Procurement Bill [HL]

Lord Hendy Excerpts

2nd reading
Wednesday 25th May 2022 Lords Chamber

[Lord Hendy (Lab)]

My Lords, it is a great pleasure to follow the noble Baroness, Lady Bennett. I will not speak about the bus shelters of the noble Lord, Lord Moylan, or my brother, but I support what was said by my noble friends Lady Hayman and Lady Young, the noble Baronesses, Lady Parminter and Lady Bennett, and others about the use of public procurement as an instrument to advance environmental objectives.

Public procurement is also a very efficient way by which government and public authorities can require high standards from, and provide a good example to, employers. This is an important aspect of fulfilling the second objective in Clause 11(1)—“maximising public benefit”—because, of course, every public contract to which the Bill will apply requires workers to execute it. The United Kingdom has long recognised public procurement as a particularly apt tool to protect and enhance wages and working conditions. The fair wages resolutions of the House of Commons date back to 1891. Their final form was the fair wages resolution of 1946, introduced by Labour and supported by the Conservatives. In his speech in support, Harold Macmillan said of the Government:

“in placing their buying power—and this is the story behind this Resolution—they should see that they do so only with the best employers and that they do not use their contracting power to do down the better employer and to get better prices from the bad employer.”—[Official Report, Commons, 14/10/1946; col. 632.]

At that stage, the fair wages resolution had been elaborated from 1891 so that, in 1946, it had two main components. First, government contractors and subcontractors were required, as a condition of their contracts, to observe those terms and conditions of employment that had been established for the trade or industry in the relevant district by joint negotiating machinery or by arbitration. Secondly, in the absence of such established terms, contractors had to observe terms no less favourable than the general level observed by other employers whose general circumstances in the relevant trade or industry were similar. Questions arising under the resolution were first referred to the Advisory, Conciliation and Arbitration Service for conciliation and, if unsuccessful, to the Central Arbitration Committee for decision. These provisions were generally duplicated by public authorities, public bodies and the nationalised industries. In this way, wages, terms and conditions were driven up and good employers were not undercut by bad employers.

The resolution was rescinded by the Thatcher Government in 1983. To do so, it was first necessary for the United Kingdom to denounce, in 1982, International Labour Organization Convention 94, the Labour Clauses (Public Contracts) Convention 1949, which had adopted much of its text from the fair wages resolution.

Industrial relations have of course changed a great deal since 1983. Then, over 80% of British workers still had terms and conditions of employment set by collective agreements negotiated between employers and trade unions. Most of that coverage was by national agreements in various sectors. So the abolition of the fair wages resolution did not immediately have a great impact, but the policy and legislation of successive Governments have now reduced collective bargaining coverage to something below 25% of the workforce. Indeed, less than 13% of workers in the private sector, where public contracts will be placed, have the benefit of collectively agreed terms and conditions.

Consequently, today, the vast majority of the workforce are at the mercy of the labour market and employer diktat to set the terms and conditions on which they have to work. The national minimum wage is intended to protect the lowest hourly rate, but it cannot, of course, create the “high-wage, high-productivity economy” to which this Government aspire. So, reversion to negotiated terms and conditions, as elsewhere in western Europe, and as advocated by both the ILO and the OECD—see successive employment outlooks from 2017 onwards—and, as proposed by the fair wages Bill now before the New Zealand Parliament, might well redress the falling value of real wages in this country, wages which are already lower in value now than they were 12 years ago, particularly in the lowest three quarters of the wage distribution, with the exception of the very lowest paid.

This Bill presents the opportunity to revert to the 1891 and 1946 precedents as a simple and powerful mechanism to drive up wages, terms and conditions and to prevent bad employers from undercutting good ones. I will propose an amendment to that effect, if the Government are unwilling to move their own, and would be happy to consider with colleagues how these principles might apply to overseas suppliers, which we have heard about this evening. The Bill also provides the opportunity to deal with any number of other workplace abuses. Here is the chance to make public contracts dependent on not behaving as P&O Ferries did, as my noble friend Lord Whitty pointed out. Here is a chance to put an end to the noxious practice of “fire and rehire”, at least by public bodies. If it be thought that public bodies do not resort to such tactics, Richmond upon Thames College is an example of such a body, which has threatened 127 lecturers with that very ploy. Again, if the Government do not move such amendments, and in the absence of an employment Bill, I would wish to do so.

There are a number of other good practices to encourage and bad practices to discourage which this Bill could achieve by way of conditionality for the grant of public contracts, but I will not take time now to go through them. I have just one further point. The public procurement regulations which are to be displaced by the current Bill do not do any of the things that I have mentioned. But one thing that those regulations did do—in Regulation 56(2) of the Public Contracts Regulations 2015, for example—was allow public authority contractors to refuse tenderers which failed to comply with the various environmental, social and labour law provisions listed in Annex X to the EU public contracts directive of 2014. Amongst other things, that annexe lists ILO Convention 87 on the right to organise and ILO Convention 98 on the right to bargain collectively. These provisions have been excised from the current Bill. Schedule 7 does not include such international standards as grounds for discretionary exclusion of tenderers, and the list of international agreements in Schedule 9 does not include any ILO conventions or, indeed, any human rights instruments at all.

