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 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.
My Lords, I thank the Minister for his comprehensive introduction to the Bill, which is quite complex in some areas. I begin by saying that we welcome this Bill. Changes to the procurement regime are long overdue, not least as a procurement Bill was promised in the last Session, so it is good that we finally have it before us today. I know from my experience of navigating OJEU just how complicated the EU procurement regime can be, so we support the Government’s stated ambition of speeding up and simplifying the processes. We welcome particularly the move from awarding contracts based on most advantageous tender, or MAT, rather than MEAT, the most economically advantageous tender, which will allow more flexibility around procurement, and the duty to consider breaking contracts into lots will also help social enterprises and SMEs.
The first part of the Bill, which replaces definitions that came about from long negotiations between EU member states with clearer definitions, has been welcomed across the board, as has the ambition to simplify rules and bring a range of existing rules together into one place. Having said that, recent events and investigations have shone a light on the clear failures of the current procurement regime and government practices during the Covid pandemic, with huge concerns raised in a time of great sacrifice for many people.
I heard what the Minister said on this matter in his introduction, but taxpayers’ money was wasted— £9 billion spent on PPE was written off, with £2.6 billion spent on items that were “not suitable” for the NHS. That is one in 10 of all items. There is also £800 million of additional stock that has not been used. We also know that there were major issues with direct awards. We appreciate that Governments have to act quickly during a crisis, but contracts worth tens of millions that were given out through the VIP fast lane, totalling almost £2 billion, lacked scrutiny or transparency. This Bill gives us the opportunity to fix that—to put in place a rigorous procurement regime which would prevent these practices happening again.
My Lords, it is a great pleasure to be working on this Bill with a new set of colleagues: a new set of Front-Bench spokespeople from Her Majesty’s loyal Opposition and a new Minister. I look forward, as the noble Baroness does, to a fruitful process in working on this Bill.
In framing the Bill, the Government explained that they had three options: to do nothing, to do the minimum or to carry out wholesale reform. They have chosen reform, which we welcome; the Bill is the result of that reform process. What is it for, and how wholesale are those reforms? The reforms are less wholesale than the Green Paper suggested they might be, as the noble Baroness, Lady Hayman, just said in her excellent speech. I will not try to cover the same ground that she did, but I associate myself with all of her comments.
I will, however, start with the point with which she started: the missing principles for the Bill. Without those principles, it will be difficult to guide the rest of what we are doing. There are objectives, and they appear in Clause 11. As we have seen, they are value for money, maximising public benefit, sharing information and acting with integrity. We would all sign up to those. Elsewhere in the Bill documentation, there are all sorts of other lists that are all similar, but different in a subtle way. This is not nit-picking, because it is important to understand where the Bill is headed and what it is seeking to achieve. Some of the objectives are potentially conflicting, and we need to know where the priority lies.
For example, to create greater opportunities for small businesses and social enterprises, which I understand and agree is one of the important elements of the Bill, there might be a higher initial cost attached. How will the Government calculate the public benefit that they get from the process of broadening the remit? What priority will they give to value for money? The impact assessment says that the highest priority is value for money. However, it also says that the Bill will be required to take into account national strategic priorities such as job-creation potential, improving supply resilience and tackling climate change. There is no help as to how these trade off, and there is no understanding of what “take into account” means. Of course, none of these is on the face of the Bill, so we do not have a definition of “public benefit” anywhere.
My Lords, I may be a relatively new Member of your Lordships’ House, but I suspect that the Second Reading of the Procurement Bill may not capture the public’s imagination today in quite the way that certain other events and reports taking place in Westminster will. But that should not in any way detract from the importance of the measures before us, because the Bill represents an important advance on a number of the predecessor EU procurement regimes that we have been subject to and generally moves us in the right direction. As the Minister said, it has the potential to simplify and accelerate public procurement and to deal with some of the lessons, both positive and negative, that have arisen during the coronavirus pandemic.
I will briefly mention three avenues that may be worth considering further as the Bill progresses through your Lordships’ House. The first is the connection between the procurement regime and supply chain resilience for the UK. No doubt we will discuss multiple times this afternoon the experience that arose as the UK Government and the Department of Health and Social Care sought to procure PPE and testing for the National Health Service during the pandemic and, as was the case with many other European countries, faced a supply crunch as Chinese factories closed down. The problem has been sustained as China pursues its zero Covid policy, now overlaid with Ukrainian disruptions as a result of the war.
