Procurement Bill [HL]

Lord Fox Excerpts

Report stage
Monday 28th November 2022 Lords Chamber

The clause is so badly drafted that I think it completely puts an end to horizontal arrangements. My noble friend Lady Noakes has expressed this very well; it is a very simple matter to correct this. It is not the Government’s intention, I am sure, to tie everybody up in knots in this way. It would be very simple for my noble friend on the Front Bench simply to say that my noble friend Lady Noakes has got this absolutely right, and that she will bring forward an amendment in just those terms at Third Reading so that we can solve this and put it to bed.

[Lord Fox (LD)]

My Lords, I will speak very briefly. I have just a couple of points to make before I speak to Amendment 9. First, I join the chorus of welcome for the collaborative spirit that the Minister has managed to engender among noble Lords working on the Bill. Secondly, the noble Lord, Lord Lansley—who I see has slipped out—and the noble Lord, Lord Moylan, both mentioned the fog of uncertainty created by the number of government amendments. I have a small mea culpa as to why some of those have been carried over on Report. Those of your Lordships who were in Grand Committee will remember the outrage caused by 340-odd government amendments landing without an explanation. That caused me to push them back, so I am afraid that I am responsible for their reappearance. However, that did what we wanted it to do: it gave us time to understand and follow those amendments. I think this amendment arises from the perspective we have had in that time.

Two things have happened which I never thought would: first, I find myself in almost complete agreement with the noble Lord, Lord Moylan; and, secondly, he appears to be calling for the emulation of the EU in British law. When we get to the retained EU law revocation Bill, I am sure he can join me to make similar entreaties from his position at the back of the Chamber. Joking aside, the point here is whether this was deliberate or an accident; we are waiting to hear from the Minister on that. This issue reflects a number of debates, certainly the one we have had on Amendment 34—which I trust will come back at Third Reading rather than being agreed here—and one that we will have in a later group in which the noble Earl, Lord Lindsay, has highlighted another issue.

More generally, whatever happens to the Bill on Report, there is a real need for people to sit down with cold towels on their heads and go through the Bill line by line one more time before we get to Third Reading. Because there have been so many amendments, it has been almost impossible to follow properly what is happening. We have all done our best, and the Minister has worked like a Trojan—as have your Lordships—but I think that there is a strong call for further work to be done once we get through Report stage on Wednesday evening.

With that, I support the attempts of the noble Baroness, Lady Noakes, in Amendment 9 to get some clarity on this, and I support the spirit of her speech.

[Lord Greenhalgh (Con)]

My Lords, I rise because I was named by my noble friend Lord Moylan, and because this is a subject that I feel very passionately about, as someone who spent 16 years as a councillor and six years as a council leader. Indeed, I am very proud of the work we did to collaborate. It is something that came to me a little late in my local government career, because I used to believe in two things: competition and fear—that is, fear of failure—but collaboration is also important in local government.

My noble friend Lord Moylan pointed to the vision we had in west London to come together to collaborate to drive down costs. In fact, when it came to library services, it was very much in the back offices that we could make savings so that libraries could stay open and the public could be served by excellent libraries. We worked very carefully across a whole range of areas, such as highways and helping children across west London who needed safeguarding and support to find potential parents who could look after them, in a way that would not have been possible without collaboration.

I am also a huge fan of mutualisation. I know that is coming up in group 6, but I want to say that as someone who was a pathfinder of the work that my noble friend Lord Maude brought forward. The organisation that was spun out of the council to provide school support services exists today and is trading very well with officers I had as senior officers in Hammersmith and Fulham. They preferred a life outside the council. I pay tribute to that movement. It had real vision behind it. It did not involve competition and was really about empowering people to provide the services that they were already providing in a better and more comprehensive way. I think that was a tremendous pathfinder and I only wish that it could have been rolled out more widely across local government and the public sector.

