Procurement Bill [HL]

Lord Mendelsohn Excerpts

2nd reading
Wednesday 25th May 2022 Lords Chamber

[Lord Mendelsohn (Lab)]

My Lords, I thank the Minister for his very impressive introduction. This is an important new framework, representing some progress and some decent measures of reform. Of course, as ever, language overstates the problems and usually the benefits, but ambition is no bad thing in this area. We saw from the excellent speeches of my noble friend Lady Hayman of Ullock and the noble Lord, Lord Fox, that there are a lot of issues here which will lead to a very interesting and useful debate.

The Minister said that this would deliver an effective and efficient regime. As we heard from the last speakers, a variety of things not inherently in the Bill would lead to an effective and efficient regime. We must give due regard to those and ensure that we have the right skills, the right capacity, and the right objectives. A few areas are not present which I would be keen for the Minister or this House to give a view on, to ensure that we get them right.

I am concerned that the Minister gave a clean bill of health to the Covid procurement process. In my experience in business, it is untenable to say that there were rigorous evaluations. If you were procuring based on selecting people who did not have one moment’s experience in being able to source effectively, and if you do not know how to do quality control or logistics, then it is untenable. The number of companies in that list that got it shows that it was not done properly. I am concerned that we do not have the mechanisms reflected in this Bill to ensure that those things which are important once you have a framework are there.

I also think we must consider one of the things that is not there, and which has led to many unsuccessful procurements: late changes being made to the system. Whether that is mending or meddling—I hope that it is more the first than the latter—these are significant areas which affect the capacity of procurement and its success. We must work out how those can be done better, not least with the changes to parcelling to allow for small businesses to be part of it.

I reinforce the point so excellently expressed by the noble Lord, Lord Stevens, that our supply chain resilience is an important part of this. The noble Lord, Lord Lansley, talked about innovation, but the general use of market-making, not as a central mechanism but as an important function of £300 billion-worth of expenditure, and the way that has been so successfully used by many other countries to improve their capacity to deal with cybersecurity, regional variations, or other things—that resilience—is really important.

Notwithstanding that, I greatly congratulate the Government. I am very heartened by the increased focus on small businesses and on late payment and payment terms. This is to be warmly applauded and welcomed, and I am very grateful to the Government for making these changes. I can see a wry smile from a previous Minister because I am banging the same drum, but I will carry on doing so.

In Part 4, Clauses 63 and 64 set a maximum 30 days for payment, so there is no real change for government. However, if my interpretation of Schedule 2 is correct, this is all-encompassing, and this deals with supply chains and utility companies—a major step forward, so again I greatly congratulate the Government on doing that. I hope that this means that they will amend the late payment of commercial debts Act by setting maximum payment terms of 30 days for all suppliers, bringing the procurement Act, the Prompt Payment Code and the Late Payment of Commercial Debts Regulations into alignment.

I would also be very keen for the Minister to guarantee that after the Government have defined supply chains, they will have also dealt with the increasing practice of putting in a financial service company between the main contractors, with whom they contract and where there is an obligation for 30 days in the supply chain, to offset the supplier to a contract with another party which gives them 90 days. That is a way in which that mechanism has been subverted. I hope that the Government can be consistent in ensuring that this is applied throughout. It would be of great benefit to small businesses.

In Clause 65, there are strong provisions on information about payments under public contracts. Again, this appears to require public bodies to submit information along the lines of the duty to report. It would be sensible for the Government to use the existing mechanism available under duty to report, which gives a single point of reference for businesses to review public and private payment performance, and it would be a helpful addition.

In Part 8, Clauses 85(2)(a) and 85(2)(b) concern some potential exclusions to the duties to publish and provide information, and it talks about prejudicing interests. I would be grateful if the Minister could ensure that payment terms are never part of those exclusions, to make sure that that information continues to flow consistently.

The Bill provides for a contracting authority’s duty to comply with Parts 1 to 5, 7 and 8, saying that only enforceable and civil proceedings are covered under this part. The Government really need to recognise the litigation costs required. Lord Justice Jackson’s review of civil litigation costs found that the claimant’s costs for cases in the £50,000 to £110,000 region are likely to exceed £110,000, while the defendant can expect costs in excess of £129,000. It is unrealistic to expect small businesses that are trying to break into this market to be able to rely on that as a protection. I therefore suggest that, as an alternative, small businesses be able to report abuses to the Small Business Commissioner so that it can investigate them. I further suggest that the Small Business Commissioner be given both the budget and autonomy to act independently on such claims.

