Public Procurement Processes

Peter Dowd Excerpts

Wednesday 25th January 2023 Westminster Hall

[Mick Whitley]

The hon. Lady makes a good point, which I will cover a bit later.

Team Resolute is led by a Spanish ship company called Navantia, which is guaranteed to get at least 40% of the work, worth about £640 million. Ministers have confirmed that there is no limit on the jobs it can create in Spain. As for Navantia being part of a UK consortium, it is true that the bid includes Navantia UK, but here’s the rub: Navantia UK was created only in May last year as a subsidiary of the Spanish firm. It has no trading history, and its two directors live in Spain.

At the very heart of the problem lies the fact that a social value calculation is not included in the public procurement process. My call on the Government is simple: make it a compulsory component—make its inclusion in the consideration of all bids compulsory.

[Peter Dowd (Bootle) (Lab)]

Is my hon. Friend aware that in the other House, Members expressed concern that the Procurement Bill falls short of the Green Paper, in that there is no exact definition of key procurement principles, there are no specific requirements on climate objectives and, as he just said, there is no real emphasis on social value elements?

[Mick Whitley]

I thank my hon. Friend for that intervention; I am just about to cover that point.

Only by including a social value calculation can we ensure that every contract is transparent, and that its impact on local communities, job creation, the standard of jobs and the local economy is taken into account and plays a key part in shaping the final decision. Its absence from the Bill is even more surprising given the noise the Cabinet Office made in response to the consultation on the original Green Paper, “Transforming Public Procurement”. The Cabinet Office wrote last December that social value

“can play a big role in contributing to the Government’s levelling-up goals.”

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[Mick Whitley]

The hon. Gentleman makes a good point. The Government must be aware that the supply chains are too long. Instead of offshoring, they need to inshore.

Public money has been wasted on an industrial scale, and the ability of Ministers to throw taxpayers’ money away is now being codified in the Procurement Bill. Conservative peers voted down an amendment to ban the use of VIP lanes in the awarding of contracts. Together, my Labour colleagues and I will do our level best to change that and get the VIP lanes closed for good. The High Court has agreed with us and ruled the VIP lanes illegal.

[Peter Dowd]

I am sorry to interrupt my hon. Friend in mid flow. He has dealt with some specifics, but one of my concerns is that there does not appear to be any real assessment of how the measures in the Procurement Bill will fulfil its principles. For example, the Government want to launch new measures to promote jobs and new skills, but how many, and what sort of skills? They want to encourage economic prosperity and growth—God knows, we need it—but there is no indication of how. They want to tackle climate change and level up, but there are no indicators and no metrics at all to assess that. Does he agree that we need not just words but facts and assessment to back this up?

[Mick Whitley]

Yes, and the Minister should address that question in his response.

In summary, we cannot continue with a system under which one in six procurement contracts over a five-year period was found by the Fair Tax Foundation to have been awarded to companies with connections to tax havens. We cannot continue with VIP lanes. We need a system that is accountable and transparent and made watertight against cronyism; that places social value, local economies and fair employment practices at its heart; that enables the Government to recoup money from those who fail to deliver; that gives real opportunity to small, medium and social enterprises to win; and that recognises that outsourcing has been a complete failure and the time for a return to insourcing is overdue. Without extensive amendment, the Procurement Bill does none of those things.

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[Jon Trickett (Hemsworth) (Lab)]

I am pleased to speak under your chairpersonship, Ms McVey.

I congratulate my hon. Friend the Member for Birkenhead (Mick Whitley), who has made a great contribution to the debate. I agree with him that the procurement of services and goods during the pandemic was a disgrace. It is hard to avoid the word “racketeering” when we consider what happened. There was a time when suppliers would meet on the golf course—perhaps at the 19th hole, as they used to say—to rig the prices for providing services to local councils, and there was debate about whether that took place in freemasons’ lodges and elsewhere; now, it seems that they just pick up the phone to a Tory Minister or MP and it gives them access to the VIP lane.

One pound in every £3 of public spending goes on procurement, and possibly more. It is around £300 billion, which is an astonishing amount of money. The OECD, the European Commission and the United Nations have all said that procurement carries the biggest risk of corruption or fraud in modern states. Of the £12 billion that was spent on PPE, £4 billion was spent on contracts that failed to meet the NHS standards—a third was spent on supplies that were not fit for purpose. Some £10.5 billion-worth of contracts was awarded without any fair or open competition in a seven-month period at the height of the pandemic. We understand that there was a national crisis and huge pressure on the NHS, but notwithstanding that, something went badly wrong; everybody must agree with that.

[Peter Dowd]

It is interesting that a Government publication said:

“Value to the taxpayer should lie at the heart of our procurement decisions.”

