Procurement Bill [HL]

Lord Lansley Excerpts

Report stage
Monday 28th November 2022 Lords Chamber

[Baroness Noakes (Con)]

My Lords, I have Amendments 4 and 190 in this group. Some questions have been raised by the Benches opposite about whether I was here for the commencement of the debate. I assure the House that I heard every word of the Minister’s opening remarks from my place and I am not usually regarded as invisible in your Lordships’ House.

Before I get to my amendments, let me say that I have much sympathy with the amendments tabled by the noble Baroness, Lady Brinton. I think we have to stop the culture of exceptionalism for the NHS and bring it within the ordinary rules; other noble Lords have said why that is. We should allow an exception only if there is a very good case for it so I will be listening very carefully to what my noble friend the Minister has to say about that when she concludes this debate.

My amendments each cover a distinct issue. I will start with Amendment 190 because that is the easier of them. Noble Lords may have noticed that my noble friend the Minister has added her name to Amendment 190 and I am grateful for the Government’s support in dealing with a technical issue that I raised in Committee following the eagle-eyed scrutiny of the Bill by Professor Sanchez-Graells of the Centre for Global Law and Innovation at the University of Bristol.

The Bill had defined how to value contracts including VAT when the contracting authority paid for the goods or services that it was procuring but failed to deal with the converse situation when it received money, which can arise under a concession contract. Amendment 190 puts this right and so sums receivable under contracts will be valued including the related value added tax. I look forward to moving this amendment formally in due course.

Amendment 4 is an amendment to government Amendment 2. Amendment 2 has virtually rewritten most of Clause 1 but my amendment would have also been proposed in relation to the text of the Bill as introduced. It is about control and how to define it, which I raised in a couple of amendments in Committee.

A public authority is defined in the amended Clause 1(2) proposed by Amendment 2 as including a person who is

“subject to public authority oversight”,

which is in turn defined in amended Clause 1(3) as being

“subject to the management or control of … one or more public authorities, or … a board more than half of the members of which are appointed by one or more public authorities.”

Thus, if a board is involved, control is determined by the fact of appointments rather than the capacity to appoint members of the board. That is an unusual concept for those of us steeped in company or tax law.

The Clause 1 approach to control is in contrast to its use in determining whether vertical arrangements exist in order to qualify as an exempted contract under Schedule 2. The Schedule 2 definition has its own problems, which I spoke about in Committee, but its core concept is to use the Companies Act 2006 definition of control, which is based on capacity to control. I believe that the issues with Clause 1 and Schedule 2 were not satisfactorily dealt with when I raised these points in Committee, so I have returned to them today, to highlight that the Bill is not internally coherent in its approach to determining whether organisation A controls organisation B.

My solution is to import the Schedule 2 definition into Clause 1, save for paragraph 2(3) of Schedule 2. I personally think that sub-paragraph (3) is very odd in the context of Schedule 2, but it certainly does not belong to the approach for control in Clause 1. I have no intention of dividing the House on this matter and I am by no means confident of my drafting, but I believe that the Government should look again at the robustness and coherence of the approaches they have taken in the Bill.

[Lord Lansley (Con)]

My Lords, I have no amendment in this group, but I want to refer to government Amendment 34. I entirely agree with the proposition that the Bill enables public procurement to be put on a better path than it has been in the past. Many of those working in procurement across the public services have welcomed the Bill. As it happens, they also welcome the scrutiny we are giving it, because it is leading to improvements to the Bill. I did not attempt to count the number of government amendments we dealt with in Committee, but they were in the hundreds. In addition to those, I calculate that we have 153 government amendments on Report, so if it takes us a while, it is not our fault. None the less, it is a good job and it is right that we should do it. That is why I raise the following question on government Amendment 34.

