Procurement Bill [HL]

Lord Fox Excerpts

2nd reading
Wednesday 25th May 2022 Lords Chamber

[Lord Fox (LD)]

My Lords, it is a great pleasure to be working on this Bill with a new set of colleagues: a new set of Front-Bench spokespeople from Her Majesty’s loyal Opposition and a new Minister. I look forward, as the noble Baroness does, to a fruitful process in working on this Bill.

In framing the Bill, the Government explained that they had three options: to do nothing, to do the minimum or to carry out wholesale reform. They have chosen reform, which we welcome; the Bill is the result of that reform process. What is it for, and how wholesale are those reforms? The reforms are less wholesale than the Green Paper suggested they might be, as the noble Baroness, Lady Hayman, just said in her excellent speech. I will not try to cover the same ground that she did, but I associate myself with all of her comments.

I will, however, start with the point with which she started: the missing principles for the Bill. Without those principles, it will be difficult to guide the rest of what we are doing. There are objectives, and they appear in Clause 11. As we have seen, they are value for money, maximising public benefit, sharing information and acting with integrity. We would all sign up to those. Elsewhere in the Bill documentation, there are all sorts of other lists that are all similar, but different in a subtle way. This is not nit-picking, because it is important to understand where the Bill is headed and what it is seeking to achieve. Some of the objectives are potentially conflicting, and we need to know where the priority lies.

For example, to create greater opportunities for small businesses and social enterprises, which I understand and agree is one of the important elements of the Bill, there might be a higher initial cost attached. How will the Government calculate the public benefit that they get from the process of broadening the remit? What priority will they give to value for money? The impact assessment says that the highest priority is value for money. However, it also says that the Bill will be required to take into account national strategic priorities such as job-creation potential, improving supply resilience and tackling climate change. There is no help as to how these trade off, and there is no understanding of what “take into account” means. Of course, none of these is on the face of the Bill, so we do not have a definition of “public benefit” anywhere.

All the language so far completely avoids the issue of supplier ethics and human rights. I know that the noble Lord on my left and others will bring this up, and I expect to agree with them. My noble friend Lady Parminter will no doubt speak to the need for a central role for procurement in fighting climate change. I also believe that that has to be written into the Bill and I hope that the Minister will hear that from others as well.

There are other definitions in the Bill which are not helpful. The Explanatory Notes refer to “fair treatment”, so perhaps the Minister could explain what “fair” means in the context of this new process. Perhaps he will agree with me that “equal” might have been a better word. Here is an example: it is unclear how the Bill, in its present form, will replace the regulatory framework for accessibility within public procurement legislation. Therefore, can the Minister please explain how the new regime will ensure that specifications take into account accessibility criteria and design for all users? This is just one example of what is potentially dropping out.

For the Bill to be implemented, it needs to be understood. For that to happen, the Government need to differentiate what they are seeking to achieve and be very clear about the Bill’s moral, as well as economic, objectives. I am sure that we will give Ministers plenty of opportunity to do that in Committee.

One of the benefits paraded in various government publications is that the new data platform will deliver centralised data. How will the Government use that data and who will use it? On the data protection front, the UK has to date employed GDPR as its tool. However, changes in data protection law heralded by the new data reform Bill set out in the consultation Data: A New Direction call into question the level of proper oversight of that data. We already see companies from the US sweeping up and using data that is currently available; for example, within the NHS. They operate free, in effect, from proper scrutiny. Without explicit safeguards in the legislation, there will be a real opportunity for data abuse.

The Government talk of visibility and transparency in the Bill. If those are realised that will be thoroughly welcome and we encourage that process. However, if we needed an example of how the lack of visibility leads to corruption, there is the example given by the noble Baroness, Lady Hayman, and which I think my noble friend Lord Strasburger will give, of the abuses of what I might describe as a system based on Ministers’ WhatsApp rather than a transparent system. That was a scandal, and we must have a system that ensures that that sort of thing can never happen again.

How transparent is the legislation? I note that, alongside defence and security interests, the Advanced Research and Invention Agency—ARIA—is exempted. Not only is ARIA carved out of the Freedom of Information Act, it is able to procure in secret. Why should we not know from whom this agency buys its electricity? Overall, much of the information the public might seek about public contracts has been or is being put beyond the reach of the Freedom of Information Act. Although the Government talk about transparency, their legislation seems to demonstrate a drift—if not a jump—in the opposite direction.

