Procurement Bill [HL]

Lord Maude of Horsham Excerpts

Report stage
Monday 28th November 2022 Lords Chamber

[Lord Maude of Horsham (Con)]

My Lords, I have a very specific point to raise by way of reassurance. It is clear from the debate so far that these are complex areas that are particularly complicated because of the interaction between this Bill and the previous Health and Social Care Act; I wish my noble friend the Minister well in disentangling that and making it all clear to your Lordships.

My concern is around the provisions as they affect public service mutuals. This programme has always had cross-party support. It began under the Labour Government in the Tony Blair years, specifically in the NHS. It was then taken up enthusiastically by the coalition Government. I led the programme with the support of Liberal Democrat colleagues, in particular the noble Lord, Lord Wallace of Saltaire. This was a programme where, in particular services right across the public sector, groups of public sector workers were able to spin themselves out of the public sector and form themselves into employee-owned and employee-led entities. They then provided that service, whatever it was, to what was in effect the contracting authority under a negotiated contract.

Technically, this is procurement and, in good practice, should be subjected to a competitive tender. Indeed, we had some difficulty with the then EU public procurement regime that made it legally impossible to do this. I was able to negotiate with Commissioner Barnier a change to the EU procurement directives, which enabled a mutual to spin itself out without a competitive process for a relatively limited period before being subjected to a retendering process.

This was a very benign programme. Mutuals that spun themselves out demonstrated almost overnight a dramatic improvement in productivity—something close to 4% annually. More than 100 of them spun out. The largest number came from the health and social care sector. They did not have to do this but nearly all of them—certainly all the ones from the health and social care sector—chose to be a not-for-profit, social enterprise.

They brought together four powerful elements. The first was entrepreneurial leadership. The second was an empowered and liberated workforce. The third was commercial discipline, in the sense that they would all talk about themselves as a business even if they were a not-for-profit; that commercial discipline was crucial. The fourth element was the public service ethos. Bringing all that together created a powerful alchemy that delivered improvements in efficiency. Costs were able to be reduced, there was a reduced fee basis through the life of a contract and quality improved.

Staff satisfaction also improved enormously. Whenever I visited these mutuals, I always asked people whether they would go back and work for the NHS, the council, the Government or wherever they had come from. I never heard anyone say anything other than an immediate “No”. When asked why, they would all say something like, “Because now we can do things. We’re freed from bureaucracy. We’re freed from constraints. We can make things happen quickly”.

So my question for my noble friend the Minister, to be answered whenever she is able to do so, is whether she can provide some reassurance that the arrangements in the complex interaction between this excellent Procurement Bill and the Health and Social Care Act will, if the Government wish to accelerate this programme again, allow such arrangements to be negotiated directly between the contracting authority and the emerging spun-out entity without the need to go through a competitive process.

[Lord Wallace of Saltaire (LD)]

My Lords, we will return to the question of not-for-profits, mutuals and social enterprises in group 6, when we have Amendments 41 and 123 in my name and the name of my noble friend Lord Fox. I very much hope that we will have the support of the noble Lord, Lord Maude, on that. There was, in the Green Paper where we started this process, a very strong emphasis on the useful role that non-profits and social enterprises would have. That has disappeared from the face of the Bill. We wish to make sure that it reappears.

--- Later in debate ---

I hope that my noble friend can respond positively to the strategic priorities in Amendment 47. I look forward to hearing what she has to say. However, if it is not sufficiently positive, I may need to test the opinion of the House on Amendment 47.

[Lord Maude of Horsham (Con)]

My Lords, I draw attention to my interests as set out in the register. I am co-owner of a company that provides advice to Governments outside the UK on issues of public sector reform, including procurement—a subject that is not dear to very many people’s hearts but is to mine. I am delighted to have the chance to speak on this important group of amendments.

