Procurement Bill [HL]

Lord Scriven Excerpts

Committee stage
Monday 4th July 2022 Grand Committee

[Lord True (Con)]

My Lords, it has been an interesting and important debate, which we will reflect on as we go forward in the normal way between Committee and Report. I was asked a couple of definitional questions again, including: what is a public undertaking? Clause 1(2) defines a public undertaking as

“an undertaking that is not a public authority but … is funded wholly or mainly from public funds, or … is subject to contracting authority oversight.”

Public undertakings differ from bodies that are also funded wholly or mainly from public funds, or are subject to public authority oversight but which are considered to be public authorities, in that public undertakings do not have functions of a public nature, which means their activities may be more economic and commercial in nature—these are some of the things we have been discussing. For example, although it is no longer a public undertaking, before the Government sold their share in 2015, Eurostar International was a public undertaking. I am sure that people will examine that definition in Hansard. I will come on to some other points shortly.

On the question of what a private utility is, utilities are public sector bodies—public authorities or public undertakings—that carry out utility activities, or certain private organisations carrying out utility activities, which are the private utilities. The Bill covers private utilities only where they have been granted a “special or exclusive right” to carry out a utility activity. Rights are “special or exclusive” where they have been granted by a statutory, regulatory or administrative provision, and the granting of that right in itself substantially limits other utilities from carrying out those activities—it is a competition issue. This effectively puts them in a position of a natural monopoly and therefore they could, however unlikely it may be, engage, for example, in preferential treatment that favours their own affiliates or strategic partners and discriminates against other suppliers bidding for contracts, which could negatively impact the market and customers. That would not be good for the industry or consumers.

Furthermore, though I listened with great interest to what the noble Baroness opposite said in relation to international agreements, the UK is required by various international agreements to ensure that private utilities do not discriminate against foreign suppliers with rights under international trade agreements, known in the Bill as “treaty state suppliers”, and that they adhere to the rules we have agreed for utilities procurements. This is why the Bill regulates private utilities but only to the extent required by those international agreements and where we consider it appropriate or necessary to make the regime work.

There has been a lot of debate in relation to the extent of coverage; I will come on to that. A philosophical question was posed by the noble Earl, Lord Lytton, and the noble Lord, Lord Fox: what is in and what is out? I am sure that we will debate and discuss this in our engagement as the Bill goes forward. There was a slight difference of opinion. Behind me, I have been hearing, “Everybody out”, whereas, on the other side, the noble Lord, Lord Fox, seemed at one time to stray towards a definition of private delivery of public service. That sounds like the kind of concept that might have led Mr Benn or Mr Corbyn to say, “Let’s have them all in. They provide food, the banks and all these things”. I do not think that one would want to go that far but obviously there is a question of how far; indeed, my noble friends behind me have posed the question of “if at all”.

I was alarmed by what my noble friend Lady Neville-Rolfe said, with her immense experience both in the public sector in Europe and in business. She said that, as it is drafted, she would find the Bill a deterrent to applying for public business. That is certainly not what the Government intend at all.

I will come back to the question of coverage shortly but we have included a number of measures that will reduce the regulatory burden for private utilities. For example, the Bill contains a number of provisions unique for all types of utilities, such as the higher financial thresholds and the utilities dynamic markets, which are available only to utilities. In framework agreements, public utilities can let closed frameworks for up to eight years and there is no maximum term for frameworks entered into by private utilities. In addition, with contract amendments, there is no 50% financial cap on the value of permitted modifications.

Obviously, the Bill seeks to reduce the regulatory burden on private utilities in terms of transparency. The transparency requirements for private utilities are the minimum required by international agreements—that is, the tender notice, the transparency notice in cases of direct award and the award notice. Regarding mandatory and discretionary exclusions, the Bill retains the flexibility under the current regime where the application of mandatory exclusions is discretionary for a private utility. Private utilities are not restricted in the duration of closed frameworks, which is generally four years for non-utilities. The terms of any closed framework are their commercial decision. Private utilities will also not be subject to oversight by the procurement review unit, which we will come to discuss later in the Bill.

I was asked about broadband and drainage. I am not sure that I have an answer on drainage except to say that I always evoke the great spirit of Bazalgette. Schedule 4 sets out that the Bill covers utilities operating in the water, energy and transport sectors that are regulated in our international trade agreements to minimise the burdens on utilities. Broadband is not covered by those trade agreements so we have not chosen to regulate public or private utilities in that area.

In relation to that, I was asked about private bus companies and Transport for London. Private utilities that run transport services, such as private bus companies, are regulated as they operate services where they have special or exclusive rights to do so. That limits competition and is reflected in international trade agreements; for example, the World Trade Organization government procurement agreement specifically lists Transport for London as being covered by that agreement. The Bill exempts it under paragraph 17 of Schedule 2 as it will be regulated by Department for Transport regulations.

The noble Lord, Lord Berkeley, asked about the reasons for excluding certain utilities. I will turn to his amendments now. Schedule 4(8) includes certain utility sectors that are exempt from the regulations. As they have proved to the European Commission, they are exposed to competitive forces. Schedule 4(8) provides an exemption determination for those decisions. If other sectors can do similarly, we will be able to exempt them from procurement regulations.

Regarding the amendments tabled by the noble Lord, Lord Berkeley, Schedule 4 sets out the scope of utilities activities, largely mirroring the coverage of the existing regime domestically. I repeat: this reflects our commitments in trade agreements such as the WTO’s GPA. Amendment 25 would extend the exclusion for the supply of gas and heat produced as a consequence of carrying out a non-utility activity to all contracting authorities where this is currently available only to private utilities and public undertakings. This would breach our commitments in the WTO government procurement agreement and other international agreements where this exemption applies only to private utilities and public undertakings. It does not apply to contracting authorities that are public authorities.