The question is not simply: what are the procurement mechanisms that the Government use in spot markets at times of crisis? It is: what strategic assessment have the Government made of which aspects of our supply chains need onshoring? The orthodoxy for many years has been that just-in-time logistics are the most efficient way—until you get a shock such as the pandemic, in which case it becomes blatantly obvious that they are not. At that point you wish you had stockpiles or onshore capability. In the same way that, for example, Sir John Parker’s national shipbuilding review looked at what the supply chain might look like for naval vessel procurement, I wonder whether the Minister can tell us how he thinks a similar approach will be taken to supply chain resilience for other aspects of what the public service will need in the future.
My Lords, I am very glad to follow the noble Lord, Lord Stevens. He very helpfully reminded us that we might legislate but it is the Government’s job to execute. The ability with which the execution of policy is carried out is a fundamental part of this. I might also say that, as the noble Lord unfortunately discovered in the particular respect he mentioned, we can legislate but if we leave loopholes we allow the Government to drive coaches and horses through them from time to time. That is why we sometimes have to look very hard at Bills to make sure they very clearly express Parliament’s intentions. Important and detailed as this Bill is—the way my noble friend Lord True very clearly set out the Bill’s intentions was most helpful —as the noble Baroness, Lady Hayman, said, we want constructively now to engage with that and to seek to improve the Bill before we send it to the other place.
In terms of interests, I am a director and adviser to LOW Associates, which is a beneficiary of procurement contracts with the European Union. I have looked quite carefully: we have a number of contracts with the European Commission and we advise on European procurement. Although that gives me experience in this respect, I do not think it gives rise to any direct conflict of interest—but I make the declaration in case anybody wants to check it out.
The noble Lord, Lord Stevens, is absolutely right. Where the NHS is concerned, “light touch” should not mean without proper transparency, processes and the ability to understand what is being bought and why. Indeed, there has been some activity in the NHS that should be paralleled across government. Procurement is increasingly seen as an essential part of the quality of management. That is happening through things such as Getting It Right First Time and the benefit of the report from the noble Lord, Lord Carter of Coles, on procurement in the NHS, which included building a procurement profession inside the NHS, which hardly existed. Right across government, we need chief procurement officers to be seen as often as important as chief financial officers in getting the quality of service and value right.
Forgive me—it was actually added to Schedule 9. But I am referring to paragraph 3 in Schedule 11, on repeals. None the less, I welcome the Bill and look forward to our debates on it.
My Lords, I thank the Minister for his very impressive introduction. This is an important new framework, representing some progress and some decent measures of reform. Of course, as ever, language overstates the problems and usually the benefits, but ambition is no bad thing in this area. We saw from the excellent speeches of my noble friend Lady Hayman of Ullock and the noble Lord, Lord Fox, that there are a lot of issues here which will lead to a very interesting and useful debate.
The Minister said that this would deliver an effective and efficient regime. As we heard from the last speakers, a variety of things not inherently in the Bill would lead to an effective and efficient regime. We must give due regard to those and ensure that we have the right skills, the right capacity, and the right objectives. A few areas are not present which I would be keen for the Minister or this House to give a view on, to ensure that we get them right.
I am concerned that the Minister gave a clean bill of health to the Covid procurement process. In my experience in business, it is untenable to say that there were rigorous evaluations. If you were procuring based on selecting people who did not have one moment’s experience in being able to source effectively, and if you do not know how to do quality control or logistics, then it is untenable. The number of companies in that list that got it shows that it was not done properly. I am concerned that we do not have the mechanisms reflected in this Bill to ensure that those things which are important once you have a framework are there.
I also think we must consider one of the things that is not there, and which has led to many unsuccessful procurements: late changes being made to the system. Whether that is mending or meddling—I hope that it is more the first than the latter—these are significant areas which affect the capacity of procurement and its success. We must work out how those can be done better, not least with the changes to parcelling to allow for small businesses to be part of it.
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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.