In Part 10, Clause 96(1) and Part 13, Clause 111(1)(a), an appropriate authority may investigate compliance under the Act. The appropriate authority is, of course, a Minister of the Crown. I remind the House that the Small Business Commissioner is already well versed in matters pertaining to late payments and, with that in mind, I strongly suggest that it could also be called upon to perform that duty.

Finally, in Schedule 2 there is one area of concern on which it would be useful if the Government expanded during Committee: how far do the 30-day terms extend? Is it just government purchases—for example, the petrol for ambulances—or does it fully affect the whole supply chain of a utility company’s expenditure on, for example, branding, refit costs and so on? If it is the latter, this is even more excellent news and a first step in reducing all contracts to a maximum of 30 days, and it is to be warmly welcomed.

Although there are many wider issues, which I look forward to examining, I welcome the provisions on small businesses and hope that the Minister and his department will take extra care to make sure that they remain consistent, and that the advances they have developed to the benefit of small businesses are carried through the entirety of the Bill.

Procurement Bill [HL]

Lord Mendelsohn Excerpts

Committee stage
Monday 18th July 2022 Grand Committee

[Lord Aberdare (CB)]

My Lords, I added my name to Amendment 445, tabled by the noble Lord, Lord Hunt, and I shall make a couple of points in addition to what he has said.

Clause 84 requires pipeline notices to be published where the contracting authority expects to pay more than £100 million under relevant contracts in the coming financial year. However, this will be required only for contracts with an estimated value of more than £2 million. This threshold will do very little to improve transparency or, indeed, preparedness and competitiveness for SMEs and charities. According to research by the Federation of Small Businesses, over the past three years almost half—48%—of public sector contracts applied for by SMEs were worth below £25,000 and nine in 10, or 89%, were worth below £100,000.

My second point is that the amendment merely requires contracting authorities to consider publishing a pipeline notice where this would be likely to enable a wider range of providers to participate, thus improving the quality and value for money of services tendered. This would surely be a useful, if relatively mild, way of promoting greater awareness of the importance of engaging more small businesses, charities and social enterprise in public contracts. It deserves support.

[Lord Mendelsohn (Lab)]

My Lords, I rise to support Amendment 445, which I was also pleased to sign. The noble Lord, Lord Hunt, made a very good case for why it would be so useful for charities and the noble Lord, Lord Aberdare, extended that. I wish to extend it further to reinforce the point that the importance of the pipeline notice is that it provides guidance for the authorities to take a risk that, in a sense, goes slightly beyond the principle that no one got fired for choosing IBM. If we are trying to get the best service, we must look for the right opportunities and the right people, not just in the context of charities, or even small businesses. Those especially penalised are microbusinesses, freelancers or even start-ups in the commercial sector, not-for-profits and social enterprises. All are massively disadvantaged by tendering for any contract. Many have more than enough skill to be able to do it, and many of the people who provide the backbone for those areas are people who accomplished it very comfortably in larger companies. The effective use of pipeline notices is a strong signal that the Government expect all contracting authorities to make a judgment that will help all those sorts of businesses and those people who can provide excellent and outstanding service. They deserve the opportunity to do so.

[Lord Berkeley (Lab)]

My Lords, I shall speak to Amendment 449A tabled in my name and that of the noble Lord, Lord Clement-Jones. I support the two amendments to which my noble friend Lord Hunt of Kings Heath has just spoken. Amendment 449A covers much the same ground as his Amendment 449, but it probably goes a bit further in arguing for the need for transparency. It relates to public service contractors and where information about them should be available under FoI.

The Bill’s disclosure provisions are very limited in comparison with what would be available under FoI. Authorities responsible for contracts worth over £200 million would be required to set and publish key performance indicators, but they do not give the same information, there is a delay of probably up to one year in them and they do not help members of the public and others who might be interested in getting the information.

The amendment sets out that the FoI Act should be extended to cover information held by public sector contractors about these contracts. At present, it allows access to such information only if it is held on behalf of the commissioning authority, which normally applies only where the contract specifically entitles the authority to obtain particular information from the contractor. Where it does not, the information held by the contractor is outside the scope of FoI provisions.