Amendments 26 and 27 seek to remove from the scope of the Bill utility contracts related to public transport services and contracts associated with activities for the provision of airports and ports, as was discussed by the noble Lord, Lord Berkeley, and my noble friend Lord Moylan. Both activities are covered under the existing regime, and are required by our international commitments under the WTO GPA and other international agreements that require access to utility contracts in the transport, ports and airports sectors. The Bill therefore regulates these utility activities to comply with our international obligations.

As my noble friend Lady Neville-Rolfe said, the Bill provides for a mechanism in Schedule 4(7); this was alluded to in a different context by the noble Lord, Lord Fox. This will be developed to permit an appropriate authority to exempt utilities operating in these sectors where they are exposed to competition. This would apply to all utilities and is permissible under our international obligations.

I will reflect carefully on—

[Lord Scriven (LD)]

Can the Minister clarify what an appropriate authority is? Who are the appropriate authorities and what is the process for that appropriate authority to amend the private utilities provision?

[Lord True (Con)]

I was asked that at Second Reading. An appropriate authority is a Minister of the Crown or a Welsh Minister. Indeed, the noble Lord’s colleague, the noble Baroness, Lady Humphreys, referred to this when we discussed the earlier group of amendments. We clarified it in some of the amendments that we tabled but were not brought forward earlier. Among them was an amendment to replace “appropriate authority”, although I cannot remember with what exact words—a Minister of the Crown or a Welsh Minister, I think.

--- Later in debate ---

which essentially has no scrutiny at all. It has the Secretary of State, who may or may not choose to scrutinise it. Within those powers, ARIA can buy property for example. It can buy things—anything it likes, effectively—with essentially no public scrutiny. We are dealing with a Procurement Bill, and to deliberately put in place an organisation that can spend hundreds of millions of pounds—if, as I say, it ever manages to find a top team and get itself in order—with no scrutiny whatever is remiss. It would be remiss of your Lordships on this Committee not to consider this and it would be remiss of the Minister not to respond directly as to why there should not be some form of scrutiny. It could be the same sort of scrutiny that the Security Service enjoys or something different, but simply relying on the Secretary of State, as currently, is not good enough.

[Lord Scriven (LD)]

My Lords, I shall speak on this set of amendments, particularly Amendment 42. It is the first time that I have been able to speak on the Bill. I was not able to participate in Second Reading, but I have followed the debate and, like many noble Lords, spent the weekend probably losing a little hair trying to make sense of the number of amendments that have come out. I thank the Minister for the withdrawal of Amendment 1 and for looking to find a way forward with some of the issues that those amendments made.

Particularly with Amendment 42, I raise my interests in the register, particularly as a vice-president of the Local Government Association and as an adviser to the Robertson group of organisations, which does work with the public sector. Amendment 42 is genuinely probing. It addresses what is in, what is out and what is the autonomy and the role of local authorities within the Bill. In particular, when a local authority works with others, how do some of the provisions within the Bill work—whether it is a central purchasing authority or not—particularly when they overlap with other procurement legislation in, for example, the Health and Care Act?

I shall put a couple of scenarios to the Minister and genuinely look forward to hearing some of his replies. First, local authorities are being asked to significantly integrate social care and health. They will be part of integrated care boards, which are purchasing organisations. Some public sector money from local authorities will come forward as part of that. When they are purchasing as an integrated care board and significant amounts of local authority money is put in there, which provisions will the local authority be asked to enact? Will it be the provisions within this Bill or the provisions under Sections 79 and 81 of the recently enacted Health and Care Act? There will be potential conflicts of interest as to by which procurement rules two different partners procuring a public good will be bound. I hope the Minister can help to explain that scenario.

There are also lots of local authorities that have significant public-private partnerships. Again, what rules will the public-private partnership be bound by, particularly when the local authority purchases significant services or goods with a private sector organisation which are to be used for public procurement? How will the private sector organisation be bound by that? For example, what rules will there be for that public-private partnership when purchasing a good, depending on whether the 51% amount has been put forward by the public sector—the local authority—or by the private sector entity?

I understand from reading the Bill that there will be the national procurement policy statement. I just need to understand from the Minister what autonomy local authorities will have to move away from the procurement guidelines that will be in the NPPS.

Finally, it would be helpful if local authorities could be put in the Bill as centralised procurement authorities. Is there any particular reason why the Government did not take that on board in the Bill?

There are many general questions about local authorities; those are a number that I wish to probe. I genuinely look forward to the Minister’s answers.

[Baroness Neville-Rolfe (Con)]

My Lords, I very much welcome the question of the noble Lord, Lord Scriven, about local authorities. They are so often underappreciated and undervalued, and we need to know what can and cannot be done in a collective way—the question he is rightly probing. For example, a simple question would be: for planning services—where my committee has identified a huge shortage of talent and resources in some planning authorities—could you have a collective procurement, and would that be caught by this Bill?

I also ask what the GPA does on telecoms and the internet infrastructure. I must say that I tried in vain, as a Minister, to get contracts for the roll-out of infrastructure around Washington DC—there was not a level playing field. I fear that overseas interests will benefit preferentially from this Bill, as they have done in some other areas, such as contracts for difference in energy. Can the Bill help to hold the GPA to level the playing field?

I strongly support my noble friend Lady Noakes, both on her brilliant technical points, which I barely understand, and on ARIA. On the latter, I agree with her that it must be free from hassle—I think we agreed that in our debates in this House. It probably does not have enough money, but it is important to ensure that it can proceed without the benefit of lots of new regulations, which could be quite bureaucratic to them.