Procurement Bill [HL]

Lord Wallace of Saltaire Excerpts

Committee stage
Monday 11th July 2022 Grand Committee

[Baroness Brinton (LD) [V]]

My Lords, I will speak to Amendment 30 but just want to say that I agree with Amendment 33, in which my noble friend Lord Wallace asks why suppliers from outside the UK are likely to want to compete for contracts for the supply of services. Amendments 34 and 35 remind us that there are a wide range of different bodies that need to be able to tender for services, probably mainly local, but they should not be either excluded formally or informally as a result of this Bill.

Returning to Amendment 30, I thank the noble Baroness, Lady Noakes, for her helpful introduction and I want to raise with the Minister matters that we will be returning to in Clauses 41 and 108. As the noble Baroness, Lady Noakes, has laid an amendment that includes health and social care services supplied for the benefit of individuals, there are questions that need to be raised. Had we been debating the second group of government amendments today, I would have covered this topic in the Minister’s Amendment 526 as well.

Clause 108 sets out the disapplication for this Bill in relation to procurement by NHS England, but Section 79 of the Health and Care Act talks about

“health care services for the purposes of the health service in England, and … other goods or services that are procured together with those health care services.”

It goes on to define a relevant authority in healthcare services in subsection (7) as

“(a) a combined authority;


(b) an integrated care board;

(c) a local authority in England;

(d) NHS England;

(e) an NHS foundation trust;

(f) an NHS trust established under section 25”.

The problem is that that definition excludes certain parts of health services. For example, an integrated care board will be commissioning, but not procuring directly, some services to primary and secondary care organisations. However, not all NHS organisations are covered by the relevant authority in the healthcare definition. For example, a GP surgery might be a private partnership or a company employing surgery staff including GPs. This might be UK based or even an overseas company, but not a trust or any of the other definitions. The same definition also exists for dentists’ surgeries. I was wondering if the noble Baroness, Lady Noakes, was thinking that this type of organisation would be covered by her amendment. Most of them are small organisations.

I ask the Minister this question of principle, really as advance warning that we will return to it later in the Bill. Why are health services, clinical and

“other goods or services that are procured together with those health care services”,

going to have a completely different procurement regime entirely delegated to the relevant Secretary of State, who can enact it by SI? That can ignore all the important clauses that we are debating in this Bill—value for money, value for society, transparency and the technical elements critical for anybody wishing to procure goods and services using money from the public purse, except for those parts of the health service that do not fall into that definition in the Health and Care Act, which will have to abide by the Procurement Bill.

Secondly, can the Minister advise on exactly where the dividing line is for those parts of the health service that are commissioned by other parts of it, but do not fall under the definition? It would be perfectly logical to have a contractor team preparing a bid for a contract with a regional consortium that includes a hospital trust and a non-NHS body, perhaps a charity—exactly the sort of small organisation that the noble Baroness, Lady Noakes, referred to—that worked with patients. It would have to remember, if syringes were included in that PFI contract for the new wing, for example, when the NHS procurement system would therefore be used, that there would be an entirely different set of rules, processes, et cetera, compared with a contract for a hospital trust that covered only non-clinical items, and therefore used the terms in this Bill.

This will be horribly messy. It will not just be confusing for contractors, which will need teams fully au fait with where the dividing line is between the completely different rules that will apply, but I suspect it will be total chaos inside the NHS. Can the Minister explain the thinking behind this and where the differences are? If possible, could we have a meeting with him and other noble Lords interested in the interface between this Bill and the Health and Care Act legislation, and in how it will work in practice?

[Lord Wallace of Saltaire (LD)]

My Lords, I will speak to Amendments 33 and 34, but I start by thanking my noble friend Lady Brinton for highlighting the need to make sure that this Bill and the Health and Care Act do not contradict each other. I was struck by a speech by the noble Lord, Lord Willetts, at the Second Reading of the Higher Education (Freedom of Speech) Bill the other week, in which he suggested that the Minister consider whether definitions of freedom of speech in the Online Safety Bill and the higher education Bill were compatible. The noble Lord very much doubted that they were. In spite of the current chaos within the Government, they need to ensure that different Bills going through in the same Session are compatible and do no cut across each other.

