Small Business, Enterprise and Employment Bill

Lord Deben Excerpts

Wednesday 14th January 2015 Grand Committee

[Lord Young of Graffham]

Perhaps I can assist the noble Lord over some of the difficulties that he sees in this particular clause, in three areas that he raised. First, the mystery shopper—it is a bizarre name, but people understand what it means—has been operated by the Cabinet Office on central government contracts for the past few years. It had a great defect; it was reactive—somebody had to complain—and there were very few small firms in this world that would willingly make a complaint against a big customer. So we have made it proactive, so that the Government will, on a random basis, go and question people. That covers the possibility that any small firm can now complain without having the finger of blame put on them.

Secondly, we have now substantially modified PQQs. For example, there is now a standard PQQ for every contract worth more than €200,000. The small firm or the large firm does it once and the public sector reads it many times.

One element of our reform that we have not referred to this afternoon may well satisfy some of the noble Lord’s concerns. Next month we are launching a site, provisionally titled Contract Finder, that will record on it every public sector contract—worth £250 million a year—whether it be fire, ambulance, education, health, central government or local government. These will be postcoded, so that firms around the country can see what is coming up. More than that, we will expect local authorities, the health service and others to give notice of impending contracts, to enable firms to prepare for them. If a subcontractor sees that a new school is being contemplated in its area, it can go to the contractors that normally do it.

Thirdly, after each contract is won, the results will be placed on the site, so that people can see how near they were to winning. This is the first time in the world that this has been done. It is getting a great deal of interest overseas. It is a substantial undertaking, but its whole purpose is to create a level playing field for small firms and large firms. I hope that, if we see it through as intended, we will be looking at a very different small firms sector in a few years’ time.

[Lord Deben (Con)]

My Lords, I would first like to say how pleased many of us are at the changes that the noble Lord, Lord Young, has just described. They will make a big difference for small firms around the country.

However, there is another part to this on which I hope that the Minister will be able to help. There are reasons to disagree with the specifics put before us, but the noble Lord, Lord Mendelsohn, has made it clear that he is seeking a response from the Minister that shows that she understands the real problem that is being adumbrated, which is that small firms often find that they are not competing fairly simply because what is asked of them is a much bigger ask than the same thing asked of a big firm. That is the fundamental issue.

There is a second part to that, which is the reaction of those who place the contracts. I am increasingly worried that, in the public sector, there is a safety culture that means that people would prefer to have a firm whose name they know and which they feel no one can blame them for taking on, even if that firm does not in the end do the job properly. It is much easier if it is a national company with a national name—when you have taken it on, nobody can make the complaints that they might make if you were taking on a smaller firm.

Even if the Minister is not able to accept these aspects, I wonder whether she would help us by saying what the Government intend to do to try to make it easier for the public sector to take on companies that might be less assured because they are smaller and because they have not had a contract of that kind before. Are there not serious institutional ways in which we could make that easier? I have not yet seen any indication that, in their plans, the Government have sought to make it less dangerous for a public servant to take on a firm that has perhaps not previously worked with the public sector or perhaps does not have such a long history of doing so. Where there is a risk involved, I think that it is a risk that the public sector ought increasingly to be willing to take if we are to have entrepreneurial innovation in Britain.

[Baroness Neville-Rolfe]

My Lords, as the noble Lord, Lord Mendelsohn, said, there is a good deal of common ground here, although we believe that we have most of the powers that we need, either in this Bill or in separate, regulation-making powers. I thank my noble friend Lord Young of Graffham for explaining the mystery shopper so clearly, and how PQQs have changed. I will come on to Contracts Finder in a minute.

On Amendment 35G, we consider that requiring a small business to pay a fee to access a public contract opportunity is a significant barrier to entry and should be stopped. That is why the Government’s intention in the draft Public Contracts Regulations 2015, which I have mentioned several times, is to help ensure that small businesses have free access to contract opportunities in one place. Moreover, the power in Clause 38 can already be used to make regulations to ensure that documents, information and any process involved in bidding for a contract are made available free of charge. The Cabinet Office will assess the impact of the reforms to be introduced through the draft Public Contracts Regulations before deciding whether to use Clause 38 to make regulations about providing free access.

The noble Lord, Lord Mendelsohn, asked how we will ensure that there is early engagement with suppliers and that small businesses are included. This is a very good question. Noble Lords will recall that our draft illustrative regulations demonstrate how the power could be used to require authorities to carry out pre-procurement engagement in a way that increases interest in bidding for procurement for SMEs. This could also help to bring in new SMEs and deal with the reputational issues, which was the issue behind my noble friend Lord Deben’s helpful intervention. I recall that, when I was in business, we had a similar wish to encourage new small and local suppliers. We held pre-engagement road shows to talk to the suppliers. Bringing in suppliers that we had not had anything to do with before led to new contracts being let to smaller suppliers outside the mainstream. That is not public sector experience, but it gives me confidence that we should be able to use this pre-engagement process to improve things.

We support the spirit of Amendment 35H and we are already doing more to promote transparency in public procurement. The procurement directive, which was intended to be transposed earlier this year, will require contracting authorities to disclose the number of above EU threshold contracts awarded to small and medium-sized enterprises, based on the EU definition. Contracting authorities will also be required to provide information on the number of bidders for a procurement, as well as reporting on the value of any contracts awarded.

The noble Lord, Lord Mendelsohn, said that too many prime contracts go to large suppliers. I cannot help but agree with that. The new Public Contracts Regulations will require contracting authorities to explain why they have not broken down large requirements into smaller lots. As my noble friend Lord Young, said, there will be a new Contracts Finder website, which will advertise all central government contracts over £10,000 and local government contracts over £25,000 free of charge. As has been said, the site is already attracting international interest and comment. The regulations will also place an obligation on a contracting authority to report, for contracts of £10,000 and above for central government and £25,000 and above for other authorities, on whether the successful bidder is a small or medium-sized enterprise or a member of a voluntary community social enterprise organisation, and on the value of the contract awarded. I think that that is important. Contracting authorities will be required to publish this information on Contracts Finder.