideration given to providing services in-house. Contractors drop standards and squeeze employees to raise their profit margin, but the MoD is not always willing to step in and enforce the expected standards. It is an absurd state of affairs that the MoD is not allowed to look at a contractor’s previous performance when assessing their bid—a state of affairs that needs to be rectified immediately.”


Yet when we have asked Ministers about excluded contracts, excluded suppliers and what is going to be looked at, we have been reassured that the Procurement Bill will mean that a contractor’s previous performance will be looked at, and that if its bid is not up to scratch or not what you would expect, that supplier can be excluded. However, we read in a May 2022 report from the Defence Select Committee that the MoD is not allowed to look at a contractor’s previous performance when assessing its bid. So, is the Defence Select Committee wrong, or is the Bill wrong? It would be useful for us to hear from the Minister whether the MoD is allowed to look at a contractor’s previous performance, and whether it has or has not.

I have been speaking for a few minutes and I do not want to speak for any longer than that. I have tried to use contracts run by the Ministry of Defence to give some examples of appalling contract management. I have seen the response that the Government sent back to the committee, which says, “We’re dealing with all of these. We don’t agree with the committee; essentially, it is wrong on some aspects of this, but we agree with it on others. We are doing all sorts to tackle this”.

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[Lord Coaker (Lab)]

Will the Minister address the point about the treatment of contracted staff for the MoD’s ancillary services? I will just remind her that the Defence Select Committee report published recently says in its summary:

“It is an absurd state of affairs that the MoD is not allowed to look at a contractor’s previous performance when assessing their bid—a state of affairs that needs to be rectified immediately.”


Will the Procurement Bill rectify what the Defence Select Committee says is an appalling state of affairs that the supplier’s previous performance cannot be looked at?

[Baroness Goldie (Con)]

My understanding is that the Government’s response has been framed to that report and is currently under review. I have no more up to date information, but I will write to the noble Lord. The department is under an obligation to respond to that proposal.

[Lord Coaker (Lab)]

The Government cannot answer the point about whether the Procurement Bill will allow the MoD to look at a contractor’s previous performance when assessing its bid—a state of affairs that needs to be rectified immediately. Every time we have talked about what is an excluded supplier or an excludable supplier, we have been told that previous performance is one of the criteria that can be looked at, yet from what the Defence Select Committee said, and the Minister just said, is that it is not clear whether the MoD can do that.

[Baroness Goldie (Con)]

Well, yes, within the law the MoD can, and this Bill provides more flexibility for past performance to be taken into account. However, there are legal constraints which govern how any party entering into a contract can responsibly consider previous conduct. The Bill allows the MoD to exclude a supplier, and there are various grounds in the Bill to clarify when the MoD can make such a decision. Our view is that there is the necessary flexibility within the Bill. The Government will be looking at the observations of the Committee.

[Lord Coaker (Lab)]

It would be really helpful if the Minister, as she suggested, wrote to me and copied it to noble Lords in the Committee, because she said it was not allowed and then she said it was allowed, but the Defence Select Committee report, which was published just a few weeks ago, said the MoD was not allowed to look at a contractor’s previous performance when assessing its bid. So either the Defence Select Committee is wrong, or the MoD has changed the regulations or the Bill changes the regulations. All I am trying to seek is what the situation actually is.

[Baroness Goldie (Con)]

What I said to the noble Lord was that, as happens with any committee report, the department is preparing a response to the committee, and that is currently being done. I do not want to pre-empt that, but, when the response has been submitted to the committee, it will for the committee to determine whether it wants to make that response public.

On the issue that is perplexing the noble Lord and causing him anxiety, we believe that the Bill as drafted gives the MoD the power to exclude suppliers if we have reservations.

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[Baroness Goldie (Con)]

There is a part of the Bill that allows the Secretary of State to exclude a supplier; that is a specific provision in the Bill. Where defence and security contracts are concerned, I think these are powerful provisions. I am very happy to take the advice of my officials and see if I can clarify the position further for your Lordships’ Committee.

Moving on, government Amendments 520 to 526, to which I referred earlier, are what I would describe roughly as Schedule 10 amendments. Schedule 10 amends the Defence Reform Act 2014 principally to enable reforms to the Single Source Contract Regulations 2014. The regulations are working well to deliver their objectives of ensuring value for money for the taxpayer and a fair price for industry. That is the balance against which we always have to work. Delivering the Defence and Security Industrial Strategy and building on experience since 2014 means that some reforms are needed. This will ensure that the regulations continue to deliver in traditional defence contracts and can be applied across the breadth of single-source defence work in the future, providing value for money for the taxpayer while ensuring that the UK defence sector remains an attractive place in which to invest.

We are making two government amendments to Schedule 10 which will clarify the wording and deliver the full policy intent. The first relates to paragraphs 3(2) and 3(8) of Schedule 10, where we are increasing the flexibility of the regime by taking a power to enable contracts to be considered in distinct components—this is an important development—allowing different profit rates to be applied to different parts of a contract where that makes sense. Secondly, we are simplifying the contract negotiation process by an amendment to paragraph 8(3)(a) of Schedule 10, which ensures that the contract better reflects the financial risks involved, and in paragraph 8(3)(c) of Schedule 10, taking a power that will clarify how the incentive adjustments should be applied. We are clarifying the wording currently in paragraph 8(3)(c), which will become paragraph 8(3)(ea)—I am sorry that is a little complicated; it is just to achieve accuracy of reference—by government amendment in Committee to ensure that the schedule fully delivers the policy intent.

In short, these government amendments provide improved clarity and greater flexibility in the defence procurement process, and I hope your Lordships will be minded to support them.

[Lord Coaker (Lab)]

My Lords, I thank the noble Baroness for that informative reply, and I look forward to the letter to clarify the point that we had some discussion on. I apologise to the noble Lord, Lord Alton; I knew that he had signed the amendment and forgot to mention it. It is in my notes: “Don’t forget Lord Alton”—and I did. I apologise for that but thank him for his support.

For reasons of allowing us to move on to the next group, which I know a number of noble Lords are waiting to discuss, I would just say that Amendment 101 is almost like an encouraging amendment; it is trying to encourage the Government to do more. I accept what the noble Baroness said with respect to contracts and some of the difficulties that there are—to be fair, the noble Baroness, Lady Smith, raised that as well. The amendment is just an attempt to ask whether we can do a bit more to support our own industry and small and medium-sized enterprises. I know that the noble Baroness agrees with that and will take it on board.

As far as Amendment 485 is concerned, we need to look at what the noble Baroness has said, look again at the Bill and reflect on it. The important part of Amendment 485, as usual, is tucked away. Proposed new subsection (4) says:

“The Secretary of State must commission the National Audit Office to conduct a similar review annually.”


It is that continual microscope that is needed. I accept the point that the National Audit Office can conduct the reports and that it is independent. I accept all those sorts of things; the noble Baroness is right about that. I just think that all of us want to get this right. Therefore, that point about an annual review is particularly important. With that, I beg leave to withdraw.

Amendment 101 withdrawn.

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These are value-based issues. I can see what the Government will say on some of them when the Minister speaks from the Dispatch Box, but others are significant exclusions on which the Government need to reflect before Report.

[Lord Coaker (Lab)]

My Lords, I will try to be reasonably brief in summing up some of the points made. I start by welcoming my noble friend’s Amendment 174 about late payment. It is a point he has made continually and this important amendment should not get lost in these great debates about serious international issues. His point about trying to support small and medium-sized businesses through dealing with late payments deals with the point that my noble friend Lady Hayman and I are also trying to deal with in Amendment 179. I would not want that to get lost.

In speaking to Amendment 329, in my name and that of my noble friend Lady Hayman, and Amendment 331, in my name and those of my noble friend Lady Hayman, and the noble Lords, Lord Bethell and Lord Fox, I want to wrestle with whether the group is too big or not. At its heart it has the discussion and debate we have had through the Committee—and no doubt will have again on Report, when there will be votes on it—which is on what the Government are trying to achieve through their procurement policy. We are saying that, as well as being efficient, effective, value for money and all those things, there are certain social, economic and other objectives that the Government should also pursue. When we look at this group of amendments, which is about exclusion grounds, a whole range of different issues can be raised to say that, if a firm or supplier does this, it should be excluded from consideration when the contracting authority comes to make its procurement decisions.

Maybe the Government will say that these amendments are not necessary and that they do not want to add them to the Bill. A question then arises for the Minister—I do not believe he believes in accepting serious human rights abuses. If that is not going to be put in the Procurement Bill, how will the Government pursue their objective of trying to do something about serious human rights abuses through the Bill or will they not? Will they just leave it to the market to do?

That is the point of Amendment 331, which my noble friend Lady Hayman, the noble Lords, Lord Bethell and Lord Fox, and I have put down. We have listed just some of the grounds, and we think that, if a supplier is guilty of those human rights abuses as listed in the amendment, and others, the contracting authority should not procure from them. If that is not the right way of going about it, how will the Government ensure that contracting authorities do not purchase from those who have been guilty of serious human rights abuses such as war crimes, crimes against humanity, genocide, forced sterilisation and so on? I take the point made by the noble Lord, Lord Alton, that perhaps genocide needs taking from that; that may be helpful and is obviously something that can be looked at.

It is not just us in this Committee; the Foreign Affairs Committee has also said that the Government and the contracting authority need to take these things into account when it comes to purchasing. The Government’s response to the Foreign Affairs Committee’s report, published in November, says:

“The forthcoming Public Procurement Bill will further strengthen the ability of public sector bodies to disqualify suppliers from bidding for contracts where they have a history of misconduct, including forced labour or modern slavery.”


There is a lot of pressure from lots of different bodies to do something about this.

