Public Procurement

Sarah Champion Excerpts

Monday 13th May 2024 Commons Chamber

[Sir John Redwood]

There will be that bias. Sometimes it is right, and it is always understandable, but Ministers and, above all, the senior officials implementing this new policy will have to bear that in mind. They will have to try to correct for the ease of going for a large company solution, where all the boxes will be filled impeccably and all the right things will be ticked, although that can lead to a contract disaster, because getting the electronic responses right is not the same as delivering the right good at the right price in all the right ways.

I have another worry. We are in an era of exciting and rapid change. Technology is changing even more quickly than over much of our lifetimes so far, as the Prime Minister was mentioning in his remarks this morning. None of us can be sure what opportunities artificial intelligence will produce in wider digitalisation, but we know that digitalisation will make an increasing contribution to, and have an impact on, service provision. So much of government is about the provision of personal services and administrative services, and so much of that can benefit from the intelligent application of these exciting new technologies, but they need careful handling.

The big problem in public procurement is when the innovators are moving so quickly that the invitation to bid is about things that are out of date; they are what the system has been used to handling and the state feels comfortable with. The state can define the old products and old services perfectly well, because it has experience of them, whereas maybe what is needed in certain cases is the innovative product or service. I remember innovating in industry in the past. Often, we had to be willing to license a competitor of our own breakthrough, to give people comfort that there would be some competitive check on costs and availability. Such things are complicated to model and to build in to big procurement systems, such as the state. It means that the state tends to lag and the private sector makes much more rapid advances, because people take more risk and are prepared to change what they wish to procure when they see something better. In the case of the state things have to go through many committees and many memos, and it is probably easier not to bother or to wait a few years until something has happened.

I do not have any easy answers. I understand that the Government and the Minister have the best of intentions, and they have come up with rules that they think are more flexible, but the proof of this pudding will be in the eating. I just emphasise that we need a system that is flexible enough to understand that sometimes it does not know what it wants, or does not know what is available, or that something that is available might be better than the thing people thought they wanted.

My final observation is that we have lost a lot of the self-employed in recent years for one reason or another, but the issues over tax status are part of the problem, with the toughening of the rules over IR35. I worry that a lot of self-employed people will struggle to get any work from the Government, because it is much easier for those procuring just to say, “It’s too much hassle; we would be to blame if this person were taking liberties with the tax system, and although they say they are compliant and self-employed, we aren’t so sure.” Of course, someone can become genuinely self-employed only if they win enough independent contracts. If a big part of procurement is not allowing them to win state contracts, it is much more difficult for them to become genuinely self-employed.

[Sarah Champion (Rotherham) (Lab)]

The right hon. Member makes a very good point. The self-employed have been telling me about the amount of administration they have to do even to be in the running. Also, they do not tend to find out about contracts. I hope that the regulations will extend their promotion and the length of time, and that the Government try to break down those contracts into smaller chunks, so that small British businesses can genuinely be in with a chance.

[Sir John Redwood]

I entirely agree. That is where the more transparent and simpler system will be very good, and we should give that a good trial. I am concerned about someone who is genuinely self-employed struggling to prove that they are sufficiently self-employed, and whether the state would want to take less risk on that. Again, I would like the Minister to put a stronger case to the Treasury that, perhaps, to have more successful self-employed people working for the state under contract, we need to review how we enforce and police their tax status.

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[John Spellar (Warley) (Lab)]

I would like to make a couple of observations before I get on to the main thrust of my argument.

First, I regard the regulations as a great missed opportunity. It is not that the actual regulations themselves are not acceptable—they are probably an improvement—but they do not deal with a whole number of core failures in public procurement in this country. We have just discussed the covid era. I had a firm in my constituency that produced safety apparel for the catering industry. It knew exactly how to produce gowns; it had skilled cutters and machinery. There was no way of getting through the bureaucracy, which of course had been subcontracted to Deloitte, which also got a massive cut out of it. There was a real failure to engage with industry and, as the hon. Member for Angus (Dave Doogan) pointed out, a failure to maintain the industrial base—although I would gently point out to my friend that procurement from the Scottish Administration has not always distinguished itself over recent years either.