My noble friend will recall that these amendments were not moved in Committee because there was some difficulty about what “covered procurement” was relative to “procurement”. At the time, I supported the Government’s amendments, because it seemed right to ensure that the broader scope of the Bill and the regulatory requirements encompassed within it should be applied to larger procurements and not smaller ones. I now support the insertion of “covered” before “procurement” in all the government amendments—except Amendment 34. Why do I single it out? Including “covered” means that procurements which are above the threshold and not exempt are subject to the Bill and the full range of its requirements—see Schedule 1 for the thresholds and Schedule 2 for the exemptions. Clause 2 makes it clear that public contracts are those that are above the threshold and not exempt. Okay, fine: “covered procurement” makes a distinction between those that are exempt and of lesser value and those that are of a higher value and included.

Clause 11 relates to procurement objectives. Procurement objectives are statements, not least by Parliament as well as by the Government, about what those who are engaged in procurement should regard as their responsibility. The essence of Clause 11 is that:

“In carrying out a procurement, a contracting authority must have regard to … delivering value for money … maximising public benefit … sharing information”—


so that people can understand the authority’s procurement policies and decisions—and

“acting, and being seen to act, with integrity.”

In my submission, these are not regulatory requirements; they are the basis on which contracting authorities should be behaving. We will come on to debate Clause 11 and will deal with its proposals then. But it seems to me that, however we end up stating in Clause 11 that these are procurement objectives for contracting authorities, they should apply to all contracting authorities and to all their procurements.

Interestingly, the Government resist this on grounds of flexibility. I am not sure in this context what that means: flexibility not to have value for money; flexibility not to act with integrity? But the Government have not disapplied the operation of Clause 12 and the national procurement policy statement. The Government want to have the power to apply the statement to all procurements, so we do not get “covered” in front of procurement in Clause 12(1) but we do get “covered” in relation to procurement in Clause 11. This must be wrong. It must clearly be right that not only the procurement statement but the objectives on which it must be based must apply to all procurements.

So I put it to my noble friend that this is not a technical amendment. There may be many that are technical amendments, but this is a substantive amendment that has an unhappy consequence that it would disapply the procurement objectives to a significant number of the lower-value procurement activities in the public sector. So when we reach government Amendment 34, I invite my noble friend not to move it. I hope that she will at the very least do that on the grounds that this should be revisited before Third Reading.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I rise briefly having attached my name to Amendment 173 in the names of the noble Baroness, Lady Brinton, and the noble Lord, Lord Scriven. I attempted to attach my name to Amendment 3, but somehow that transferred to government Amendment 2, which I am guessing everyone has already worked out was a mistake—part of the general confusion we have with this Bill. Perhaps it is just, as the noble Lord, Lord Lansley, outlined, that the flood of government amendments has overwhelmed the administration of Report.

The noble Baroness, Lady Brinton, and the noble Lord, Lord Hunt, have already set out the issues very clearly. The noble Lord, Lord Alton, gave us a masterclass, having made himself an absolute expert on the issues of procurement, particularly around Covid. I want to add one extra balancing thought to that. The issues of privatisation and contracts do not apply only to the procurement of materials; they apply to the procurement of services, including the clinical services to which the noble Lord, Lord Hunt, referred. It is important that this does not get lost.

I will refer to a study published in the Lancet public health journal by academics from the University of Oxford in June. It showed that outsourcing since 2012 had been associated with a drop in care quality and higher rates of treatable mortality. This is peer-reviewed research published in a very respected journal that shows that privatisation has had and is having a disastrous effect. To quote the authors of that study:

“Our findings suggest that further privatisation of the NHS might lead to worse population health outcomes.”


I think it would be unrealistic to expect the public to engage with the details of the kind of debate we are having this afternoon, but it is important, and I have no doubt at all that the public is gravely concerned to see that we have maximum transparency. Indeed, I think there is strong public support for reversing the privatisation of the NHS—but, wherever we are letting contracts for the NHS, we must have maximum transparency and clarity about the manner in which that is done.

