Procurement Bill [HL]

Lord True Excerpts

2nd reading
Wednesday 25th May 2022 Lords Chamber

Moved by

[Lord True]

That the Bill be now read a second time.

[The Minister of State, Cabinet Office (Lord True) (Con)]

Since the British people voted to leave the European Union, and we finally got it done, this country is being freed from many bureaucratic and process-driven regulations that stifled our country and businesses for many years—

[Noble Lords]

Oh!

[Lord True (Con)]

Noble Lords opposite laugh at the concept, but one of the most prominent of these regulations was the EU public procurement network. Frankly, I would have thought that noble Lords would have heard that cry from businesses up and down this country. We now have the opportunity to reform it. I am delighted that the Second Reading of this important Bill has come to your Lordships’ House because it has a particular capacity to scrutinise complex matters. I look forward to working with your Lordships across the House on that basis.

Public procurement is one of the most important and influential duties of Her Majesty’s Government: £1 in every £3 of public money—some £300 billion a year—is spent on public procurement. Imagine the power of the most efficient and effective use of that money every year. Imagine the extra small businesses that we could help to hire more workers, expand their operations and contribute to the wealth of this nation. Imagine the efficiencies that we could achieve so that we could spend more on our National Health Service and other vital public services.

The Procurement Bill reflects over two years of intense policy development—I pay tribute to all those involved—a Green Paper, government responses and meetings with hundreds of stakeholders. This work is being carried forward by my right honourable friend the Minister for Government Efficiency, Mr Rees-Mogg. The Bill will reform the UK’s public procurement regime, making it quicker, simpler, more transparent and better able to meet the UK’s needs, while remaining compliant with our international obligations. It will introduce a new regime that is based on value for money, competition and objective criteria in decision-making. It will create a simpler and more flexible commercial system that better meets our country’s needs, and it will more effectively 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.

Before rising to speak, I listened to your Lordships’ concern on the matter of human rights abuses in China; I agree with many of the comments that were made. The Bill will strengthen the approach to excluding suppliers where there is clear evidence of their involvement in modern slavery practices—for example, in the increasing number of reports of human rights abuses in Xinjiang. Running through each part of the Bill is the theme of transparency. We want to deliver the highest possible standards of transparency in public procurement, and the Bill paves the way for that.

Leaving the EU has provided the UK with the responsibility and opportunity to overhaul the public procurement regulations. The current regimes for awarding public contracts are too restrictive, with too much red tape for buyers and suppliers alike, which results in attention being focused on the wrong activities rather than on value for money. There are currently over 350 different procurement regulations spread over a number of different regimes for different types of procurement, including defence and security. The Procurement Bill will consolidate these into a single regime that is quicker, simpler and better meets the needs of the UK. We have removed the duplication and overlap in the current four regimes to create one rulebook which everyone can use. The Bill will also enable the creation of a digital platform for suppliers to register their details once for use in any bids, while a central online transparency platform will allow suppliers to see all opportunities in one place. We hope that this will accelerate spending with SMEs.

This is a large and technical Bill. It includes a number of regulation-making powers, and I have no doubt that your Lordships will want to consider those carefully. We submit—and hope to convince your Lordships—that these powers are necessary to ensure that the legislation will continue to facilitate a modern procurement structure for many years to come, so that we can put in place a lasting model which will allow us to keep pace with technological advances and new trade agreements, and to stay ahead of those who may try to use procurement improperly. As we continue to scrutinise this legislation, we will revisit some of the powers included and will seek to improve on those, if necessary. I also accept that there are some areas that will need refinement, and we will come back at Committee with appropriate amendments.

