Procurement Bill [HL]

Lord Scriven Excerpts

Committee stage
Monday 18th July 2022 Grand Committee

[Baroness Noakes (Con)]

My Lords, I shall speak also to Amendment 107 in this group. The large part of this group is government amendments, but my two small probing amendments have found their way into my noble friend’s rather large group.

Amendment 96 is another “may/must” amendment, which we always enjoy in this Committee. It probes the effect of not satisfying participation conditions on a tender. Clause 21 allows a contracting authority to set conditions of participation in specific areas. Subsection (6) permits but does not require the contracting authority to exclude a supplier which does not satisfy a participation condition from then participating in all or part of the tendering process.

If a contracting authority does not exclude a supplier from the tender process, one might think that such a tender could result in the award of a contract. If that were not the case, I can see no reasonable case for allowing such a tender into the process at all. However, subsection (3)(a) of Clause 18, which deals with contract award, states that

“a contracting authority … must disregard any tender from a supplier that does not satisfy the conditions of participation”.

Hence, we seem to have an Alice in Wonderland world where a supplier which has fallen foul of participation provisions can take part in the tender process, but only on the strict understanding that it cannot win the contract. That does not make any sense to me. My amendment would make the terms of Clause 18 permissive, so that a contract could be awarded. Another solution would be to make exclusion mandatory from the tender as well as from the contract award.

My second amendment in this group, Amendment 107, is a simple probing amendment to ascertain what is meant by Clause 19(3), which deals with competitive tendering procedures. Subsection (3) requires the procedure to be proportionate,

“having regard to the nature, complexity and cost of the contract”,

which seems at first sight entirely sensible and should stop contracting authorities using unnecessarily burdensome procedures. What subsection (3) does not say, however, is how this is to be assessed.

In a rare case of going beyond what is in the Bill, the Explanatory Notes say:

“Subsection (3) requires contracting authorities to ensure that the procedure is not designed in a manner that is unnecessarily complex or burdensome for suppliers”.


This is, in fact, from paragraph 141 of the Explanatory Notes, not paragraph 142 as I set out in my explanatory statement. The Explanatory Notes therefore firmly place the consideration of proportionality in the context of suppliers, but that has not found its way into the text of Clause 19, and that is what my Amendment 107 seeks to change.

In addition, even if subsection (3) could be read as being a supplier-centred proportionality requirement, it does not give any help as to whether the contracting authority has to consider suppliers generally, in an objective way, or whether they should take account of the particular characteristics of likely suppliers. I have in mind in particular that what proportionality might look like to a multi-million-pound contracting business is light years away from its impact on a small or medium-sized enterprise.

I hope my noble friend will agree to make the Bill clearer in this regard, or at least make a clear statement from the Dispatch Box as to how Clause 19(3) is intended to be interpreted. I beg to move.

[Lord Scriven (LD)]

My Lords, I rise to speak to Amendment 105 in the names of my noble friends Lord Wallace of Saltaire and Lord Fox. I will come on to some of the points the noble Baroness, Lady Noakes, made, but before I start, I apologise for not being here at the start of the Committee. As my noble friend Lord Clement-Jones said, I was on a train for four hours. Actually, you can hear my croakiness: I am the healthiest one on our Front Bench today, so I am here—

[Baroness Smith of Newnham (LD)]

That is not quite true.

[Lord Scriven (LD)]

Well, the healthiest on the Procurement Bill and constitutional affairs Front-Bench team. I thank the Minister, I think, for passing on his cold of last week to me.

My noble friends’ Amendment 105 is also a probing amendment. Clause 19 uses the word “appropriate”, and this amendment is to see

“under what circumstances it may be considered ‘appropriate’ not to undergo an open tendering procedure.”

There are no criteria or guidelines about what may be appropriate. This is just a probing amendment to see if the Minister can explain why such a wide-ranging word as “appropriate” is in the clause. Who will decide whether it is appropriate, and what guidelines or criteria would the Government expect the authority to seek in determining whether the open tendering procedure should not go ahead?

With Amendment 96, yet again, the noble Baroness, Lady Noakes, raises some important points in Committee by changing just one word. I particularly point to what she described as the “Alice in Wonderland world”, in which you can be debarred from one part of tendering but not have been given a contract—or the other way round. The noble Baroness’s suggestion to include exclusion from the tendering process in the Bill makes eminent sense or we will be in the position in which people could, by law, tender but would be debarred from getting the contract, even if theirs was potentially the best tender around.

