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.