That the draft Procurement Regulations 2024, which were laid before this House on 25 March, be approved.
This statutory instrument represents a significant legislative step in implementing the Procurement Act 2023, which seizes the opportunity, following Brexit, to develop and implement a new public procurement regime for over £300 billion-worth of public contracts. The new regime helps to deliver the Prime Minister’s promise to grow the economy by creating a simpler and more transparent system that will deliver better value for money, reducing costs for businesses and the public sector.
The regulations bring to life and set out the practical detail necessary for the functioning of many of the Act’s provisions. They address many of the points of practical detail that are more appropriately set out in regulations given their detailed nature and propensity to change and need updating from time to time. Many of the measures set out the detail required to be provided in notices required by the Act, which allow contracting authorities to conduct their public procurement in an open, transparent and informative manner. They include the particular contents of various notices that will be used to communicate opportunities and details about forthcoming, in-train and completed procurements.
Does the Minister think the regulations are duly simplified so that it is feasible for the self-employed and very small businesses to have access to contracts? Is there any provision for breaking down contract sizes so that the self-employed and small businesses have more opportunity?
My right hon. Friend asks a pertinent question—one that was at the forefront of Ministers’ minds when the legislation was drafted and as it made its way through both Houses. A number of provisions in primary legislation are there specifically to increase the chances that small and medium-sized enterprises, which are more likely to be British, get a bigger share of the £300 billion-worth of public procurement. Those provisions include everything from the online procurement system that we are building—which will increase transparency and allow greater notification of pipelines, helping small and medium-sized enterprises to prepare for those procurements—to reduced red tape, which will take the burden off those SMEs and reduce their barriers to entry. We are hopeful that a lot of local businesses in his constituency and in mine will benefit from this landmark piece of post-Brexit legislation.
The contents I was describing would typically include the contact details for the contracting authority, the contract’s subject matter, key timings for the procurement process, and various other basic information about a particular procurement that interested suppliers would need to know. The provisions also cover the practical measures that authorities must follow when publishing those notices, such as publishing on a central digital platform and handling situations in the event that the platform is unavailable.
Beyond transparency, the instrument includes various other necessary provisions to supplement the Act that will be relevant in certain situations. We provide various lists in the schedules so that procurers are able to identify whether certain obligations apply in a particular case, including a list of light-touch services that qualify for simplified rules, and a list of central Government authorities and works that are subject to different thresholds. The regulations disapply the Procurement Act in relation to healthcare services procurements within the scope of the NHS provider selection regime, which has set out the regulatory framework for healthcare services procurement since its introduction in January this year.
I thank the Minister for giving way—at least it will enable him to draw breath—but could I ask a straightforward question? To what extent is this instrument going to enable British industry and British services to compete on a level playing field, in which we prioritise our domestic producers like every other country in the world does?
The right hon. Gentleman knows what is coming, because he asked me this question a number of times during the passage of the Act. We are doing two main things: the first is that we are greatly simplifying our procurement processes, which—as he heard me say a moment ago to my right hon. Friend the Member for Wokingham (Sir John Redwood)—will particularly work to the advantage of small and medium-sized enterprises. However, the right hon. Gentleman must be cognisant of the fact that we have a number of international trade agreements with countries all over the world, in which we have agreed to compete with them on a level playing field. The only way in which we could deliberately give advantageous opportunities to British companies vis-à-vis those arrangements would be to break those trade deals. I am sure that is not what the right hon. Gentleman is proposing.
We have a lot of time and a thin House. I presume that the United States is also a signatory to the same trade treaties, yet it has the “buy American” legislation, which is very strong and very effectively enforced. In the area of shipping, for example, it also has the Jones Act, which says that anything being shipped between ports in the United States has to be carried by American vessels. The United States is working under the same treaty, so why is it able to do that, while we, for some reason—perhaps deep Treasury dogma, or long-standing civil service prejudice against industry—cannot?
If the right hon. Gentleman looks at the details of the trade deals that we have with other countries, he will see that by and large, those trade deals have been created in order to further commerce and trade between two countries, and agree that there will be areas in which there will be a level playing field between our country and that other country—that is often the basis of a trade deal. The United States is the world’s leading economy and has been for over a century, and can sometimes strike deals or come to arrangements that other countries that are not the world’s largest economy cannot. I am afraid he will have to go and do his own research on American trade deals, but I can explain to him why we have the procurement system we do and why, because of the steps we have taken in this legislation, we will be creating additional opportunities for small and medium-sized enterprises in his constituency as well as in mine. That is much for the better, and it is a much better situation than we found ourselves in while we were still in the EU, with a very cumbersome, slow-moving and long-unreformed system of procurement to which we had been shackled for about 40 years.