With those comments, I feel that, particularly on Amendment 105 in the name of my noble friends, some clear guidance from the Dispatch Box would be welcome.

[Baroness Hayman of Ullock (Lab)]

My Lords, I thank the noble Baroness, Lady Noakes, for introducing her two amendments. As ever during Committee on this Bill, she has spotted where the nonsense lies and where problems could quite easily be resolved, if her wise words are listened and adhered to.

On her Amendment 96, I know my dear and noble friend Lord Coaker is very disappointed not to be having the must/may discussion with her today and that it has fallen to me, but it is an important point. Different terminology in different parts of the Bill impacts on what is expected. What does that mean? As the noble Baroness clearly demonstrated, if you follow that logically—all the way down the rabbit hole, to carry on the metaphor—it does not make sense any more. I think she has picked up something that could be sorted out straightforwardly and I would be interested to see whether the Minister agrees.

The noble Baroness’s second amendment, Amendment 107, on the lack of assessment and what is in the Explanatory Notes not being sufficient for what we need to know to feel secure about this clause, is again a simple amendment that makes a lot of sense. To me, it strengthens and provides clarity to the Bill. The noble Baroness made the critical point that these kinds of things have a different impact on multinationals from small businesses and, as we have said previously, charities and voluntary organisations. This is important.

The noble Lord, Lord Scriven, ably introduced the amendments in the name of the noble Lord, Lord Wallace. I hope the Liberal Democrat Front Bench manages to recover before we come back in September, but I thank the noble Lord for that. They are about terminology —what the words mean and what the impact of that terminology is on the Bill. As the noble Lord pointed out, there are no guidelines and criteria, and nothing specified about what “appropriate” means, nor on whose shoulders it falls to interpret what it means and whether that could be open to challenge. Again, they are small but important amendments and we support them.

There are a number of government amendments in this group. I have read through them and they seem straightforward, but I shall be interested to hear the Minister’s introduction.

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[Baroness Scott of Bybrook (Con)]

It is certainly not the Government’s intention to exclude those groups of providers. In fact, we want to encourage them and make things easier and more transparent for them. I will take a look at Hansard and discuss the issues in Clause 32 with the team. We will make sure that, perhaps in those groupings throughout the summer period, we discuss these issues further; I will make a note to do that. It is absolutely our intention not to make this more difficult for those groups but to make it easier, so we will look at how we can do that if this clause makes things more difficult.

In Clause 33, Amendments 200 and 201 would clarify that, where a supplier does not qualify for the reserved contract, the contracting authority can exclude that supplier at any point in the procurement process. Amendments 203 and 204 to Clause 33 are simply to improve the drafting, as I said.

Amendment 206 would make it clear that suppliers will fail to be eligible for reserved contracts only where they have signed a “comparable contract”, as defined in subsection (7), within the previous three years, not just because such a contract was awarded to them. It ensures that there is no risk of a supplier being penalised where a contracting authority had decided to award a contract to a supplier but, for whatever reason, the contract did not progress.

I turn next to Clause 34. Amendment 209 clarifies that competitive flexible procedures can allow for the exclusion of a supplier from both participating and progressing in the procedure where the supplier is neither a member of a dynamic market, nor a part of a dynamic market—for example, a category of goods or services. The current provision refers only to “the exclusion of suppliers”, and this change clarifies that this means participation and progression in the procurement by, for example, progressing to the next stage of a multi-stage procurement. Amendments 214 and 215 are consequential to this amendment.

Amendment 262 in Clause 48 changes “virtue of” to “reference to” for ease of reading.

Amendment 341 removes the more general reference to “procurement” in Clause 56, to clarify that notification of exclusion is required in all competitive tendering procedures.

Finally, Amendments 427 and 428 are technical amendments to Clause 78: the first to ensure drafting consistency across the Bill and the second to reflect the fact that Northern Ireland and Wales have derogated from this provision and so do not require the threshold-altering powers in subsection (4).