I thought my noble friend Lord Hain made a brilliant speech on his Amendments 184 and 187. He talked about Bain with respect to South Africa. If his amendments are not the right way of going about things, what will the Government do about it? These are the Committee’s questions.

The noble Baroness, Lady Boycott, made a very important point about environmental considerations in Amendment 310 and so on. The Government will say, “We are very concerned about the environment; we agree with the thrust of the amendment.” If that is true, and the amendment is not going to be accepted and go into the Bill, how will that aim be achieved? That is certainly the frustration that I feel, and I want the Minister to answer on how it will be achieved if this is not in the Bill.

I come to Amendment 353 in the name of the noble Baroness, Lady Stroud, supported by the noble Lord, Lord Alton of Liverpool, the noble Baroness, Lady Smith of Newnham, and me. The noble Earl, Lord Dundee, also came in on that. I thank him for his kind remarks about my report at the Council of Europe; I appreciated that. That amendment is, again, about supply chains and how we ensure that contracting authorities do not contract with those who have modern slavery, exploitation and all those things that we would object to within their supply chains. If the Government do not agree with Amendment 353 and think it is unnecessary, how are they going to achieve what that amendment seeks to achieve? That is an important question for the Government to answer.

In other words, why are all the amendments in this group unnecessary? Why do they not matter? Why are they irrelevant? Why do we not need them in the Bill? How will the Government achieve all these objectives if they are going to say that all these amendments are not acceptable?

On the point that the noble Baroness, Lady Neville-Rolfe, made—she also picked up one or two of the points that the noble Baroness, Lady Noakes, made—Schedules 6 and 7 are massive. To be frank about it, whatever the rights and wrongs of those schedules, they have huge implications. All I want to ask the Minister is: how have the lists in Schedules 6 and 7 both been arrived at?

You could pick up a number of examples. Why, for example, does Schedule 7(15) set out a discretionary ground for exclusion for threats to national security? I find that quite difficult to understand. No doubt there is a good reason for it but you would have thought that a national security threat would be a mandatory ground for exclusion. The reason is probably in there somewhere but I could not find it. If you look at Schedule 7, there is a whole list of slavery and trafficking offences that are discretionary. It might be that they should be so but you would have to do a lot to convince the noble Earl, Lord Dundee, and me—let alone the noble Baroness, Lady Stroud—that they should be discretionary.

As the noble Baroness, Lady Neville-Rolfe, noted, whatever the rights and wrongs of these schedules and whether they should be there or not, how have the lists been arrived at? The purpose of Committee is to try to understand what the Government are doing so that, on Report, we can make our minds up on whether amendments that can be voted on should be taken forward.

[Baroness Neville-Rolfe (Con)]

I thank the noble Lord for taking up the point about the extent of the schedules and the shared detail that people who are procuring—they are sometimes quite small organisations —will have to comply with. We have also heard that there will be guidance, so not only do you have the nightmare of a complicated Bill with rules that are different from the EU ones that, with great difficulty, people have become used to; you also have extra guidance that I do not suppose will be scrutinised by Parliament. That creates further difficulties for the people on the receiving end who are trying to do a good job. I emphasise that I am as keen as anybody to have companies doing the right thing but we have to find a way of getting this through, in not too complex a fashion, so that this can go forward smoothly.

[Lord Coaker (Lab)]

That is a point well made. Indeed, the whole issue of the increase in the use of regulations by the Government is something that various Select Committees and other committees have commented on. It is a real difficulty because you do not know what the regulations will be. The legislation just gives the power to the Secretary of State to make regulations; you then wonder what they will be.

If I understood her amendment right, the noble Baroness, Lady Noakes, asked why some provisions in the schedules, perhaps really important ones, do not apply if a supplier contravenes them before the Bill becomes an Act. It strikes me that the self-cleansing we talked about earlier would have to be pretty dramatic if, on 26 February 2023, a firm was found guilty of breaking some of the mandatory conditions laid out in Schedule 6 then, on 3 March, it said it had dealt with those but you could not take into account the five days before when it had broken a lot of the conditions because it was before the Bill become an Act. Is that really what the Government intend? I am not sure because, when I read it, I could not quite make this out. I think that the point of the amendment from the noble Baroness, Lady Noakes, is to try to understand exactly what the Government are getting at. What does “before” mean? There are a range of things in that.

The central point I want to make in speaking to our various amendments is that, if all these things are unnecessary around all these things that are really important, how are the Government going to achieve these objectives, many of which are part of their own policies? Many of us wish to see the Procurement Bill used as the vehicle to achieve that but the Government are resisting, and will resist, that. How will they be achieved if not through this Bill?

[Lord True (Con)]

My Lords, there is a wide gamut of public policy that enables a Government to achieve the objectives on which they stood for office; that is a broader philosophical argument. I am not certain whether the noble Lord opposite wishes to have more in Schedules 6 and 7—he has certainly mentioned one aspect—or whether he makes a plea that something should be taken out. If the Labour Party wants to make a submission to change things and excise individual aspects of Schedules 6 and 7, no doubt we will look at that as our discussion advances in Committee.

Procurement Bill [HL]

Lord Coaker Excerpts

Committee stage
Monday 24th October 2022 Grand Committee

[Baroness Northover (LD)]

My Lords, I am a co-signatory on this amendment and, from the Lib Dem Benches, we strongly support the noble Lord, Lord Hunt, in his endeavours to combat the appalling issue of forced organ transplantation. He has made a strong and comprehensive case, as did the noble Lord, Lord Alton—as ever. Like them, I am glad that Ministers have been responsive over the past few years in relation to these appalling practices. I hope that this continues. As the noble Lord, Lord Hunt, said, the amendment is designed to exclude suppliers located in a country

“at high risk of forced organ harvesting”

from being awarded a public contract involving

“any device or equipment intended for use in organ transplant medicine”

or in related regard—for example, research.

As the Minister will know, this House has a very well-informed and cross-party approach to combating forced organ transplantation. She will be aware of the significance of such obvious and lengthy cross-party working. I assume that this might rightly be in red on the risk register for the Bill. I have noticed that that might be the case.

I recall a few years ago that a Peer, who is a current government Minister, was praising the Chinese for the speed and apparent efficiency of their transplant programme. I am certain that they would not have expressed that view had they known what we know now. That is surely thanks to the assiduous work of the noble Lords, Lord Hunt and Lord Alton, and others. They, in turn, have been supported by the meticulous examination of the evidence by the China and the Uighur tribunals, both headed by Sir Geoffrey Nice, former prosecutor in the Balkans war-crimes tribunals. They shone a light on the terrible practice of forced organ harvesting. I noted that they found—as others have noted—that victims in China were targeted because of their religion, beliefs or ethnicity.

As the noble Lord, Lord Alton, has just said, the China tribunal concluded that forced organ harvesting has been committed for years throughout China on a significant scale; and that commission of crimes against humanity against the Falun Gong and the Uighurs have been proved beyond reasonable doubt. Noble Lords have also heard the view from the United Nations; securing that was very difficult to achieve. The noble Lord, Lord Alton, as ever, calls some of the individuals concerned into our view, so we cannot say that we did not know.

The medical profession has been accused in the past of turning a blind eye to such practices. The BMJ criticised the transplant community for failing to implement high ethical standards. I note, however, that, in the BMA’s briefing for the Bill, it states that,

“upholding ethical procurement standards is essential.”

It refers to the procurement of medical equipment, including PPE, from the regions in which labour abuses have been alleged. It states that it would support

“any amendments to strengthen the legislation to help ensure ethical procurement and transparency throughout the supply chains of health-related goods.”

That would certainly apply to this amendment. In addition, as we have heard, the UK enjoys a global reputation for high-quality medical research. It is something that the Government emphasise as being key to the United Kingdom’s future. As the noble Lord, Lord Hunt, has indicated, it is thus vital that we protect medical researchers from inadvertent involvement.

During the summer, in the then Conservative leadership debates, Rishi Sunak was asked about dealings with China. It is good that he acknowledged the potential human rights challenge. However, he also said that he sought to have a constructive engagement. This amendment would close a loophole, given that he has now been chosen by the Conservatives to be the country’s newest Prime Minister. It will help to ensure that the Government do indeed properly pay attention to human rights, which the new Prime Minister said was an aim of his.

In regard to the issue raised by the noble Lord, Lord Alton, in relation to the hospital in China, will the Minister say whether UK Export Finance funds were given in this case? If she cannot tell me now, can she write to me? In summary, I commend this amendment to the Committee, and I hope that we will see progress and engagement with the Government.

[Lord Coaker (Lab)]

My Lords, I apologise; I will see how long my voice lasts—not long, I imagine some people hope, but we will see how it goes.

I too congratulate the Minister on her promotion. She has already learned some of the tricks of the ministerial trade: she has gone through what she has previously said and asked her civil servants to have a look and see what she could say back if anyone raised it, which relates to what she opened with about simplification.

The serious point is that the fact that she has questioned the Bill will make her a very good Minister. That does not mean undermining the Bill, but you have to have a Minister who challenges it and listens to what people say, otherwise the whole process is pointless. From that point of view, we are all reassured by her appointment.

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[Lord Scriven (LD)]

I apologise to the Committee for being late; I have literally just got off an aeroplane. Like others, I welcome the Minister to her place. I will welcome some of the acrobatics she may have to do on Report now that she is sitting there rather than next to the noble Baroness, Lady Noakes, as she was earlier in these Committee proceedings.