The right hon. Member for Wokingham (Sir John Redwood) rightly pointed out that very often Government procurement policy deliberately moves against SMEs because it aggregates contracts, for example, for repairs and maintenance in defence. Instead of being done by local firms, they are aggregated into one large contract, which only the big national facilities companies are able to do. Of course, they subcontract out the work and we know—we have just had a considerable number of reports about defence accommodation—how woeful their record is on delivery. That is a further problem that, I regret, is not addressed in the document, or in the Minister’s rapidly delivered speech.

That is the point: there are no penalties for failure. Recently, the Defence Committee received a letter from the Defence Secretary saying he cannot, under Government procurement rules, take into account past performance in assessing a contract. Mr Deputy Speaker, if you give work to a builder, he bodges the job, he comes back and tenders with the lowest price and you are governed by Government procurement, you have to take that, even though you know the history is that he cannot do the job. We see that very much in IT contracts, where firms fail time and time and time again. It is a shame that the right hon. Member for Rayleigh and Wickford (Mr Francois) is not present because I am sure he could talk at length about a company that is, rightly, his bête noire in that regard.

There is a fundamental failure of philosophy at the heart of Government and the regulations do not address it. That is also why I think this is a missed opportunity. They are based on a philosophy and theory that do not relate to the real world. I intervened on the Minister to talk about trade deals and he went on about the United States being able to strike particular deals. The core of international trading relations—and a lot of it that deals with public procurement is mentioned in the document—is World Trade Organisation agreements. I accept that there has been a deep fundamental failing within the WTO, which was to admit China to the organisation and then not to insist that it followed its rules, until basically it became too big to fail and too big to take on. I accept that there was that failure. But every other major industrial country looks after its own, often very effectively.

We heard all this during the debates about the European Union. I used to have to say, both to Eurosceptics and to Euro-enthusiasts who were ascribing either our problems or our salvation to Brussels, that the problems were not fundamentally in Brussels—they were in Whitehall. I remember once saying to a senior civil servant—a good one, by the way—during an argument about an issue related to this that, if the British civil service had fought the corner of Britain as hard as its French, German, Italian and other counterparts fought theirs, the British public would have been much more content with the EU. The British undermined it because they would not be good Europeans: they would not behave like the rest of Europe.

Let us consider the issue of police vehicles, which I raise regularly in the House. If we go to Berlin, Paris or Rome, we see that all their police vehicles—apart from the Carabinieri Land Rovers—are made in their own countries. If there is free competition and a superior product is available at a better price, surely one country should dominate? Not a bit of it.

Another argument that we have regularly concerns the fleet solid support ships. The Government insist on putting the contract out to international competition, and the bulk of the ships will be built in northern Spain. When France and Italy decided to procure similar vessels, it was made very clear that they had better be built in yards in France and Italy.

[Sarah Champion]

My right hon. Friend is making a very good speech and I fully agree with what he is saying. One of the ways in which Europe manages to support its own industry is by applying weighting to social value, ascribing the highest value to the very act of providing jobs for local people. That is something that we could be doing.

[John Spellar]

It is true that the social weighting applied here is insufficient, but European countries also send a clear subliminal message to competitors, putting up, as it were, a sign saying “Just don’t bother.” When Germany did procure a design for naval vessels from Holland, the prerequisite was that they had to be built in German yards.

--- Later in debate ---

[Sarah Champion (Rotherham) (Lab)]

I thank the Minister for bringing forward the regulations. I know that he is passionate about this area and really wants to do the best for British businesses, so I hope he takes my comments as helpful, rather than as a challenge—or perhaps as a positive challenge.

Every year, the Government spend over £300 billion on public procurement. A significant proportion of that goes to multinational corporations, and in 2020 alone £18 billion of public funds went to overseas suppliers, rather than supporting their UK counterparts. A consequence is that SMEs are effectively shut out of the public procurement system, with big corporations winning 90% of contracts deemed suitable for small and medium-sized businesses. This means that SMEs miss out on £30 billion-worth of contracts annually, and despite repeated Government promises to buy British food, this is just not happening.

British businesses are being let down by the procurement system. The British steel industry, of which Rotherham is a proud hub, is one of the industries suffering from this lack of Government support. The UK steel industry employs over 40,000 people and directly contributes £2.9 billion to the economy. However, steel contracts continue to be handed out to foreign companies. The British Constructional Steelwork Association’s analysis of steel use in the HS2 project found that only 58% of steel contracts were awarded to British suppliers, despite the UK steel industry having the capacity to carry out 100% of the work.