I turn now to Amendment 96, tabled by my noble friend Lady Noakes, which questions why a supplier “must” satisfy the conditions of participation in Clause 18(3)(a) to be awarded the contract, while in Clause 21(6) contracting authorities only “may” exclude the supplier from participating or progressing in the competition. I reassure noble Lords that the two clauses work together: suppliers must satisfy the conditions of participation in order to be awarded the ensuing public contract, and that is what is addressed in Clauses 18(3)(a) and 21(2). Clause 21(6) gives the contracting authority the flexibility to decide when to assess the conditions of participation, and at what point to exclude suppliers that have not met them. Having “may” in Clause 21(6) allows the condition to be assessed during the procedure. For example, when it comes to insurance requirements, a company may not have the full cover initially, but it may have the chance to obtain it before that contract is awarded. I hope that this makes it slightly clearer; if not, I am sure that we can discuss it further throughout the summer months.

I now turn to non-government amendments. Amendment 105 to Clause 19 from the noble Lords, Lord Wallace and Lord Fox—both of whom I hope will be better very soon—proposes to remove the competitive flexible procedure. The practical reality of procurement is that the open procedure is simply not appropriate in all circumstances. The government procurement agreement contains three procedures: open, selective and limited or direct-award tendering. The open procedure is popular where the requirement is well-defined and straightforward; price is likely to be the key feature. There is no pre-qualification of suppliers, any interested party can submit a tender and they must all be assessed.

We want contracting authorities to use the new competitive flexible procedure, which we could not have had when we were in the EU, to design fit-for-purpose procurements that deliver the best outcomes. This may mean including phases such as a prototype development when seeking innovative solutions. Contracting authorities will use it to limit the field by applying conditions of participation to take forward only those suppliers with the financial and technical capability to deliver the contract. Clause 21(1) requires these to be proportionate so as not to disadvantage smaller suppliers.

The competitive flexible procedure also allows for negotiation and discussion of the requirements, which is particularly important to ensure not only that the best value is obtained but that requirements are clearly understood. The ability to negotiate is severely limited under the current EU-derived rules.

Clause 19(3) requires the contracting authority to ensure that any competitive tendering procedure is proportionate, having regard to the nature, cost and complexity of the contract. Amendment 107 from my noble friend Lady Noakes proposes to make these considerations from the perspective of the supplier. We believe that these assessments are better considered by contracting authorities in the round following pre-market engagement. Otherwise it would be possible for prospective suppliers to challenge and assert that a procedure is not appropriate.

To counterbalance the flexibility given to contracting authorities to design a competitive tendering procedure, we wanted to ensure that procedures do not become overly convoluted or burdensome for suppliers. We believe that Clause 19(3) achieves this, as it will force the contracting authority to consider what is proportionate, without suppliers dictating the specifics of the procedure. I understand that my noble friend Lady Noakes requires more clarity, and I am sure we can do that if that explanation did not provide it.

[Lord Scriven (LD)]

I want to come back to the Minister’s explanation about the word “appropriate” and it being wide. I understand that there may be reasons why a fully open procurement would not be wanted. Amendment 105 deals with what is appropriate. The Minister raised an issue relating to prototypes. Clause 18(3)(a) states:

“In assessing which tender best satisfies the award criteria, a contracting authority … must disregard any tender from a supplier that soes not satisfy the conditions of participation.”


If it cannot do the prototype, it would be debarred. I think further clarification is required about the Government’s view about an appropriate situation in which a fully open tendering procedure would not be required.

[Baroness Scott of Bybrook (Con)]

It is obvious that the noble Lord, and probably all noble Lords, need more clarity about this. I do not have any further clarity at the moment, but we will make sure we provide that because it is obviously an issue of concern.

I have just been handed a note to avoid a Hansard correction. To correct something I said about the consistency of Clause 21, I need to refer to Clauses 18(3)(a) and 21(2), which both make clear that conditions of participation must be satisfied. I believe I said Clause 22(2) rather than Clause 21(2). I clarify that we were talking about Clause 21(2), not Clause 22(2).

The competitive flexible procedure also allows for negotiation and discussion of the requirements, which is particularly important not only to ensure that the best value is obtained but that the requirements are clearly understood. The ability to negotiate is severely limited under the current rules—I think I have got past that, but we will keep going.

Clause 19(3) requires the contracting authority to ensure that any competitive tendering procedure is proportionate, having regard to the nature, cost and complexity of the contract. Amendment 107 from my noble friend Lady Noakes proposes to make these considerations from the perspective of the supplier—we have been through all this, and we have agreed that clarity is what my noble friend Lady Noakes requires. Sorry, I went back in my speech. I was looking back because the noble Lord, Lord Scriven, had asked me to go back. I will now go forward.