There are many examples of this. Some of those cited by my noble friend probably also apply here but I shall mention one or two others. The first is a report on potential fire safety defects at Hereford County Hospital, constructed and managed under a PFI scheme by Mercia Healthcare Ltd under an agreement with the NHS trust. The report was commissioned by Mercia Healthcare from the now-defunct contractor Carillion, which was still operating at the time. The request to the trust for information about this was refused on the grounds that the report was not held by or on behalf of the trust. There are many such examples. I could explain at length some of the contracts that HS2 has got into; I shall not, but the same comments apply. There is a complete lack of transparency about information on that.

The extension to cover information held by contractors about contracts with public authorities has been supported by the Information Commissioner, the Public Accounts Committee, the Public Administration and Constitutional Affairs Committee, the Justice Committee, the Committee on Standards in Public Life, the Independent Commission on Freedom of Information, set up by the Government to review the FoI Act in 2015, and the Institute for Government. There are many other examples from around the world where transparency is thought necessary and desirable. I believe the UK FoI provisions should be extended to allow access to such information via a request to the public authority responsible for the contract.

While I am on my feet and while we are talking about transparency, I should like to ask the Minister about a Written Statement giving guidance to Ministers participating in government commercial activity. It comes from the Minister for Brexit Opportunities and Government Efficiency and says that the Bill we are discussing

“creates a simpler and more flexible commercial system that better meets our country’s needs while remaining compliant with our international obligations. Ministers have the opportunity to participate fully in this system with certain safeguards to protect them from the risk of legal challenge.”—[Official Report, Commons, 15/7/22; col. 17WS.]

I could add that it does not protect the taxpayer and does not seem to protect anybody from the Minister making lots of money out of NHS contracts, as we have heard. It is odd that this Statement has come out in the middle of our deliberations on this Bill. Could the Minister explain when we can see the guidance—I have asked the Library and it does not have it yet—and how it fits in with the Bill we are discussing?

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Moved by

[Lord Mendelsohn]

174: Clause 30, page 19, line 16, at end insert—
“(d) a supplier is not a signatory of good standing on the Prompt Payment Code.”Member’s explanatory statement
This amendment would strengthen requirements of good practice and simplify checking processes for all contracts either under this Act or in the open market.

[Lord Mendelsohn (Lab)]

My Lords, I think the phrase in a situation like that is “follow that”; that was an impressive performance by the chair.

In moving Amendment 174, I will speak to Amendment 317 in this rather interesting little group. The amendments I propose relate to the Prompt Payment Code. Amendment 174 aims to ensure that suppliers are signatories to the code and of good standing; and to ensure their exclusion in government procurement if they are not of good standing, not signatories to the code or have been subject to an investigation and not done the right thing having been found wanting.

I suggest these amendments for three reasons. First, the Prompt Payment Code offers a public and obvious ease of reference for any public authority or anyone involved in public procurement, even just checking the process. The real value of what the Government have done in increasing its resourcing and housing it with the Small Business Commissioner is that it makes it much easier to use it as a reference point. Making sure that you have something clear, public, available and transparent is of great use.

Secondly, it is worth acknowledging that the Government have taken steps to try to encourage a more effective Prompt Payment Code by creating a series of initiatives that came into force this year to encourage much stronger compliance with good payment terms. We do not talk just about late payments, of course, because there has been a greater imposition of long payment terms; the Prompt Payment Code has reduced those. Also, it starts to help clarify the problems that are now being felt by many where either an agreed contract is delayed or payments are reduced post hoc, with only one side making that conclusion using the asymmetries of power.

Those initiatives on the Prompt Payment Code have been welcome. In September 2019, the Government made an announcement about the importance of how people pay for government contracts, including how they must pay within the right payment terms and on the right timescale. It is useful that all these initiatives are brought together quite nicely—as I say, they are publicly available—through the code so that we have one reference point.

However, it is important to start introducing these measures together because all of them constantly need strengthening. The Government’s attempt to use their new code to make sure that suppliers cascade the money to all the people who are due has faced difficulties because master contracts are now used so that the main supplier to the Government can say that it discharged its duty easily while all the other payments are held up by people who pay the next layer. Those dates have then been massively extended, as we have seen.