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We have to be realistic about this. Of course contractors and suppliers must act with integrity—that point was made and I very much agree with it—but that is not a reason to change the whole shape of the Bill and put on contracting authorities new requirements that go very much wider than the sort of thing that we have debated. I hope the noble Lord can see the difficulties that the expansion of these obligations beyond covered procurement would create for contracting authorities, and I hope he will feel able not to press—

[Lord Lansley (Con)]

My noble friend used the important word “security” in relation to security contracts, but surely Clause 11 and the procurement objectives apply to security contracts that exceed the threshold set in Schedule 1. In what sense is it inappropriate for the objectives or principles set out in Clause 11 to be applied simply because those thresholds fall below about £5 million?

[Baroness Neville-Rolfe (Con)]

I should reflect further on this. Clearly, some parts of the Bill are carved out. We have discussed this in relation to the NHS and we will discuss it on Wednesday in relation to the Ministry of Defence. We have to be very careful about national security—there is agreement on that across the House. I have been advised that the sheer breadth of Clause 11 would have a damaging effect if we apply this right across the board on procurement, and I am disturbed about that. I am happy to look at that further and talk further to my noble friend Lord Lansley.

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[Baroness Bloomfield of Hinton Waldrist]

My Lords, this next group refers to utilities. Amendments 11, 13, 14, 17, 20, 21, 22, 169, 174, 180 and 184 relate to an exemption for utility activities exposed to competition. The amendments to Clause 5 and Schedule 4, and a consequential amendment to Schedule 2, are again in response to the concern of the DPRRC that the power to establish a procedure to exempt utilities subject to competition from the Bill amounted to a skeleton clause. The Government will replace this power with one that requires the exemptions to be made by secondary legislation under an affirmative procedure. This will afford Parliament greater scrutiny to review each exemption. The test to be satisfied for an exemption remains that there is fair and effective competition in the relevant utility market, and that entry to that market is unrestricted.

Noble Lords should note that Amendment 22 adds Part 2 to Schedule 4, which sets out the utility activities which are exempt from procurement regulations. These reflect exemptions that exist under the current regime, which are preserved by Amendment 169 in order that they are available under the Scottish procurement regulations.

Amendments 174, 180 and 184 ensure that the affirmative procedure applies to an exercise of the power.

Amendments 15 and 16 ensure that the definition of private utilities and contracting authority interact as intended and that a private utility is only a contracting authority in respect of the utility activities for which the utility has a special or exclusive right.

Amendments 18 and 19 revise the description of a utility activity in the transport sector in paragraph 4 of Schedule 4.

Amendments 56, 71 and 200 speed up procurements and reduce the burden for utilities using a utilities dynamic market—a UDM—by only requiring utilities to provide tender notices of upcoming procurements to suppliers on a UDM or appropriate part of a UDM, instead of having to publish notices. In practice, this means utilities can, for example, provide the tender notice to suppliers on the UDM as part of the associated tender documents as each procurement under the UDM is commenced.

In order to take advantage of this flexibility, the notice setting up the UDM must meet minimum information requirements, which will be set out in regulations under Clause 88. Utilities must specify in the UDM notice that only members of the UDM will be provided with tender notices. The notice setting up the UDM will be published continuously and will remain open so new members can join at any time. If accepted, they would then be entitled to receive tender notices.

Amendment 77 to Clause 48 will allow private utilities to adopt a voluntary standstill period to direct award contracts instead of a mandatory one. This means private utilities will take a risk-based decision on whether to apply a standstill period to a direct award procurement. It is in keeping with only regulating private utilities’ procurement to the extent necessary under our international obligations. I will turn to the amendment in the name of my noble friend Lord Lansley in my closing speech, having heard the points he raises. I beg to move.

[Lord Lansley (Con)]

My Lords, I am most grateful to my noble friend, not least because she referred to Amendment 169 in her helpful introduction to these amendments on utilities. Happily, we have reached the end of the Bill quite early on; that amendment relates to the very last page—page 118—where, in the present draft of the Bill, Commission decisions relating to public contract regulations, utilities and so on were to be repealed. Her explanation is interesting, in that it retains these European Commission decisions as retained EU law for the benefit of the Scottish regime. I am slightly perplexed as to why they were to be repealed in the first place since, presumably, the Scottish regime would have required them for this purpose regardless. However, that is just a question and it is only a matter of curiosity that I ask it.