We are concerned that transparency seems to have slipped down the agenda when compared to the original proposals in the Green Paper. The Public Contracts Regulations 2015 have more on transparency than the Bill before us, so why are the Government taking a step backwards? Since the Government did not comply with the current transparency rules during the pandemic, can the Minister reassure noble Lords that this is not because they are finding transparency rules a little bit tricky to comply with? While we welcome the Bill, we do have concerns that many of the positive changes proposed in the 2020 Green Paper and the Government’s response to the consultation appear to be either missing or watered down, despite being welcomed by business, industry, trade unions and other stakeholders.
What we need from this Bill is a genuine commitment to reshape procurement to the very highest standards—from the integrity of the process to the delivery of real social and economic value. While we will no doubt explore these issues in more detail in Committee, I would like to raise some of my key concerns with the Minister at this stage. I look forward to clarification in his response today and further discussion on how improvements can be made as the Bill progresses through your Lordships’ House.
Turning first to the principles, the majority of the more than 600 respondents to the Green Paper consultation supported legal principles for procurement. In their response, the Government stated that they would
“introduce the proposed principles of public procurement into legislation as described”.
The proposed principles are
“public good, value for money, transparency, integrity, fair treatment of suppliers and non-discrimination”,
and we absolutely support them.
However, disappointingly, Part 2—“Principles and objectives”—does not have the principles laid out clearly in a clause on the face of the Bill, despite doing so for the objectives. The principles are an integral part of procurement. They are a vital tool for setting out what legislation is designed to achieve and by what its success will be judged. The rest of the world knows this; almost every other piece of procurement legislation in the world starts with clear principles, so it is surprising that this is not in the Bill, and we believe that this needs to be revised. Furthermore,
“acting, and being seen to act, with integrity”,
as set out in the objectives, could also include a wider duty of transparency. Even in the midst of a crisis, integrity and transparency should be non-negotiable.
Looking at the objectives, we believe that the Government are wasting a huge opportunity to put the environment and tackling climate change right at the centre of how public money is spent. Why is there no mention of this in the objectives, no commitment to sustainable procurement, and no duty for all government departments to comply with the carbon reduction plan and demonstrate sustainable procurement performance? If the Government are to achieve their goal of net zero, climate and nature goals must be an integral part of any new legislation that will have an impact on its delivery. Does the Minister not agree that sustainable procurement will help avoid damage to the environment while at the same time generating benefits for business, society and the economy?
Another gap in the Bill is a commitment to social value, which does not appear at all. There should be specific reference to social value being part of the public benefit in order to provide clarity to public bodies, companies and social enterprises. Social value should be embedded in the procurement system through appropriate guidance and reporting requirements for public bodies, as seemed to be the case in the Green Paper proposals. In fact, the Government’s response to the consultation stated:
“A procurement regime that is simple, flexible and takes greater account of social value can play a big role in contributing to the Government’s levelling-up goals.”
I absolutely agree. As a matter of principle, social value will improve circumstances for residents by bringing money and jobs to local areas, which should in turn go some way towards helping to level up the country.
This is especially true in more disadvantaged areas. A more responsive, community-focused supply chain spreads the social value net further, helping to maximise environmental and social well-being at every level, and would contribute positively to the Government’s levelling-up ambitions. So why is it no longer in the Bill? Have the Government already given up on their levelling-up goals, or does the Minister recognise that this is an oversight in the drafting that needs to be corrected?
The Government’s 2019 manifesto asserted that the public sector should
“‘Buy British’ to support our farmers and reduce environmental costs.”
Public procurement has the potential to create thousands of jobs for UK farmers and food producers and to help deliver the Government’s climate and nature emergency commitments. Can the Minister outline how the Bill before us will achieve those commitments? We need to do what we can to ensure that far more public contracts are awarded to British businesses—something that will have a positive effect on our economy but also support those who are struggling to get through the current cost of living crisis.
Moving on to the fair treatment of suppliers, we have concerns that the language on requiring contracting authorities to make impartial decisions without conflict of interest has been weakened, as too has the important principle of non-discrimination. I hope that the Government will therefore commit to tightening up these areas of the Bill as we move into Committee.