Indeed, it is not as if the Prompt Payment Code is immune to certain problems. For that reason, it is important that the Government show their full commitment to it and use it most effectively to encourage those are not doing the right thing on payment terms. The members of the Prompt Payment Code pay better but the difference between them and those who are not members is widening, although the code has a huge advantage. It is also clear that what was hoped—that the code would be some sort of cultural change or even encourage people to do more of the right thing—is not happening. We are starting to see that the Prompt Payment Code is something that companies find easy to evade. The idea of naming and shaming does not seem to have much significance.

I say this because we have seen a series of substantial, prodigious suppliers to government walk out on the Prompt Payment Code. They include some of Britain’s biggest companies. Tesco left because the code’s definition of a small business did not correspond to how it viewed a small supplier. Recently, in only the past few months, two of the top five Britain-based listed companies—that is, two of our largest companies by market capitalisation—have left the code: Unilever and Diageo. The culture of compliance is not there. We must reinforce the mechanisms that we use to ensure that, across the chain, prompt payment and good payment terms are properly enforced.

We now know the costs of this. We have always talked about the costs and consequences, about the number of businesses that are at stress, but we also now know the benefits. The recent report from the Centre for Economics and Business Research—Cebr—said that, if invoices were paid as they were presented, small businesses would increase their turnover by £40 billion to £60 billion. That shows, as always, the importance of the velocity of cash.

If the Government can play an enhanced role in making sure that payment terms are done properly across any procurement in the public sector, and can encourage the private sector in all of its transactions to do the right thing, this will be extremely useful. Bringing the Prompt Payment Code into the canon of law for public procurement will be a very important and useful step in that regard.

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[Lord Mendelsohn (Lab)]

My Lords, that was the very definition of a wide-ranging debate. I do not want to delay the Committee for too long, but I must just say that I appreciate the difficult hand that the Minister is having to play at this stage. I reflect on the fact that I have been in this House for just over eight years, and during that time, there is not a single piece of legislation I have been involved with that has been delivered with the intention that the Ministers wanted. All have failed for one reason or the other, and all are coming up for some form of revision at different points. It seems to me that yet again we have a problem in drafting and delivery that will bedevil this Bill as it goes on.

I also have to say that I do not really think it is that radical a Bill. As the chairman of a public limited company, I think that the Government, who have been pressing the corporate sector to take ESG and other matters more seriously, have been leap-frogged by the private sector and are quite behind. There can be a better process in thinking this through to delivery—one that either takes a different form of comply or explain, or other sorts of things—but the Bill is starting to get to the point where it does not really address the issues or create good behaviour. In the end, we are going to end up with an overreliance on decisions made by people who I suspect have not really seen how these things work in real life. So, while I beg leave to withdraw my amendment, I think it is important to understand that over time we may live to regret quite a few of the provisions we have put in this Bill.

Amendment 174 withdrawn.

Procurement Bill [HL]

Lord Mendelsohn Excerpts

Committee stage
Wednesday 26th October 2022 Grand Committee

[Baroness McIntosh of Pickering (Con)]

My Lords, Amendments 370ZA and 370ZB are tabled my name and I thank the noble Baroness, Lady Hayman of Ullock, and the noble Lord, Lord Coaker, for their support which is much appreciated.

The thinking behind these amendments relates to the plight of the wholesale sector, which supplies food and drink to critical public service infrastructure on which we all depend, including schools, hospitals and care homes. According to the briefing I have received from the Federation of Wholesale Distributors, wholesalers are struggling to fulfil these contracts due to unfavourable contractual terms, which are resulting in these businesses making significant losses. That does not bode well for the future viability of the sector. They are facing rising costs and food inflation, which we know has hit 15.1% as of August 2022— this week it looked as though it could be higher still. It leaves the wholesalers unable to negotiate any price increases; or the smaller price increases they have negotiated on certain contracts have been well below inflation. This is an unsustainable circumstance going forward.

Given the situation where price reviews occur only every six months or, in some cases, only once a year, this gives wholesalers very little room for manoeuvre to negotiate price increases. This means that wholesalers are not making a profit on the product and service they provide to their customers. This is affecting the quality of the products they are able to serve to children and the most vulnerable, and the viability of providing catering services in the long term. They would argue that the quality of catering services is of paramount importance, as we have seen with Jamie Oliver’s campaign in hospitals and during the pandemic.