I probably should have declared my business interests as set out in the register before starting to speak. However, I can honestly tell noble Lords that I have absolutely nothing to do with public procurement in my business life because today it takes a long time. It is really difficult and the barriers to entry are very great. I am sure the purpose of this Procurement Bill is to make sure that public procurement works for the benefit of those services and we can use competition in a sensible way and it can be streamlined. I think the purpose of the amendment from my noble friend Lady Noakes is to ensure that, where local trading companies exist, they will not fall foul of the reasonableness test and things have to be put out to competition. In fact, as a council leader I bought a communications service from the City of Westminster because of the expertise it had in comms. That was an expertise that existed only in Westminster City Council, and I did not think that that needed to go out to competition. So I think we need to be sensible.

As a true loyalist, I support the Government if they can point out how a reasonable test can work to ensure that there is not unnecessary tendering in this instance. Provided I get those reassurances, I am happy to support the Minister in her endeavours to ensure that we sort out these areas and preserve areas such as local authority trading companies that provide an important part of services in local government.

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Amendment 165 responds to a recommendation of the Delegated Powers and Regulatory Reform Committee. Paragraph 3(3) of Schedule 10 amends Section 15 of the Defence Reform Act 2014 to provide a power to specify an alternative method of determining the price payable under a qualifying defence contract and the circumstances under which that method is to be used. The committee’s view was that regulations brought forward under this power should follow an affirmative procedure. The Government accept the committee’s view, and hence this amendment. I hope noble Lords will therefore support these government amendments. I beg to move.

[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.

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[Lord Fox (LD)]

My Lords, this is a very important group of amendments. We have had many speakers, so I will be concise. My noble friend Lady Parminter has already made some important points on our part. I will not repeat her comments, but we regard the issue of economic, social and environmental benefits to be paramount and we do not subscribe to the idea that it should not be in some way guided by the legislation or the operational part of the legislation.

I have listened carefully to the other speeches. I am minded to side with the approach of the noble Lord, Lord Lansley, of using the NPPS as the vehicle through which this aim and principle is achieved. I hope that we shall be able to support both him and the noble Baroness in His Majesty’s Opposition if they decide to press their amendments. Amendments 35 and 46 bear my name; clearly, I stand by them and the speeches that others have made.

There are two other areas on which I want to speak very briefly. Not least, the noble Lord, Lord Hunt, was unable to be here, but I know that he and my noble friend Lady Brinton have tabled Amendments 38 and 83, which reflect on accessibility. The previous legislation had prior regulations about accessibility and the fact that public procurement should ensure accessibility to all people. It has been lost in the drafting of this Bill. It is not clear to me whether that is a deliberate or accidental dropping of something, so it will be very useful to hear from the Minister what the Government’s thinking was on this. If it was deliberate, I would urge them to think again; if it was accidental, there is time to put it right.

Finally, I would like to make a pitch to support the noble Earl, Lord Lindsay, who has unearthed something that must be another unintended consequence of this legislation. I cannot believe that this was deliberately put in place by the Government. His Amendments 58 and 82 are an important way of righting that situation. I hope, again, that the Minister will think again.

In conclusion, we on these Benches absolutely believe that there should be a public purpose to procurement. We feel that the legislators have a role, as well as the very important role outlined by the noble Lord, Lord Maude, for the professionals, when it comes to implementing that policy. It is really important that we seek to achieve public good through the £300 billion of procurement that this country makes.

[Baroness Neville-Rolfe (Con)]

My Lords, we have had an extremely interesting debate—a shorter one than I was expecting—and I am grateful for all the contributions.

I will start by saying that, while I understand that noble Lords rightly wish to pursue their particular interests, many of which I agree with, we have to bear in mind that procurement is, above all, an economic activity. That does not mean that we cannot take other things into account, but no amount of environmental or social benefit could make a procurement satisfactory if it failed to deliver economically on its intended purpose. We need to avoid the Christmas tree that my noble friend Lord Maude referred to. Of course, the NPPS allows for the inclusion of these sorts of policies—including net zero, as the noble Baroness, Lady Parminter, said—but that does not mean to say that we want to put them on the face of the Bill.