The noble Lord, Lord Lansley, has just spoken a lot of sense. I declare my interest as someone who advises a company that works with frameworks. I have seen some games played with frameworks, though not by the company I advise, with frameworks used for a number of purposes completely alien to why the original contract framework was set. It debars competition and innovation, particularly when the public body decides that it wants something completely tangential to the original framework contract and the original purpose, and allows a company to continue building its commercial relationship with that public sector body without necessarily having the core competences required. It then goes into a lot of partnerships with adjunct companies that have no relationship back to the original company when the framework was initially set.

I support the noble Lord, Lord Lansley, in trying to work out, in his Amendment 249, what the fee purpose is in terms of companies going around the framework. I particularly agree with him on the issue of small and medium-sized enterprises. I think this would be a block in that field for SMEs in particular. Could the Minister explain a little more about the reason for the fee, how it will allow competition and how it will not debar SMEs in particular from this type of framework agreement if it is to continue?

[Lord Coaker (Lab)]

My Lords, we are getting into some detail now. That is the purpose of Committee and it is very constructive and informative. I very much agreed with the points made by the noble Lord, Lord Aberdare, about framework alliances and whether Clauses 44 to 47 include such alliances. If they do not, why not? The noble Lord’s point requires a simple answer: yes, they do, or no, they do not. He has asked an important question about the inclusion of framework alliances.

Similarly, I thought the points of the noble Lord, Lord Lansley, were really well made. Amendments 247, 248 and 249 have been put down specifically to ask the Minister whether the Government’s new subsection (3G) answers some of those points. That is the sort of detail we need to get into, as the cascade principle is really important. I think the noble Lord, Lord Scriven, also supported that.

I have a couple of specific points on the importance of transparency and openness, which we are all striving for. The noble Lord, Lord Fox, asked the Minister about what “value for money” means; that could almost be taken as a trick remark but it is crucial, as these sorts of definitions are really important. Therefore, can the Minister say what “proportionate” means in government Amendment 246? One person’s “proportionate” would be to allow people to get through without proper checks. However, without “proportionate”, the burden on some businesses and suppliers would be completely unacceptable—just too much and unrealistic. It would be helpful for the Committee to understand the use of “proportionate” in new subsections (3A) and (3D) and “may not” in new subsection (3C).

Government Amendment 246 talks about proportionate means of ensuring that suppliers have the relevant

“qualifications, experience or technical ability”

to perform a contract. It would be helpful if the Minister said a bit more about what that means.

More generally, since we are discussing Clauses 44 to 47, can the Minister explain why so many respondents to the Government’s consultation opposed open frameworks? Some 27% of the respondents did so. Is that a high negative response? I am not sure whether it is high or low, but it struck me as quite a lot. The Government did not agree with that view and ploughed on with Clause 47.

On Clause 45(3), can the Minister explain what sort of reasons there could be for a framework to exceed the normal eight years for a defence and security contract and four years for other frameworks? The Government seem to believe there might be a necessity to clarify that through their own Amendment 251, which seeks to clarify some of that but also reflects a concern about the number of years that could apply to a contract. That would be helpful.

Our limited discussion on the use of frameworks has been very important; it has sought to get into some of the details, which are what mean they do or do not work well—sometimes on the basis of what a particular word means. Like many noble Lords, I read the assessment in preparing for this Committee; you can see the point the noble Lord, Lord Fox, made in our earlier debate about a cry for clarity on what the Government are seeking to achieve. What different words mean is crucial. Building on the noble Lord’s plea to know what “value for money” means, a little more about what “proportionate”, et cetera, means in the context of government Amendment 246 would be helpful. The Minister may need a little more time to reflect on that but, if you are seeking a contract under a framework, the word “proportionate” will mean everything—or nothing. It would be very helpful if the Minister could clarify that.

With that, I think the Government have taken some very important steps forward under these clauses.

[Baroness Neville-Rolfe (Con)]

My Lords, I thank the noble Lords, Lord Aberdare and Lord Scriven, and my noble friend Lord Lansley, for their kind words.

I will start with the government amendments, because even though this will not be in strict order, it will help to answer the other points that have been raised. Frameworks are a well-established commercial purchasing tool, used widely across the public sector. Having looked at some of the public responses, that percentage figure that was quoted is not worrying. Key is whether this is a sensible provision and whether we are reforming them in the correct way. The Bill makes a number of improvements to the effectiveness of frameworks, to increase flexibility, provide value for money, et cetera.

I am glad that the noble Lord referred to government Amendment 246 because it is quite a substantial and important amendment among the hundreds that I apologise for having tabled in Committee. It allows contracting authorities to set conditions of participation in a competitive selection process for the award of a contract under a framework. New subsections (3A) to (3F) impose restrictions on the use of such conditions to those which apply to conditions of participation in a competitive tendering procedure under Clause 21. These include limiting the conditions in various ways, for example, to those which are a proportionate means of ensuring that suppliers have the relevant qualifications, experience and technical ability to perform the contract, of ensuring that the conditions do not break the rules on technical specifications, and of requiring that equivalents must be allowed where particular qualifications are required. The question on proportionality is a good one. I do not have as good an answer for the noble Lord as I would like, so I will write to him on that point.

My noble friend Lord Lansley commended new subsection (3G). This restricts the basis on which proposals received as part of a competitive selection process under a framework can be assessed to all or some of the award criteria against which tenders the frameworks were assessed. This is to ensure that suppliers that have already been admitted to a framework do not have to meet entirely different criteria later. New subsection (3H) allows for the award criteria to be refined.

Government Amendments 251 to 255, and 258 to 260, relate to rules for frameworks for the future award of contracts. The remaining government amendments in this group deal variously with light-touch contracts, ensuring open frameworks work as intended, and with minor tidying-up changes.

Turning to the noble Lord, Lord Aberdare, the thing that we worked on together when I was last a Minister is still unresolved, so I feel a sense of guilt.

--- Later in debate ---

[Lord Coaker (Lab)]

My Lords, this has been another interesting debate. This group is on oversight and remedies. If you are going to have something worth legislating for, it has to have some sort of oversight and remedy. In other words, you have to see whether you are achieving what you wanted to and, if not, know what you going to do about it. It is therefore an important section, but to do that you have to have the right fundamentals in the Bill to have oversight and remedy.

I agree with my noble friend Lady Thornton’s amendment. She has been consistent throughout this Committee in trying to ensure that the Bill reflects the importance of social value. The noble Lord, Lord Scriven, supported that in his remarks. I know my noble friend will continue to argue for it, and we will support her should she wish to take it further on Report. It is really important, and I thank her for that.

As we are coming to the end of our remarks, I shall say that I agree with the point made by the noble Lord, Lord Fox, on Amendment 353A, tabled by the noble Lord, Lord Wallace, on what has happened to the procurement review unit. It was in a Green Paper and it seemed to be universally applauded—except, obviously, somewhere in government, so it was struck out. It would be interesting to know why it was struck out. Everybody supported it, except the Government, so why were they wrong and the Government right? Sometimes I find it baffling to understand why something is done. A procurement review unit seems essential to review what you are seeking to achieve. It is not a weakness but a strength. Those are my remarks about that.

I have to say this openly to the Committee: I am devastated that I did not notice the amendment from the noble Baroness, Lady Noakes: Amendment 477. Honestly, it is absolutely brilliant. The noble Lord, Lord True, has been promoted for being a socialist in charge of the Bill; the noble Baroness, Lady Neville-Rolfe, is on her way; and now we have this from the noble Baroness, Lady Noakes. Clause 96 is quite astonishing. I reread it to make sure; when I read it before, it completely passed me by. I will read it out, because people will not understand if they read Hansard without also reading this. Clause 96(1) says:

“An appropriate authority may investigate a relevant contracting authority’s compliance with requirements of this Act.”


So, we have a really important government Bill that will become law, and then, in subsection (5):

“In this section—‘procurement investigation’ means an investigation under subsection (1)”—


which I have just read out—

“‘relevant contracting authority’ means a contracting authority”,

as the noble Baroness, Lady Noakes, points out,

“other than … a Minister of the Crown or a government department”

and various others. Why would the Government set up something that is desperately important—in other words, a procurement unit—which makes purchases of hundreds of billions of pounds, but their own Bill says they will not investigate them?

Amendment 477 is brilliant and, as I say, I am devastated that I did not think of it or notice it. Fair play—I am very fair. More seriously, the amendment points out something that fundamentally seems to be a flaw in the way the Bill is drafted. Otherwise, there must be some incredible explanation or reason that I cannot think of—I do not know if anyone else on the Committee can think of any.

To finish, oversight and remedies are an extremely important part of any Bill, because that is how you ensure that what you seek to achieve is achieved and that you are held accountable. The amendments seek to answer those questions. Unless the Minister is able to respond in a way that persuades us, I think there are certainly one or two issues that we must come back to. With that I will sit down. It is a brilliant amendment, honestly.

[Baroness Neville-Rolfe (Con)]

I thank noble Lords for an interesting debate on these non-government amendments. I do not think that I have a perfect reply to my noble friend Lady Noakes’s three questions. We are due to meet to discuss various aspects of the Bill and I would like to explore her questions further, and then perhaps I can write to the Committee when it is clear to me what the right replies to those questions are.

I will attempt to comment on the amendment that the noble Lord, Lord Coaker, has just talked about, on why government departments do not have the same obligation to have regard to recommendations under Clause 97. It is a simple question, and our response is that it is not necessary to include government departments in Clause 96 and 97, because the appropriate authorities have sufficient influence over contracting authorities to ensure that any recommendations that result from an investigation are duly taken into consideration. To confirm, investigations, findings and progress reports may be published by the relevant authority acting as a further incentive. It is simply unnecessary to provide statutory powers in respect of government departments, whereas due to the different relationship with non-central contracting authorities, statutory powers were required to ensure appropriate engagements for these purposes. As noble Lords will know, we have quite a well-developed procurement operation now, right at the heart of Government, sitting in the Cabinet Office, which I think is an improvement. That is why it is not provided for in the Bill.