For these reasons, I was proud to bring forward my private Member’s Bill, the Public Procurement (British Goods and Services) Bill. It was developed with a cross-sector group of experts, to whom I pay tribute. The Bill sought to encourage the Government to award more public contracts to British farmers, British manufacturers and British producers by increasing transparency regarding contract awards. This would be done by requiring contracting authorities to publish in contract award notices how they had complied with various requirements in the Bill.

I am therefore genuinely pleased to see that a large section of the regulations is dedicated to contract award notices. Notably, I welcome the inclusion of pipeline notices, planned procurement notices and preliminary market engagement notices, which will allow businesses to better prepare for bids for public contracts. During the development of my Bill, I was told that publishing contract award notices was time-consuming and laborious. That might be true, but the rewards to British businesses surely outweigh the admin, so I am hopeful that today’s legislation will open up more public contracts to SMEs.

However, I reiterate a point made by my hon. Friend the Member for Llanelli (Dame Nia Griffith): we must make sure that the hub is as easy and accessible as possible. The regulations are not perfect and we are keen to see improvements. I would like to see the inclusion of more measures to back British farmers, uphold good employment practices and better support SMEs through public procurement. As the Minister will know, UK Departments currently have to report where steel is procured from. That is a welcome step, and I firmly believe that the UK food industry would benefit from a similar intervention.

The UK public sector spends around £2.4 billion a year on food procurement, yet there is no accurate measure of the amount of food procured from British suppliers, which is of huge concern to our farming industry. Due to the lack of central Government policy on farming and food, public bodies are effectively establishing their own policies, potentially to the detriment of British farming. To address these issues, my Bill would have compelled contracting authorities to publish what proportion of the food being procured originated from UK suppliers. This was designed to encourage more public contracts to be awarded to our farmers.

The economic benefits of backing British farming are obvious, but there are also ethical benefits. We are a world leader in animal welfare standards, and an increased focus on buying British food would contribute to cruelty-free procurement becoming the norm. I was proud that the National Farmers Union, the Countryside Alliance and the Royal Society for the Prevention of Cruelty to Animals helped me to develop my Bill, and I hope that the Government will look favourably on this specific measure and implement it in the future.

I am disappointed that the regulations do not include an obligation for contracting authorities to support good employment standards, good working practices and social values. I worked with the TUC when developing my Bill, and it informed me of the dire state of some employment standards in public procurement. To remedy this, I worked with the TUC on a measure that would have encouraged the awarding of public sector contracts to employers that treat their staff well and that would have stopped bad employment practices, such as fire and rehire, being tolerated within public procurement.

My Bill would have required contracting authorities to consider how they might act to support good employment standards and working practices, and it would have placed an obligation on them to include in contract award notices how they have complied with this requirement. I urge the Minister to reconsider and to include this in the regulations.

Despite making up 99% of UK businesses, SMEs do not receive their fair share of public contracts. The National Federation of Builders told me that one of its members has not secured a public sector contract for over a decade, even though it is well qualified to deliver and has kept on applying. The member found the hugely time-consuming process off-putting, and when it did not receive the contract, it received no feedback on why, which would have helped it to make the next application better.

Sadly, that situation is replicated across many sectors. I therefore ask the Minister to consider implementing a requirement for contracting authorities, when procuring goods and services from SMEs, to consider how they might improve an area’s wellbeing and to report on how they have complied with this obligation.

When spending taxpayers’ money, as much as possible should be spent on supporting British businesses and British jobs, as other countries do with their own industries. We were told that British businesses would be the first in the queue for UK Government contracts once we left the EU. The 2019 Conservative manifesto even stated, with regard to food procurement:

“When we leave the EU, we will be able to encourage the public sector to ‘Buy British’ to support our farmers and reduce environmental costs.”

That is yet to happen, so can the Minister confirm how the regulations will seek to address the barriers specifically around farming?

I urge the Government to implement the changes that my hon. Friend the Member for Llanelli and I have outlined today, because we all want British businesses to do much better. I wrote to the Minister, at a previous Minister’s request, about my working party coming to meet him to discuss how guidance could help British businesses to secure these contracts. I have yet to receive a reply, and I would be very grateful if he could provide one.