The Green Paper included a positive commitment to the digital single suppliers portal, operating on a “tell us once” principle. This would not quite level the playing field between supersized corporate bidders such as Serco and SMEs from across the country, but it would certainly be a step in the right direction, removing an unnecessary obstacle for smaller, less well-resourced options. My understanding is that this is still the Government’s intention, but I can see nothing in the Bill to ensure that it will actually happen. Do the Government remain committed to putting this on a statutory footing, or will further regulation and guidance be published? If this is linked to other digital systems such as Contracts Finder—again, I hope the Minister can confirm that this is still happening—it could also help to level the playing field when contracting authorities are making decisions.
There are also several areas of exemption in the Bill. Part 13 includes powers
“to disapply this Act in relation to procurement by NHS in England”
and
“to amend this Act in relation to private utilities”.
Schedule 2, “Exempted contracts”, includes defence and security contracts, which my noble friend Lord Coaker will consider further in his winding-up speech. What criteria were used to draw up this group of exemptions? Following the Minister’s introduction, can he clarify exactly how ministerial discretion for NHS procurement will apply? For example, what services is this intended to cover? Will it apply just to clinical services? I am sure your Lordships’ House will agree that we do not want to see a repeat of what happened during the pandemic.
The Minister mentioned—and we are aware—that there is going to be a six-month lead-in for the implementation of the Act’s provisions once it is passed. Even so, there will be significant challenges to meet the timescales, considering the number of changes proposed in the Bill. Does the Minister agree that the Government will need to provide substantial support; for example, for staff training, for communicating the many changes to the system to prospective suppliers, and to cash-strapped local authorities? If so, will he outline what that support will look like?
This really is an opportunity for the Government to be bold, to address these concerns, and to help rebuild public confidence in how taxpayers’ money is spent. There is much in the Bill that I have not had the time to cover today, and we will, of course, be tabling amendments to try to improve it. I offer the Minister our constructive support to work closely with him and his department officials so that, by the time it leaves this place, it will be truly fit for purpose.
All the language so far completely avoids the issue of supplier ethics and human rights. I know that the noble Lord on my left and others will bring this up, and I expect to agree with them. My noble friend Lady Parminter will no doubt speak to the need for a central role for procurement in fighting climate change. I also believe that that has to be written into the Bill and I hope that the Minister will hear that from others as well.
There are other definitions in the Bill which are not helpful. The Explanatory Notes refer to “fair treatment”, so perhaps the Minister could explain what “fair” means in the context of this new process. Perhaps he will agree with me that “equal” might have been a better word. Here is an example: it is unclear how the Bill, in its present form, will replace the regulatory framework for accessibility within public procurement legislation. Therefore, can the Minister please explain how the new regime will ensure that specifications take into account accessibility criteria and design for all users? This is just one example of what is potentially dropping out.
For the Bill to be implemented, it needs to be understood. For that to happen, the Government need to differentiate what they are seeking to achieve and be very clear about the Bill’s moral, as well as economic, objectives. I am sure that we will give Ministers plenty of opportunity to do that in Committee.
One of the benefits paraded in various government publications is that the new data platform will deliver centralised data. How will the Government use that data and who will use it? On the data protection front, the UK has to date employed GDPR as its tool. However, changes in data protection law heralded by the new data reform Bill set out in the consultation Data: A New Direction call into question the level of proper oversight of that data. We already see companies from the US sweeping up and using data that is currently available; for example, within the NHS. They operate free, in effect, from proper scrutiny. Without explicit safeguards in the legislation, there will be a real opportunity for data abuse.
The Government talk of visibility and transparency in the Bill. If those are realised that will be thoroughly welcome and we encourage that process. However, if we needed an example of how the lack of visibility leads to corruption, there is the example given by the noble Baroness, Lady Hayman, and which I think my noble friend Lord Strasburger will give, of the abuses of what I might describe as a system based on Ministers’ WhatsApp rather than a transparent system. That was a scandal, and we must have a system that ensures that that sort of thing can never happen again.
How transparent is the legislation? I note that, alongside defence and security interests, the Advanced Research and Invention Agency—ARIA—is exempted. Not only is ARIA carved out of the Freedom of Information Act, it is able to procure in secret. Why should we not know from whom this agency buys its electricity? Overall, much of the information the public might seek about public contracts has been or is being put beyond the reach of the Freedom of Information Act. Although the Government talk about transparency, their legislation seems to demonstrate a drift—if not a jump—in the opposite direction.