Amendments 33 and 34 are concerned with light-touch contracts. Amendment 33 is purely a probing amendment. We wish to understand the circumstances in which suppliers from outside the UK are likely to want to compete for contracts of the sort that the noble Baroness, Lady Noakes, suggested would be covered under the light-touch system—primarily, the provision of personal and social services to be delivered on the ground, in local communities, by people with sufficient local knowledge to be effective.

My concern here was heightened by the outsourcing of the initial test and trace contracts to two large companies, one of which has its headquarters in Miami, Florida, and neither of which has any appropriate expertise in local delivery or geography. Not surprisingly, therefore, testing stations were set up in inconvenient places and local volunteers, who offered to assist in large numbers, were often ignored. My colleague, my noble friend Lord Purvis, would have wished to ask whether the new trade agreements the DIT is negotiating would nevertheless open these contracts to overseas companies, including those from non-English speaking countries. Can the Minister therefore explain and justify the paragraph concerned?

Amendment 34 would put in the Bill the importance of local provision of services and the constructive role that non-profit entities can play in the provision of services in which sympathy, personal relationships and concern for welfare above immediate profit are important parts of the motivation for those who work in them and in which volunteers can also contribute to effective supply. My experience here is mainly from the care home sector, although I believe the argument stretches a good deal more widely than that. Private companies, including offshore-based private equity companies, have made excessive profits out of care home provision in a number of cases. Noble Lords will be familiar with Terra Firma, which the Minister will recall is based in the Channel Islands. That is why I have a later amendment that challenges the question of whether companies based in the Crown dependencies and overseas territories should be considered UK suppliers—but there are other examples.

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Amendment 30, tabled by my noble friend Lady Noakes, proposes narrowing the scope of light-touch contracts to cover only health or social care services supplied for the benefit of individuals. In our opinion, this would not be desirable as the broader range of services can and should benefit from the light-touch provision, where they are subject to fewer obligations in free trade agreements—for example, catering and canteen services and possibly some prison-related services. We would not want to adopt a more stringent approach than that taken in other countries in Europe.

[Lord Wallace of Saltaire (LD)]

My Lords, could we ask for some clarification on this, perhaps in a letter? Probation services are obviously a personal service that falls outside healthcare. Personal tutoring was raised by my colleague the noble Baroness, Lady Bennett. If this is to be a wider sector than purely health and social care, we would like a little more guidance as to how wide it might go.

[Baroness Scott of Bybrook (Con)]

I understand. We will make sure to get that guidance well before Report.

Amendments 33, 34 and 35, tabled by the noble Lords, Lord Wallace and Lord Lansley, and the noble Baroness, Lady Bennett, relate to Clause 8(4). This subsection identifies features that may constitute light-touch contracts and complements the regulation-making power to determine light-touch contracts in Clause 8(2). The noble Lord, Lord Wallace, included a probing amendment to delete Clause 8(4)(a). However, recognising that Clause 8(4) is an indicative list, the relevance of the provision is to identify that light-touch services are often unlikely to be of cross-border interest. I hope that that makes sense; if not, we can discuss it further.

This is still a useful identifying feature of light-touch contracts and helps readers of the legislation to understand why some contracts have light-touch rules. Set against subsections (4)(b) and (4)(c) of Clause 8, subsection (4)(a) identifies that the services are not exclusively domestic. We are content that Clause 8(4) is appropriate as drafted.

Amendment 34, proposed by the noble Lord, Lord Wallace, and the noble Baroness, Lady Bennett, requests an addition to Clause 8(4), which aims to ensure that local authorities, social enterprises, not-for-profit organisations, mutuals and charities are properly considered for such contracts. Similarly, Amendment 35, proposed by the noble Lord, Lord Lansley, has been put forward to include a consideration that

“the suppliers of such services consist of small and medium-sized enterprises and few larger enterprises.”

Clause 8(4) does not dictate how contracting authorities award light-touch contracts. We already have adequate provision in the Bill to support these groups to obtain public contracts—for example, reserved contracts, the introduction of a new user choice direct award ground, and maintaining significant flexibility to tailor award criteria for light-touch contracts. We think that we strike the right balance in the Bill by creating opportunities for these sectors while maintaining fair treatment of all suppliers in the awarding of public contracts.