I assume that it is accepted everywhere that the primary purpose of good procurement law and practice is to ensure that the goods and services being procured provide excellent value and the best quality for the money. That trade-off between the two should always be primary. The various objectives and principles that are adumbrated in the amendments tabled by my noble friend Lord Lansley, and the noble Baronesses, Lady Hayman and Lady Worthington, are all excellent. I mean no offence when I say that they are motherhood and apple pie. No one would be against any of them, they are good things. The question is the extent to wish you should build into law the obligation for these to be taken into account in the ways laid out in the various amendments.

My noble friend Lord Lansley referred to the Public Services (Social Value) Act 2012, which I was very glad about as I was the Minister responsible for it. It was a Private Member’s Bill in the other place, but I was very happy that the Government supported it and saw it into law. It was very much a permissive Act. The objective was to make it clear that procurements were not to be just an arithmetic exercise looking at the pure financial value of bids but that you could look at wider social value.

However, when the coalition Government was formed in 2010 and we started to look at how procurement was being done, procurement policy was being used as a sort of Christmas tree on which many different policies were being hung. My recollection is that there were something like 11 different policies. All of them were very good. None of them was something we did not want to take seriously or thought did not matter. There were environmental and social policies, and others concerning training and apprenticeships; a whole range of interesting and good objectives. I have to say that we fairly ruthlessly stripped them out because, like now, the Government had a significant budget deficit and it is essential that primacy must be given to value for money. So we stripped them out, but that was not in any way to suggest that those factors could not be put into a request for proposal—RFP—or tender document, in the way that a number of your Lordships want to see happen on a routine basis.

The key to this is bespoking. There will be many cases where the inclusion of wider requirements makes sense and will not skew or bias a particular procurement in a way that damages its value for money—but there will be some where this is damaging, and this must be addressed close to the chalkface by those who are doing the procurement. As I said at Second Reading, the key is practices, and getting experts in procurement involved at an early stage so that the procurements can be devised in a way that supports the policy objective. Too often that does not happen. The problem with introducing broad, overarching requirements or even policy statements into the approach is that these get baked in at the policy development stage of a project, and that can then jeopardise and get in the way of the project’s effective implementation.

This leads to a broader point. It is essential that those charged with implementation of projects, programmes and policies—implementation professionals with the necessary expertise in procurement, project management, IT and digital, financial management and HR—are involved at the policy development stage. Far too often, that does not happen. That is the stage when advice can be taken and a procurement devised and formulated in such a way that these desirable other policy objectives can be addressed, but in a way that is proportionate and appropriate in the circumstances.

It seems to me that that is the reason for having that flexibility. The noble Baroness, Lady Hayman, said that the words of Ministers can be warm, encouraging and good, but there is nothing like having good, strong law to bake it in. The problem is that this can be counterproductive. We all know the reality, and it is clear from this debate that procurement is difficult, complex and technical. If it is so for those of us who are here making the law, then it is pretty difficult, complex and technical for those trying to bid for contracts from the public sector. The more complexity and legal rigidity we build in at this stage, the greater the ability of the established universe of vendors and suppliers to freeze out newer, smaller ventures from effectively bidding for and winning these important contracts.

When procurement law becomes too rigid and prescriptive, frankly, it can enable established vendors to present some of the characteristics of an oligopoly. We saw this 15 years ago, particularly in the world of public sector IT contracts. It is really important that we bear this in mind.

A little later, in group 6, we will debate the government amendment that rightly requires contracting authorities to take account of the needs of SMEs, which I wholly welcome. In an earlier debate, the noble Lord, Lord Wallace of Saltaire, mentioned the desirability of including the needs of social enterprise, to which I am very sympathetic, for all the reasons we discussed earlier.

However, the fact is that, the more prescription and rigidity in the law, the greater the scope for the big beasts in the supplier market to use their financial muscle and heft to squeeze out the smaller vendors through judicial review in the courts. Some of them are very trigger-happy in this respect. It is often the smaller, newer vendors who bring the most dynamism and innovation and are most able to bring quality and good value to the needs of delivering services and providing goods for citizens.