The Minister sought to defuse the treaty state supplier issue by using the NHS opt-out as an example but, of course, that is in only one sector. My noble friend Lady Brinton will be talking to that issue, but let us remember what Clause 82(1) says:
“A contracting authority may not, in carrying out a procurement, below-threshold procurement or international organisation procurement, discriminate against a treaty state supplier.”
Can the Minister confirm that if a UK contracting authority wanted specifically to buy British food from a British farmer, it would be unable to do so at the expense of a treaty state supplier such as, in future, an Australian farmer, selling a similar product at a lower price? That not only flies in the face of many social objectives, it seems to fly in the face of the Subsidy Control Act, which includes provision for purchasing under a subsidy scheme to support local businesses and certain products. Which of these two factors prevails? Is it the treaty state supplier rule or the subsidy control rule, because they do not work in the same direction?
More broadly, essentially, if the market is opened by a treaty, the contracting authority is bound to buy the product that offers the best value for money—remember, that was the number one criterion of the four set out in the government documents. I fear that that will be headline price, irrespective of what it does to local capability in future. Other countries may be looking at reshoring; the Bill delivers the opposite.
The regulation-making power in Clause 8(2) relates to common procurement vocabulary—or CPV—codes, which the Cabinet Office has explained will be used to decide which contracts benefit from the light- touch regime. Understandably, this legislation does not include the long list of what might be on that CPV list, but I feel sure that there will be some important issues here.
I would like to ask the Minister what “light touch” actually means. If it means service contracts of the sort that the Minister hinted at, then far from “light touch”, “rigorous oversight” might be more appropriate. I give the example of the children’s homes issue, which is currently live. Perhaps the Minister can help us before we get to Committee by publishing either a draft or an indicative list of what the Government expect to be in the statutory instrument that will bring the CPV codes to your Lordship’s House.
I am also in the dark about how this Bill, the Sewel convention, the Trade Act and the UK Internal Market Act intersect. For example, if a Scottish-based public authority seeks to purchase a product from a treaty state supplier, does the Minister agree that it is up to the Scottish Government whether the regulations in Scotland need to be the same as those in the rest of the United Kingdom?
Secondly, can the Minister please explain what happens if that Scottish public authority offer then extends to the rest of the United Kingdom—for example, across the border to England? The Procurement Bill seems to say that once it crosses the border and there is a difference, Westminster regulations need to be applied, not Edinburgh’s. However, I suggest that the non-discrimination parts of the UK Internal Market Act mandate the exact opposite, and I think an interpretation of the Sewel convention is a moot point. Further, there is the common frameworks process, which is still live. Can the Minister please reconcile all these issues for your Lordships’ House?
As I reach the end, I turn to implementation, which will not be trivial. We know that the Government are very challenged when it comes to digital projects. In its report, The Challenges in Implementing Digital Change, the National Audit Office reviewed the implementation of digital programmes by government, going back, I think, over 25 years.
Its comments are extremely apposite. It said:
“Initiating digital change involves taking a difficult set of decisions about risk and opportunity, but these decisions often do not reflect the reality of the legacy environment and do not fit comfortably into government’s standard mechanisms for approval, procurement, funding and assurance.”
The report also found that digital leaders
“often struggle to get the attention, understanding and support they need from senior decision-makers”
who lack sufficient digital expertise. It will be important to remember that as this project progresses. We know from past government IT disasters that delivery is always harder than it is portrayed when launched at the Dispatch Box.
As far as I can tell from the impact assessment, the estimated cost of launching this platform is £36 million, which seems ambitious to say the least, given the Government’s 25 years of underperformance on digital projects. In Whitehall alone, this involves a lot of people. The Cabinet Office Civil Service statistics for 2021 say there were 12,340 civil servants in the procurement commercial function that year. Of course, as we have heard, there are many more people in local authorities and public utilities being brought into this system.
For some of the Whitehall departments, these numbers are huge. In the Ministry of Defence, including agencies, more than 2,000 employees are involved in procurement. In the Minister’s own Cabinet Office, again including agencies, it is more than 1,700 employees. I know from experience of working in the private sector that when a large enterprise implements a cross-business digital programme, the systems analysts always meet the same response. They go into a department, which says, “Yes, I agree that this is a very good idea, but you have to understand that we are different”.