I will now provide a more detailed overview of some of the key aspects of the Bill. Turning first to territorial application, we have delivered this Bill in a spirit of co-operation with the other nations of the United Kingdom—I welcome this. As part of the policy development process, we welcomed Welsh and Northern Irish policy officials into our team so that they had a critical role in shaping this legislation from the very beginning. The result is legislation whose general scope applies to all contracting authorities in England, Wales and Northern Ireland. This will ensure that contracting authorities and suppliers can benefit from the efficiencies of having a broadly consistent regime operating across the constituent parts of the United Kingdom. The Scottish Government have opted not to join the UK Government Bill and will retain their own procurement regulations in respect of devolved Scottish authorities. This is similar to how the current regulations operate, with the Scottish Government having transposed the EU directives into their own statute book. There may be some in both Houses who will regret this. I am sure that we would all welcome our Scottish friends if they wished to join the new system proposed by the Bill; taxpayers and public services alike would benefit across the whole United Kingdom.

Part 1 of the Bill sets out which authorities and contracts it applies to. It covers contracts awarded by most central government departments, their arms-length bodies and the wider public sector, including local government and health authorities. This also includes contracts awarded by utilities companies operating in the water, energy and transport sectors, and concession contracts. The Bill also sets out a small number of simpler rules which apply to lower-value contracts, and it makes provision to carve out those procurements regulated by the Health and Care Act in order to ensure clarity about which regime applies.

The Bill consolidates the current procurement regimes and therefore extends to defence and security contracts. Defence procurement will benefit from the simplification and increased flexibility of the core regime. There are a limited number of derogations that meet the specific needs of defence and security procurements, and which will support delivery of the Defence and Security Industrial Strategy published in March 2021. A national security exemption has also been retained to protect our national interest. The Bill also includes a separate schedule to enable reforms to the Single Source Contract Regulations 2014. The proposed reforms seek to ensure that these regulations fully support the delivery of the Defence and Security Industrial Strategy by supporting a more strategic relationship between government and the defence and security industries. My noble friend Lady Goldie will be assisting your Lordships on these provisions.

Part 2 of the Bill is focused on the principles and objectives that must underlie the awarding of a public contract. Contracting authorities must have regard to delivering value for money, maximising public benefit, transparency, and acting with integrity. Integrity must sit at the heart of the process. It means that there must be good management, prevention of misconduct, and control to prevent fraud and corruption.

Part 5 of the Bill sets out the particular requirements on contracting authorities to identify and manage conflicts of interest.

Public procurement should also support the delivery of strategic national priorities, and this part of the Bill makes provision for a national procurement policy statement and a Wales procurement policy statement to support this.

In Part 3, the Bill sets out how a contracting authority can undertake a procurement and award a contract. Competition is at the heart of the regime. The Bill introduces a new procedure for running a competitive tendering process colloquially known as the “competitive flexible procedure”—I am not quite sure how colloquial that is—ensuring for the very first time that contracting authorities can design a competition to best suit the particular needs of their contract and market.

There will continue to be a special regime for certain social, health and education services, specifically identified by secondary legislation, which may be procured as “light-touch contracts”, leaving room for authorities to design procurement procedures that are more appropriate for these types of services. These light-touch contracts are still subject to the necessary safeguarding requirements.

The Bill also continues the existing ability to reserve certain contracts for public service mutuals and for supported employment providers. There are a limited number of circumstances in which it may be necessary to award a contract without competition. The Bill sets these out, including new rules governing the award of contracts to protect life and public order.

Part 3 also sets out the circumstances in which a supplier may be excluded from a procurement due to serious misconduct, unacceptably poor performance or other circumstances which make the supplier unfit to bid for public contracts. Contracting authorities will be able more easily to reject bids from suppliers which pose unacceptable risks.

Part 3 also legislates for the introduction of a public debarment list for serious cases of misconduct. For far too long, too many unscrupulous suppliers have continued to win public sector contracts due to the ambiguity of the rules, multiplicity of systems and lack of central effective oversight.

The important work on procurement does not stop once a contract has been awarded, so Part 4 of the Bill sets out steps that must be taken to manage a contract. This includes the strengthening of rules ensuring that suppliers are paid on time and new requirements to assess and publish information about how suppliers are performing.