The Minister sought to defuse the treaty state supplier issue by using the NHS opt-out as an example but, of course, that is in only one sector. My noble friend Lady Brinton will be talking to that issue, but let us remember what Clause 82(1) says:

“A contracting authority may not, in carrying out a procurement, below-threshold procurement or international organisation procurement, discriminate against a treaty state supplier.”


Can the Minister confirm that if a UK contracting authority wanted specifically to buy British food from a British farmer, it would be unable to do so at the expense of a treaty state supplier such as, in future, an Australian farmer, selling a similar product at a lower price? That not only flies in the face of many social objectives, it seems to fly in the face of the Subsidy Control Act, which includes provision for purchasing under a subsidy scheme to support local businesses and certain products. Which of these two factors prevails? Is it the treaty state supplier rule or the subsidy control rule, because they do not work in the same direction?

More broadly, essentially, if the market is opened by a treaty, the contracting authority is bound to buy the product that offers the best value for money—remember, that was the number one criterion of the four set out in the government documents. I fear that that will be headline price, irrespective of what it does to local capability in future. Other countries may be looking at reshoring; the Bill delivers the opposite.

The regulation-making power in Clause 8(2) relates to common procurement vocabulary—or CPV—codes, which the Cabinet Office has explained will be used to decide which contracts benefit from the light- touch regime. Understandably, this legislation does not include the long list of what might be on that CPV list, but I feel sure that there will be some important issues here.

I would like to ask the Minister what “light touch” actually means. If it means service contracts of the sort that the Minister hinted at, then far from “light touch”, “rigorous oversight” might be more appropriate. I give the example of the children’s homes issue, which is currently live. Perhaps the Minister can help us before we get to Committee by publishing either a draft or an indicative list of what the Government expect to be in the statutory instrument that will bring the CPV codes to your Lordship’s House.

I am also in the dark about how this Bill, the Sewel convention, the Trade Act and the UK Internal Market Act intersect. For example, if a Scottish-based public authority seeks to purchase a product from a treaty state supplier, does the Minister agree that it is up to the Scottish Government whether the regulations in Scotland need to be the same as those in the rest of the United Kingdom?

Secondly, can the Minister please explain what happens if that Scottish public authority offer then extends to the rest of the United Kingdom—for example, across the border to England? The Procurement Bill seems to say that once it crosses the border and there is a difference, Westminster regulations need to be applied, not Edinburgh’s. However, I suggest that the non-discrimination parts of the UK Internal Market Act mandate the exact opposite, and I think an interpretation of the Sewel convention is a moot point. Further, there is the common frameworks process, which is still live. Can the Minister please reconcile all these issues for your Lordships’ House?

As I reach the end, I turn to implementation, which will not be trivial. We know that the Government are very challenged when it comes to digital projects. In its report, The Challenges in Implementing Digital Change, the National Audit Office reviewed the implementation of digital programmes by government, going back, I think, over 25 years.

Its comments are extremely apposite. It said:

“Initiating digital change involves taking a difficult set of decisions about risk and opportunity, but these decisions often do not reflect the reality of the legacy environment and do not fit comfortably into government’s standard mechanisms for approval, procurement, funding and assurance.”


The report also found that digital leaders

“often struggle to get the attention, understanding and support they need from senior decision-makers”

who lack sufficient digital expertise. It will be important to remember that as this project progresses. We know from past government IT disasters that delivery is always harder than it is portrayed when launched at the Dispatch Box.

As far as I can tell from the impact assessment, the estimated cost of launching this platform is £36 million, which seems ambitious to say the least, given the Government’s 25 years of underperformance on digital projects. In Whitehall alone, this involves a lot of people. The Cabinet Office Civil Service statistics for 2021 say there were 12,340 civil servants in the procurement commercial function that year. Of course, as we have heard, there are many more people in local authorities and public utilities being brought into this system.

For some of the Whitehall departments, these numbers are huge. In the Ministry of Defence, including agencies, more than 2,000 employees are involved in procurement. In the Minister’s own Cabinet Office, again including agencies, it is more than 1,700 employees. I know from experience of working in the private sector that when a large enterprise implements a cross-business digital programme, the systems analysts always meet the same response. They go into a department, which says, “Yes, I agree that this is a very good idea, but you have to understand that we are different”.