My Amendment 23 is an amendment to government Amendment 22. As my noble friend made clear, the DPRRC said that this was a skeleton clause and was particularly unhelpful because it disguised the fact that policy had not been developed. I do not know whether that is the case or not; the point is that Ministers have come forward with a proposal for how these exemption decisions should work in relation to utility activities. I remind noble Lords that there are activities, and there are utility activities. The effect of Schedule 2 is to make it clear that certain activities should not be regarded as utility activities because they are in fair and effective competition and there are no restrictions on entry to that market. The decisions that were made were about electricity, gas and oil extraction, production and generation.

That being the case, the policy decisions in government Amendments 17 and 22, which my noble friend has explained, have the effect in Amendment 22 of saying, “These are the existing exemption decisions”. Government Amendment 17 says that, in future, Ministers can add to them or subtract from them by regulation. The point of my Amendment 23 is to ask, “When Ministers were reaching a view as to how these exemption decisions should be made in future, why did they not look at the Competition and Markets Authority, which we have as our own creature for the making of competition-related decisions, and put to it the job of determining whether a given activity in the utilities sector—actually, it would also be true in other sectors if exemption decisions were sought—is in fair and effective competition and there are no restrictions to the market?”

If my noble friend says, “Ah, but when Ministers make regulations, they will of course take advice from the Competition and Markets Authority”, I will be very happy. If she does not say that, however, I will be nervous, because what is the point of having the Competition and Markets Authority able to make such decisions in lieu of what used to be the European Commission’s responsibility if Ministers are going to pre-empt it themselves? I hope that she will be able to give me that reassurance about the use of the CMA for making competition-related decisions.

[Baroness Hayman of Ullock (Lab)]

My Lords, I thank the Government for tabling a lot of the amendments, which have helped to bring clarification around utilities; quite a bit of confusion was expressed in Committee. I also remind the noble Baroness, Lady Neville-Rolfe, who is not currently in her place, that she did say that we should be extremely careful about regulating private utilities in Committee. These amendments seriously have her stamp on them; I thank her for that. The noble Lord, Lord Lansley, made some important points. I hope that the noble Baroness, Lady Bloomfield, listened carefully and can give the reassurances that he requested.

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[Baroness Worthington (CB)]

My Lords, I will speak to Amendment 42 in my name in this group and in support of Amendments 46 and 47. I will keep my comments brief. We had a very good debate in Committee about what should go into the Bill in relation to the principles that will guide procurement. In my amendment, I sought to be as precise as possible and selected two specific issues relating to climate change and biodiversity loss. The reason for that is that it has been pointed out to me that society’s priorities shift over time and primary legislation should be regarded as very serious: you therefore should not put a long shopping list of things into it. However, on these two issues, I cannot imagine a time henceforth when we will not be concerned about the impacts of climate change or biodiversity loss. The Government have a huge lever for change to drive investments into solutions. It would be a great shame if we were not to make it very clear in the Bill that this lever is something that we are willing and want to use.

The more the public purse can create markets and drive investment, the more we can rely on the private sector to come forward with innovation. It will bring down the cost over time. If we do not use public procurement, we will be expecting more from our private sector, and it will debatable whether it will be able to enter into markets that are highly mature and overcapitalised. We are not talking about a level playing field here. If you want private solutions to come in, you have to support them either through government policy, through taxation or through procurement. This Bill is a huge lever that I hope we will pull.

Although I would be delighted to test the will of the House of Amendment 42, it is actually more important that we put these principles in on the operational aspects of this Bill, in which case Amendments 46 and 47, which relate to national policy planning guidance, are hugely important, and I support both of those amendments. I look forward to hearing those who speak to them and to the Government’s response.