There are two ways of dealing with this response. One is to instigate local variations to comply with all the perceived differences; the other is to use this digital platform to lead cultural change. In my experience— I have helped on a number of company-wide ERP implementations, and in a way this is a much bigger version of that—if you choose the variation route, it is a road to confusion and cost. But the second one, invoking real cultural change, is still a challenge. These departments are supertankers of departmental culture that will take years of sustained activity to turn around. A couple of days’ training here or there will not do it; these people have to own this system, believe in it and want it to succeed.
Any Bill that seeks to do what this Bill seeks to do is ambitious. It is a long Bill and covers all sorts of different departments. The process we are about to embark on will be long and detailed. There is a lot of work to do before the Bill is fit to be enacted, but we will work very hard with the Minister and Her Majesty’s loyal Opposition to help that to happen.
Secondly, I suspect that your Lordships will be looking for greater clarity, as this Bill proceeds, on aspects of these proposals which at the moment are remitted to regulation or guidance. Only a few short weeks ago, Royal Assent was given to the Health and Care Act 2022. Many noble Lords participated in the extensive discussions around what the procurement regime that was set out in that Act should be as it applies to the National Health Service. On the Health and Care Act 2022, the Cabinet Office memo of 11 May to the Delegated Powers and Regulatory Reform Committee says:
“It has not been possible to set out on the face of that Act the scope of procurement Regulations made under it, so this Bill”—
the Procurement Bill—
“needs to be able to make provision to manage the overlap.”
Therefore, Clause 108 would grant Ministers the power to “disapply” provisions in relation to
“services or goods to which health procurement rules apply”.
I suspect that your Lordships will want much greater clarity on the circumstances under which those will or will not be disapplied.
Frankly, that will go in both directions: there will be some services where, having had the debate as part of the Health and Care Act, we will be clear that they should not be subject to competitive market principles; and there will be other areas where they must be, even where industry partners will sometimes try to exclude them from that scope. An example of this is the importance of using competitive procurement mechanisms for the purchase of medicines, where in some cases, I am afraid, some of our life sciences partners would rather that market mechanisms were not used to drive value for taxpayers and for patients. Indeed, when the National Health Service was seeking to procure medicines for hepatitis C so that we could eliminate that virus and save hundreds of millions of pounds in the process, it was sued for daring to use procurement mechanisms in those circumstances.
So we must be quite precise as to the circumstances under which we will and will not do this. Simply leaving it to regulatory guidance is not good enough, because some of us—I say this gently—have buyer’s remorse about some aspects of the Health and Care Act, including aspects which were left to regulation or ministerial discretion. I am thinking particularly of the debate we had around childhood obesity just a few short weeks ago, where we were promised that we would indeed be cutting out junk food advertising on TV aimed at kids. Days later, however, that commitment was ditched—actually, the noble Lord, Lord Kamall, said that it was not a backtrack but a delay. I read elsewhere that this is part of scraping the barnacles off the boat. Most of us do not regard children’s health as a barnacle to be scraped off the broadcasting boat. Therefore, we will want more clarity on some of these distinctions, rather than leaving them purely to regulation and future ministerial fiat.
Thirdly and finally, as we think about the application of these new procurement rules to infrastructure and big capital projects, we should have the humility to recognise that, by themselves, the rules will not speed up delivery. To will the end is to will the means. Frankly, the root cause of stalled and delayed infra- structure—be it energy, defence or health—is more often not the procurement rulebook per se but the absence of multiyear capital allocations funded at the correct level, the result of delayed business case approval and the result of a lack of constancy in political direction on the results we seek to achieve.