There are two ways of dealing with this response. One is to instigate local variations to comply with all the perceived differences; the other is to use this digital platform to lead cultural change. In my experience— I have helped on a number of company-wide ERP implementations, and in a way this is a much bigger version of that—if you choose the variation route, it is a road to confusion and cost. But the second one, invoking real cultural change, is still a challenge. These departments are supertankers of departmental culture that will take years of sustained activity to turn around. A couple of days’ training here or there will not do it; these people have to own this system, believe in it and want it to succeed.

Any Bill that seeks to do what this Bill seeks to do is ambitious. It is a long Bill and covers all sorts of different departments. The process we are about to embark on will be long and detailed. There is a lot of work to do before the Bill is fit to be enacted, but we will work very hard with the Minister and Her Majesty’s loyal Opposition to help that to happen.

--- Later in debate ---

[Lord True (Con)]

My Lords, I thank very much all those who have taken part in the debate. Myriad points have been raised from all sides of the House. I never know what the usual channels are deciding, but it is probably a good thing that, as I understand it, we are not going into Committee for some time because I can feel a compendious letter to your Lordships coming on, which might be as long as the Explanatory Notes.

Your Lordships will forgive me if I do not deal with every detailed point; I will try to address some of the main themes of the debate, which were expressed very well by the noble Baroness, Lady Hayman, when she opened and the noble Lords, Lord Coaker and Lord Wallace, in summing up. We will not agree on all these things. Certainly, in some of the speeches from the other side, there was a yearning to impose policies on the private sector—on people outside government. The high-water mark was the speech of the noble Lord, Lord Hendy, which I guess was the counterpoint to the low-water mark—I am not sure there was any water in it at all—of the speech of my noble friend Lord Moylan. To impose your political objectives on a nation, you have to win an election and form a Government. What we need to do—there was great support and great consensus across the House on this—is put together a framework that we could all work with to provide clarity, simplicity and, yes, transparency, which I will come on to, for those seeking to provide to public procurers.

An important speech on defence was made by the noble Baroness, Lady Smith, and the subject was also alluded to by the noble Lord, Lord Coaker. My noble friend Lady Goldie will respond in writing on the points made but, obviously, when we get into Committee, we will be able to address the points.

Points were raised about control, management and remedies. The noble and learned Lord, Lord Thomas, put forward some ideas. We will reflect on those but, basically, the law of the land is the framework; my noble friend was right.

Many noble Lords alluded to Covid-19 procurement. I understand that but we need to look forward. While the debate was going on, I looked this up on my machine and saw that in April 2020 the leader of the Liberal Democrats was calling for all red tape to be swept aside to get PPE. People in other parties were saying the same. Yes, mistakes were made, but when you make mistakes you must learn from them. We are putting together a regime that will deliver more comprehensive transparency requirements, clear requirements on identification, management of conflicts of interest and so on. It is right that we should address those things, but the priority of the Government—indeed, of all of us in all parties—as the pandemic we knew so little about arose, was to save lives. I acknowledge that there are lessons, but I hope that when we look at how the Bill is structured, we will see that we have an improved framework for addressing all aspects of procurement.

The noble Lord, Lord Alton of Liverpool, and others rightly addressed the issue of human rights. We will discuss this in Committee. I had the pleasure of discussing it with the noble Lord before, as he was kind enough to say. Certainly, modern slavery has no place in government supply chains; I affirm that strongly. I accept that the current rules on excluding suppliers linked to modern slavery are too weak. For example, they require the supplier to have been convicted, or for there to have been a breach of international treaties. These rules are not capable of dealing with some of the issues that we see.

We are making explicit provision in the Bill to disregard bids from suppliers known to use forced labour or to perpetuate modern slavery in their supply chain. Authorities will be able to exclude them where there is sufficient evidence; they do not need to have a conviction. We are seeking to respond in this area and no doubt we will be probed further.

One issue raised right from the start by the noble Baroness, Lady Hayman, was that of principles. A lot of people have said that this was in the Green Paper but is not in this Bill. A Green Paper is a basis for consultation and reflection. A Bill is the proposition that the Government put before Parliament and this is the proposition that we are putting before Parliament. The Bill splits the procurement principles into a group of objectives and rules to help contracting parties understand what they are obliged to do. The rules on equal treatment, now termed “same treatment”, in Clause 11(2) and (3) are obligations that set minimum standards in plain English that contracting authorities must follow on treating suppliers in the same way to create a level playing field. Non-discrimination, in the context of the Bill, means discrimination against treaty state suppliers on the grounds of nationality, which is a concept different from non-discrimination in the UK market. The national rules on non-discrimination in the Bill can be found in Clauses 81 to 83.