While recognising the good values and intentions that lie behind this desire to load all these additional factors on to procurement law and make them explicit, my counsel is that we should tread with very great caution. I do not find myself able to support these amendments.

[Baroness Noakes (Con)]

My Lords, I will offer a few general observations. I do not have any amendments in this group, and I will echo some of what my noble friend Lord Maude has just said.

I will make four points. First, I see little point in duplicating in this Bill what is already on the statute book. We have already referred to the Public Services (Social Value) Act 2012. This deals with social value and does not need to be repeated in the Bill. That applies to other matters as well.

Secondly, lists of noble Lords’ favourite topics, such as climate change and innovation, run the risk of accelerating the Bill’s obsolescence. This is the case even if lists are drafted in a non-exhaustive form. The list itself provides context for interpreting the statute at a later stage. Those interpreting the legislation will look at what Parliament’s intention was when we passed it. The sorts of things we put in now will help determine the framework within which that judgment is made.

--- Later in debate ---

[Baroness Parminter (LD)]

My Lords, I add my support to the noble Baroness, Lady Worthington. There is disunity in Horsham tonight: I disagree strongly with the noble Lord, Lord Maude of Horsham. I went to school in Horsham and was on the council there. However, I take a different view from the noble Lord about the role of procurement.

He talks about procurement’s sole purpose being good value. He went on to say that it is “motherhood and apple pie” to have value-driven public procurement policy, but I argue that it is not. That is the point of procurement: to marry good value with being value-led. Why be in government if you are not using all the levers at your disposal—regulation, fiscal incentives and disincentives, and procurement, with its massive spend—to deliver the values your Government want to deliver?

[Lord Maude of Horsham (Con)]

My Lords—

[Baroness Bloomfield of Hinton Waldrist (Con)]

I remind the House that noble Lords may speak only once on Report.

--- Later in debate ---

[Lord Maude of Horsham (Con)]

My Lords, I support government Amendment 40. This is very worthwhile. I am also very sympathetic to Amendment 41, tabled by the noble Lord, Lord Wallace of Saltaire. The reality is that not-for-profits, social enterprises and mutuals, when they come to retender or bid for different contracts, because a number of mutuals we supported have grown, both by expanding into different areas for the same group of clients but also by expanding into different geographical areas for different public authorities—and this is very worthwhile—but they are subject to very much the same kinds of constraints that the conventional procurement we inherited in 2010 imposed on SMEs.

I take slight issue with the noble Lord, Lord Wallace. I do not actually believe that there is a conflict between this approach—working to remove barriers to SMEs, social enterprises and so on participating in, bidding for and winning government and public sector contracts—and achieving better value and supporting the aims of the free market. When we went down the path, in the coalition Government, of setting an aspiration of 25% by value, at that stage, of public procurement going to SMEs, the immediate response from the conventional wisdom was, “Oh, that means you’re going to abandon best value; you’re going to have to effectively subsidise SMEs”. Precisely the reverse was the case. Opening up procurement got rid of some ridiculous requirements that were not necessary at all but were imposed by safety-first procurers: for example, that bidders should have to show three years’ audited accounts and that there should be turnover thresholds, performance bonds and requirements to show that they had in place the insurance to cover the contract value before they even bid.

The combination of all these things meant that many SMEs and start-ups and some of the most innovative, competitive and dynamic potential suppliers were simply not able to get into the marketplace at all. So there is no conflict between value for money and opening up to smaller businesses: the two objectives go absolutely hand in hand. So I strongly support the amendment the Minister has brought forward, but I urge her to look sympathetically at Amendment 41, because social enterprises, not-for-profits, mutuals and so on suffer from exactly the same disadvantages and obstacles as there were in old-fashioned procurement and it is important, I believe, that they should be included in the same bracket.

[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.