For the avoidance of doubt, Members will want to be aware that this statutory instrument has been corrected to remove drafting references and a couple of typographical errors that were mistakenly added during the publishing process. I hope that colleagues will join me in supporting these regulations and will approve this SI today.
Labour Members will not be opposing the regulations, which provide the detail needed for the Procurement Act to come into effect later this year. As Members across the House will recall, there was a need for a new procurement Act to reform the EU law-based procurement regime following the UK’s exit from the EU and to consolidate various procurement regulations into one place. For those reasons, we did not oppose the Procurement Bill on Second or Third Reading.
The purpose of the Procurement Act was to create a simpler, more flexible commercial system that better meets our country’s needs after having left the EU, while remaining compliant with our international obligations. However, as we have made clear in this House before, we are concerned that the Procurement Act was a wasted opportunity to reform procurement. In spite of our attempts to strengthen and improve the Bill with our amendments, the Procurement Act, when it comes into force in October, will unfortunately allow the same wasteful approach to emergency contracting rules that we saw during the pandemic, when friends of and donors to the Conservative party were given the first bite of the cherry while decent, skilled local businesses were denied the same opportunity. Billions of pounds of public money was wasted while excellent small and medium-sized businesses were overlooked. Nothing in the draft regulations will address that concern.
We also made it clear that we were very disappointed that the Act failed to mandate social value to secure investment in good British businesses, and I have to say that I was disappointed by the answer the Minister just gave to my right hon. Friend the Member for Warley (John Spellar). The procurement policy of a Labour Government would be rooted in getting value for money for every pound spent. Our national procurement plan would reward businesses that create jobs and pay their taxes, slash red tape for disadvantaged SMEs and claw back money from contractors that fail to deliver.
It is difficult to come up with a good system that has the right balance, because the taxpayer’s interest is very much in favour of economies of scale and availability, while the small business struggles to meet the possible volumes of a successful bid for a contract and to satisfy all the criteria that the large company finds easy to manage. I am grateful for the fact that the Minister and the Government generally have been thinking rather more about how small business and the self-employed can make a bigger contribution and how contracts can be broken down into more manageable sizes, both in primary legislation and now in the detail.
The right hon. Gentleman is absolutely right on that, but very often the primes get the contract and subcontract to the SMEs and put on a huge on-cost and profit margin. Those SMEs are therefore never able to grow properly, and they are stifled, because Whitehall prefers to deal with very large conglomerates.
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.
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The regulations also set out how devolved Scottish contracting authorities are to be regulated by the Act if they choose to use a commercial tool established under the Act or procure jointly with a buyer regulated by the Act. The provisions of the regulations apply to reserved procurement in England, Wales, Northern Ireland and Scotland, and to transferred procurement in Northern Ireland. The Welsh Government have laid similar secondary legislation that will apply in respect of devolved procurement in Wales, and if the devolved body carrying out that procurement mainly operates in Wales, elsewhere.
The Government have consulted carefully with stakeholders throughout all stages of the reform process, and we published our response to the formal public consultation on these regulations on 22 March. That consultation was a great success, evoking a good response from the various representative sectors, and confirmed that the proposed regulations generally worked as intended. Many stakeholders urged that certain matters be clarified and explained in guidance and training, which is a key part of our implementation programme that is being rolled out across the UK. The Government response demonstrates that we have listened to feedback, and confirms a number of areas in which the consultation led to technical and drafting improvements.
Once the instrument has been made, contracting authorities and suppliers will need time in order to fully adapt their systems and processes before go-live. As such, the Government have provided six months’ advance notice of go-live of the new regime before these regulations come into force, which will happen on 28 October this year.
The statutory instrument is required to implement the new public procurement regime established by the Procurement Act 2023. It specifies what information should be included in the notices that contracting authorities must publish as per the requirements of the Procurement Act, and where and how these should be published. Other regulations in the statutory instrument impose requirements as to how contracting authorities should obtain specified information from suppliers, and provide further detail about how certain organisations and contracts are to be regulated. It gives details about how the Act covers Welsh and Scottish procurement in relation to reserved matters, and clarifies the disapplication of the Act in relation to regulated healthcare procurement.