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[Baroness Neville-Rolfe (Con)]

The point is well made. I would be interested to know how long that Act has been in operation in the United States. One of the concerns I have had, looking at these various provisions in all their complexity, is that we are actually continuing relatively new EU requirements; they came into our law between 2014 and 2016 with a directive and a number of regulations. I am not clear to what extent they have been reviewed to be effective. You need them to be fair and effective, and you need to consider the people who are excluded as well as those who happily champion them—as one does if one works for a big multinational; I have worked for one. My comments are intended to encourage the Committee to look at the detail to ensure that perverse effects are minimised and excluded where they can be.

[Lord Scriven (LD)]

My Lords, this has been a fascinating discussion on a number of amendments that are grouped around what I would call value-based procurement. The values should allow £300 billion of taxpayers’ money to be used to create good business and a solid foundation. We wish to see public money spent in a way that is based on the values we hold as a nation, not just in the UK but elsewhere.

It was interesting listening to the noble Baroness, Lady Neville-Rolfe, who just said very distinctly that a value-based approach could have the effect of destroying competitiveness and productivity for certain companies and exclude them. All the businesses I have worked with—big ones, small ones, social enterprises, small and medium-sized enterprises—want a nudge from government at times to be able to do the right things. When the Government nudge in their procurement, they send a signal to the market that enables business to make decisions based on things other than the bottom line. I tend to find that that is a useful thing for them, rather than a negative thing. Therefore, I think that value-based procurement is really important.

I start by speaking to Amendment 331, signed by my noble friend Lord Fox—as you can see, I am struggling so I will not go on at great length, like the Minister did last week. Clause 59 creates a centralised debarment list that allows Ministers to prohibit suppliers from contracting with public bodies if they fall under the certain exclusionary grounds in Schedules 6 and 7. However, a supplier’s involvement with serious human rights abuses is not listed even as a discretionary ground for exclusion. I am sure that that is an omission by the Government and not a deliberate exclusion. Human rights abuses should be on the face of the Bill as a reason for debarment. You can argue whether it should be mandatory or discretionary—personally, I would like it to be mandatory—but it has to be at least discretionary. The purpose of this amendment is to allow Ministers to debar companies that have proven involvement with serious human rights abuses. I hear what the noble Lord, Lord Alton, said about listing genocide there.

I have a particular interest in Gulf states, particularly human rights abuses in Bahrain. I could keep the Committee for hours on the significant human rights abuses in that country. A number of companies in the UK, both large and small, trade with some of the organisations that are directly linked to human rights abuses in Bahrain. However, under this Bill on public sector procurement, there would be no way of debarring them, even though these companies are sponsoring or are directly involved in working with organisations that are implicated in death, torture and the deprivation of liberty—for at least 20 years, in some cases. So I ask the Minister: why is this exclusion there? Has there been an oversight in not having human rights abuses on the face of the Bill?

I come to a couple of the other amendments that noble Lords have addressed. Amendments 174 and 179 on payment are really interesting and quite important, because cash flow is king, particularly for small and medium-sized enterprises. Within the Bill are assumptions about 30-day payments to public sector organisations. There is an implied assumption in the Bill that the same subcontracting arrangements will take place between the major contractor and the subcontractor, but there is no mechanism for sanctions if that does not happen. That is why I think Amendments 174 and 179 are an interesting way of saying that there will be sanctions, in debarring people from getting public sector contracts.

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We recognise that modern slavery often occurs in countries which are not party to international treaties on forced labour and which are unlikely to prosecute the perpetrators, and where there may be no relevant national laws. Paragraph 3 of Schedule 7 allows authorities to exclude suppliers and disregard their bids where there is sufficient evidence of modern slavery—

[Lord Scriven (LD)]

I have listened very carefully to the description the noble Lord has given. Exactly the same kind of provisions exist in states which do torture, where there are no laws or treaties that those states uphold. So, what is the difference between modern slavery and torture when they take place in a state where the laws and the regime that rules that state do not protect its citizens from either?

[Lord True (Con)]

My Lords, I referred to the position where there may be no relevant national laws. The Government’s submission is that this Bill greatly strengthens the defences we have against modern slavery and the vile abuse of individuals in these circumstances. As I said, this will apply whether or not there has been a conviction or a breach of an international treaty.