Just before I leave voluntary standstills, let me say that I will make sure we come back properly on the exchange we had earlier. We want to maintain voluntary standstills for dynamic markets—they are intended to be quick to use, agile and efficient, as we heard from my noble friend Lord Lansley—and for light-touch contracts, which are often for time-sensitive services such as the provision of health and social care. We do not want to make the light-touch contract rules stricter in this regard than current legislation, as we think that could lead to some problems.

Amendments 349A, 349B and 353A were tabled by the noble Lord, Lord Wallace of Saltaire, and others. They seek to legislate for the procurement review unit with a new clause. The procurement review unit, which is very important, is not specifically referenced in the Bill as it will be exercising statutory and non-statutory powers on behalf of Ministers. The proposed new clauses would therefore conflict with existing provisions. Furthermore, considering the importance and potential implications of the decisions the PRU will support the Minister of the day in making—the proper statutory process—we believe it would be inappropriate to delegate that ultimate responsibility to unelected officials below ministerial level.

The PRU will work on behalf of the Minister of the day in two key areas. The first area is debarments. Clauses 56 to 61 set out the process for the establishment of a debarment list of excluded and excludable suppliers; this has already been debated. Under these clauses, it is envisaged that the PRU will investigate whether a supplier is subject to an exclusion ground and whether the issues in question are likely to arise again. The PRU will issue advice to the relevant Minister, usually the Minister for the Cabinet Office, who will take the final decision whether to add the supplier to the debarment list.

The second area is improving compliance with the Bill. Clauses 96 to 98 provide the framework and statutory powers required for carrying out procurement oversight. The PRU will exercise these oversight functions on behalf of the Minister and make proposals regarding any investigations, recommendations and statutory guidance it considers appropriate for the Minister’s ultimate approval.

Procurement Bill [HL]

Lord Coaker Excerpts

Committee stage
Wednesday 26th October 2022 Grand Committee

[Baroness Bennett of Manor Castle (GP)]

My Lords, it is a great pleasure to follow the noble Baroness, Lady Noakes, and congratulate her on the first half of her contribution, which clearly identified a crucial problem that has undoubtedly been missed by numerous other eyes.

However, I entirely disagree with the second part of her contribution, which referred to Clause 76(4). I do not often find myself in the position of defending what is potentially the Government’s position—perhaps I am about to pre-empt entirely what the Minister is about to say—but subsection (4) says:

“If a contracting authority is aware of circumstances”.


It does not say, “We expect the contracting authority to be clairvoyant and know of every single circumstance where a reasonable person might”. We all know this. Think about local councils. Having been a local journalist on another continent, I think of a case where a large city authority kept commissioning a certain architect to do a whole series of projects. That ended up raising considerable public concern. If that is happening, noble Lords can see why it would make sense to pre-empt the explanation of why there is no conflict of interest and therefore no problem here. It is also worth pointing out that the amendment tabled by the noble Lord, Lord Moylan, said that this was a subjective judgment that would affect the letting of the contract. In fact, it would not; it just says that there must be details of the steps included. So I would defend Clause 76(4), if the Government feel that it needs to be defended.

Before I get to what I chiefly want to say, I want to apologise briefly. I attached my name to a number of amendments in the previous group; I meant to be here to speak to them but events unfortunately intervened and I could not be. I still stand behind them.

Coming to this group, I have attached my name to a number of amendments in various combinations of the names of the noble Lords, Lord Wallace of Saltaire and Lord Scriven, and the noble Baroness, Lady Brinton. As the noble Lord, Lord Scriven, clearly outlined—I will not go over the same ground—the Boardman review reported in May 2021, which has allowed plenty of time for this issue to be included in this Bill, despite all the hurry and rush that we know there has been around it. I would also point out something that the noble Lord did not say: when the Boardman report came out, the Government said, “We accept all of these recommendations”. If the Government have accepted them, they should surely be incorporated in this Bill.

I want to pick up on one amendment that I did not sign, although I would have had I noticed it: Amendment 413 in the name of the noble Lord, Lord Wallace of Saltaire, that

“a donation or loan of more than £7,500 to any political party in a calendar year”

should be declared. We are talking about transparency and trust. This is obviously a practical, simple step that would not be very hard to implement and would be well worth while.

Amendments 421 to 423 are about preventing undue influence. Like the noble Baroness, Lady Brinton, I shall concentrate on Amendment 423. There is huge public concern about the revolving door, and I note that my honourable friend in the other place, Caroline Lucas, has done a huge amount of work, dating back in Hansard to at least 2013, on the revolving door in the defence and energy sectors.

That concern is not restricted to the Green Party. I was just looking through some of the reports. In 2011, Transparency International UK issued a press release headed

“Revolving door between Government and business is ‘spinning out of control’”.

If it was spinning out of control in 2011, we are at jet engine speeds by this stage. In 2016, the Centre for Crime and Justice Studies, in a report entitled Redefining Corruption, said that the public want a ban on the revolving door. This amendment provides much less than a ban; it is a modest six months, and I am not altogether sure that it should not be longer, but there is certainly great public concern about this. In 2017, the Committee on Standards in Public Life expressed concern about the revolving door.

The noble Baroness, Lady Brinton, set out one disturbing case. Here is another. In 2020, We Own It highlighted the interaction between Serco and NHS Test and Trace, and the degree to which there has been a revolving door between Serco and the senior Civil Service, to the point where a former head of public affairs of Serco became a Health Minister—I am not sure how many Health Ministers back, but at some point, anyway.

Finally, we should not forget the Greensill scandal. Just look at the mess that arose in part because of a revolving door—indeed, in some cases people were stuck in the same door at the same time, apparently representing both private interests and public, government interests. The Advisory Committee on Business Appointments noted that there were thousands of potential cases, but initially looked at only 108. There is lots of discussion about limits to that committee’s power; it cannot possibly cover this issue. We must start from the other side of the contracts.

[Lord Coaker (Lab)]

My Lords, I will be relatively brief, because I sense that some of the drive and energy has gone out of the Committee.

[Noble Lords]

Oh!

[Lord Coaker (Lab)]

Noble Lords have more energy than me, then.

Having said that, we are discussing incredibly important issues. In his opening remarks about Part 5, the noble Lord, Lord Scriven, was absolutely right. To be fair to the Government, Part 5 is undoubtedly a step forward and an improvement. For that reason, they are to be commended.

The amendments before us seek to improve what the Government have done and take it forward, and to provide clarity where it is lacking, as the noble Baroness, Lady Noakes, has done. These amendments are particularly good in challenging the Government to go further in achieving their objectives, but also asking whether they are sure they have defined things as well as they might have done.

Procurement Bill [HL]

Lord Coaker Excerpts

Report stage
Monday 28th November 2022 Lords Chamber

[Lord Wallace of Saltaire (LD)]

My Lords, we will return to the question of not-for-profits, mutuals and social enterprises in group 6, when we have Amendments 41 and 123 in my name and the name of my noble friend Lord Fox. I very much hope that we will have the support of the noble Lord, Lord Maude, on that. There was, in the Green Paper where we started this process, a very strong emphasis on the useful role that non-profits and social enterprises would have. That has disappeared from the face of the Bill. We wish to make sure that it reappears.

[Lord Coaker (Lab)]

My Lords, I thank the Minister and her predecessor for their engagement with us and other noble Lords on this Bill as it made its progress through your Lordships’ House. I join with other noble Lords in saying to the Minister that we all believe, from where I am speaking, that this is a great improvement, and the Bill will make a big difference; we are generally very supportive of it. It is important, as other noble Lords have done, to start with those remarks to set the context for this discussion and those which will follow.

I do not want to speak for very long, but I will start with Amendment 3, in the name of the noble Baroness, Lady Brinton. I very much support the amendment, which seeks to put on the face of the Bill—for the avoidance of doubt, for the avoidance of the sort of discussion that we are having here this evening and for the avoidance of the sort of discussions that will go on, as to which set of regulations procurement for the NHS comes under—that procurement includes the NHS in Clause 1. The important point, following the excellent speech by the noble Baroness, Lady Brinton, was set out in my noble friend Lord Hunt’s question to the Minister, which encapsulated the problem that we are going to have under two sets of regulations.

I thought that my noble friend put the argument very well in his question—and I am going to repeat it—about the sort of thing that will happen without clarification of where we are with respect to procurement. What happens if a procurement contains both clinical and non-clinical parts and services? Which Act and which regulations regime would apply? That encapsulates the problem in one, because the answer is that it will not be clear at all if we carry on with the current two-system regulatory regimes that will operate for the NHS. I am always very practical about these things and, of course, noble Lords will have seen as well that there is actually a clause—Clause 111—that makes it perfectly clear that there is a power for Ministers to disapply, through regulations, this Act in relation to procurement by the NHS in England. Therefore, on the one hand we have the health Act of 2022; on the other hand, we have a Bill going through that, in some sense, is supposed to include the NHS but, in other senses, is not supposed to do so. We do not know where the boundary is going to come between clinical services and goods and services, so there is a whole realm of difficulty and problems.

I said at the beginning of my speech that all of us are supportive of the Bill, but we need to resolve these difficulties. We cannot just say, “Well, the regulations will sort it out”, or “Good sense or common sense will deal with it.” There is a real legislative problem that we should try to resolve before we pass the legislation. The noble Baroness, Lady Noakes, pointed this out in a couple of important technical amendments. As always, we are thankful to the noble Baroness for trying to improve the Bill and to make suggestions, one of which, I understand, the Government have accepted. That is the sort of spirit in which we take the Bill forward.

