Procurement Bill [HL]

Lord Lansley Excerpts

Committee stage
Wednesday 26th October 2022 Grand Committee

Moved by

[Lord Lansley]

268: Clause 50, page 31, line 6, leave out from “publish” to end of line 7 and insert “performance indicators in respect of the contract, which must include at least three quantifiable measures and such further factors and measures as the contracting authority considers justified in relation to the requirements and value of the contract.”

[Lord Lansley (Con)]

My Lords, this is quite a large group, led by Amendment 268, and it encompasses a number of issues all of which relate to the structure of contracts and how contracting authorities enter into agreements with their suppliers. I will not attempt to speak to anything other than my five amendments, save to say that the first, Amendment 268, originally went alongside Amendment 269, which has subsequently been withdrawn but was in the name of my noble friend Lady Neville-Rolfe. Were it still there, I would have said that I have some sympathy with what she says, as there can be circumstances in which a contract, in effect, looks for one item of delivery. Therefore, in my view, one quantified key performance indicator may be appropriate and the requirement to have at least three would be unnecessary. The point is that contracts should have key performance indicators.

My point in Amendment 268, which starts this group so I am able to move it, is to replace the reference to “key performance indicators” with “quantifiable measures”. I entirely admit that we know where we are with KPIs, everybody has them and so on. The trouble is that KPIs can be non-quantifiable and qualitative. That is not what we are looking for here. There is a risk that, if we are not precise about it, they will not be quantifiable, and quantifiable is what we are looking for. I do not think key performance indicators should be subjective; they should be objective and demonstrably proven. Suppliers have a significant benefit where that is the case.

That is Amendment 268, and it is more or less probing. Many of my amendments in this group are intended to ask my noble friend and the department whether they will take account of these points in the way they draft the national procurement policy statement in the guidance that follows.

Amendment 270 also relates to key performance indicators and is linked to a point we discussed on Monday, which is that the structure of the relationship and contract entered into with suppliers should relate to the original tender and the specifications in it. The amendment says that the key performance indicators “must relate” to the tender. Likewise, I hope that my noble friend will say that the Government understand that and that that is their intention. Otherwise, we run the risk that people will enter a competitive selection process, win that process and negotiate a contract but, suddenly, the contract asks them to do things that were not in the original specification. That should not be the case.

My third amendment in this group is Amendment 364. As one reads the Bill, one may come across something and think, “How does that work?” This relates to changes in the contract and the definition in Clause 69 of “substantial modification”. The first definition is that the term of the contract is increased or decreased

“by more than 10 per cent”.

Most contracts are expressed in terms of months and years, and 10% is an awkward measure: “10% of an 18-month contract is 1.8 months—let’s work that out in days”. Can we not write this is in a slightly simpler way? One-sixth has the benefit, in my view, of making a substantial modification slightly more than 10%— 16% or thereabouts—but the point is that it is readily transferrable into months and years, particularly months. So, if a contract for 18 months is modified by more than three months, you know where you stand; it is dead simple. The purpose of the amendment is to suggest that it could be done a little more simply.

My final two amendments are Amendments 397 and 400, which relate to the termination of a contract and to Clause 72. The clause states:

“every public contract … can, if a termination ground applies, be terminated by the contracting authority”,

and a list is then given of the termination grounds. I do not know whether this has been left out deliberately, or because it does not appear in the public contract regulations, or because it is intended to be part of general terms and conditions anyway and therefore does not need to be specified in legislation. But force majeure is, I think, a termination ground for a contract, so I am not sure why it is not mentioned. The point is that it should be mentioned—and if it is, there is a problem with it.

I declare an interest, and in doing so revert to what I was saying earlier about the European Commission. This issue arose for us—my wife’s company—during the pandemic. We were contracted to supply a number of events and when the pandemic hit, or shortly thereafter, some of them had to be cancelled. Members will not be surprised to hear that, under those circumstances, a significant amount of expenditure had been incurred, including cash expenditure on locations, suppliers, venues and so on. The term of the force majeure written into the European Commission’s standard contract was that, at the point at which force majeure is notified, payment for the services provided is required. As noble Lords can imagine, initially, they said, “Well, you haven’t provided those services. Those events haven’t happened and we won’t be having them.” I will not bore noble Lords with all the detail, but the net result was that we lost money. We did not lose as much as we had feared because we had a negotiation, but, according to the letter of the contract, they could have said, “You’ve spent tens of thousands of euros on events that will not now take place, but because they are not taking place, you’re at risk and you will meet the cost.” This a very large public authority expecting an SME to take the hit. We did discuss it and they did come round, but I do not think that that arrangement is sensible.