There were a number of changes to the principles. For example, the procedural transparency obligations in the Bill are complemented by a new information-sharing objective in Clause 11(1)(c), which will provide clarity to contracting authorities on exactly what they need to publish. There is also no need for an objective to maximise competition in procurement processes under the Bill, as procedural obligations start with the use of open and fair competition, unless there are legitimate grounds to dispense with or narrow competition. The most obvious of those would be special cases for direct award.

I acknowledge that transparency has been a key ask for the House. The House expects that transparency will be improved. We believe that the Bill does this. We are extending the scope of publication requirements to include planning and contract performance, in addition to current requirements to publish contract opportunities and contract awards. By implementing the open contracting data standard we will publish data across the public sector so that it can be analysed at contract and category level, and compared internationally. The new regime will also establish obligations on contracting authorities to capture potential conflicts of interest for individuals working on procurement additionally, or mandate the publication of a transparency notice whenever a decision is made to award a contract using a procedure as a direct award. This will all be supplemented by a comprehensive training programme that will be available to contracting authorities, which I will come back to later.

We remain committed to our aim to embed transparency by default through the commercial life cycle. We recognise and make no apology that this new regime seeks to do that. The new central digital platform will be designed to make complying with the new transparency requirements automated and low cost. We intend to make data analysis tools available to contracting authorities, which will ensure that they can use the data available to drive value for money.

Taxpayers have a right to see how public money is spent. There is abundant evidence of public engagement with contracting information, and it increases as the data improves. Because the data will be more comprehensive it will be more valuable and, we believe, better used. I have no doubt that we will be tested on that, but I assure the noble Baroness opposite that it is something we are extremely determined to achieve.

On social objectives, I was asked by a number of noble Lords how the Bill will help with achieving net zero. I accept that the Bill does not include any specific provisions on the Government’s target to achieve net-zero carbon emissions by 2050, but it will require contracting authorities to have regard to national and local priorities as set out in a national procurement policy statement to be published by the Government, and the Wales procurement policy statement to be published by Welsh Ministers. Many noble Lords have given notice that they will want to return to examination of the national procurement policy statement, how it will operate and how it will go forward, but there are statements in there.

Public sector buyers are able to structure their procurements so as to give more weight to bids that create jobs and opportunities for our communities, where this is relevant to the contract being procured. This is absolutely in line with the concept of value for money. Social value in procurement is not about a large corporate’s environmental, social and governance policies but about how the contract can be delivered in such a way that it delivers additional outcomes, such as upskilling prison leavers, which I think someone referred to.

Delivering value for taxpayers should certainly be the key driver behind any decision to award contracts to companies using public money, but again, public sector buyers will have to have regard to the national policy statement. The Bill will take forward a change from “most economically advantageous” to “most advantageous” to reinforce the message that they should take a comprehensive assessment of value for money, including the wider value of benefits, in the evaluation of tenders.

I know that many of your Lordships want to see and have asked for buying British. Public sector procurers are required to determine the most advantageous offer through fair and open competition. We confirmed in December 2020 that below-threshold contracts can now be reserved for UK suppliers and for small suppliers where it is good value for money. This applies to contracts—in those strange figures in the Bill that arise from international treaty—with a value below £138,760 for goods and services, and £5.336 million for construction in central government.

Above those thresholds, we need to act in line with our international obligations. A blanket “Buy British” policy would conflict with the UK’s international obligations to treat suppliers from other countries on an equal footing. The requirement for fair and open competition is a two-way street because it gives UK firms access to other markets. Within the UK, on average, just over 2% of UK contracts by value were awarded directly to foreign suppliers between—

[Lord Fox (LD)]

I thank the Minister for giving way. I am confused and I am sure he can help me. Clause 82(1) specifically says:

“A contracting authority may not, in carrying out a procurement, below-threshold procurement or international organisation procurement, discriminate against a treaty state supplier.”