Running throughout the Bill are requirements to publish notices. These are the foundations for the new standards of transparency which will play such a crucial role in the new regime. Our ambitions are high, and we want to ensure that procurement information is publicly available, not only to support effective competition but to provide the public with insight into how their money is being spent. Part 8 of the Bill provides for regulations which will require contracting authorities to publish these notices, resulting in more transparency and greater scrutiny.

In respect of Covid-19 contracts, the Government are clear that all offers for PPE, regardless of the route through which they were identified, underwent rigorous financial, commercial, legal and policy assessment led by officials from various government departments.

Part 9 details what remedies are available to suppliers for breach of the new regime by contracting authorities where that has resulted in loss or damage. Having an effective and well-functioning remedies regime is essential to the successful operation of any public procurement regime.

Any claims made during an applicable standstill period—between the award decision and the entering into of the contract—will result in the procurement being automatically suspended. We will introduce a new test for the court to consider, when hearing applications for the automatic suspension to be lifted, that is better suited to procurement than the one currently applied.

Part 10 of the Bill gives an appropriate authority oversight over contracting authorities and the power to investigate their compliance with this new Act as part of a new procurement review unit.

The UK is already party to a number of international agreements which guarantee valuable market access for UK suppliers. For example, our membership of the WTO’s Agreement on Government Procurement gives British businesses access to £1.3 trillion in public procurement opportunities overseas. Access to these markets is a two-way street and requires the UK to ensure that treaty state suppliers have equivalent access to UK markets. Part 7 prohibits a contracting authority from discriminating against suppliers from those states. This part also contains a power to make regulations specifying the agreements listed in that schedule. This provides greater flexibility to be able to extend the procurement regime to cover matters covered by the UK’s international procurement agreements, both current and future. This is a well-defined and tightly restricted power which will enable the procurement aspects of future trade agreements to be enacted efficiently, but I have no doubt we will discuss this in Committee. It is not an open door to changing UK procurement regulations to meet international commitments. This power allows only for the extension of the UK procurement regime to cover overseas suppliers covered by such agreements. Amendment of the UK’s procurement rules is outside the scope of this power, even if it were to be required as part of an international agreement. It would not, for example, allow the opening up of NHS clinical healthcare procurements to private providers from any state. To do so would require broader legislative changes, and this power has been carefully drafted so as not to allow for that.

In conclusion, there has never been a piece of UK procurement legislation as comprehensive as this. I hope that I will be able to demonstrate, in our discussions on the Bill, how this Government plan to reform procurement so that we can collectively boost business, spread opportunity, level up the country and strengthen our union. I very much look forward to taking the Bill through your Lordships’ House and I will be keen to hear any questions and suggestions your Lordships may have, today and throughout our proceedings. I commend the Bill to the House, and I beg to move.

--- Later in debate ---

[Lord True (Con)]

My Lords, I thank very much all those who have taken part in the debate. Myriad points have been raised from all sides of the House. I never know what the usual channels are deciding, but it is probably a good thing that, as I understand it, we are not going into Committee for some time because I can feel a compendious letter to your Lordships coming on, which might be as long as the Explanatory Notes.

Your Lordships will forgive me if I do not deal with every detailed point; I will try to address some of the main themes of the debate, which were expressed very well by the noble Baroness, Lady Hayman, when she opened and the noble Lords, Lord Coaker and Lord Wallace, in summing up. We will not agree on all these things. Certainly, in some of the speeches from the other side, there was a yearning to impose policies on the private sector—on people outside government. The high-water mark was the speech of the noble Lord, Lord Hendy, which I guess was the counterpoint to the low-water mark—I am not sure there was any water in it at all—of the speech of my noble friend Lord Moylan. To impose your political objectives on a nation, you have to win an election and form a Government. What we need to do—there was great support and great consensus across the House on this—is put together a framework that we could all work with to provide clarity, simplicity and, yes, transparency, which I will come on to, for those seeking to provide to public procurers.