The UK was the first country to ratify Conventions 87 and 98, in 1948 and 1949 respectively. They became the most fundamental and are now the most ratified of all the conventions of the ILO. The present Government might harbour the desire to denounce those conventions, as they did 40 years ago with Convention 94, given that the UK has been found to be continuously in breach of them since at least 1989. However, they cannot denounce them because they have recently committed to

“respecting, promoting and effectively implementing the internationally recognised core labour standards, as defined in the fundamental ILO Conventions, which are: … (a) freedom of association and the effective recognition of the right to collective bargaining”—

I will not read the rest, but I am quoting from Article 399 of the EU-UK trade and co-operation agreement of last year. That article also reiterates that the Government

“commits to implementing all the ILO Conventions that the United Kingdom and the Member States have respectively ratified”.

In light of that, I ask the Minister: how can the exclusion in this Bill of references to ILO Conventions 87 and 98 as a potential basis of refusing tenderers be justified?

In conclusion, I wonder if the Minister would be prepared to meet to discuss whether and to what extent labour standards might be made conditions for public contracts.

Procurement Bill [HL]

Lord Hendy Excerpts

Committee stage
Wednesday 13th July 2022 Grand Committee

[Lord Knight of Weymouth (Lab)]

My Lords, I should start by apologising for not being able to be present for Second Reading, but I hope that we can have an interesting niche debate about the importance of good work and good work in respect of government procurement. There are five amendments in my name in this group, and I am delighted that I was joined by my noble friends Lord Hendy and Lady Hayman and the noble Baroness, Lady Bennett. I am grateful to them for their support. Also in this group are some important amendments from my noble friend Lord Hendy.

There are two aspects of regulation as I see it. One is about putting some minimum standards in place, which is what my noble friend’s important amendments are about, and the other is about commissioning better practice and better performance, and that is where my amendments sit.

I should also remind your Lordships that I am the co-chair of the All-Party Parliamentary Group on the Future of Work, along with David Davis in the other place. We have been working with the Institute for the Future of Work on this good work agenda and have found from the evidence around good work that the more you can increase the quantity of good work in the economy and society, the better the prospects are for people and the communities in which they live. We therefore remind the Minister and the Committee of the importance of this agenda in terms of levelling up, in particular, but also building security, prosperity and self-respect—there is a virtuous circle in play.

We are also trying to tackle particular problems that the Institute for the Future of Work, for example, uncovered in its report The Amazonian Era. It looks at the supply chain in the logistics sector that starts with the Amazon warehouses and the problems of algorithmic management where people are being managed by machines and are suffering in terms of their mental health, self-respect, security and prosperity as a result. The Committee may be interested to know that President Biden in the United States is currently instigating a whole swathe of work around supply chains for procurement in order to look at this very topic.

In one of the amendments, we define what good work is, but it is important to remember how good work aligns social, economic and health interests. Taking health, for example, the institute’s good work monitor shows a really strong correlation between health outcomes and higher-quality work, especially regarding chronic obstructive pulmonary disease, heart disease, some cancers, liver disease, drug use and self-harm. All those can be improved by people being able to work in a better environment. This was underscored by the Deaton review for the Institute for Fiscal Studies in May 2019.

There is also a correlation between the pay and benefits that workers receive and the productivity they then generate—hence this is also good for employers. The Resolution Foundation today has published a report showing that UK households are, on average, £8,800 worse off than their equivalents in France and Germany, in large part because of low productivity. This is a British disease that we need to tackle. I suggest that tackling, and incentivising through procurement, a better quality of work is at the heart of what we might want to do. I can also tell the Committee that this is not at the expense of unemployment. There is a very useful correlation showing that good work creates good and higher levels of employment.

I will not run through the principles of good work, as they are set out in one of my amendments. However, in terms of the requirement that we want to put on those entering the process to secure government procurement, there are plenty of indicators to help them demonstrate the quality of the work that they are offering and engaged in. The amendments would essentially ensure that the impacts on access to work and the conditions and quality of work are evaluated at a prequalification stage in procurement. They would thereby deliver strong public benefits. I listened carefully to what the Minister, the noble Lord, Lord True, said in response to the last group of amendments around public benefit. The essential argument was, I think, that it applies differently to different projects, and he therefore wants to keep it loose and flexible.