Therefore, I hope that the Minister is listening carefully to what the noble Baroness, Lady Brinton, my noble friend Lord Hunt, and the noble Lord, Lord Alton, have said. We all noticed that the noble Baroness, Lady Bennett, was not a supporter of Amendment 2. We say that loudly and clearly so that her future in the Green Party is assured, but Amendment 3 is what the noble Baroness put in, and for some reason it appeared under Amendment 2. We are all very clear which amendment the noble Baroness supports.

The comments made in the short speech by the noble Lord, Lord Lansley, on government Amendment 34, are extremely important, showing how one word here or there can fundamentally change the Bill. He is quite right to point out that Clause 11 refers not to thresholds but to objectives. What is procurement trying to achieve? As the noble Lord outlined, by inserting “covered”, the Government imply that it is only covered procurement that takes account of the various points that are listed in the Bill. The noble Lord read out four, but I choose just one, to show how important it is that the Government listen to what he has said and think again about moving their Amendment 34. It is acting and being seen to act with integrity. The one thing that you would expect any procurement process to act under, whatever the threshold, whatever the regulations, whatever law it comes under, whether it is for £10 or £10 million, is integrity. Yet as it reads now, the only procurement that this clause will relate to as an objective, if the government amendment is agreed to, is covered procurement. That was the crucial point that the noble Lord made—as an objective. It is not an objective. It is closer to being law, that you are supposed to act openly, honestly and transparently. However, leaving that aside, it is an extremely important point that the noble Lord has made. In full support of what he has said, I hope that the Government have listened to his very well-made points, particularly when he went on to relate them to Clause 12, which seems to be the opposite of that. That point was well made.

The government amendments before us in many ways improve the Bill. I thank the Minister for listening to what was said to her and for trying extremely hard to table amendments that have improved many parts of the Bill. There are important tweaks that the noble Baroness, Lady Noakes, has pointed out. There is a fundamental point that was raised by the noble Lord, Lord Lansley. However, the points raised by the noble Baroness, Lady Brinton, and supported by many noble Lords, point to a fundamental choice for us. We must resolve this issue about procurement and the NHS. The noble Lord, Lord Alton, pointed out some of the difficulties that have arisen, but for all of us, clarity, certainty and clearness in legislation is crucial, particularly when it comes to procurement. We have the opportunity to sort this out. I hope that noble Lords will support the amendment tabled by the noble Baroness, Lady Brinton, should she put it to the vote.

[Baroness Neville-Rolfe (Con)]

My Lords, Amendment 3, tabled by the noble Baroness, Lady Brinton, of Kenardington, and the noble Lord, Lord Scriven, of Hunters Bar, would, as the noble Baroness said, explicitly name the NHS in the definition of a contracting authority. We are also debating Amendment 173, to which the noble Baroness, Lady Bennett of Manor Castle, added her name, and Amendments 171 and 172, to which the noble Lord, Lord Hunt, spoke so eloquently.

There is a concern, which I understand after several meetings with those involved, about the interplay in health between this Bill and the arrangements across the NHS in the light of the Health and Social Care Act. I very much enjoyed the meetings that I had with the noble Baroness, Lady Brinton, and thank her and the noble Lord, Lord Alton, for their kind comments on the Bill more generally, as well as my noble friends Lady Noakes and Lord Lansley. It has been a pleasure to work on this Bill across the House. I thank the noble Lord, Lord Coaker, for his comments, although we are no longer working together from the Back Benches.

--- Later in debate ---

[Baroness Neville-Rolfe (Con)]

I should reflect further on this. Clearly, some parts of the Bill are carved out. We have discussed this in relation to the NHS and we will discuss it on Wednesday in relation to the Ministry of Defence. We have to be very careful about national security—there is agreement on that across the House. I have been advised that the sheer breadth of Clause 11 would have a damaging effect if we apply this right across the board on procurement, and I am disturbed about that. I am happy to look at that further and talk further to my noble friend Lord Lansley.

[Lord Coaker (Lab)]

We would all be grateful if the noble Baroness reflected further on Clause 11 and government Amendment 34, as she said.

--- Later in debate ---

[Lord Fox (LD)]

My Lords, we should all be grateful to the DPRRC for its vigilance and thoroughness in scrutinising legislation and this is no exception. A familiar sequence is nearly complete: first, the Government present a Bill threatening to take constitutional liberties to take on board powers for the Executive that should be with Parliament; next, the DPRRC highlights these grabs for power in a hard-hitting report; then one of us presents these issues in Committee via a series of amendments; and, we hope, finally, on Report, the Government accede to almost all the DPRRC’s concerns, although they often keep one or two extra powers in their back pocket, just in case they need them later.

And so it is today with the arrival of this sequence of amendments and we should note how many there are, which indicates how much the Government were planning to take on board. The music of this dance is beginning to fade and sufficient has been done by the Government for us to move on, but I feel sure that the yen for power snatching by the Executive continues and it is already focused on other Bills. I wish it was not.

[Lord Coaker (Lab)]

My Lords, I agree with much of what the noble Lord, Lord Fox, has just said. The Delegated Powers and Regulatory Reform Committee’s report was particularly damning and some of the language that it used about the Procurement Bill was, frankly, very surprising. It would be churlish now not to thank the Government for listening to what that committee said and for bringing forward the amendments that the Minister outlined for us. We welcome the change of heart on the part of the Government and hope that they will learn from what has taken place and make sure that we do not have a blanket change, which was what happened here. Normally, there would be two or three arguments about negative to affirmative; this is like a blanket change of heart on the part of the Government, but it is very much to be welcomed.

I wish to highlight government Amendment 165. The Delegated Powers and Regulatory Reform Committee was particularly exercised by the fact that the Government were seeking to change primary legislation in the Defence Reform Act through the negative resolution procedure. It was particularly concerned that the Government were seeking to do that, notwithstanding its other concerns. The Government have re-established an important principle that primary legislation should be treated with the respect that it deserves. I am pleased that the Government have put forward Amendment 165 to ensure that, at the very least, primary legislation in that respect is changed through the affirmative resolution procedure. We welcome the changes the Government have made and think they will be helpful as we make progress, not only in this Chamber but in the other place.

[Baroness Bloomfield of Hinton Waldrist (Con)]

It remains for me to thank both noble Lords for their support for these government amendments and their helpful comments. I take on board the comments of the noble Lord, Lord Coaker, about the Defence Reform Act and the comments of the DPRRC in that regard. We will, obviously, be saying more on defence procurement on Wednesday.

[Lord Coaker (Lab)]

I am sorry to interrupt. I want to say that the noble Baroness, Lady Goldie, was particularly helpful when I met her and said that she would look to bring about this change. I apologise for not mentioning her.

--- Later in debate ---

[Lord Fox (LD)]

My Lords, I rise to speak on Amendment 73 as my noble friend Lord Clement-Jones is detained in Grand Committee. This amendment requires direct-award contracts included in a framework agreement to be retendered 18 months after the award. This amendment takes a different route from the one we discussed in Committee, but the aim is the same: to prevent direct contracts being used within framework agreements to restrict competition from British SMEs and reinforce the dominance of certain key foreign players in the market. The Minister will remember that we used cloud computing as a major example of where the system has gone off the rails. The SME share of the market has fallen from more than 50% to just 20% in the past five years. In this respect, there is little sign that the Procurement Bill is in reality designed to provide new opportunities to prevent this slide towards—shall we call it “oligopoly”, to coin a phrase that was used by the noble Lord, Lord Maude, in a different context?

Rather than preventing such awards, as we attempted last time, we have instead put down an amendment to time-limit the awards. This would introduce a duty to retender, after 18 months, direct contracts awarded as part of a framework agreement under Clauses 38 and 41. This would provide the opportunity to redress the balance and help support UK SMEs. In Grand Committee, the Minister said that my noble friend Lord Clement-Jones had made a lot of points that she was not aware of and promised to study in relation to the important areas of cloud computing and UK businesses. She also emphasised some of the advantages of framework agreements. We are not arguing with that, but that is not the point. This is about detriment to SMEs through the use of direct contracts which are hidden within framework agreements. The problem can be cured. The Minister also said in relation to these agreements that it makes sense for them to be time-limited. I hope she has studied the words of my noble friend and has something to offer that limits the duration of direct contracts that are made within framework agreements.

[Lord Coaker (Lab)]

My Lords, I have just a few brief remarks on this group. Before I come on to the main point that I want to make, I shall say that I think Amendment 37, tabled by the noble Baroness, Lady McIntosh, about local produce and the local procurement of foodstuffs is something that is growing in importance. All of us know in our own communities that people individually are doing that, as well as local businesses. I think that before long the 50% target she put in her amendment will grow. I think it is an important amendment. Given the other things being talked about, it should not be lost in the general debate.

I thank the Minister for government Amendment 40, which goes to the heart of the discussion in this group, which is about encouraging small and medium-sized enterprises in the procurement process to do better than they are present, and the responsibility of contracting authorities to achieve that. The real question for the Minister—and, frankly, if there are changes of Minister in future—is how we will ensure that that happens, because successive Governments have tried to encourage small and medium-sized enterprises, and it has not been as successful as we wanted. The question is about how we make this procurement system work in a way that benefits small and medium-sized businesses in the way that we would all want.

I am very supportive of Amendment 41, tabled by the noble Lord, Lord Wallace, which talks about the barriers faced by social enterprises and not-for-profit companies in competing for procurement. I think that is something that will become increasingly important.

I know my noble friend Lord Hendy will speak about his later amendment in more depth. His amendment in this group, Amendment 162A, allows procurement to take into account the terms and conditions of staff and the legal status of subcontractors. I think it is an extremely important area, and I thank my noble friend for raising it because all of us would wish to see that people are paid properly for the work they do and that nobody is undercut in the winning of various contracts.