An important speech on defence was made by the noble Baroness, Lady Smith, and the subject was also alluded to by the noble Lord, Lord Coaker. My noble friend Lady Goldie will respond in writing on the points made but, obviously, when we get into Committee, we will be able to address the points.

Points were raised about control, management and remedies. The noble and learned Lord, Lord Thomas, put forward some ideas. We will reflect on those but, basically, the law of the land is the framework; my noble friend was right.

Many noble Lords alluded to Covid-19 procurement. I understand that but we need to look forward. While the debate was going on, I looked this up on my machine and saw that in April 2020 the leader of the Liberal Democrats was calling for all red tape to be swept aside to get PPE. People in other parties were saying the same. Yes, mistakes were made, but when you make mistakes you must learn from them. We are putting together a regime that will deliver more comprehensive transparency requirements, clear requirements on identification, management of conflicts of interest and so on. It is right that we should address those things, but the priority of the Government—indeed, of all of us in all parties—as the pandemic we knew so little about arose, was to save lives. I acknowledge that there are lessons, but I hope that when we look at how the Bill is structured, we will see that we have an improved framework for addressing all aspects of procurement.

The noble Lord, Lord Alton of Liverpool, and others rightly addressed the issue of human rights. We will discuss this in Committee. I had the pleasure of discussing it with the noble Lord before, as he was kind enough to say. Certainly, modern slavery has no place in government supply chains; I affirm that strongly. I accept that the current rules on excluding suppliers linked to modern slavery are too weak. For example, they require the supplier to have been convicted, or for there to have been a breach of international treaties. These rules are not capable of dealing with some of the issues that we see.

We are making explicit provision in the Bill to disregard bids from suppliers known to use forced labour or to perpetuate modern slavery in their supply chain. Authorities will be able to exclude them where there is sufficient evidence; they do not need to have a conviction. We are seeking to respond in this area and no doubt we will be probed further.

One issue raised right from the start by the noble Baroness, Lady Hayman, was that of principles. A lot of people have said that this was in the Green Paper but is not in this Bill. A Green Paper is a basis for consultation and reflection. A Bill is the proposition that the Government put before Parliament and this is the proposition that we are putting before Parliament. The Bill splits the procurement principles into a group of objectives and rules to help contracting parties understand what they are obliged to do. The rules on equal treatment, now termed “same treatment”, in Clause 11(2) and (3) are obligations that set minimum standards in plain English that contracting authorities must follow on treating suppliers in the same way to create a level playing field. Non-discrimination, in the context of the Bill, means discrimination against treaty state suppliers on the grounds of nationality, which is a concept different from non-discrimination in the UK market. The national rules on non-discrimination in the Bill can be found in Clauses 81 to 83.

There were a number of changes to the principles. For example, the procedural transparency obligations in the Bill are complemented by a new information-sharing objective in Clause 11(1)(c), which will provide clarity to contracting authorities on exactly what they need to publish. There is also no need for an objective to maximise competition in procurement processes under the Bill, as procedural obligations start with the use of open and fair competition, unless there are legitimate grounds to dispense with or narrow competition. The most obvious of those would be special cases for direct award.

I acknowledge that transparency has been a key ask for the House. The House expects that transparency will be improved. We believe that the Bill does this. We are extending the scope of publication requirements to include planning and contract performance, in addition to current requirements to publish contract opportunities and contract awards. By implementing the open contracting data standard we will publish data across the public sector so that it can be analysed at contract and category level, and compared internationally. The new regime will also establish obligations on contracting authorities to capture potential conflicts of interest for individuals working on procurement additionally, or mandate the publication of a transparency notice whenever a decision is made to award a contract using a procedure as a direct award. This will all be supplemented by a comprehensive training programme that will be available to contracting authorities, which I will come back to later.

We remain committed to our aim to embed transparency by default through the commercial life cycle. We recognise and make no apology that this new regime seeks to do that. The new central digital platform will be designed to make complying with the new transparency requirements automated and low cost. We intend to make data analysis tools available to contracting authorities, which will ensure that they can use the data available to drive value for money.