I support the fact that the Government’s food strategy is seeking to drive up standards of public sector food by requiring caterers to use more organic and locally sourced foods. This is not sustainable, however, without funding that matches inflation—it is just not viable going forward. In the federation’s view, small and medium-sized enterprises will be the most affected of all businesses. Without quarterly price reviews, the trend will continue towards market consolidation and homogenisation, driving standardisation not the localisation of publicly produced foods.

I expressed my disappointment previously that the public procurement contracts we signed up to under the European Union conditions have been replaced by the GPA; this is something we need to look at on an ongoing basis. Of course, it is right that the Procurement Bill aims effectively to open up public procurement to new entrants such as small businesses and social enterprises, so that they can compete for and win more public contracts. It is just the case that SMEs are more acutely affected by price increases. They are smaller in scale, less resilient and need to pass the increases on in real time. They do not have the capacity to absorb those increases and, as such, are more vulnerable to these pressures if price increases are not passed on. We can therefore envisage a situation where SMEs are either closing down or being sold to larger national conglomerates. If these conditions continue, the sector believes that this will undo competition and the diverse market that brings a number of benefits to the public sector.

To ensure that the targets in the Procurement Bill are met, to encourage more SMEs to supply contracts and to ensure the continued supply of public sector food—which I think the Committee would sign up to—I ask my noble friend the Minister to consider publishing guidance to instate quarterly price reviews to allow contract price increases more regularly than once a year or every six months, and only if a certain threshold is met—for example, inflation over 5%. This is what I have set out in Amendment 370ZA to Clause 69 and in Amendment 370B to Schedule 8, regarding a review when inflation is 5% or more.

The quarterly price reviews would allow contract price increases more regularly, as I have stated, than either once a year or once every six months, if the threshold is met. I propose that that threshold should be over 5%. I remind the Committee that we have seen record increases in the price of staple goods such as milk, dairy, bread and even pasta, and some of the cheaper products that these public sector wholesalers would seek to provide in the context of the contracts we are discussing this afternoon.

I put on record that public sector caterers are struggling to meet the food standards, being forced to reduce portion sizes and using less UK-grown and produced product, which is against both my better judgment and the Government’s aims. I would like to see the quality of the food used to service public sector contracts improve, under the amendments I have spoken to. Without these amendments, standards will continue to decline to mitigate the rising costs if the Government do not step in to support the industry. A number of wholesalers rely on profitable contracts subsidising loss-making contracts at the moment. However, with the ever-decreasing level of profitable contracts, the balance is tipping towards overall loss-making, which is unsustainable in the long term.

Other advantages of these amendments are that they would enable meeting the government targets which would otherwise not be met in the current climate, and would enable those in this sector to bid for more contracts, which would impact the supply of food and drink to public service infrastructure. Some 95% of wholesalers have said that the current climate and rising costs mean they are unlikely to bid for new contracts, especially ones with unfavourable terms, such as the long pricing review.

I ask my noble friend to respond to these issues to help SMEs and secure more bids for future contracts, in particular by a three-monthly review and a 5% review of inflation. The level of food inflation is pushing up the level of inflation across the piece. We are woefully short on food self-sufficiency, particularly fruit and vegetables. I hold the Minister’s feet to the fire, because we heard from her colleague the Minister for Agriculture in this place, my noble friend Lord Benyon, that the Government are seeking to do something to help produce more fruit and vegetables locally, even to increase production such that we can export. Nowhere is that more important than in the delivery of public sector contracts.

I really regret that we are going backwards, having left the European Union, and are relying on more imported and more expensive food. We should be sourcing more food, whether it is meat, bread or dairy—milk and butter—as all these staples have been hugely impacted by inflation. I urge my noble friend to look favourably on these two amendments.

[Lord Mendelsohn (Lab)]

My Lords, this is my first opportunity to welcome the Minister back to her place and to say what a pleasure it is to see her here. We who have experienced time with her have always been impressed by her courtesy and the seriousness with which she takes these deliberations. I am returning to a theme we first discussed during the Small Business, Enterprise and Employment Bill in 2014. As they say, some songs are so good, they may be old but are worth repeating. I hope she will forgive me for coming back to some of the issues we had then, of which, during her time on the Back Benches, she has been a doughty supporter. I am conscious that there is an awful lot to respond to in this group of varying themes. I look forward to seeing her do so with aplomb.