I say to him that I worry, first, about the possibility of companies that are successful in procurement off-setting one social or public benefit against another. I really do not want to see anyone off-setting the quality of the work against some other social good or public benefit. Secondly, my understanding of how good, successful capitalism works is that business and employers demonstrate four types of value: value to the shareholder; value to the customer, in this case the public purse; value to society, namely public benefit; and employee benefit and value. That is the value mix we are looking to incentivise and get right. In this context and this group of amendments, we are arguing—there is really good evidence to support this—that you can deliver really strong employee benefit and in doing so deliver extremely successful social and public benefit along the way. I seek to get this written into the Bill through these amendments. I beg to move.

[Lord Hendy (Lab)]

My Lords, I will speak to Amendments 186, 292, 297, 315, 319 and 519. I express my gratitude to the noble Baroness, Lady Bennett, and my noble friends Lord Hain and Lord Monks for adding their names. Of course, I support the amendments moved by my noble friend Lord Knight, for the reasons he advanced.

All the amendments in this group are designed to utilise the tremendous power of public procurement to improve the lot of Britain’s 32 million-strong workforce. As the Minister reminded us at Second Reading, £300 billion of public contracts is involved, some 13% of GDP. Public contracts involve tens of thousands of employers and hundreds of thousands, if not millions, of workers in their execution.

At Second Reading, I tried to make the case for the Bill to restore the fair wages resolution of the House of Commons, which subsisted to protect terms and conditions from 1891 through to 1983. The response of the Minister, the noble Lord, Lord True, was:

“To impose your political objectives on a nation, you have to win an election and form a Government.”—[Official Report, 25/5/22; col. 925.]


He made that point earlier this afternoon in different words. It was a powerful point, but we do not think it is sufficiently powerful to answer the amendments proposed.

There are two reasons for this, one ethical and the other legal. I will deal with the ethical issue first. As we know, Clause 11(1) of the Bill includes “maximising public benefit” as one of four objectives to which the contracting bodies must have regard in letting public contracts. Clearly, one way of maximising benefit is to improve or maintain the condition of the working lives of both the workers engaged on public contracts and the many more millions whose employers will be influenced by the terms and conditions set on public contracts.

The other side of that coin is the public benefit in preventing bad employers undercutting good ones in the obtaining of public contracts. Bad employers such as P&O Ferries, which deployed employment practices which the Prime Minister and other Ministers condemned as abominable, should not on any basis be the beneficiaries of public contracts, as I am sure the Minister will agree. Schedules 6 and 7 of the Bill already specify various mandatory and discretionary grounds for excluding potential bidders from public contracts, among which are various forms of abuse of workers. So the principle is established, but the exclusions do not go far enough.

Amendments 186 and 319—one is mandatory and the other discretionary, if your Lordships do not like the idea of mandatory exclusion on this basis—would provide for the possible exclusion of bidders on the basis that the bidder has been found by an employment tribunal or court to have significantly breached the rights of an employee or worker, or that it has admitted that it significantly breached those rights, or that it has made a payment to an employee or worker in respect of a significant breach of their rights. That would catch the P&O Ferries-type employer. Of course, it is necessary to include, as the previous legislation did, a mechanism for self-cleansing so that bidders that are genuinely remorseful and have changed their practice can be included.

--- Later in debate ---

The noble Lord, Lord Hendy, also mentioned the TCA.

[Lord Hendy (Lab)]

Why would breaches of ILO conventions not apply to bidders in this country if they apply to bidders from outside this country?

[Baroness Scott of Bybrook (Con)]

As that is a legal question, I shall get a legal answer for the noble Lord, and I will certainly write. I thought I had answered him, but I will make sure that that is clearly written legally.

On the TCA, with respect to Articles 387 and 399 of the EU-UK Trade and Cooperation Agreement, procurement law does not grant rights to workers and, as such, the exclusion grounds are not inconsistent with the UK’s obligations under those articles. The rights protected by these provisions are provided elsewhere in national laws, none of which are affected by the Bill. The exclusion grounds are not intended as a means of enforcing labour rights; rather, exclusion is a mechanism to ensure that contracting authorities do not award contracts to suppliers that pose a risk.

I am confident this will enable contracting authorities effectively to protect the rights of workers delivering public contracts, especially when combined with other changes we are making to strengthen the exclusions regime, such as the inclusion of serious labour misconduct in the absence of a conviction as a discretionary ground for exclusion; requiring assessment of whether the exclusion grounds apply to subsidiaries of the supplier; and extending the current time limit for discretionary exclusion grounds from three years to five years.

Amendments 292 and 297, tabled by the noble Lords, Lord Hendy, Lord Hain, Lord Monks and Lord Woodley, remove the requirement for contracting authorities to consider the risk of the circumstances giving rise to an exclusion ground recurring in applying the exclusions regime. Exclusion is not a punishment for past misconduct; that is for the courts to decide. Exclusion is a risk-based measure and, as such, suppliers should be encouraged to clean up their act and given the right to make the case that they have addressed the risk of the misconduct or other issues occurring again. This might be through better training, stronger compliance controls or dismissing the staff involved in any misconduct. 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.