Taxpayers have a right to see how public money is spent. There is abundant evidence of public engagement with contracting information, and it increases as the data improves. Because the data will be more comprehensive it will be more valuable and, we believe, better used. I have no doubt that we will be tested on that, but I assure the noble Baroness opposite that it is something we are extremely determined to achieve.

On social objectives, I was asked by a number of noble Lords how the Bill will help with achieving net zero. I accept that the Bill does not include any specific provisions on the Government’s target to achieve net-zero carbon emissions by 2050, but it will require contracting authorities to have regard to national and local priorities as set out in a national procurement policy statement to be published by the Government, and the Wales procurement policy statement to be published by Welsh Ministers. Many noble Lords have given notice that they will want to return to examination of the national procurement policy statement, how it will operate and how it will go forward, but there are statements in there.

Public sector buyers are able to structure their procurements so as to give more weight to bids that create jobs and opportunities for our communities, where this is relevant to the contract being procured. This is absolutely in line with the concept of value for money. Social value in procurement is not about a large corporate’s environmental, social and governance policies but about how the contract can be delivered in such a way that it delivers additional outcomes, such as upskilling prison leavers, which I think someone referred to.

Delivering value for taxpayers should certainly be the key driver behind any decision to award contracts to companies using public money, but again, public sector buyers will have to have regard to the national policy statement. The Bill will take forward a change from “most economically advantageous” to “most advantageous” to reinforce the message that they should take a comprehensive assessment of value for money, including the wider value of benefits, in the evaluation of tenders.

I know that many of your Lordships want to see and have asked for buying British. Public sector procurers are required to determine the most advantageous offer through fair and open competition. We confirmed in December 2020 that below-threshold contracts can now be reserved for UK suppliers and for small suppliers where it is good value for money. This applies to contracts—in those strange figures in the Bill that arise from international treaty—with a value below £138,760 for goods and services, and £5.336 million for construction in central government.

Above those thresholds, we need to act in line with our international obligations. A blanket “Buy British” policy would conflict with the UK’s international obligations to treat suppliers from other countries on an equal footing. The requirement for fair and open competition is a two-way street because it gives UK firms access to other markets. Within the UK, on average, just over 2% of UK contracts by value were awarded directly to foreign suppliers between—

[Lord Fox (LD)]

I thank the Minister for giving way. I am confused and I am sure he can help me. Clause 82(1) specifically says:

“A contracting authority may not, in carrying out a procurement, below-threshold procurement or international organisation procurement, discriminate against a treaty state supplier.”


The Minister just said the opposite of that in the case of below-threshold procurement. The Bill is very clear that a below-threshold procurement does not let off the contracting authority from having to give the contract to a treaty state supplier.

[Lord True (Con)]

My Lords, I was hoping to make progress and I know that your Lordships would like to conclude these matters. As the noble Lord says, those clauses refer to international treaty obligations. What I was saying was in reference to a contract to let; I was asked very pertinently by the noble Lord, Lord Whitty, for example, about local authorities buying locally, and I repeat what I said: below-threshold contracts can be reserved for suppliers located in a particular geographical area. If international issues arise, that is a different matter. This policy was set out in the Government’s Procurement Policy Note 11/20.

My noble friend Lord Lansley and many others, including the noble Baroness at the start, asked me about innovation. The legislation will put more emphasis on publishing pipelines of upcoming demand, procurement planning and pre-market engagement so that businesses can properly gear up to deliver and offer the best innovative solutions. It will have a new competitive tendering procedure which will enable contracting authorities to design and run procedures that suit these markets. For example, it will allow them to contract with partners to research, develop and eventually buy a new product and service in a single process. The new rules will make it clear that buying innovation does not apply only to buying something brand new but can be about developing an existing product to meet different requirements.