The Minister just said the opposite of that in the case of below-threshold procurement. The Bill is very clear that a below-threshold procurement does not let off the contracting authority from having to give the contract to a treaty state supplier.

[Lord True (Con)]

My Lords, I was hoping to make progress and I know that your Lordships would like to conclude these matters. As the noble Lord says, those clauses refer to international treaty obligations. What I was saying was in reference to a contract to let; I was asked very pertinently by the noble Lord, Lord Whitty, for example, about local authorities buying locally, and I repeat what I said: below-threshold contracts can be reserved for suppliers located in a particular geographical area. If international issues arise, that is a different matter. This policy was set out in the Government’s Procurement Policy Note 11/20.

My noble friend Lord Lansley and many others, including the noble Baroness at the start, asked me about innovation. The legislation will put more emphasis on publishing pipelines of upcoming demand, procurement planning and pre-market engagement so that businesses can properly gear up to deliver and offer the best innovative solutions. It will have a new competitive tendering procedure which will enable contracting authorities to design and run procedures that suit these markets. For example, it will allow them to contract with partners to research, develop and eventually buy a new product and service in a single process. The new rules will make it clear that buying innovation does not apply only to buying something brand new but can be about developing an existing product to meet different requirements.

The noble Lord, Lord Stevens, the noble Baroness, Lady Brinton, and others asked about the health service and the relationship with the DHSC. These reforms sit alongside proposals to reform healthcare commissioning which have been enacted through the Health and Care Act. We recognise the need for integration between local authorities and the NHS, both for joint commissioning and integrated provision, and we will work closely with the Department of Health and Social Care.

I repeat: the public procurement provisions will not result in the NHS being privatised. The procurement of clinical healthcare services by NHS bodies will be governed by DHSC legislation and is separate to the proposals in the Bill. However, the non-clinical services, such as professional services or clinical consumables, will remain part of the Bill. Clause 108, which I agree is widely framed as it sits in the Bill, is needed to ensure that it neatly dovetails with any regime created under the Health and Care Act, providing clarity. Obviously, we will have that probed.

Accessibility was another theme that was raised by the noble Lords, Lord Whitty and Lord Fox. The Government remain committed to ensuring that public procurement drives value for money, and that includes better outcomes for disabled people, as it must. The Bill does not dictate how technical specifications may be drawn up, only what is actually prohibited, as set out in Clause 24. However, there is a clear expectation that when contracting authorities set technical specifications for procurement, they do so in a way that takes into account accessibility criteria for disabled persons. Clearly, this is an important matter that requires further consideration, and we commit to doing that.

Training is important, and the training package will be made available in good time for users to prepare for the new regime being implemented. That is why we have committed to six months’ notice before going live, and the training will be rolled out. The Cabinet Office will provide both funded training and written guidance and learning aids, covering the range and depth of knowledge requirements for those operating within the new system. The online learning will be free at the point of access for contracting authorities. The knowledge drops will be freely accessible for all via YouTube, and the written guidance and learnings will also be free and accessible for all via GOV.UK.

The noble Lords, Lord Mendelsohn and Lord Aberdare, asked some pertinent and specific questions about small businesses, and I will certainly make sure that they are answered. This legislation will help SMEs to win contracts for many reasons: bidders will only have to submit their core credentials to the single platform once, for example, making it easier and more efficient to bid. The single transparency platform, or single sign-on, means that suppliers will be able to see all opportunities.

The new concept of dynamic markets, which we will explore, is intended to provide greater opportunity for SMEs to join and win work in the course of a contracting period. The Bill will ensure that subcontractors in chains will also benefit from prompt payment obligations.

There are many other ways in which we intend to help SMEs. The noble Lord, Lord Wigley, asked about the great Principality of Wales. Wales will, as he knows, have the power to publish its own procurement policy statement, in which it can set out its own local priorities for communities. We have worked closely with the Welsh Government to ensure that there is continuity for Welsh contracting authorities. For the first time, Welsh Ministers will be able to regulate the procurement of some goods and services in Wales by some cross-border contracting authorities. But in our judgment, it is right that, where the scope of a procurement extends outside Wales into the rest of the UK, the UK rules should apply.

Publicly funded housing associations would be in scope of the contracting authority definition. However, I am advised that privately funded providers of social housing would not be in scope because they do not meet either the funding or the control requirements. I will write to the noble Lord further about this.

I was going to address points about data collection, but—