The noble Baroness, Lady Noakes, pointed to Amendment 163 in the name of the noble Baroness, Lady Bennett, and her supportive Amendment 164, which she ably put forward. She made some important points which we can look at in due course and to which I hope the Minister will respond.

However, I go back to where I started: the key amendment in this group is government Amendment 40. We are grateful that it has been brought forward and hope that it will encourage greater success for small and medium-sized enterprises in the procurement business in this country. The key for us is to make sure that this time it works and that we do not have another government amendment in two years’ time trying to achieve the same.

[Baroness Neville-Rolfe (Con)]

My Lords, the noble Lord, Lord Coaker, is right that the challenge is to make the shift to SMEs a reality. I will take that away as my homework. I thank all noble Lords who have spoken, especially the noble Lord, Lord Aberdare, who progressed matters with me and saved me from a further group of amendments.

I was also very interested in the real-life experience of my noble friend Lord Maude as to the difficulties of getting potential small suppliers to apply for government contracts, because in my experience SMEs can represent very good value for money. They do not have the same costs and scale of central services that some of the bigger operators have, and that can feed through into great prices and great service.

Procurement Bill [HL]

Lord Coaker Excerpts

Report stage
Wednesday 30th November 2022 Lords Chamber

[Lord Fox (LD)]

My Lords, as other speakers have alluded to, we have been in this place before, but the things we hear are no less shocking or important for us to debate. I am speaking to Amendments 91, 95 and 141 and, as stated, my name is on Amendment 94.

It is worth thinking about how we got to where we are, as alluded to by the noble Lord, Lord Blencathra, in his stirring speech: we bought on price. We ended up with Huawei because we bought on price and eroded our own switchgear industry. On the point made by the noble Baroness, Lady Stroud, about resilience in our supply chain, we narrowed our options by simply buying on price.

The point of the amendments, whether together, separately or blended, is to put values into the purchasing process as well as price. All the way through the debate, in different ways, the purpose of what we have heard from colleagues is to put values into what we do. Public purchasing is not just about price; it is about extending the values of this country across what we do. Unless we are doing that, we are spending the money badly. We may be spending it cheaply in the short term but it becomes very expensive in the long term, not necessarily for the citizens of this country but for those of the country from which we purchase. That is why I am supporting the amendments.

I have some technical observations. We have talked about potential back doors in technology. During the early days when the Government were trying to make Huawei work, there was a group of people—in Banbury, I think—who spent their time looking closely at Huawei’s technology in order to determine how dangerous or otherwise it was to the UK. If they are not still there, we need that group of people doing that not just with surveillance cameras but with network routers and all the other technology that supports networks in everyone’s homes in this country. We need to have a strong feeling of the security danger right across our information networks. The people who were doing that originally should be reformed. I understand that they are not the Minister’s group and that they probably come under the Home Office or indeed DCMS, but I hope she can carry that message from here.

To respond to the first part of the amendment by the noble Baroness, Lady Stroud, on supply chain resilience, the Bill will provide a very good database from which to do the sort of analysis she is talking about, so that we can determine just how resilient the supply chain is. How dependent are we on two or three suppliers? I hope, whether or not the noble Baroness’s amendment is accepted or voted through, that that is what the Government are doing. Are the Government going to use that sort of information, which will be much more readily available from the digital platform, to understand our resilience or otherwise? If they are, where in government will that be done and by whom, and who will be accountable for doing it? We will have the means to do it, whereas before it was almost impossible without a tremendous amount of work to establish who was buying what from where. Now we will have that information to hand.

These are three really important amendments. If their proposers choose to move them, we on these Benches will certainly support them.

[Lord Coaker (Lab)]

My Lords, often in this House there are important occasions when there are really good debates. On this set of amendments, we have heard some brilliant speeches from all who have spoken: the noble Baroness, Lady Stroud, the noble Lords, Lord Blencathra, Lord Alton and Lord Fox, and my noble friend Lord Hunt. Why have these speeches been so good? Because, as the noble Lords, Lord Fox and Lord Blencathra, have just said, this is the chance for this Chamber to put in the Bill the procurement policies we want this country and this Government to pursue. It is a chance, through those policies, to stand up for what we regard as the international values that are important to us. That is why it is important that it goes into the Bill.

We have had this debate all the way through considering the Bill—at Second Reading, in Committee and now on Report. Time and again, we have said it is important that this country stands up and says, “This is what we think the £300 billion or so we spend on procurement should do to bring about the sort of community we want”, not only domestically but internationally. That is why it is so important. Each noble Lord who has spoken has been so inspiring, because they are speaking from the heart.

The Minister will not disagree with many of the values that have been stated. The disagreement comes in our wanting to see them in the Bill, so that it makes a statement of intent for our country. The noble Baroness, Lady Stroud, said of her Amendment 141, to which I am pleased to have put my name, that the Government are concerned about it having a chilling effect. I hope it does have a chilling effect on those who seek to use procurement to deliver policies and values that we do not support, as it is quite astonishing.

I will spend a couple of minutes on my noble friend Lord Hunt’s Amendment 91. I know we want to get to a vote, but sometimes it is worth stating what is important in this great democratic Chamber. Let me read out what he wants to be in the Bill through his proposed new sub-paragraph (2), which I fully support. Why would we not state, regarding procurement, that forced organ harvesting—this is what we seek to oppose; the amendment also mentions human tissue—

“means killing a person without their consent so that their organs may be removed and transplanted into another person”?


I understand that thousands of occurrences of such organ harvesting are alleged to have taken place. Nobody in this House is in favour of that, but my noble friend Lord Hunt’s amendment says that that should be in the Bill as a statement of what we want our procurement to achieve. I fully support my noble friend, who deserves the thanks of the House for bringing forward that amendment, which is supported by many others, including my noble friend Lady Hayman and the noble Baroness, Lady Northover.

The same is true of the amendment from the noble Baroness, Lady Stroud, against modern slavery. Nobody here is in favour of modern slavery or human trafficking, but we know that procurement policy should seek that objective. It should be laid out and pursued as something we stand up for, as an international example to countries across the world. That is inspiring. It is worthwhile and important for us to do. The Government will say that it is unnecessary—“Of course we are against modern slavery and human trafficking”—but I say we should put it in the Bill as this amendment, along with others, would do.

The noble Lord, Lord Blencathra, gave a fantastic speech. He got excited and emotional; sometimes we should do that—with logic, which is extremely important—and wake up to these things. Sometimes we need to get emotional. The sorts of policies and decisions that we debate in this Chamber affect millions of people in our country but hundreds of millions across the world. They are worth getting emotional and upset about, because they make a difference. It is not playing tennis on a Sunday; it is about international law and what makes a difference to huge numbers of people’s lives.

As the noble Lord, Lord Blencathra, said, the Government themselves have said that there is concern about the security of the country in relation to the use of these surveillance cameras, which the noble Lord, Lord Alton, mentioned. The Government say that government departments should not use Hikvision or Dahua cameras and take them out, so they admit that there is a security risk and say that something should be done about it. But, as the noble Lord, Lord Blencathra, said, what about all the other cameras within local authorities, such as street cameras and cameras in hospitals? Do they not pose a security risk? If they do in a government department, I cannot see why they do not when they are outside one but happen to be run by Westminster council. This is ludicrous and illogical, and the Government need to take account of it.

That is why Amendment 94 of the noble Lord, Lord Alton, is so important. It says that we need a timeline to ensure

“the removal of physical technology … from the Government’s procurement supply chain”

because this will tackle modern slavery, genocide and crimes against humanity. Everybody in your Lordships’ House agrees with that; no one is opposed it. The Government will say that it is unnecessary and we do not have to do this because they will, of course, have no procurement policy that does not take all these things into account.

We will certainly support my noble friend Lord Hunt, should he push his amendment to a vote, as well as the noble Lord, Lord Alton—we will see where we get to with others. But the difference between us and the Government is that sometimes you need to say what you mean. Legislatively, we should say that we, as a UK Government and Parliament, believe these things are so important that they should be put in the Bill, that we hold to these international values, and that we will set an example for other countries to do the same and that our procurement policy will reflect this. That is our opportunity in these votes.

--- Later in debate ---

Moved by

[Lord Coaker]

138: After Clause 98, insert the following new Clause—
“Audit of Ministry of Defence procurement
(1) Within one month of the passing of this Act, the Secretary of State must commission the National Audit Office to produce and publish a report setting out any instances of Ministry of Defence procurement in the period of 5 years ending with the day on which this Act is passed that have resulted in— (a) overspend on initially planned budgets,(b) assets being withdrawn or scrapped or prepaid services terminated,(c) a contract being cancelled,(d) a contract being extended beyond the initially agreed timescale, or(e) administrative errors which have had a negative financial impact.(2) The National Audit Office report must include recommendations on how better management of contracts can reduce the loss of public money.(3) Within three months of the publication of the report, the Secretary of State must report to Parliament on whether its recommendations have been accepted or rejected, with reasoning in either case.(4) The Secretary of State must commission the National Audit Office to conduct a similar review annually.”Member’s explanatory statement
This amendment would require an annual audit of Ministry of Defence procurement to be commissioned by the Secretary of State.

[Lord Coaker (Lab)]

My Lords, I say from the outset that this is a probing amendment to give us the opportunity once again to talk about defence equipment, and I am pleased to see the noble Baroness, Lady Goldie, here. I was minded when I saw her rushing in to do what somebody did to me once. They moved the amendment formally so I had to start responding when I did not have the breath to do it, but I will not do that, partly because I respect her too much.