The noble Lord, Lord Stevens, the noble Baroness, Lady Brinton, and others asked about the health service and the relationship with the DHSC. These reforms sit alongside proposals to reform healthcare commissioning which have been enacted through the Health and Care Act. We recognise the need for integration between local authorities and the NHS, both for joint commissioning and integrated provision, and we will work closely with the Department of Health and Social Care.

I repeat: the public procurement provisions will not result in the NHS being privatised. The procurement of clinical healthcare services by NHS bodies will be governed by DHSC legislation and is separate to the proposals in the Bill. However, the non-clinical services, such as professional services or clinical consumables, will remain part of the Bill. Clause 108, which I agree is widely framed as it sits in the Bill, is needed to ensure that it neatly dovetails with any regime created under the Health and Care Act, providing clarity. Obviously, we will have that probed.

Accessibility was another theme that was raised by the noble Lords, Lord Whitty and Lord Fox. The Government remain committed to ensuring that public procurement drives value for money, and that includes better outcomes for disabled people, as it must. The Bill does not dictate how technical specifications may be drawn up, only what is actually prohibited, as set out in Clause 24. However, there is a clear expectation that when contracting authorities set technical specifications for procurement, they do so in a way that takes into account accessibility criteria for disabled persons. Clearly, this is an important matter that requires further consideration, and we commit to doing that.

Training is important, and the training package will be made available in good time for users to prepare for the new regime being implemented. That is why we have committed to six months’ notice before going live, and the training will be rolled out. The Cabinet Office will provide both funded training and written guidance and learning aids, covering the range and depth of knowledge requirements for those operating within the new system. The online learning will be free at the point of access for contracting authorities. The knowledge drops will be freely accessible for all via YouTube, and the written guidance and learnings will also be free and accessible for all via GOV.UK.

The noble Lords, Lord Mendelsohn and Lord Aberdare, asked some pertinent and specific questions about small businesses, and I will certainly make sure that they are answered. This legislation will help SMEs to win contracts for many reasons: bidders will only have to submit their core credentials to the single platform once, for example, making it easier and more efficient to bid. The single transparency platform, or single sign-on, means that suppliers will be able to see all opportunities.

The new concept of dynamic markets, which we will explore, is intended to provide greater opportunity for SMEs to join and win work in the course of a contracting period. The Bill will ensure that subcontractors in chains will also benefit from prompt payment obligations.

There are many other ways in which we intend to help SMEs. The noble Lord, Lord Wigley, asked about the great Principality of Wales. Wales will, as he knows, have the power to publish its own procurement policy statement, in which it can set out its own local priorities for communities. We have worked closely with the Welsh Government to ensure that there is continuity for Welsh contracting authorities. For the first time, Welsh Ministers will be able to regulate the procurement of some goods and services in Wales by some cross-border contracting authorities. But in our judgment, it is right that, where the scope of a procurement extends outside Wales into the rest of the UK, the UK rules should apply.

Publicly funded housing associations would be in scope of the contracting authority definition. However, I am advised that privately funded providers of social housing would not be in scope because they do not meet either the funding or the control requirements. I will write to the noble Lord further about this.

I was going to address points about data collection, but—

[Lord Cormack (Con)]

Write a letter.

[Lord True (Con)]

I will indeed write a letter. It is very helpful to have my noble friend write my speeches for me.

I will answer other points but, to conclude, I thank noble Lords for their extremely intelligent, thoughtful and well-considered remarks, which the Government will consider in Committee. Our proposals have been consulted on extensively and we believe that they are common sense, but we can always gain from listening to your Lordships. In that spirit, I hope that your Lordships will support these proposals as they progress through the House.

[Lord Wallace of Saltaire (LD)]

I do not want to detain the House, but, since my noble friend Lord Strasburger made some serious points about a major contract, could the Minister possibly say that he will undertake to meet him and others to respond to some of the points he made?

[Lord True (Con)]

The noble Lord made a speech that went wide of the Bill. I will look at what he said in Hansard and respond thereafter. I make no commitment at this point.

Bill read a second time and committed to a Grand Committee.