[Lord Lansley (Con)]

My Lords, I am glad to follow the noble Baroness, Lady Worthington. I signed her Amendment 42 and I thoroughly agree with it. Indeed, I agree with all the points she made, including—I am grateful to her for saying it—the importance of focusing on the national procurement policy statement. In a sense, while it would be helpful for Clause 11 on procurement objectives to clarify what is meant by “public benefit”, there is always a risk that we either have a broad-ranging—no disrespect to it—but perfectly understandable series of statements, as in Amendment 33 moved by the noble Baroness opposite, or, as with Amendment 42, by narrowing it down, we somehow make people imagine that we have excluded these other terribly important objectives. My noble friend would doubtless say that the more we put into the procurement objectives, the more difficult it will be for contracting authorities to comply with competing considerations and so on. There is a lack of flexibility in that.

I thoroughly agree, therefore, with the proposition that we need to focus on the national procurement policy statement. The Government will publish that. As we know from other contexts, that is what the contracting authorities are going to look at. We know that the NPPS will include the Government’s strategic priorities, but we do not know what those are. The question then immediately emerges: is it proper for Parliament to have a view about that, or should we just say, “When the time comes, the Government will say what their strategic priorities are, and that’s good enough for us”?

Amendment 47 is limited in precisely the way the noble Baroness who signed the amendment said. It does not tell the Government to have a long list of strategic priorities. They may have their own strategic priorities but, during the Committee debates, noble Lords who were there will recall that there were some clear strategic priorities which the Committee wanted to see reflected in the Government’s statement. They included, perhaps most prominently, the environmental issues. One way of doing it which should cause the Government the least possible vexation is to do it by specific reference to the existing statutory targets set out in the Climate Change Act and the Environment Act—that is, to make it clear that they must ask contracting authorities to do the things that they are statutorily obliged to do in any case. They might say that that is unnecessary: actually it is not, because we all know that when these are reflected properly in the strategic priorities of the NPPS, the authorities will do it. If they are not reflected in the strategic priorities in the NPPS, they might be on statute but the authorities may well not do it. We have to make sure that they do it.

Turning to the second strategic priority in Amendment 47—requirements set out in the Public Services (Social Value) Act—I am glad that my noble friend Lord Maude of Horsham is in his place, because he will know that reflecting the strategic priority on that social value legislation is precisely one of the mechanisms for ensuring that social enterprises are given the priority they deserve. For example—I hesitate, in speaking to my noble friend, to cite this—but the European Commission document Buying for Social Impact, published in 2018, had a range of examples from across Europe, one of which was from Scotland. The Scottish example said that one of the implications of buying for social impact has been the use of not-for-profit and social enterprises in respect of public procurement. It is therefore a very effective way of bringing that to the forefront.

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[Baroness Neville-Rolfe (Con)]

My Lords, earlier today, we discussed government Amendment 34 on covered procurement, and, as promised, I have reflected on the contributions made by noble Lords. They will have noted that I left the Bill to my noble friend Lady Bloomfield for a while for this very purpose. I have looked at the implications of not proceeding with this amendment with my experts, and I still intend to move it. It is the Government’s view that, if it is not agreed, the objectives will still have to be considered for all procurements, including exempted procurements under Schedule 2, which would create the perverse situation I mentioned of needing to consider transparency in those exempted security contracts or—to give another example—contracts with law firms, which would include legally privileged information, and that would not be appropriate. It will also extend to small, low-value contracts, including those let by small authorities such as parish councils.

For these reasons, and those I set out earlier, I move Amendment 34. Should your Lordships disagree, the House can make its view known.

[Lord Lansley (Con)]

If that is the argument, why will the national procurement policy statement be applied to all procurements and not just covered procurements?

[Baroness Neville-Rolfe (Con)]

As we have discussed, the national procurement policy statement is wide-ranging. In the Bill, we have tried to set up a framework and lots of rules for contracting authorities to try to ensure that they are adopting procedures that will improve and simplify procurement, which, as we all agree in this House, is not in the state it needs to be in. We believe that not moving Amendment 34—that is, not restricting procurement in certain respects—will lead to a great deal more difficulty for contracting authorities, particularly in these exempt areas. We have looked at the exemptions carefully and, contrary to what I think my noble friend thinks, individual procurements would have to be considered in a much more detailed way as a result of the perverse effect without this amendment.