When I saw the amendments tabled here, I had a moment of undiluted joy when I noticed that Amendment 356A in my name suddenly had the addition of “g” before it. I initially thought that, in the chaos of the last few months, I had been called into government service unbeknown to me and without the benefit of a phone call. Having realised that that was probably not the case, I then thought that I had won the lottery—that, for once, one of my amendments was so good that the Government had finally adopted it and were prepared to champion it. Of course, it is a printing error.

I return to some of the things we talked about before, such as how we can align this Bill with the Prompt Payment Code and the Late Payment of Commercial Debts Regulations, for example. Genuine progress has been made in trying to deal with the curse of late payments, which affects small, medium and even large businesses, to try to improve their payment terms and to make sure that the Government play their part where they can, both as an agency of regulation and a procurer.

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[Baroness Neville-Rolfe (Con)]

I was trying to make sure that the noble Lord knew that I had listened to his point. There is a point about what is covered by the Bill and what is not, so perhaps I will reflect a little further on how we achieve the best outcome in the sort of circumstances he describes.

Moving on, I thank the noble Lord, Lord Mendelsohn, for his kind words. I look back with great pleasure on the work we did together on those Bills. I very much agree with the noble Baroness, Lady Hayman of Ullock, that he has made a huge contribution in this area. To some extent, his dogged determination has been rewarded with this Bill, which, I think, as I said right at the beginning, makes something of a breakthrough. That is why I am glad now to be the Minister and to make sure that that breakthrough is reflected in a larger share of procurement for SMEs, with payment being more consistently speedy. It is clear that, in a lot of areas, payment is quite good.

The noble Lords, Lord Aberdare and Lord Mendelsohn, have tabled Amendments 353B, 370A and 430A. They would create a process for resolving payment disputes that would mandate escalation to the Small Business Commissioner, who we remember so well, for arbitration and resolution. Going back, I think that the noble Lord, Lord Mendelsohn, wanted me to be the commissioner, but it never happened. The amendments would also require the automatic payment of late payment interest in the event of a contracting authority being found to be in violation of the payment provisions of this Bill.

I believe that this Bill represents a big step forward in tackling late payment, as I have said. However, I believe that these amendments could introduce unwelcome complexity into the system for government suppliers and remove the parties’ ability to be flexible in matters of dispute resolution by tailoring dispute resolution and escalation procedures to particular contracts. There are now—this is an important point—a range of existing mechanisms in place to deal with late payment. Suppliers, including those in public sector supply chains, can raise payment delays with the Public Procurement Review Service, which the noble Lord, Lord Aberdare, kindly drew to our attention and which will work to unblock any overdue payments. It is a well-established service. It has been successful in releasing more than £9 million of late payments to date and has grown in confidence since we passed the Small Business, Enterprise and Employment Act 2015. I assure noble Lords that the PPRS will continue to carry out this function under the new regime to unlock contract-specific instances of late payment.

[Lord Mendelsohn (Lab)]

I have just two things to say very briefly. First, I did say that I thought the noble Baroness would be a brilliant Small Business Commissioner, but I think that she is a brilliant Minister.

I did not put the Public Procurement Review Service in my speech because I have issues with it. It has unlocked £9.4 million. When I first read its work in 2020, it said £8 million. I thought that meant £8 million in that year, but £9.4 million is the entire sum that it has unlocked since it was set up in the Small Business, Enterprise and Employment Act 2015. Last year, its achievement was £1.4 million. It has dealt with 400 cases and has, it says, been 100% successful. However, it is also reported elsewhere that it has dealt with more than 1,900 cases, most of which involved suppliers that gave up on it during the course of its process. Let me retell the numbers: 23,000 invoices in one local authority alone. The Minister can tell me that 400 cases over an eight-year performance is good, but I am not so sure. I appreciate that there is a vehicle—again, I am not picky about which one it is—but one cannot say that that performance is making any meaningful impact. That is why I would be grateful if the Minister could look at that in more detail.

[Baroness Neville-Rolfe (Con)]

I will certainly look at the figures, which I am very interested in, but this Bill obviously represents something of a step change. The key thing is how we can make it work effectively. I also highlight that suppliers already have the ability to claim interest on late payment under the Late Payment of Commercial Debts (Interest) Act 1998, which has been referenced. A reference to it in our Bill therefore seems unnecessary.