In my view, value for money comes first, especially given the financial difficulties that we now face, but it is important to recognise that, as a result of Clause 18, contracting authorities will be working to a new definition, which nobody has mentioned, of “most advantageous tender” rather than “most economically advantageous tender”—that is, MAT not MEAT—so the days of focusing on price alone, not quality or wider matters such as generating UK employment opportunities, are over. Specific policies could also be put into bespoke tender documents, as my noble friend explained.

Secondly, my experience of many Bills is that it is unwise to attempt to define everything in detail at a particular point in time. As the years pass, relative priorities change. Who would have thought two years ago that inflation, the price of energy and the consequences of war would feature so highly on the national agenda? There will no doubt be other surprises—as, indeed, has been the scale of climate change; 20 or 30 years ago, most of us did not realise what would happen.

Thirdly, productivity growth is worryingly low in this country. It is essential that this Bill and the £300 billion of public procurement each year provides a boost and that small businesses are able to secure a share of that, as my noble friend Lord Lindsay’s comments implied. Innovation and competition have an important part to play here—I know that my noble friend Lord Lansley feels that strongly; they are two very important objectives. Procurement should be an enabler of innovation rather than increasing barriers to entry for competition, as my noble friend Lord Maude said.

Against this background, I come to Amendment 33, moved by the noble Baroness, Lady Hayman. This seeks to restate the six principles consulted on in the Green Paper. In addition to the 619 responses we received, we have carried out extensive consultation with interested groups, as the noble Baroness will know. As a result, our principles were refined and then translated into the objectives and specific obligations that now exist in the Bill. The language of a Green Paper is not the language of legislation, and we have reflected the principles in a way designed to help contracting authorities understand how they will implement them. That goes for value for money, public good, transparency and integrity.

The public consultation indicated that “fair treatment” was too subjective for contracting authorities to determine by objective standards, so we introduced the concept of “treating suppliers the same” in Clause 11(2); and “non-discrimination” has been converted from an objective to a hard-edged obligation in Clauses 83 to 85. We believe that the combination of the objectives and specific legal obligations in the Bill deals with procurement principles in a more effective and practical way.

Amendment 35 in the name of the noble Baroness, Lady Hayman, changes the recognised concept of “value for money” in the procurement objectives into a more amorphous one, which includes the concepts of “social value” and “equity”. I have a number of concerns with what that amendment does. First, it moves contracting authorities away from the well-known concept of “value for money” and creates a new, and perhaps confusing, duty. Contracting authorities will not know this new duty and it will take time, resources and probably a number of costly legal challenges—a bugbear of procurement—to work that out. It is also an unfair burden to place on them in this new regime; we need to minimise legal doubt wherever we can.

It is also worth reminding noble Lords that the current national procurement policy statement already includes social value as one of its key themes. I am also concerned by the assumption that an obligation to have regard to some degree of social value must ensure some degree of equity in procurements. I do not think I am alone in being unclear on what “equity” is supposed to mean in this context, and doubtful that the simple existence of “social value” would deliver it.

Amendments 36 and 42, tabled by the noble Baronesses, Lady Worthington and Lady Hayman, and the noble Lord, Lord Coaker, seek to define “public benefit” to include various social and economic matters. The public benefit objective in Clause 11(1)(b) is deliberately undefined, so it is a flexible concept that gives contracting authorities a wide degree of discretion. These amendments seek to define “public benefit” in a much narrower way, limited only to economic, social and environmental benefits.

As I said at the beginning, we have lost sight of the need for our procurement spend also to be used to increase productivity, drive efficiency and stimulate growth. So let us keep the Bill as clear and simple as we can so that we do not swamp contractors and SMEs in paperwork. Let us instead ensure that we have an appropriate national procurement policy statement that can evolve as times change.