I am grateful for the support for the amendment from my noble friend Lady Hayman and the noble Baroness, Lady Smith of Newnham. As I say, it is a probing amendment to once again ask about defence procurement. We all have an interest in ensuring that defence equipment is procured efficiently and effectively, because that contributes to the defence of our nation, which is important to each and every one of us.

In particular, I just wanted to ask the noble Baroness a couple of general points and then a couple of specifics. We could have a debate for hours on this, but I do not think that is appropriate at the moment, given that it is a probing amendment. She will know that, in November 2021, the Public Accounts Committee published a report which had significant challenges for the Government. It talked about delays in the Government’s defence equipment procurement programme and a net delay of 21 years across the programme. The committee’s report also said that:

“the Department failed to assure us it is taking these matters sufficiently seriously”.

They are the Public Accounts Committee’s words, not mine. The committee called for more transparency and openness, and said that an urgent rethink was needed and that there was waste running into billions of pounds.

As a starting point, can the noble Baroness update us all on the progress the Government have made in the year since the Public Accounts Committee’s report into defence equipment spending in the other place in November 2021 and where we are now with that? That is particularly opportune because yesterday the Government published the Defence Equipment Plan 2022 to 2032, which I read with interest. While staying on the generalities, I ask: what did the Ministry of Defence mean when it said in the plan’s executive summary:

“The publication of this report comes at a decisive point for Defence and a period of rising inflation for the country. Although these pressures will have an eventual and significant effect on Defence spending, their full likely impact is not contained in this report”?


The report starts by saying that it does not include the impact of the current inflation level, even while saying that it will have a decisive impact. Frankly, I found that quite bemusing. I would be grateful for clarification from the Minister on what inflation figure was used. If I have read the report right, it was the inflation figure for March 2022. I might be wrong, so I stand to be corrected on that. We know that the current inflation figure is 11.1% and it is not clear whether that is going to go up or down—we hope that it will go down—but how can anyone publish a defence equipment plan, laying out the cost of equipment they hope to purchase, if they do not know what the monetary impact is going to be but they state that it will have a decisive impact? Clarity on that would be extremely helpful for your Lordships’ House.

As I say, those are some of the generalities that I wanted to raise. The whole point of an audit, as we have laid out, is to try to get some clarity and understanding of what is going on. The point of my amendment is that it looks at the next five years. The equipment plan looks at the next 10 years, so the Government’s projected assumptions about inflation are pretty important regarding what they can and cannot afford during that time.

Since we are looking into the future, what is the future of Ajax? The Ajax programme began in March 2010, intended to transform the Army’s surveillance and reconnaissance capability. To say it has gone badly wrong does not really do it justice. The department has a £5.5 billion fixed-price contract with General Dynamics, which was supposed to be for an initial 589 Ajax armoured vehicles. Those Ajaxes were supposed to come into service in 2017. They subsequently missed the revised target of 2021. By December 2021, the department had paid General Dynamics £3.2 billion but had received only 26 out of the 589 vehicles, none of which it can use on the battlefield, so the programme is in absolute turmoil. What is the current situation, and what now is the projection for the numbers of Ajaxes that are finally going to be operational? When will that happen? Given that the Government have put a ceiling on the project of £5.5 billion and have already spent £3.5 billion or so but received only 29 vehicles, what is the future of that programme? What is happening?

Will the Minister take this opportunity to update the Chamber on the important question of the current situation with regard to the “Prince of Wales” aircraft carrier? We are all very proud of our two aircraft carriers and want them to be successful. The “Queen Elizabeth” is performing majestically and fantastically for us and we are very proud of that, but obviously there have been problems with the “Prince of Wales”, which has only recently been completed. What is the projection for when it will be fixed and engineered back? What will the cost of that be, and is it factored into the various budgets?

You can see the difficulty with equipment; just the other day, the Defence Secretary said that the Royal Navy’s new submarine-hunting frigate would be hit by a year’s delay costing £233 million. There are numerous examples that we could look at beyond the couple I have used but, on the general point of my amendment, I want to know from the Minister where the Government are on their response to the Public Accounts Committee report from the other place, published a year ago, and what on earth that sentence in the executive summary of the equipment plan for 2022 to 2032 means, in which the Government say, astonishingly, that inflation is not costed in even though it will have a decisive impact on that plan. We would like some answers to that.

This is said from a position of wanting the defence equipment plan to work and deliver all the requirements of our fantastic, brilliant Armed Forces. To do that, we need certainty. I know the Minister will say, quite rightly, that there are fantastic examples of equipment that has been produced for our Armed Forces. That is true, but budgets continually overrun by billions of pounds and delays happen. Most importantly, have the Government responded—and if not, how will they respond—to the Public Accounts Committee report from a year ago?

[Lord Wallace of Saltaire (LD)]

My Lords, I had to be absent for two and a half weeks in late October and early November and my noble friend Lady Smith of Newnham kindly and generously substituted for me. I now find myself in the same position, as unfortunately she is unwell.

Listening to the noble Lord, Lord Coaker, I remembered that I used to work on defence procurement when I was at Chatham House in the 1980s. It is depressing how few of the issues have fundamentally changed since then. It is part of the culture of our Armed Forces, and one or two former members of the Armed Forces who sit on the Labour Benches, that they like their toys to be of the best US complexity standard and as big and expensive as possible, and they want to change the specification several times while they are being developed. That is how one ends up with two very large aircraft carriers that we are not at all sure we ever wanted.

I sympathise with the MoD on the difficulties of procurement, but I suggest to the Minister that, as we absorb the very considerable implications of the Ukraine conflict for the sort of kit one needs and the sort of wars we may be fighting, it would be very helpful if the MoD took into account those in both Houses who are interested and briefed us as it went along. We are now discovering that a lot of cheap weapons, sometimes commercially acquired, can be as effective—or sometimes more effective—than very expensive ones. The last time I spoke to a group of former members of the Armed Forces, I asked a former colonel of an armoured regiment what he thought about the future of tank warfare. He replied: “You’d never get me inside one of those things again”. Our assumptions about the nature of warfare are changing.

This raises large questions for the MoD. We know that there are always tremendous problems with how much you need in reserve, and we are now discovering that we are running short of resupplies for Ukraine. I discovered the other year that the Liberal Government of 1895 fell on the issue of inadequate supplies of cordite for the Armed Forces, so here again, things are not entirely new. I see that the Clerk of the Parliaments remembers that occasion very well.

--- Later in debate ---

[The Minister of State, Ministry of Defence (Baroness Goldie) (Con)]

My Lords, I first thank noble Lords for their contributions. I understand fully that the proposed amendment is well intended, and I accept it in that spirit. I think it has certain implicit difficulties, which I shall move on to. I would never object to the Opposition Benches holding the Government’s feet to the fire—that is what the Opposition are there to do—but I hope they will be patient with me as I seek to explain why the precise terms of the amendment confront the MoD with difficulty.

The proposed amendment would require the Ministry of Defence to commission and publish a report from the National Audit Office, setting out instances of procurement overspend, withdrawal or scrapping of assets, termination of prepaid services, cancellations or extensions of contracts, or administrative errors with negative financial impacts. The reason the MoD rejects the amendment is not because it is not in sympathy with what I have identified as a well-intended sentiment expressed by the noble Lord, Lord Coaker, but quite simply because existing processes already ensure robust scrutiny and accountability of Ministry of Defence procurements.

Before I move on to that more detailed exposition, let me deal with a very specific point the noble Lord raised about the defence equipment plan which was published yesterday. He is more ahead than I am because I have been preparing for this. I have referred it to my officials, and I am told that it is difficult to calculate an accurate figure of inflation at the moment, due to volatility. That is an inadequate response to give the noble Lord from the Dispatch Box, so I offer to write to him. We will do further research in the department, and I shall endeavour to expand on what these particular difficulties are.

[Lord Coaker (Lab)]

That is totally acceptable, and I am very appreciative of it. The reason I asked was because the National Audit Office, commenting on the 2022-23 equipment plan, said it was already out of date because of inflation, Ukraine, the economic situation, et cetera. So I very much appreciate the offer from the noble Baroness to write and put that in context for us. I think it would be helpful if that was put in the Library for other Members as well.

[Lord Fox (LD)]

I join the noble Lord in welcoming that and also ask that the Minister includes currency because, while inflation is important, currency is actually more important in some cases. It is absolutely clear that a lot of these purchases are made in dollars and the dollar/pound rate will determine quite substantially the rising costs of equipment.

[Baroness Goldie (Con)]

I hear both noble Lords. To put a little context around this, the MoD has not been sitting in some splendid ivory tower in isolation as volatile economic circumstances swirled around us. Actually, we have built protective measures into many of our contracts to deal with inflationary pressures—or, indeed, to deal with the currency fluctuations mentioned by the noble Lord, Lord Fox. I appreciate that more detail is sought and I shall certainly look at that, with my officials, and endeavour to return to both noble Lords with some more information.

I was going to explain in more detail what we already do and how the National Audit Office already plays a role in all this. The National Audit Office is independent—we should remember that—and it already conducts a yearly audit on the defence equipment plan and undertakes regular audits of defence programmes. Further scrutiny of the performance of defence programmes is undertaken by the Infrastructure and Projects Authority, which tracks the progress of projects currently in the government major projects portfolio, not just that of the MoD. The details of these are published in its annual report. As an independent statutory body, the National Audit Office decides, independently of government, where to focus its resources and determines what projects and public bodies it audits and when.

It is important to emphasise that the Government do not direct the NAO; nor should we, because an essential feature of the importance and value of the NAO is that independence. Although it may not intend to do so, I argue that the amendment would interfere with that statutory independence. In addition, it would force the NAO to use its limited resources on a specific examination each year, irrespective of changing priorities: something might be significant one year and of far less concern the following year. It might even not reflect the continuing value of such an examination to Parliament: this is where we have to be very careful.