The proposed amendment would also significantly alter the remit of the Small Business Commissioner. Under current legislation, a small business may complain only about a large business. As such, it would not be appropriate to reference the Small Business Commissioner in this context; it is a slightly different type of system.

The noble Lord, Lord Mendelsohn, has also tabled Amendment 356A, which would place a duty on contracting authorities to report payment performance under regulations made under Section 3 of the Small Business, Enterprise and Employment Act 2015. These regulations currently place a duty on the UK’s largest companies to report on a half-yearly basis on their payment practices, policies and performance. We are thinking about what we can do to open up more contractual opportunities to SMEs and will come back to that on Report. We recognise the need for alignment with the private sector so that we can have a bit more comparison of performance.

However, we do not, for example, want to constrain the Government in the future from pursuing the reporting of higher payment standards for the public sector should we wish to do that, nor can we add new requirements to the private sector without some form of consultation, especially at this difficult time. I am happy to look at the possibilities on publishing payment performance information for private companies alongside those in the public sector and at trying to make the results more easily comparable. It may take a little time, but I hope that noble Lords will find that assurance helpful. We will see what we can do.

Turning to Amendment 361A, tabled by the noble Lord, Lord Aberdare, this amendment would enable contracting authorities to pay subcontractors in their supply chain directly where a prime contractor does not pay within agreed terms. The contracting authority would then be able to reclaim the outstanding amounts from the prime contractor, either by discounting the sum owed or by reclaiming the money as a debt. This amendment would, of course, utilise public money as a method of resolving such disputes. Where insufficient money remained, this would introduce risk and liquidity pressure to public sector accounts, with financial implications that are extremely difficult to countenance, especially in current circumstances.

The noble Lord, Lord Aberdare, asked whether we could introduce the “step-in” right, as suggested by Amendment 361A, as a right rather than an obligation. This could lead to confusion for contracting authorities about when they should step in. It would also expose them to unnecessary challenge when they decided not to step in. However, suppliers in public sector supply chains can, as we have noted, use the Public Procurement Review Service to help unlock late payments where existing contractual routes fail. Further, there are some other mechanisms available, for example, project bank accounts, which may work in some cases and allow protected sums to be distributed to those in the supply chain.

Turning to contract modifications, my noble friend Lord Lansley has tabled Amendment 364 to substitute a 10% term threshold with a threshold of one-sixth of the contract term. Noble Lords will wish to note that the Bill does not say that contracting authorities cannot extend a contract’s duration by more than 10%. They can do so, but they must use other grounds within the contract modification rules. They are set out in Clause 69 and Schedule 8. These other grounds, in the majority of cases, will oblige them to publish a contract change notice, which will set out why they are making that modification.

We do not think that contracting authorities should be given greater leeway by increasing the 10% to one-sixth. Under the current regime, we have seen contracting authorities extend contracts by substantial periods time and time again without the public or the market being aware of the situation and therefore able to challenge it. We hope Clause 69(3)(a) will change that behaviour.

Amendment 370ZA, tabled by my noble friend Lady McIntosh, the noble Baroness, Lady Hayman, and the noble Lord, Lord Coaker, proposes that we insert a provision in the Bill that contract reviews should be held by both parties every three months. The Procurement Bill covers a huge variety of contracts—that is one of the challenges—and suppliers and contracting authorities are in frequent contact. A legal obligation that contract reviews must be held every three months is overly prescriptive. Contracts are kept under review by contracting authorities and suppliers as appropriate. One size does not fit all.

I see from Amendment 370B that the proposition that contract reviews should be held every three months has arisen from current concerns over inflation. Prices may be index-linked, and contracts may contain review clauses related to inflation. In those circumstances, modifications under the ground of Schedule 8(1) are already permitted.

My noble friend Lady McIntosh raised an important point relating to the context of rising food prices, caused, ultimately, by the situation in Ukraine. Complex public contracts, including large outsourcing contracts which cover food provision for public bodies, generally do account for inflation. Obviously, coming from a farming and retail background, I understand some of the issues that my noble friend described. I particularly agree about the importance of SMEs, as we all say again and again, and trying to get them a bigger share of procurement. However, her approach is too prescriptive and could lead to yet more inflation, and would put costs on the public sector at a particularly difficult time.