Does my hon. Friend believe that there was value for the taxpayer in that particular process?

[Jon Trickett]

My hon. Friend is absolutely right to ask that question. No convincing answer has been provided as to whether value for money was achieved. In fact, it is as plain as the nose on your face that there was no value for money, and I will come to that in a second.

In recent decades, there has been a presumption in favour of outsourcing. That was never the case before. Britain used to be proud of its public service and of the high standards of ethics in the civil service and in politics. It is hard to share that pride these days. The presumption in favour of outsourcing contracts and obtaining services from the private sector has gone through the leadership of all the political parties, and it is time it stopped.

There are seven separate reasons why one should be cautious about that presumption. I hasten to say, though, that there will always be a case for some procurement from the private sector—for instance, police motorbikes will not be nationalised in the immediate future, so one can see that there is a case there—but the presumption should end. Let me briefly refer to the seven issues that it is important to consider.

First, the Government Procurement Service is not as professional as it needs to be. It is possible to get a university degree these days in good procurement practice. That is a necessity to ensure value for money for every penny spent, but the service is under-resourced and not as professional as it needs to be. That is not to criticise the civil servants who do a difficult job in difficult circumstances, but they are in danger of being flooded by the provision of contracts.

I worked in the private sector, as a plumber in the building industry. We were monitored by the main developers to make sure that we provided value for money. Quite often, I confess, we would see whether we could get extras built in on top of the money in the original contract. It was for the quantity surveyors who worked for the developers and builders to make sure that we did not get away with anything. Can we honestly say that every single line in every contract is monitored in the same way as in the private sector? I do not think we can. The reason is because staff are under-resourced, and we are under-resourced because we are outsourcing as an ideological decision rather than anything else.

Here is my second point. More often than not, there is no public comparator. When I was the leader of Leeds City Council, I would ensure that if something was going out to the private sector, there would be a public sector bid made by the council, which would not have a slice on top for profitability. I would then see whether the private sector could compete with the public sector bid. That is one thing that might be done, but there are no public sector comparators under the present neoliberal economic settlement, which we regard with despair, to be honest. Therefore, there is no guarantee that a cartel or group of racketeers is not fixing prices between them to rip off the taxpayer. We cannot be clear about whether that is happening, although without a proper procurement service, I am sure that it is.

My third point is this. No evidence has been produced anywhere in the world that outsourcing is cheaper than insourcing. It has been looked at by the Public Accounts Committee and various bodies throughout the world. What is striking is that larger global companies are now insourcing. They were outsourcing, buying in accountancy and legal services and so on. That is stopping. Why are they insourcing? Because it is cheaper and more effective, and delivers better value for money. Yet here we are with a Government that seem hellbent on outsourcing, for ideological reasons rather than to protect the public purse.

My fourth point is that the private sector puts in prices, but the first thing it does when it wins the contract is to drive down the pay and conditions of the staff employed. Wherever one looks, that is the case. I have experience of that in my constituency. We had a service for cleaning a school a few years ago. The first thing the company did was to cut wages and try to get rid of some of the staff. The staff went on strike, which went on a long time, and the school was filthy. That contract was frankly a disgrace. We all know that that happens everywhere. We see wages falling as a share of GDP. What is the process behind that happening? There are a number of processes, but one is outsourcing, driving down wages in order to increase profits.

My fifth point is this. A service provided in the public sector is motivated by the single ethos of public service. It tries to provide a service to the public without a mind to delivering profits and dividends to shareholders. There are two contesting ethoses—if that is the correct plural—in play. One is serving and enhancing shareholder value as a private sector provider; the other is public service. Well, I know what I want for the staff who treat me, my family or my constituents. I want people who are motivated by one thing only: providing the highest possible quality service. That is what motivated people. The three women I just talked about, who were cleaners and went on strike, were treated in a really shabby way. Their greatest concern was the kids left in the school. The toilets were not being cleaned. They would talk to me regularly about their guilty consciences at being unable to provide the service. They were interested in only one thing: providing a service to those children.

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[Jim Shannon (Strangford) (DUP)]

It is a real pleasure to serve under your chairmanship, Ms McVey. I thank the hon. Member for Birkenhead (Mick Whitley) for introducing the debate. I often come to support him in his debates in Westminster Hall, and I am here today to do the same, because he raises important issues and I want to add my support. It is also a pleasure to follow the contribution of the hon. Member for Hemsworth (Jon Trickett), which also was full of detailed evidence and content.