Amendments 38 and 83, tabled by the noble Lord, Lord Hunt, and the noble Baroness, Lady Brinton, but spoken to by the noble Lord, Lord Fox, require contracting authorities to have regard, when carrying out a procurement, to the accessibility of what is being procured for disabled people. I reassure noble Lords that we share the same intent. However, amendments to the Bill are not required: there is no need to change the Bill because, although disability accessibility is of great importance, it is already catered for in the public sector equality duty in the Equality Act 2010. It is appropriate that these matters are considered at the point that contracting authorities draw up technical specifications, and they must apply the requirements of existing law. My officials, however, would certainly welcome further engagement with bodies representing disabled people as the technical specifications and guidance are developed.

[Lord Fox (LD)]

The noble Baroness is right that the public sector equality duty is in the Equality Act, but the current system, which we will lose when the Bill comes into force, incorporates both the PSED and provisions under secondary legislation, such as the Public Contracts Regulations 2015. Therefore, when those regulations were laid, there was a tacit acceptance that the PSED alone was insufficient. If the Minister does not accept the amendments, will she bring forward other provisions in another way to backfill what is clearly being lost as we move from one set of rules to the other?

[Baroness Neville-Rolfe (Con)]

My attitude to this is clear, and I have offered to engage on the subsidiary detail of the transformation that we are planning with the Bill.

I turn to the important matter of the national procurement policy statement, which sets out strategic priorities for procurement. Amendment 43—I hope noble Lords will forgive me if I do not mention their names in relation to every amendment they have tabled—would require the Government to publish a national procurement policy statement, rather than just allowing them to do so. This is the so-called move from “may” to “must”. Amendment 44 then requires a statement to be published within 12 months of the relevant section coming into force.

I think the clause is right as it is. Think of how much more important issues such as supply chain resilience have become since the outbreak of Covid and the conflict in Ukraine. The current approach enables the Government to react nimbly to changes in priority, which my noble friend Lady Noakes thought was important, and they can issue a new statement as appropriate. However, importantly, I can assure noble Lords that this Government will publish such a statement when the Bill takes effect; indeed, they have already done so in draft. The Bill will put the new statement on a statutory footing. Importantly, the clause provides that, once the statement is published, contracting authorities must have regard to it when carrying out their procurement activity. The amendment as drafted requires a Minister to publish a statement. However, a Minister would be unable to fulfil this requirement were Parliament to vote against it, perversely meaning that the amendment would potentially prevent a Minister discharging the statutory duty. I would therefore prefer to avoid the formula proposed in Amendment 43.

Amendment 46 proposes that, prior to publishing a statement, the Minister must give due regard to a number of specified principles, most of which represent elements core to the procurement regime. This is evident from the drafting of the Bill overall: for example, value for money, integrity and maximising public benefit are set out clearly, and transparency is a specific requirement running throughout the Bill. There is a lot in common here with what I said at the beginning so I will not repeat that.

Amendment 47, tabled by my noble friend Lord Lansley, the noble Baroness, Lady Worthington, and the noble Earl, Lord Devon, would require the inclusion of specific priorities in the national procurement policy statement relating to the achievement of targets and requirements set under the Climate Change Act and other legislation, as well as promoting innovation and minimising the incidence of fraud. As discussed in Committee, the range of topics suggested by noble Lords during the process demonstrates that stakeholders have different priorities for procurement. These matters are already well covered in our statute book. It is important that policy priorities are addressed in a targeted way and that our regime does not contribute to a deterioration in productivity. That said, noble Lords will be reassured to know that many of these themes—net zero, social value and innovation—feature in the current non-statutory statement that we have already published.

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[Lord Hendy (Lab)]

My Lords, I rise to speak to Amendment 162A, which rather neatly follows the noble Baroness, Lady Noakes, because it deals with Section 17 of the Local Government Act 1988. Its intention is to remove the prohibition in that provision which prevents local authorities taking into account the terms and conditions of the staff of the supplier, or their legal status. The thought behind this is that public authorities should take into account the terms and conditions and the legal status of those who carry out the work under these public contracts. The restriction applies to local government only and not to other public authorities.