Amendment 519, tabled by the noble Lord, Lord Hendy, proposes to use Clause 104 of the Bill to omit Section 17(5)(a) and (b) from the Local Government Act 1988. It would remove the prohibition on relevant authorities, as detailed in Section 17(5)(a) and (b) of the 1988 Act, to consider in relation to public supply or works contracts the terms and conditions of a contractor’s workers and the employment status of their subcontractors.

The Bill provides for a range of labour violations to be considered as part of the grounds for exclusion, which must be considered for every supplier wishing to participate in each procurement within the scope of the Bill. These matters will be subject to further debate, possibly later today, when the Committee considers the exclusions and debarment regime in the Bill. I am sure my noble friend Lord True will have more to say on that.

The purpose of Clause 104 in the Bill is, first, to ensure that authorities to which Section 17 of the Local Government Act 1988 applies are not prevented by that section from complying with their duties under this Bill; and, secondly, to enable a Minister of the Crown or the Welsh Ministers to make regulations to disapply, when required, a duty under Section 17. The clause ensures that authorities covered by the 1988 Act can take advantage of domestic procurement policies that may be implemented during the life of the Bill.

Clause 104(1), which amends Section 17(11) of the Local Government Act 1988, directly achieves this. However, it amends Section 17 only to the extent necessary to ensure that the relevant authorities are not prevented by virtue of the section from complying with the Bill. It would not be appropriate to use the Bill as a vehicle to make further amendments to the 1988 Act, as proposed by the noble Lord, Lord Hendy.

Amendment 535, tabled by the noble Lords, Lord Knight and Lord Hendy, and the noble Baronesses, Lady Hayman and Lady Bennett, creates the concept of “good work”, relied upon by the other amendments in this group. In the light of my responses on substantive amendments, there is little I can usefully add on this amendment. I therefore respectfully ask that noble Lords do not pursue these amendments.

Procurement Bill [HL]

Lord Hendy Excerpts

Report stage
Monday 28th November 2022 Lords Chamber

[Baroness Noakes (Con)]

My Lords, I have Amendment 164 in this group, to which my noble friend Lord Moylan has added his name. Before turning to that, I echo what other noble Lords have said in thanking my noble friend the Minister for her amendments on SMEs. I am very glad that she has taken into the Cabinet Office the evident passion she demonstrated for the cause of SMEs when she took part in Committee on the Bill. Of course, there is no one silver bullet that is going to solve all the problems of SMEs engaging in public procurement, but I believe that most of the amendments before us here will contribute to an important advance in that area.

I have a concern about Amendment 134, which is one of my noble friend’s amendments. It keeps the new Clause 11 duty out of the enforcement clause, Clause 92. That is a pity, because it means that SMEs, which think that that duty is not being complied with, will have to fall back on judicial review—and, as we know, judicial review is not a practical remedy available to SMEs. I regret that. I similarly regret Amendment 140 in relation to procurement oversight recommendations, and I hope that the Government will have an opportunity to think again about both those areas when the Bill moves to the other place.

My Amendment 164 is aimed at the same target as Amendment 163 in the name of the noble Baroness, Lady Bennett of Manor Castle, who was not in her place when the debate started earlier this evening. I was expecting the noble Baroness, Lady Bennett of Manor Castle, to explain the amendment, and then I was going to come in behind it. They are both sourced from an amendment suggested by the Local Government Association. It concerns Section 17 of the Local Government Act 1988 and the exclusion of non-commercial interests that is required by that section. Clause 107 allows regulations under this Bill to disapply that duty for below-threshold contracts. The issue raised by the Local Government Association was that that should not be just permissive but should be an absolute requirement.

The noble Baroness, Lady Bennett of Manor Castle, tabled an amendment in the form originally suggested by the Local Government Association. I have been around a little longer than the noble Baroness, Lady Bennett of Manor Castle, and have debated may/must amendments in relation to whether regulations should be obligatory or permissive. It is a good technique for discussing issues in Committee, but when we get to the sharp end of the business of legislation, the Government always resist a regulation-making power being obligatory—and for good reason, because it ties the hands of today’s Government and any future Governments. I accept that, and I am sure that the Opposition Benches who may want one day to be making legislation of their own would accept that as well. So I retabled the concept of the amendment by inserting below-threshold contracts into the list of things that could be done with this power, in the hope not that my noble friend would accept the amendment but that she would give a clear commitment at the Dispatch Box today to use the regulation-making power at the appropriate time to ensure that below-threshold contracts are excluded from the ambit of Section 17, as I mentioned. I look forward to hearing what the Minister has to say.

[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.

--- Later in debate ---

[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.