Amendment 207, proposed by my noble friend Lady Noakes, would make the time limit at Clause 33(5) equal to the maximum duration for such a contract. The intention behind the change is to prevent a public sector mutual from being repeatedly awarded a contract for the same services by the same contracting authority.

It is not considered appropriate to align the time limit with the maximum duration permitted under the clause. It should be noted that there is no obligation on the contracting authority to award contracts that were run for the full five years’ duration allowed, or indeed that use the reserved contracts provision at all. In fact, stakeholder feedback indicated that the existing provision under the Public Contracts Regulations 2015 is underutilised due to its tight restrictions.

Public sector mutuals are usually organisations that have spun out from the public sector and most often deliver services to their local communities rather than nationally. It is therefore feasible that a reserved competition may result in a sole compliance tender, especially if the purpose of the contract is to provide services for the single local authority, which is likely often to be the case. If the restriction time limit were to match the maximum duration time limit, this could prevent the reserved competition from resulting in compliant tenders and require a new and unreserved competition to be run, which may not be in the best interests of the public.

The clause currently empowers the contracting authority to manage this risk when considering the procurement strategy, using its knowledge of the market and supported by guidance. If the time limits were to align, it would require more complex drafting of Clause 33 explicitly to enable this risk to be overcome within the time of restrictions. As I have said, if the restriction is too long, it may result in the reserved competition receiving no compliant tenders, given, I repeat, that public sector mutuals are usually organisations that have spun out from the public sector. Therefore, I respectfully request that these amendments are not pressed.

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I look forward to listening further to this debate and to the Minister’s responses.

[Lord Wallace of Saltaire (LD)]

My Lords, I will speak to Amendments 44, 56 and 57. I too have gone back to the Green Paper and the Government’s response to that consultation and I remain extremely puzzled that this entire consultation process was undertaken, that the Government responded in their response document rather favourably to it, but that almost none of that is reflected in Part 2 of the Bill. Part 2 declares that it is about principles and objectives, but Clause 12 reserves the detailed definition of those objectives to the Minister—whoever he or she may be when it comes to it—to set out later in a policy statement. This is a skeleton Bill and, reading through several parts of it, and this section in particular, I am reminded that the DPRRC commented that leaving things to regulations often disguises the fact that Ministers have not yet quite made their minds up as to what their policy and intentions will be when it comes to it.

If Ministers continue to turn over as rapidly as they have under the current Government, we might anticipate that, every nine to 12 months, a new Secretary of State will wish to issue a new strategic statement. Clause 12 tells us that the statement will be presented to Parliament after carrying out

“such consultation as the Minister considers appropriate”

and making

“any changes to the statement that appear to the Minister to be necessary in view of responses to the consultation”.

So we are asked to leave all that—the underlying principles of this Bill—to the Minister, whoever she or he may be by the time this becomes law. Much better to start with a parliamentary debate on what the agreed principles for procurement should be, from one Government to another, than to present Parliament with changing Ministers’ changing ideas after lengthy discussions with others outside.

On that topic, can the Minister tell us which Cabinet-level Minister is now responsible for this Bill, or which Commons Minister he is co-operating with in managing it as it moves through the two Houses? That would help the Committee understand how and whether it is likely to progress and what difficulties or changed circumstances the Minister is operating under. I appreciate and almost sympathise with some of the difficulties he may be going through in those circumstances, but if we intend this Bill to last, to provide some stability for non-governmental suppliers and the clients of public services, we need to put agreed principles and objectives in it.

There was much more about principles in the Government’s response to the Green Paper. Can the Minister explain why it is not here? Why did it not appear necessary, in view of the responses to the consultation? Amendments 43, 44 and others insert statements of principles largely drawn from government publications. They are central to the Bill. I hope the Minister will accept that it was a mistake not to include them and that it is not acceptable to Parliament to leave this to a future Minister—or perhaps Government—and that he will return on Report, after consultation, with a form of words on this that can command a cross-party consensus and which reflects the consultation already undertaken. Amendments 43 and 44 offer different, though overlapping, drafts of what it might be appropriate to include in the Bill.