The hon. Member for Birkenhead referred to the Procurement Bill, which is currently going through Parliament. It applies to the devolved institutions, including Northern Ireland; however, we maintain our own legal framework for Northern Ireland, so that might give us a bit more input in the process as we go forward. It is no secret that I am a Brexiteer like yourself, Ms McVey, and I am proud to be a Brexiteer. I have always been positive about the opportunities provided to us by leaving the EU, notably our chance to secure British contracts with British companies to secure jobs for our people—for my constituents and the constituents of everybody here. It is great to be here to discuss how we can encourage that through the procurement process. I particularly look forward to the Minister’s response. I am fairly sure that we are on the same page. That being the case, I will ask my question only at the end of my contribution. I am keen to get the Minister’s response.

It is always important that we take the correct steps for our economy in terms of where we produce our products and where we procure them from. Some say that we have made mistakes in the past—it would be unfair to say that we have not, especially throughout the pandemic—but the principle behind the Bill gives us an opportunity to change that. A classic example from Northern Ireland, which I have referred to, goes back to March 2022, when leading UK bus manufacturer, Wrightbus, announced its second international zero-emission bus deal in a fortnight, under which it will ship dozens of clean buses to Europe. That is really good news.

Wrightbus has signed a deal with the German bus operator Regionalverkehr Köln GmbH, or RVK as it is better known—that is easier for me to say than to try and speak German—to supply up to up to 60 Kite Hydroliner single-decker buses over the next two years. All of those buses will be fully built at the Wrightbus factory in Ballymena, north Antrim, supporting green jobs and the wider Northern Ireland economy. While that is a welcome step, I can remember a time—of course, my lifetime is maybe a bit more than others—when London buses were ordered from Egypt, despite the UK containing the world-renowned manufacturer Wrightbus. I congratulate my hon. Friend the Member for North Antrim (Ian Paisley), and thank him for his energy and commitment in pursuing Wrightbus deals, not just in the United Kingdom but across the whole world. His pushing for that company as its MP has certainly paid dividends.

Thankfully, the procurement of London buses was brought home and the superior manufacturing that takes place in Ballymena is securing additional projects, but my point is that we need a legislative change to ensure that contracts within the UK are weighted, with procurement taking into account the impact on the local economy. While we have to remain competitive, every Government contract must consider our own manufacturers; we are indebted to them, and should be focusing on them, outsourcing only when there are exceptional reasons for doing so. That includes British companies that operate outside the United Kingdom.

In addition, I recall from a debate I spoke in some time ago that it had been highlighted by the House of Lords that the NHS sourced materials made by the forced labour of Christians, Tibetans, Uyghurs and Falun Gong practitioners in Xinjiang, China, and the Government took steps to deal with that. That has also become an issue in international procurement: making sure that the materials we rely on are not made or processed by those subject to human rights violations such as forced labour, child labour, unsafe working conditions or illegal wages. Those human rights violations have become increasingly apparent in the apparel sector—clothes, handbags, accessories and so on—where young children are being trafficked into child labour and forced to produce affordable clothes. Those clothes will attract millions of people internationally, but the price—the human rights price, the physical price, the emotional price—is just too high.

Our national procurement policy statement will ultimately ask public authorities to consider benefits for the public, such as the creation of new jobs, improving diversity, and ensuring integrity and value for money. I put great stress on integrity, and I think it is important that we focus on that as well. Many think that we must procure internationally to be successful and diverse; however, I suggest that there are numerous opportunities in our own back yard that we can take advantage of. We should be focusing on those and supporting them, not to the detriment of elsewhere in the world, but certainly to the advantage of our own manufacturers.

I have mentioned the importance of defence and cyber-security procurement for the United Kingdom. Contractors such as GKN Aerospace, or Thales in the constituency of my hon. Friend the Member for Belfast East (Gavin Robinson), have the capacity to build our own products to the highest standard, and should be made aware of more procurement opportunities.

[Peter Dowd]

One definition of contract monitoring is the process of tracking the performance and status of contracts, to ensure that the obligations within them are being fulfilled as intended; it is not just about the purchase of a contract, but the monitoring. Does the hon. Gentleman agree that in the current climate, given the massive cuts that local government has endured over the past 13 years, it is being denuded of its ability to monitor some of those contracts, and that that issue has to be addressed as well?

[Jim Shannon]

I thank the hon. Gentleman for his intervention, which was succinctly put. I am sure that the Minister is taking notes, and I hope that he will reply to his request.

It is right that we oversee and ensure that local government, wherever it may be, has the same opportunity and is not precluded by financial or other restrictions. In Northern Ireland, we are fortunate to have some of the best cyber-security companies in the whole of the United Kingdom. There are some in south-east England that perhaps might be able to match them, but we have been at the fore in cyber-security, and that includes the two companies that I referred to. Thales, for instance, is at the fore in supporting the NLAWs—next generation light anti-tank weapons—being provided to Ukraine. Again, our cyber-security is excellent. Does the Minister agree that Northern Ireland must be included in the Procurement Bill? Its inclusion will bring significant benefits for the country and Northern Ireland businesses, as well as our great Union, which we are here to protect and promote.