To reassure noble Lords, as I indicated, the Ministry of Defence continues to take steps to control the rise in the price of defence goods and services over time, including through improving the communication of longer-term priorities and requirements, including, as noble Lords will be aware, through the publication of pipelines. That is an extremely important development and signals likely demand to industry far better. It lets industry reflect on preparedness, instead of what was before probably a rather stop-start process, with industry asking, “Do you need anything?” and us suddenly announcing, “Yes, we do,” and everybody trying to create the thing from new.

The Ministry of Defence is utilising a new approach to industrial strategy. This strengthens supply chains and is driving pace and agility into the acquisition system through a range of transformation initiatives. The department has implemented steps to estimate project costs more accurately, including improving our risk forecasts through the use of reference class forecasts; that is, trying to use procurement as it happens, to inform us—what can be learned from the process? We have risk-costing pilots and we use the analysis of systematic, strategic or operational problems to inform us how the contract is proceeding. The MoD is also driving evaluation into programmes through the use of monitoring and evaluation frameworks and creating a process to capture and share lessons learned.

An important area, perhaps not widely understood, is that the MoD, like everyone else, can be hit by the quality and quantity of skills. That may be a significant impediment to us. Improvements are being delivered through the improved provision of training, initiatives to recruit and retain staff, and audits to identify and fill skills gaps.

The noble Lord, Lord Wallace of Saltaire, said that not much has changed. I think he started with the 1980s, then we seemed to regress further, into the Victorian age, when I am not sure we would recognise very much of what our procurement contracts are delivering. I respectfully disagree with him because, in addition to what I have previously mentioned, including the investment appraisal process, we have made other big changes. For example, all category A procurements, which are valued at £400 million or above, go through an extensive internal MoD process before they even get to the Cabinet Office, the Treasury or the Minister of Defence for approval.

Costs are now independently assured by the cost assurance and analysis team, tender and contract documentation is independently assured through the progressive assurance team, and direct award contracts are reviewed and monitored by the single-source adviser team. If that sounds like just verbiage, let me say that behind that are highly trained expert people who are there to identify the shoals, the reefs and the rocks, bring them to our attention, and make sure that we are not inadvertently drawn into areas of contract weakness where in the past we might very well have gone.

We are content that there are sufficient checks and balances in place to ensure that we achieve best value for money, learning from previous procurements. There are some good examples, and I was very struck by visiting Babcock at Rosyth, where it is building a Type 31 frigate. That really proceeded on a new basis of approach—it was born out of the national shipbuilding strategy. That programme was established in 2017, and following competition a contract was awarded to Babcock in November 2019 for the design and build of the five ships; it is currently under way, with the first ship scheduled for float-off in 2023. With barely three years passed since contract-award, the Type 31 build at Rosyth is well under way, with the first grand block now assembled in the Venturer assembly hall. The build programme is set to meet its deadlines of delivering all five ships off-contract by the end of 2028, and the build contract is on course to deliver the five ships at an average cost of £250 million per ship.

I use that as an example because it seems to me, having seen it at first hand, a very modern illustration of where we have moved to. When I say to the noble Lord, Lord Wallace of Saltaire, that I do not agree with his characterisation, I also try to illustrate that argument by pointing out that there are different practices at play, informed—I fully admit—by a number of sources like the national shipbuilding strategy, which was an innovative change of direction for how we procure ships within the UK. But we have also had a very good example with the Poseidon aircraft programme operating out of RAF Lossiemouth in the north of Scotland on the Moray coast. It is an absolutely fantastic facility. That fleet comprises nine aircraft, which were all achieved on time, within budget, and to a challenging timeline.

It is very easy to be sceptical, and I fully understand why your Lordships rightly have been sceptical of some pretty poor experiences in the past, but all that I am pointing out is that we have moved on to a better way of doing things, and I hope that your Lordships understand from what I have been explaining and describing that there is a far better structure within the MoD to deal with these complex procurement contracts. These defence contracts are often complex, they are required quite often at speed to meet emerging threats, and are often needed to provide much-needed support to our Armed Forces, to ensure that we maintain operational advantage and to reduce the risk to our nation.

The noble Lords, Lord Coaker, Lord Wallace of Saltaire, and Lord Alton, all raised the issue of Ajax, and I think I have said before from this Dispatch Box that it was certainly not one of our proudest moments. Intrinsically, it is actually a very good vehicle, and it will provide an important capability. Following agreement from the Ajax safety panel, work has led to resuming the user-validation trials which were paused earlier this year. Results from these trials are being analysed to ascertain whether it is possible to deliver a safe system of work under which to conduct reliability-growth trails. Your Lordships are aware that there were issues with vibration and hearing, and the one thing that we were very clear about was that we were not going to put people at risk; my former colleague as Minister for Defence Procurement, Jeremy Quin, was absolutely insistent. That is why, despite the embarrassment, we paused what was happening until we had a better understanding of what was going wrong; but I make it clear that the MoD will not accept a vehicle until it can be used safely for its intended purpose.

Your Lordships will be aware that Clive Sheldon KC is leading the Ajax lessons learned review, which is looking at ways in which the Ministry of Defence can best deliver major contracts more effectively in future. That is an important review and we await his analysis, conclusions and recommendations, but I emphasise that any delay to Ajax will not affect our commitments to NATO. That is an important point to observe.

The noble Lord, Lord Coaker, asked about the “Prince of Wales” carrier. Rosyth on the Forth is where good things happen: as well as building the Type 31, that is where the Prince of Wales carrier is currently reposing. She is a state-of-the-art aircraft carrier. She has already proved her capabilities in a number of exercises, but there was an issue concerning the propulsion shaft and investigations are now under way. She is a huge vessel, and it was necessary to take her into dock to have the facilities properly to examine what was going wrong. Timelines for the repair of the shaft are being investigated and further updates will be provided in due course. We want her to return to operations as soon as possible. My understanding is that we have brought forward some routine maintenance anyway, so that can be attended to while she is at Rosyth. I have no more specific information at this time, but I expect we will get a further report when more is known about the underlying condition and how long it will take to rectify.

The noble Lord, Lord Coaker, raised the Type 26, which is a first-class ship. I have visited the programme in the yard at Govan being operated by British Aerospace. It is a fantastic piece of maritime equipment and it will be pivotal for the Royal Navy. It is proceeding very well. We have just awarded the batch 22 contract to the yard because we were absolutely satisfied about the professionalism, commitment and effectiveness of what British Aerospace was doing with the first batch. It is true that there has been a delay, but there are two reasons for that. Covid was one factor; it has created delays for our defence industry partners and their supply chain. I understand that there were also issues with locating the necessary corps of skills, but it now seems well under control and we hope that the new timeline can be adhered to. British Aerospace is certainly very keen to demonstrate that and to commit to making it happen.

The noble Lord, Lord Wallace of Saltaire, raised the issue of levels of munitions. He is quite right that particular demands have fallen on that area due to the conflict in Ukraine. Those of us who listened to the extraordinary, courageous address by Madam Zelenska yesterday—I was among those privileged to be there—could not help but feel huge admiration for her, her husband and the people of Ukraine, as well as a sense of pride that we have been able to come to their assistance. We have been able not just to support them in what they have been looking for but, I hope, to give them the reassurance of optimism and hope for the future; Madam Zelenska referred to that. I reassure your Lordships that, in our supply of anything we have provided to the Ukrainian armed forces, we have never compromised our own levels of stocks in relation to meeting our national security obligations.

The noble Lord, Lord Alton, referred to someone—that sounds rather disrespectful; it was someone very eminent—who used to be in RUSI who had certain challenges with the Bill. As a former lawyer, I would say in response that I think the Bill is a welcome clarification and consolidation of procurement law in the United Kingdom. For the MoD, there has been carefully researched tailoring of the Bill to meet the unique requirements of defence. Our industry partners have been positive, so I think the Bill has the potential to introduce far greater clarity to industry—both primes and smaller contractors—and give them a much clearer sense of how they engage, what they can do and what the rules are. That is absolutely to be commended.

In conclusion, I am under no illusions about the challenges the MoD faces in relation to large-scale procurement. We recognise these challenges, and that is why we continue constantly to explore additional actions to mitigate the effects of cost escalation and cost growth. I hope I have been able to explain in sufficient detail what we do already—particularly the very specific character of the National Audit Office, which is independent of government—to enable your Lordships to understand why the MoD is unable to accept this amendment, while it does identify with the sentiment with which it was put forward. I ask the noble Lord, Lord Coaker, to withdraw the amendment.

[Lord Coaker (Lab)]

I thank the noble Baroness for her reply and her offer of a letter. I stress how important that letter is, given the quote I am about to read, which summarises the National Audit Office’s assessment of the equipment plan that the Government published:

“The equipment plan is based on data submitted by the end of March this year and does not take account of the impact of exchange rate changes, rampant inflation, fuel costs and the Russian invasion of the Ukraine.”


It would be helpful to your Lordships’ House if the noble Baroness would respond in a letter and put it in the Library. It would be very useful to hear what the Government are saying about the National Audit Office’s comments.

I know that there are problems with Ajax; we look forward to continuing discussions on that. We have raised a number of other difficulties. I think all noble Lords here recognised that there are significant successes alongside that and we should recognise those—I certainly do. We all want our Armed Forces to succeed. The noble Baroness is quite right to remind us of the support we have given to Ukraine and the bravery of the Ukrainian people. We are right to recognise that once again this evening. With those brief comments, I beg leave to withdraw the amendment.

Amendment 138 withdrawn.