I will speak also to Amendments 56 and 57. Amendment 56 is purely exploratory; we deserve an explanation in clear and simple language of the grounds on which some suppliers are to be treated differently from others. Amendment 57 inserts clearer language on the criteria by which procurement decisions should be judged: value for money, cost, quality and sustainability—as the noble Lord, Lord Moylan, pointed out, it is the principles that matter most in setting the tone and culture under which the entire public procurement process will take place. These are important terms, not to be left to the policy statement when it comes but fundamental to the principles under which procurement decisions are taken. They must be in the Bill.

We are all aware of procurement contracts where the cheapest bid has produced unsatisfactory outcomes, where what has been promised has not been produced and where insufficient attention has been paid to quality or sustainability. The noble Lord, Lord Moylan, mentioned one, but there are many others. These need to be spelled out for future procurement, with the blessing and approval of Parliament. Parliament has been sidelined under the recent retiring Government; we hope that whoever succeeds our current Prime Minister will treat it with rather more respect and consideration.

[Lord Clement-Jones (LD)]

My Lords, I will speak to Amendment 46, which comes from a slightly different angle. In our report AI in the UK: Ready, Willing and Able?, our AI Lords Select Committee, which I chair, expressed its strong belief in the value of procurement by the public sector of AI applications. However, as a recent research post put it:

“Public sector bodies in several countries are using algorithms, AI, and similar methods in their administrative functions that have sometimes led to bad outcomes that could have been avoided.”


The solution is:

“In most parliamentary democracies, a variety of laws and standards for public administration combine to set enough rules to guide their proper use in the public sector.”


The challenge is to work out what is lawful, safe and effective to use.

The Government clearly understand this, yet one of the baffling and disappointing aspects of the Bill is the lack of connection to the many government guidelines applying to the procurement and use of tech, such as artificial intelligence and the use and sharing of data by those contracting with government. It is unbelievable, but it is almost as if the Government wanted to be able to issue guidance on the ethical aspects of AI and data without at the same time being accountable if those guidelines are breached and without any duty to ensure compliance.

There is no shortage of guidance available. In June 2020, the UK Government published guidelines for artificial intelligence procurement, which were developed by the UK Government’s Office for Artificial Intelligence in collaboration with the World Economic Forum, the Government Digital Service, the Government Commercial Function and the Crown Commercial Service. The UK was trumpeted as the first Government to pilot these procurement guidelines. Their purpose is to provide central government departments and other public sector bodies with a set of guiding principles for purchasing AI technology. They also cover guidance on tackling challenges that may occur during the procurement process. In connection with this project, the Office for AI also co-created the AI procurement toolkit, which provides a guide for the public sector globally to rethink the procurement of AI.

As the Government said on launch,

“Public procurement can be an enabler for the adoption of AI and could be used to improve public service delivery. Government’s purchasing power can drive this innovation and spur growth in AI technologies development in the UK.


As AI is an emerging technology, it can be more difficult to establish the best route to market for your requirements, to engage effectively with innovative suppliers or to develop the right AI-specific criteria and terms and conditions that allow effective and ethical deployment of AI technologies.”


The guidelines set out a number of AI-specific considerations within the procurement process:

“Include your procurement within a strategy for AI adoption … Conduct a data assessment before starting your procurement process … Develop a plan for governance and information assurance … Avoid Black Box algorithms and vendor lock in”,


to name just a few. The considerations in the guidelines and the toolkit are extremely useful and reassuring, although not as comprehensive or risk-based as some of us would like, but where does any duty to adhere to the principles reflecting them appear in the Bill?

There are many other sets of guidance applicable to the deployment of data and AI in the public sector, including the Technology Code of Practice, the Data Ethics Framework, the guide to using artificial intelligence in the public sector, the data open standards and the algorithmic transparency standard. There is the Ethics, Transparency and Accountability Framework, and this year we have the Digital, Data and Technology Playbook, which is the government guidance on sourcing and contracting for digital, data and technology projects and programmes. There are others in the health and defence sectors. It seems that all these are meant to be informed by the OECD’s and the G20’s ethical principles, but where is the duty to adhere to them?