As I said, should your Lordships disagree, the House can make its view known, should it wish. I beg to move Amendment 34.

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[Lord Aberdare (CB)]

My Lords, my principal interest in the Bill has been whether it would achieve its stated objective of giving small and medium-sized enterprises a better chance to compete for and win public contracts, including SMEs providing specialist services in the construction sector, such as those represented by the Actuate UK engineering services alliance. So I very much support the government amendments in this group that seek to reinforce that objective, notably Amendment 40, explicitly requiring contracting authorities to take account of barriers faced by small firms and Amendments 57, 73 and 74, preventing unreasonable requirements for participation, such as providing audited annual accounts even for firms that do not otherwise need to produce them, or having insurance already in place before the award of a contract.

Other issues of importance to SMEs covered in Committee related to improving payment practices for public contracts and resolving payment disputes. However, since these are not specifically addressed in the amendments in this group, it might be more appropriate to raise them when we discuss the procurement review unit on Wednesday. However, I add my support to Amendment 41 in the names of the noble Lords, Lord Wallace and Lord Fox, adding social enterprises and not-for-profit companies to the beneficiaries of Amendment 40.

On that subject, I also thank the Minister for her recent letter confirming the Government’s commitment to resolving a concern I raised in Committee about whether the drafting of Clause 31, concerning reserved contracts to supported employment providers, actually delivers the Government’s intention to implement an approach fully equivalent to that currently in place. I know that community enterprises that use such reserved contracts are much reassured by the commitment given by the Minister and I look forward to the letter she has promised to confirm that the issue has been resolved, and how.

[Lord Lansley (Con)]

My Lords, I thank my noble friend for taking up the issue of SMEs, following not least the points she herself made in Committee. We thoroughly agreed with her and I think there was much consensus. I have two amendments in this group, which are by way of probing the issues a little. The first is Amendment 54. The two government amendments on SMEs relate, interestingly, to covered procurements in the first instance and then to below-threshold procurements separately. To that extent, putting it in the Bill and applying it to broader procurement seems to work in this case.

Amendment 54 would specifically include a reference to the capability of small and medium-sized enterprises in relation to preliminary market engagement, which may well be a place where SMEs in particular need to be supported, because they often do not necessarily have all the credentials and capabilities to hand. The second is an amendment to government Amendment 188, which defines “small and medium-sized enterprises” in thoroughly familiar terms to all of us who deal with these things. I tabled my amendment because the origin of the definition is essentially in European Commission regulations.

The reason that the Commission, in addition to the head-count calculation, adds turnover or revenue requirements is that SMEs have to be assessed by reference to that for the purposes of state aid and subsidy control. In this instance, subsidy control or state aid is not relevant, so, when it comes down to capability, the only issue that really matters is head count. Indeed, the Commission itself, in the regulation it put forward, makes it very clear that head count is the “main criterion”. I think it would be better to rest only on that, rather than to include the necessity for contracting authorities to look at turnover or revenue.

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Moved by

[Lord Lansley]

47: Clause 12, page 9, line 11, at end insert—
“(3A) The strategic priorities to be included in the statement must include, but are not limited to—(a) achieving targets set under the Climate Change Act 2008 and the Environment Act 2021,(b) meeting requirements set out in the Public Services (Social Value) Act 2012,(c) promoting innovation amongst potential suppliers, and(d) minimising the incidence of fraud, waste or abuse of public money.”Member’s explanatory statement
This amendment would require that the priorities listed in the amendment are among the strategic priorities in relation to procurement included in the National Procurement Policy Statement.

[Lord Lansley (Con)]

My Lords, Amendment 46 does not in any sense pre-empt Amendment 47, since Amendment 47 adds specific text to the Bill relating to the Environment Act, the Climate Change Act, the Public Services (Social Value) Act, and the promotion of innovation and the minimisation of fraud, waste and abuse of public money. It does so, as my noble friend said in the group we have just discussed, by putting it in the Bill and what is currently in the national procurement policy statement does not suffice. I move Amendment 47 and beg leave to test the opinion of the House.