I cannot imagine that our experience is in any sense unusual. During the pandemic, thousands of businesses must have had exactly the same kind of force majeure complication. In public contracts, the force majeure contract should say what I suggest in the amendment: that, under those circumstances, when the termination ground is notified, there should be a requirement to meet the expenditure

“necessarily incurred in relation to the contract”

up to that point.

I will be happy if my noble friend the Minister is able to say, as with the other amendments, that these are interesting points and she will take them away and look at how the guidance or the statement might reflect them for the future. I beg to move Amendment 268.

[Baroness Thornton (Lab)]

My Lords, my speech is a good way of following the excellent introduction to this group of amendments by the noble Lord, Lord Lansley. I start by thanking my noble friend Lady Hayman of Ullock for putting her name to Amendment 276A and the noble Baroness, Lady Bennett, and the noble Earl, Lord Devon, for putting their names to both Amendments 269A and 276A.

As the noble Lord, Lord Lansley, said, Amendment 269A is dealing with the key performance indicators, and it adds a line that I hope the Minister will find useful:

“including at least one indicator in relation to social value.”

This would mean that all public sector contracts over £2 million would have to include a key performance indicator on social value. This would ensure that social values are included in all public sector contracts over £2 million and would send a clear signal to the private sector in particular. It would also ensure—similar to Amendment 477A, which we discussed on Monday—that contracts with social value commitments are monitored effectively and transparently.

Amendment 276A concerns transparency and “open book accounting”. It would insert a proposed new clause that I hope the Minister will see as helpful, given that she has spoken already in Committee about transparency and its importance in the spending of public funding. It says:

“All suppliers bidding for public contracts must declare the expected profit and surplus they expect to generate through the contract.”


In childcare, for example, the top 10 providers have made £300 million in profit, despite the standards of care falling and local authority budgets being under such pressure. We know this because the newspapers have reported on the conditions in which we have found cared-for children. During Covid, when we had PPE, a number of companies were making significant profits from these contracts without the need to report to the contract what margin they were prepared to make. I believe that this prevented the state adequately protecting our public money.

This amendment would mean that, on all government contracts, the supplier would have to report what profit or surplus they were expected to generate from the contract and then report back each financial year on how much profit or surplus they had generated—although I do not believe that this would solve the problem of people charging the state too much money for goods and services, and there is still a risk that companies could cost-shift artificially to reduce their declared profits. This may well leave the taxpayer in a better position to understand the true costs of contracts and would advantage providers such as social enterprises and SMEs, which are more likely to be investing the money received from contracts back into their businesses than extracting public money as profit. That is an important point because charities and social enterprises are bound by their rules to complete their accounting in two or three ways, which would include the social value of the contracts they are fulfilling.

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[Baroness Neville-Rolfe (Con)]

And a three-month review. The point about inflation is that if you build it in—this is a wider economic point—and then it goes up further, you can get an inflationary spiral. We have to try to find a way for people to come together and think about how we can best handle that, and I think the current system does that well. That is certainly my own experience, having been involved in procurement on both sides of the divide.

You can write in three-monthly reviews, but the difficulty is that this is an all-embracing Act and putting that into the Bill could lead to a lot of extra meetings and reviews that might not fit in with simplicity. But obviously this is Committee and we will be reflecting further on the right thing to do. I thank my noble friend for, as always, pursuing her point with such clarity and doggedness.

Finally, this is not in my script but I would like to confirm that I and the team are looking back at the undertakings made on earlier days in Committee to make sure that balls are not dropped. I confirm that we will be arranging meetings on the SME angle, even though I am not able to champion them. I have already had a round table with SMEs and the official team to see what can be done. I do not want to overpromise, but we want to do our best. I respectfully request that the various non-government amendments be respectively withdrawn or not moved.

[Lord Lansley (Con)]

Thank you. That was a long group so the reply was necessarily substantial, and we are most grateful for that. I was happy to have the confirmation that KPIs must be quantifiable. I am still slightly uncertain whether 10% works very easily—maybe it would have been easier to express it as one month in a year or something like that to deal with time—but still I am grateful.

If the question of force majeure is taken up through the general terms and conditions, I just ask that it requires the system, as it were, to say that we have standard terms and conditions and, as a result of some of the debates on the Bill, we also need to look at our general terms and conditions, and how things are to be expressed in future. As far as Amendment 268 is concerned, I was grateful for the Minister’s response and I beg leave to withdraw the amendment.

Amendment 268 withdrawn.

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Moved by

[Lord Lansley]

436: Clause 81, page 52, line 40, at end insert—
“(3A) Regulations may only be made under this section in relation to international agreements which have been laid before Parliament under the Constitutional Reform and Governance Act 2010.”

[Lord Lansley (Con)]

The lead Amendment 436 in this small group is in my name. These three clauses are about putting into the Bill a list of who the treaty state suppliers are. They introduce Schedule 9, which sets out that long list of countries with which we have international trade agreements that give rise to access to procurement opportunities for them here and us there.