It is instructive to read the recent government response to Technology Rules?, the excellent report from the Justice and Home Affairs Committee, chaired by my noble friend Lady Hamwee. That response, despite some fine-sounding phrases about responsible, ethical, legitimate, necessary, proportionate and safe Al, displays a marked reluctance to be subject to specific regulation in this area. Procurement and contract guidelines are practical instruments to ensure that public sector authorities deploy AI-enabled systems that comply with fundamental rights and democratic values, but without any legal duty backing up the various guidelines, how will they add up to a row of beans beyond fine aspirations? It is quite clear that the missing link in the chain is the lack of a legal duty to adhere to these guidelines.

My amendment is formulated in general terms to allow for guidance to change from time to time, but the intention is clear: to make sure that the Government turn aspiration into action and to prompt them to adopt a legal duty and a compliance mechanism, whether centrally via the CDDO, or otherwise.

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Amendment 56, tabled by the noble Lords, Lord Wallace of Saltaire and Lord Fox, would change Clause 11(2) so that contracting authorities would have to treat all suppliers the same, rather than being able to treat them differently where differences were justified. The equal treatment of suppliers is clearly a key principle in procurement law, and Clauses 11(2) and (3) of the Bill acknowledge that. However, there are circumstances in which it is right to prefer some suppliers over others; indeed, the regime would not work if contracting authorities could not treat those who offered better bids differently from those who offered worse ones. Clauses 11(2) and (3) together seek to draw a distinction between those circumstances under which differential treatment is unacceptable, and can form no part of the procurement regime, and those where it is a necessary part of delivering improved bids through legitimate competition. Even if such a difference is justified, contracting authorities must do what they can to ensure that it is not unfair. We believe that the amendment would remove that flexibility, but again I am happy to engage with the noble Lords on that in more detail.

[Lord Wallace of Saltaire (LD)]

My Lords, although I am not a great expert on this subject, it seems that this is a case in which judicial review would be extremely easy because the question of how one justifies it is not spelled out here. Could the Minister perhaps write to us between now and Report about what criteria would then be used to justify the decisions taken? I entirely agree with the noble Baroness, Lady Neville-Rolfe, that one wants to ensure as far as possible that we do not leave large holes for judicial review to come in.

[Lord True (Con)]

My Lords, obviously I accept that, but we will certainly undertake to provide further information.

The noble Lord, Lord Scriven, was adumbrating cases where it should be possible to take different issues into account in terms of local activity. I understand the point that noble Lords are making about clarity. Clarity can either be sought through superdefinition, chasing the Snark through the end of the rainbow—sorry, I am mixing my metaphors—or it can be something for which the Government set out a clear framework that ultimately it is open to anyone in a free society to test under the common law. There is a balance to be found here and we will write further.

On Amendment 57, the noble Lords, Lord Wallace and Lord Fox, and the noble Baroness, Lady Bennett, complain that Clause 11 does not define value for money in order to leave a degree of flexibility for different types of organisation with different drivers to place a different emphasis on the concept. That is not unusual in legislation. Value for money as a concept is not uncommon on the statute book without further definition. It has been used in relation to setting high-level objectives for organisations, including the general duties of Ofcom in Section 3 of the Communications Act 2003 and indeed those of the Nuclear Decommissioning Authority in Section 4 of the Energy Act.

There are many precedents, I am told, but I have only given two of them where the term is left undefined, and this allows a degree of flexibility. We are happy with the broad interpretation of value for money, but Amendment 58 would have the effect of limiting the scope for future reviews of what value for money means. That is something that future Governments might wish to do. We do not support that position at the moment but, again, I am ready to listen to further discussion in Committee.

Amendments 128 and 130, tabled by the noble Lord, Lord Davies of Brixton, amend the provisions on award criteria. I am grateful to the noble Lord, first for the explanatory statement which sets out that his amendment intends to ensure that value for money does not override other procurement objectives, and secondly for his exposition of it. While it is important to be clear that Clause 22 does not affect the relative weighting of the objectives in Clause 11, I am grateful to the noble Lord for his consideration of this point and respond on that basis.