[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.

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[Baroness Neville-Rolfe (Con)]

My Lords, I rise to introduce a number of government amendments. These include several technical amendments, so I will be brief.

Amendments 59, 60, 108 and 109 exempt the corporate officers of Parliament from the requirement to seek agreement from a Minister of the Crown before excluding a supplier or terminating a contract under the national security exclusion ground. Amendment 85 ensures that the mandatory exclusion grounds capture all Scots law offences equivalent to the already specified English and Welsh offences.

Amendments 86 and 87 refer to the relevant sections in the Theft Act to align with other legislation on economic crimes. Amendment 88 amends the transitional regime for mandatory exclusions to ensure that the correct time period is applied for the mandatory exclusion ground for conspiracy to defraud. Amendment 90 simplifies the exclusion grounds for suppliers which are insolvent or bankrupt. Amendments 92 and 93 amend the rules on how far in the past events can be taken into account as discretionary exclusion grounds in relation to breach of contract and poor performance.

I will turn to the amendments tabled by other noble Lords when I close. I beg to move.

[Lord Fox (LD)]

My Lords, I rise to speak to Amendment 89 in my name. I feel that the time pressure has lifted, so perhaps I can make a nice long speech to your Lordships now. Amendment 89 is intended to allow Ministers and contracting authorities to exclude businesses from procurement where there is evidence of financial and economic criminal activity, such as fraud, money laundering, bribery or sanctions evasions, but there has not yet been a conviction by a court.

This follows the debate we had in Grand Committee on Amendment 320, when the Minister made some cogent points about the problems of excluding organisations that had not been convicted—that point was understood. However, given the length of time involved in carrying out investigations and then securing the resulting enforcement action, we remain concerned that there is a real possibility that unsuitable suppliers may be awarded procurement contracts while they are awaiting the full length of the process.

It was therefore with some interest that my attention was drawn to the Government’s Review into the Risks of Fraud and Corruption in Local Government Procurement. This review looked into the risks of fraud and corruption in local government procurement—not surprising; that is what it was supposed to do—and made the recommendation that the exclusions regime for public procurement should be examined to see

“if more could be done to allow procurers to exclude bidders from the process (with reasonable cause and without the requirement to disclose), for example when there are known concerns with law enforcement that have not yet resulted in a prosecution”.

We believe that the Bill provides an opportunity for the Government to fulfil this recommendation, and suggest that the process of studying how to do that, recommended in that report, could happen. I should be grateful if the Minister would bring forward some sort of government process to have that assessment. If this is not the Government’s intention, she needs to explain to your Lordships’ House why she is prepared to recommend one process for local authorities through a report that had ministerial backing while ignoring the actual issue in the appropriate legislation, which is the Bill. This was the subject of a letter that I wrote to the Minister many days ago and I am still waiting for the reply.

It is in everyone’s interest to ensure that the contracting authority can act when it has evidence of financial or economic offences, but formal conviction is outstanding. We understand the problems, but the Government themselves have identified this as an issue with local authorities. The exclusion regime is not just a deterrent for bad actors; it is also supposed to prevent them getting the contracts in the first place.

[Lord Hendy (Lab)]

My Lords, my Amendment 91A follows the theme of my earlier Amendment 162A. The thrust of this amendment is that in determining whether to let a public contract to a bidder, a public authority should have the power to take into consideration the conduct of the potential supplier vis-à-vis its staff.

The Government are to be praised for accepting that public procurement is a useful tool to maintain and raise standards, hence the emphasis on public good, even without the benefit of Amendment 46. Clause 29, for example, excludes those guilty of improper behaviour of various kinds. Schedule 6 provides that there are mandatory exclusions, among other things, for suppliers who have been convicted of various offences: corporate manslaughter, homicide, terrorism, theft, fraud, bribery, organised crime, tax offences, and cartel offences.