Turning to Amendment 436, I do not disagree with the Government wanting to use secondary legislation to implement international trade agreements’ procurement requirements. I think that is a perfectly reasonable thing to do, because there will be a string of them, and amendments to them; changes to the general procurement agreement; and new agreements being entered into—all of which would lead to a tedious amount of primary legislation. Therefore, having secondary instruments is perfectly reasonable. As we will see later in the Bill, that the secondary instruments are subject to the affirmative procedure is also important.

We have to understand—I speak as a member of the International Agreements Committee—that there is a relationship between these processes and the scrutiny by Parliament. Essentially, treaties are laid under the Constitutional Reform and Governance Act. We then have a period of time in which to report to the House. I think our normal expectation is that the House would have an opportunity to look at any issues raised by the International Agreements Committee, in our case, either for information or for debate, before the point at which it is likely to have to decide whether there would be any reason to object to a draft of a statutory instrument of this kind. That would not be the case if the relevant agreement were not laid under CRaG. Noble Lords might say, “Surely they all are”, and indeed the reply from the Minister might be that they all will be. That would be a very useful thing for the Minister to say—I am not trying to lead the witness in advance—because they are not always.

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[Baroness Neville-Rolfe (Con)]

I think the greatest brains behind me have not managed to answer the noble Baroness’s question—she has bowled another good ball. Perhaps we can add that to the list for our discussions.

With that, I hope that the noble Lord will withdraw his amendment.

[Lord Lansley (Con)]

My Lords, only 110 amendments to go, so, with the benefit of that promise of further discussions, I beg leave to withdraw Amendment 436.

Amendment 436 withdrawn.

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[Lord Wigley (PC)]

I congratulate the Deputy Chairman of Committees on that “Just a Minute” miracle. I will speak to Amendment 491 standing in my name and those of the noble Baroness, Lady Humphreys, and the noble and learned Lord, Lord Thomas of Cwmgiedd.

We return to the question of the relationship of Wales to the rest of the provisions of the Bill, which we touched on way back in May or June. It was certainly a very long time ago. A certain amount of water has gone down the river since then, but none the less, the representations made by the Welsh Government to the UK Government at that time, as well as to those of us serving on this Committee, are still matters that need to be finally aired before we move out of Committee.

I note, as it is relevant to Amendment 491, that the Government did not move Amendment 490. If I am right in my understanding of that, the content which Amendment 491 seeks to amend is not changed. Amendment 491 therefore stands in relation to the Bill as it was originally formulated. I am grateful for that clarification.

The Welsh and UK Governments have, by and large, worked very closely together on the Bill, and there has been quite a close meeting of minds and a considerable amount of harmony. However, there is one matter which the Welsh Government have raised with us. The Minister concerned is seeking an amendment to the definition of the WCAs, with a view to ensuring that the clauses work more fairly in relation to some cross-border procurements—single procurements which relate to both Wales and England. The Minister in Cardiff wrote to the Minister for Brexit Opportunities and Government Efficiency on 18 May, raising this question, and discussions thereafter took place. None the less, to the best of my knowledge, there has been no amendment to the Bill that has met the question about procurement relating solely to Wales or of whether it should read, in the words of Amendment 491, “wholly or mainly”.

We are talking about the awarding of

“a contract for the purpose of exercising a function wholly in relation to Wales”.

The question is whether we put in “wholly or mainly” relating to Wales. That amendment is needed for the Bill to work effectively. One only has to think of certain of the procurements that the Welsh Government, or an agency on their behalf, are making, which may be having an effect both in Wales and over the border. One thinks of procurement in relation to water and rivers, for example, where the river runs from Wales to England. Quite clearly, in making a procurement one cannot be absolutely certain whether the product or service that is being procured relates solely to Wales, or to Wales and England. One thinks of certain aspects of the health services along the borders where that again will arise.

It seems sensible to put in the words “or mainly” to ensure that the Welsh Government, or anyone else who is concerned with this, do not get caught in a tangle about what is covered by the Bill and what is not.

Given that there has been such a close working relationship between the Welsh and UK Governments on this matter, I am surprised that there has not been a meeting of minds. If there has been some non-legislative agreement that has covered this, that we may not know about in this Committee, I would be glad if that was pointed out. I am not speaking to the other amendments in this group because they do not seem to be dealing with the same point. I would be glad to have the Minister’s response in relation to Amendment 491. I beg to move.

[Lord Lansley (Con)]

My Lords, these are different subjects, and before we turn to how regulations are to be agreed, I will turn to Amendment 527. It might be helpful if colleagues, if they have a moment, look at Schedule 11. Clause 107 sets out in Schedule 11 the repeals of legislation resulting from this legislation. The third item under “Primary legislation” says:

“An Act of Parliament resulting from the Trade (Australia and New Zealand) Bill that was introduced into the House of Commons on 11 May 2022.”