To conclude, many would say that it is time that the Bill is put into law so that we can repeal the current EU-based procurement regulations and make our own. It is time to do that. After the UK’s exit from the EU, we should have the scope to create new home-grown procedures, select suppliers and award contracts. That will also allow for the advancement of smaller businesses. My constituency has many small businesses; it has some large ones as well, but there are a larger number, percentage-wise, of smaller businesses. They are the backbone of my constituency of Strangford and of the economy. I look forward to learning about the opportunities for us to do all that we can to ensure that this great nation, the United Kingdom of Great Britain and Northern Ireland, progresses together in the way that it should.

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[Kirsty Blackman]

I absolutely do. It is disappointing, especially given some of the excellent things that are happening in Wales, particularly around the work of the Future Generations Commissioner and how that is embedded in what the Welsh Government do. To hand that over to Westminster seems a real dereliction of duty, and I am concerned that that is the direction that has been chosen.

The biggest concern that we have about the Procurement Bill is its significant impact on Scotland in relation to devolution and the implementation of trade deals, including the Australia and New Zealand trade deals. We agree that trade deals are reserved. Obviously, we want to be independent, and we will be signing our own trade deals then, but while they are reserved, we agree that that is what the devolution settlement looks like. However, the implementation of trade deals in Scotland touches on devolved areas. We should be able to implement the procurement rules that come out of trade deals ourselves. The Procurement Bill will allow UK Ministers to implement, through secondary legislation, procurement practices in Scotland, as well as in the rest of the UK. That should be the responsibility of the Scottish Parliament and Scottish Ministers, and the UK Government should put that in the Bill rather than reserving that additional power.

[Peter Dowd]

Does the hon. Lady agree that the Bill is taking back control to Westminster, not to the places that actually need it?

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[Alex Burghart]

If the hon. Gentleman is talking about fleet solid support ships, they are built to a British design. There is a huge amount of construction in Belfast and Appledore—the final assembly is completed in Belfast—bringing shipbuilding back to Northern Ireland. This is an enormous opportunity for levelling up and bringing jobs into exactly the sort of shipyards around the country that I am sure the hon. Gentleman wants to see benefit, so I do not quite recognise all the allegations he has made.

[Peter Dowd]

Will the Minister give way?

[Alex Burghart]

I am happy to give way to my old adversary from Bootle.

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[Peter Dowd]

One of the issues that I am trying to tease out is that even when we were in the European Union—I know this, the Minister knows this, and so does everybody in this Chamber—those countries had an imaginative approach to public procurement, and we did not. Even under those rules, we had a less imaginative approach. Even under the provisions that the Government are bringing forward, they cannot move away from the anal retention and enable us to take a much more imaginative approach to procurement. What in the Bill is more imaginative and will enable us to do what we want and we were promised when we were coming out of Europe?

[Alex Burghart]

I blush to quote the hon. Gentleman back at him, but there is a lot less of the form of retention that he describes in this Bill than he would have found in the existing European rules. As he heard me say to the hon. Member for Birkenhead, the system is moving from MEAT to MAT. This is a broader understanding of what public authorities can choose to do when they procure goods and services, and that is a really good thing.

The hon. Members for Bootle (Peter Dowd) and for Birkenhead talked about buying British. This Bill will help, but we start from a strong position: between 2016 and 2019, 98% of contracts given out by public authorities in the UK went to British firms. In the Bill, we are making it easier for small and medium-sized enterprises, the majority of which are likely to be in the vicinity of public body procuring, to access contracts from public authorities. We are making it much more likely that there will be more jobs and more opportunities for growing businesses. That is very exciting and one of the most appealing things about the Bill. My noble Friend Baroness Neville-Rolfe wrote a good piece for The Times showing how we are removing barriers to engagement for SMEs in a meaningful way. She has vast experience in business and was able to shine a light on that.

Let me turn to the hon. Member for Hemsworth (Jon Trickett), who talked about insourcing and outsourcing, and the need for an ideological shift. I hope he will not mind me reminding the House that he entered the Commons in 1996 and supported one of the great outsourcing Governments—that of Tony Blair and Gordon Brown. It is so interesting to see the hon. Gentleman’s ideological shift since that time.

I gently remind the hon. Gentleman that public authorities absolutely have the freedom to insource if they think that is the best thing to do. The important thing is that they have the choice, and I hope he would not want to deprive local authorities and local councils of that choice. Maybe he would.