Public procurement needs to be focused on achieving value for money, and we submit that this is rightly at the top of the list of objectives set out in Clause 11. The noble Lord laid an amendment, the second part of which would in effect—taken literally—relegate or at least abnegate the possibility of placing value for money exclusively at the top. Our submission is that, while value for money will be the highest priority in procurement for the Government and that is reflected in the drafting of the Bill, it does not disapply or override the obligation on contracting authorities to have due regard to the other matters in Clause 11. I have no doubt that this will be probed further, but I hope that this will reassure the noble Lord that the amendment is not only unnecessary but, in its detail, we could not accept it. There is a balance to be sought here, and that balance will be seen differently by successive Administrations in successive places.

There was a very interesting range of amendments put forward in this group. I have listened carefully, and we will engage further on the points raised. I hope on that basis that noble Lords will feel ready to withdraw or not move their amendments.

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Moved by

[Lord Wallace of Saltaire]

45: After Clause 10, insert the following new Clause—
“Procurement requirements
In carrying out a procurement, a contracting authority must have regard to—(a) the target to reduce the net UK carbon account;(b) the ethical and human rights record of the supplier;(c) the need to maintain data security within the digital platform; and(d) the necessity for transparency and openness.”Member’s explanatory statement
This amendment specifies a number of overarching requirements that a contracting authority must have regard to when carrying out a procurement.

[Lord Wallace of Saltaire (LD)]

My Lords, all the amendments in this group—which, the Minister will note, come from all the various groups and tendencies in the Lords, including the Conservatives—are concerned to spell out in the Bill in rather more detail the social and economic objectives that public procurement should promote. My name is on Amendments 45 and 59, but there is language in other amendments that I support and which I hope the Minister will accept. The concepts of “public benefit” and “social value” are broad and non-specific. We are asking for rather more spelling out of the kinds of benefit and value that are intended, in order to guide contractors and suppliers as well as Ministers and officials.

All of us on the Committee are conscious of the significant impact that the principles of public procurement can have on the broader UK economy and society. I am struck by the degree of consensus in the Committee around a number of issues. If I may say so, I have never before been so painfully aware of how much I am agreeing with the noble Baroness, Lady Noakes, and perhaps I shall ask to sign one of her amendments on Report. That shows a sense of what we are trying to do constructively with the Bill, and let us hope that we continue. I hope the Minister is indeed in a receptive and co-operative mood and will be willing to consult members of this Committee before Report and to return with agreed language that responds to these concerns.

I appreciate that there are some on the hard right of the Conservative Party who do not believe in moving towards net zero or in the concept of social value. Conservative Ministers and Liberal Democrat Ministers co-operated in producing the social value Act of 2012, which remains in force and is highly relevant to the Bill. With respect, there are a minority within the Minister’s own party and a smaller minority within the wider public who resist this. The Minister himself is a self-declared one-nation Tory committed to conserving the nation’s shared values and long-term interests, so let us put some of these shared principles and objectives in the Bill.

Amendment 45 would insert the target of reducing the UK’s net carbon amount. The Minister will note the modesty of that objective since it does not even mention net zero, and indeed the noble Baroness, Lady Bennett, will probably disapprove of my modesty. The ethical and human rights record of suppliers is a live public issue across the parties that will not go away, as the Minister must be aware.

Amendment 59 spells out what is a definition of public benefit that, again, I hope the Minister will agree with and shares. Will he now accept that such a definition ought to be in the Bill?

[Baroness Thornton (Lab)]

My Lords, I shall speak to Amendment 47A in my name and Amendment 52. Basically, we believe that Clause 11 should include specific references to maximising social value as something that a contracting authority must have regard to in line with the social value Act and the national procurement policy strategy. The question to which I would appreciate an answer from the Minister is: why is that not included? In my previous contribution, I went through all the different policy streams—including levelling up—that lead us to the conclusion that social value and support for social enterprises and social businesses are a good, and they are good in procurement. It is therefore a mystery why this has been left out of the Bill. I hope the Minister will agree with that and, if not, explain to me why it is not the case. I hope he will support these amendments and add them in. They are modest amendments, really.