We have seen that in the defence sector: the House of Commons Defence Committee made the point in respect of naval procurement in its memorably named report published before Christmas, We’re Going to Need a Bigger Navy. I am afraid that we are seeing that right now in connection with the proposed building of 40 new hospitals. This is going to be a major piece of procurement for the Government and the National Health Service. It was a very welcome commitment that the Prime Minister made in the run-up to the 2019 general election on a visit to North Manchester General Hospital. As I pointed out at the time, that hospital was opened in 1876 when the then Prime Minister was Benjamin Disraeli. So there is a need to get on with it, but the fact is that we have only a three- year capital allocation—£3.7 billion—and that does not buy you 40 hospitals. Matt Hancock, the then Secretary of State, said back in 2019 that the first eight of them hospitals were “ready to go”, but we now see in the latest Department of Health and Social Care publication that their planned start date is “TBC”.
So the fact is that the procurement processes will help but by themselves they will not get us the result. We need greater clarity on how the totality of the Government’s effort can help advance these important goals, we need greater clarity on the circumstances under which these rules will or will not apply in the health sector and elsewhere, and—that is not my phone, by the way—we need greater clarity in respect of the way in which other social goals will be advanced.
Finally, no doubt we will hear a certain amount this afternoon about the net-zero agenda and how that could be incorporated. A friendly suggestion would be that the Government could follow their own precedent in very wisely incorporating a set of amendments in the Health and Care Act. All we really need is for the amendments the Government accepted there to be incorporated in this Bill and perhaps we will be 9/10ths of the way home and dry.
Because this is Second Reading and time is necessarily short, I will mention just two things—there will be further detail on the Bill—that I want to raise in this debate and that I hope to follow up in Committee and on Report. The Chancellor the Exchequer, in his Spring Statement in March, said that
“over the last 50 years, innovation drove around half the UK’s productivity growth, but since the financial crisis, the rate of increase has slowed more than in other countries. Our lower rate of innovation explains almost all our productivity gap with the United States.”—[Official Report, Commons, 23/3/22; col. 341.]
It is clear from the research that innovation and procurement are intimately related in an economy. Procurement, as a mechanism for fostering innovation in an economy, is probably more important than the grant-led systems that we often focus on. We often operate on the supply side, saying, “We must have more scientists, start-ups and grants for innovation”, but actually we need to remember that the demand side may have at least equal impact, because demand pulls through innovation. The home market—the UK market—in particular can be of additional and significant importance to innovative suppliers, enabling them to establish and bring forward innovation in an economy. Innovation needs to be an essential part of our procurement process.
I acknowledge that the objective of procurement is not innovation but to secure quality and value in public services and to do so in a transparent and fair way. But the consequences of procurement to society are terrifically important. What the noble Baroness and the noble Lord, Lord Fox, were saying about social value is terrifically important. We should acknowledge and understand the externalities of procurement, and, through the legislation, we should tell the public contracting authorities that they should take account of them. There was an interesting exchange on this.
The Government’s national procurement policy statement, published in June 2021, acknowledged that the national priority is social value. In that context, “social value” was defined as
“new businesses, new jobs and new skills; tackling climate change and reducing waste, and improving supplier diversity, innovation and resilience.”
This relates to the point that the noble Lord, Lord Stevens, was making, and to my own point about innovation. These things are all in there, but they are not in the Bill, because the day after the Bill comes into force, the Government could write a new national procurement policy statement.
My initial submission at Second Reading is that government should be very clear that the procurement objectives include not only public benefit but social value, and the latter must be defined in the national procurement policy statement in the ways that we specify in the Bill. I hope to include all those points, including the issues relating to climate change, supply chain resilience and the importance, from my point of view, of procurement-led innovation in the economy.
I will make one other point about treaty state suppliers—this is not the point that was previously made. The International Agreements Committee, of which I am a member, is scrutinising the Australia and New Zealand free trade agreements, which are the first of their kind. The Trade (Australia and New Zealand) Bill has been introduced in the other place, and the purpose of this legislation will be to repeal that when the time comes. So, at the same moment, we have a Bill at each end, with one repealing the other—why is that the case? Looking at the Explanatory Notes to the Bill in the other place, I see that it is clearly because the Government expect that Bill to pass rapidly and this one to pass slowly. Therefore, the consequence is that they need that legislation quickly but will subsequently repeal it using this legislation. This is the way that such legislative matters proceed.