Turning to the specific measures in the regulations, there is clarification about the various notices that will be published on the central digital platform. The platform was set up by the Minister for the Cabinet Office, and I hope it is progressing well. Notices that must be published there include planned procurement notices, tender notices, dynamic market notices and transparency notices. There is further specification of the information that should be included in the notices, with the purpose being to increase transparency and make the procurement regime more accessible to smaller businesses.
Measures that improve transparency and increase access to procurement opportunities, particularly to small and medium-sized businesses, are very much to be welcomed. The challenge will be in how to make these notices and the digital platform as user-friendly as possible, with all the relevant information easily accessible and searchable. As we move forward, it would be helpful if the Minister updated the House on progress in meeting the requirements of the regulations and on what impact they have on the number of small and medium-sized enterprises that bid for contracts. Goods purchased from small and medium-sized enterprises often mean providing local jobs, and local jobs mean that people can stay in their home towns and not have to move away for work, and importantly that they will spend their money in their local areas thus boosting the local economy.
The regulations also set out the details for supplier information requirements that will enable the creation of a supplier information system, the purpose of which will be to hold commonly used supplier information and allow it to be shared with contracting authorities, with the laudable aim of reducing the burden for suppliers, who have to provide the same information in relation to every procurement. Anyone who talks to businesses will say just how frustrating it is to have to supply the same information time and again. That is a particular burden for small and medium-sized businesses which simply do not have the capacity to deal with endless red tape. Measures that help to reduce that burden are very much to be welcomed, but again the challenge will be in the design and operation of the system. It should become a useful tool that saves repetition, rather than becoming a burden in itself, with businesses struggling to upload the necessary information.
The regulations also specify a list of services that may form the subject matter of what are called light-touch contracts, which would enjoy a less onerous regulatory regime, with the aim of encouraging organisations such as social enterprises and mutuals to bid for contracts for certain social, health and other person-orientated services. The key issues will be to maximise transparency and to ensure sufficient regulation to protect and get value for money for the public purse while at the same time encouraging a wider range of organisations to bid for contracts. The regulations specify that the Act does not apply to what is termed “regulated health procurement”, which is governed by other legislation.
The UK’s commitments under the World Trade Organisation agreement on Government procurement require us to have one financial threshold that applies to central Government authorities and another for the procurement of goods and services by local government and wider public sector bodies, as well as a specific threshold that applies to procurement for what are termed “works”—construction procurement that reflects the typically higher monetary values involved in procuring construction. The regulations therefore set out lists of which bodies are defined as central Government authorities and construction-related services that constitute “works”. These regulations set out further requirements in respect of what happens at the awarding of contracts and thereafter, with regulation 31 setting out what the assessment summary should contain, including an explanation as to why the particular scores were given against each criterion.
There are some innovative measures, and we welcome those that help to make the whole process more transparent. Regulation 37 sets out the information required in a procurement termination notice that is published when a contracting authority decides not to award a contract, and regulation 40 sets out the details to be included in a contract change notice, including the grounds on which modification will be made.
The regulations also change the frequency of reporting on the prompt payment of invoices by Government bodies from one year to six months and spell out requirements in respect of the contract performance notice, including the details required when used to report poor performance or a breach of contract. The explanatory notes clarify that these regulations do not include a statutory review clause, as they do not regulate an activity carried out by a business for the purposes of the business, but rather that they place obligations on the public sector. However, feedback and monitoring are crucial to ensuring both that we are getting value for the public purse and that the regulations are working effectively for business, including reducing the burdens on business and encouraging a wider range of businesses, particularly small and medium-sized enterprises, to bid for contracts.
I note that the approach to monitoring this legislation will be through feedback from contracting authorities, suppliers, industry representatives and professionals. As I noted earlier in my remarks, what is important is not just the content of the regulations but the way in which the requirements are implemented. The smooth operation of the supplier information system and the ease of access to the digital platform where the notices of procurement opportunities will be posted are crucial. I note that the Government have given the required six months’ notice of the coming into force of the Procurement Act on 28 October, when public bodies and businesses will be required to follow these regulations. It would be useful if the Minister kept the House updated about the implementation of the Act, and going forward, its impact, including, importantly, the impact on the uptake of procurement opportunities by small and medium-sized businesses.
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.