My amendment relates to whether it would be appropriate for the whole of that piece of legislation to be repealed if it were amended in the other place or in this House. As it stands at the moment, the Bill implements the procurement chapters of the two agreements. They will be implemented by their being added to Schedule 9. That is absolutely fine—it is not the issue. The issue is if the Trade (Australia and New Zealand) Bill is amended. It was not amended in Committee in the other place, but there is an amendment down on Report in the other place in the name of Nick Thomas-Symonds, for the Official Opposition, which adds a clause that says:

“The Secretary of State must publish an assessment of the impact of the implementation of the procurement Chapters within twelve months of the coming into force of Regulations made under section 1 of this Act and every three years thereafter.”


It probably will not be passed, but let us say for the sake of argument that an impact assessment was passed here—or an impact assessment or report on the impact was required here in relation to the Australia and New Zealand trade agreements more generally—into the Trade (Australia and New Zealand) Act. I think either House would then expect it to happen. However, it would probably not happen because the Procurement Bill will become the Procurement Act, and when it comes into force it would repeal the Trade (Australia and New Zealand) Act and all that is in it, regardless of whether it has been amended.

The point of my Amendment 527 is to repeal the provisions of the Act resulting from the Trade (Australia and New Zealand) Bill in so far as they were included in the Bill at its introduction. Therefore, if there is an amendment, it would not be repealed by virtue of this provision. That is the question. We are at the stage of having further conversations, and I would be very happy to have further conversations with my noble friends about this matter before we get to Report.

[Baroness Humphreys (LD)]

I will speak reasonably briefly to Amendment 491 in the name of the noble Lord, Lord Wigley, to which I have added my name. I thank the noble Lord for outlining the reasons for this amendment so clearly. I reiterate my thanks to the Cabinet Office and its civil servants, which I expressed earlier in Committee, for their constructive and positive engagements with Welsh officials. I know they have worked closely to ensure that Welsh policy objectives have been included in the Bill.

The issues that Amendment 491 highlights arise in Clause 99 and have been the subject of discussion between the two parties for some time. Like the noble Lord, Lord Wigley, I understand that the Welsh Minister for Finance and Local Government wrote to the Minister for Brexit Opportunities on 18 May to ask the UK Government to consider an amendment to the Bill to address her concerns. I hope that in the intervening five months, some agreement has been reached between the two parties.

As the noble Lord pointed out, this is a probing amendment designed to tease out, first, the problems that arise from the definition of Welsh contracting authorities and, secondly, the issue of ensuring that both clauses work more fairly in relation to some cross-border procurements. The definition of Welsh contracting authorities initially proposed by the UK Government was that of a “devolved Welsh authority”, as defined in the Government of Wales Act 2006. However, as the Welsh Government have pointed out, that does not accurately reflect all the contracting authorities in Wales that should be on the list of Welsh contracting authorities. Clauses 1 to 3 of the Bill now set out a broader definition of a devolved Welsh authority. However, there is still a concern that the breadth of contracting authorities that are not DWAs within the GoWA definition, but are to be treated as DWAs for the purpose of the Bill when they carry out a cross-border procurement, does not go far enough.

My real concern is about Clause 99(3)(b)(i), which provides for those contracting authorities that are to be treated as DWAs for the purpose of the Bill and bound by the Welsh rules where the authority is awarding a contract for the purpose of exercising a function wholly in relation to Wales—the point that the noble Lord, Lord Wigley, raised—but not for any other procurements, including cross-border ones. That word, “wholly”, means that the Welsh Government play no part in this. Ultimately, this means that, even if 90% of a cross-border procurement is for use in Wales, the English elements of the rules would apply. To me, that smacks a little of the lion wanting to take the lion’s share.

We on these Benches agree with the fairer and more pragmatic approach suggested by the Welsh Government: to follow Regulation 4 of the Public Contracts Regulations 2015 for mixed procurements. This would allow for cross-border contracts to be procured depending on the main geographical location of the contract; on which financial value was the highest; or on where the majority of the services, goods or works were being delivered. The Welsh Government have suggested that, where more than half of the procurements are to be delivered in Wales, the Welsh procurement rules should apply. They contend that, in the event of a 50/50 split, the English rules should apply. The insertion of the words “or mainly” following “wholly” in Clause 99(3)(b)(i) would achieve this end.

These proposals by the Welsh Government seem reasonable and fair. They would redress the balance between the two parties on cross-border procurement, and are supported by the Lib Dem Benches. I look forward to the Minister updating us on where officials are with these issues and hope that the spirit of positivity and co-operation that has characterised the negotiations on this Bill extends to the issues in Clause 99.