My problem is that Schedule 12 to this Bill simply repeals that legislation. So, if we were to amend the Trade (Australia and New Zealand) Bill at any point in the future, it could—or, in fact, would—be repealed by government by virtue of Schedule 12, so any debate on the Trade (Australia and New Zealand) Bill is pointless. I hope that we make sure that that does not happen. We must therefore have a serious debate about whether we are happy for future free trade agreements with procurement chapters to be implemented solely by secondary, rather than primary, legislation. We had this debate on the Trade Act, and I think that we will need to come back to it.
Overall, this is an important Bill, very well introduced by my noble friend—
I reinforce the point so excellently expressed by the noble Lord, Lord Stevens, that our supply chain resilience is an important part of this. The noble Lord, Lord Lansley, talked about innovation, but the general use of market-making, not as a central mechanism but as an important function of £300 billion-worth of expenditure, and the way that has been so successfully used by many other countries to improve their capacity to deal with cybersecurity, regional variations, or other things—that resilience—is really important.
Notwithstanding that, I greatly congratulate the Government. I am very heartened by the increased focus on small businesses and on late payment and payment terms. This is to be warmly applauded and welcomed, and I am very grateful to the Government for making these changes. I can see a wry smile from a previous Minister because I am banging the same drum, but I will carry on doing so.
In Part 4, Clauses 63 and 64 set a maximum 30 days for payment, so there is no real change for government. However, if my interpretation of Schedule 2 is correct, this is all-encompassing, and this deals with supply chains and utility companies—a major step forward, so again I greatly congratulate the Government on doing that. I hope that this means that they will amend the late payment of commercial debts Act by setting maximum payment terms of 30 days for all suppliers, bringing the procurement Act, the Prompt Payment Code and the Late Payment of Commercial Debts Regulations into alignment.
I would also be very keen for the Minister to guarantee that after the Government have defined supply chains, they will have also dealt with the increasing practice of putting in a financial service company between the main contractors, with whom they contract and where there is an obligation for 30 days in the supply chain, to offset the supplier to a contract with another party which gives them 90 days. That is a way in which that mechanism has been subverted. I hope that the Government can be consistent in ensuring that this is applied throughout. It would be of great benefit to small businesses.
In Clause 65, there are strong provisions on information about payments under public contracts. Again, this appears to require public bodies to submit information along the lines of the duty to report. It would be sensible for the Government to use the existing mechanism available under duty to report, which gives a single point of reference for businesses to review public and private payment performance, and it would be a helpful addition.
In Part 8, Clauses 85(2)(a) and 85(2)(b) concern some potential exclusions to the duties to publish and provide information, and it talks about prejudicing interests. I would be grateful if the Minister could ensure that payment terms are never part of those exclusions, to make sure that that information continues to flow consistently.
The Bill provides for a contracting authority’s duty to comply with Parts 1 to 5, 7 and 8, saying that only enforceable and civil proceedings are covered under this part. The Government really need to recognise the litigation costs required. Lord Justice Jackson’s review of civil litigation costs found that the claimant’s costs for cases in the £50,000 to £110,000 region are likely to exceed £110,000, while the defendant can expect costs in excess of £129,000. It is unrealistic to expect small businesses that are trying to break into this market to be able to rely on that as a protection. I therefore suggest that, as an alternative, small businesses be able to report abuses to the Small Business Commissioner so that it can investigate them. I further suggest that the Small Business Commissioner be given both the budget and autonomy to act independently on such claims.
In Part 10, Clause 96(1) and Part 13, Clause 111(1)(a), an appropriate authority may investigate compliance under the Act. The appropriate authority is, of course, a Minister of the Crown. I remind the House that the Small Business Commissioner is already well versed in matters pertaining to late payments and, with that in mind, I strongly suggest that it could also be called upon to perform that duty.
Finally, in Schedule 2 there is one area of concern on which it would be useful if the Government expanded during Committee: how far do the 30-day terms extend? Is it just government purchases—for example, the petrol for ambulances—or does it fully affect the whole supply chain of a utility company’s expenditure on, for example, branding, refit costs and so on? If it is the latter, this is even more excellent news and a first step in reducing all contracts to a maximum of 30 days, and it is to be warmly welcomed.
Although there are many wider issues, which I look forward to examining, I welcome the provisions on small businesses and hope that the Minister and his department will take extra care to make sure that they remain consistent, and that the advances they have developed to the benefit of small businesses are carried through the entirety of the Bill.