Procurement Bill [ Lords ] (Fifth sitting)
Tuesday 7th February 2023
(1 year, 3 months ago)
Public Bill CommitteesRead Full debate Procurement Act 2023 View all Procurement Act 2023 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 7 February 2023 - (7 Feb 2023)
The Committee divided: - Ayes: 5 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 8 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 8 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 8 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 8 - Question accordingly negatived.
The Committee divided: - Ayes: 4 / Noes: 8 - Question accordingly negatived.
The Chair
I remind the Committee that Hansard colleagues will be grateful if you could send your speaking notes to hansardnotes@parliament.uk. Please switch all electronic devices to silent. Tea and coffee are not allowed to be consumed during sittings.
Florence Eshalomi (Vauxhall) (Lab/Co-op)
I beg to move amendment 13, in clause 41, page 28, line 27, at beginning insert “Subject to subsection (4A),”.
This is a paving amendment for Amendment 14, which would prevent the award of direct contracts to excludable suppliers when the supplier was excluded as a threat to national security.
The Chair
With this it will be convenient to discuss amendment 14, in clause 41, page 28, line 38, at end insert—
“(4A) If the supplier is an excludable supplier by virtue of the discretionary exclusion ground in paragraph 14 of Schedule 7 (threat to national security), the contracting authority may not award the contract to that supplier.”
This amendment would prevent the award of direct contracts to excludable suppliers when the supplier was excluded as a threat to national security.
Florence Eshalomi
It is a pleasure to serve under your chairship again, Mr Efford.
Amendments 13 and 14 reiterate our amendments 15 to 19 to clause 29, which we debated last week. We think that competitive and due process should be followed as much as possible, and that the bypasses enabled by clause 41 should be used as little as possible. Although we understand why direct awards might be needed, we believe that they must be used with caution.
One element of the clause that we find troublesome is the provision on excludable suppliers and the public interest test. The rationale for direct awards can be related to defence, as under paragraph 18 of schedule 5, and the matters listed in the “overriding public interest” test in clause 41(5) are serious. We understand why the Government may look to bypass many of those grounds should the issues be serious enough, but we do not believe that it should ever be the case that threats to national security are awarded contracts, in particular under direct awards.
Previously in Committee, we attempted to move national security concerns from discretionary to mandatory grounds. We feel that the necessary amendment would require us to go beyond the public interest test for excluded suppliers and exclude suppliers with national security concerns across the board. The fact is, as we go further up the food chain of security sensitivity, the risk to our country from exposing our supply chain to national security threats becomes more severe.
To take the public interest test on constructing, maintaining or operating critical national infrastructure, we understand that that is of the utmost importance for the country, but we should not expose our network to security threats if the need for such a test is so great. The risk of doing so is catastrophic. It could mean malign surveillance in vital infrastructure undermining our entire security system and the fundamental safety of the state. In such cases, there must be a clear instruction for contracting authorities to look for alternative provisions that do not put the state at risk.
We feel that our amendments address such proportionality concerns. They would ensure that we never turn to national security threats for procurement, preventing the threat that those could cause to critical infrastructure. The Minister will say that we need flexibility in the system and that decision makers can assess the threat where necessary, but the reality is that we cannot expect procurement officers to be national security experts and to spot every threat that could be present with a supplier with national security concerns.
It is worth bearing in mind that, in high-pressure situations when wrong decisions can have hugely damaging unintended consequences, proper and strong legal checks and balances are critical, even at urgent times. Again, we may want to remember what happened during the covid pandemic. The National Audit Office investigation into Government procurement during covid-19 found:
“General guidance issued by the Crown Commercial Service recommends that awarding bodies publish basic information about the award of all contracts within 90 days of the award being made. Of the 1,644 contracts awarded across government up to the end of July 2020 with a contract value above £25,000, 55% had not had their details published by 10 November and 25% were published on Contracts Finder within the 90-day target.”
The result was that £10 billion-worth of PPE was written off, with auditors rebuking the Department of Health and Social Care for its management of taxpayers’ money during the pandemic. The Government are now locked in legal battles with the companies that failed to deliver on their contractual obligations. In the first quarter of 2022-23, the Government are still disputing 176 contracts worth nearly £3 billion. It is fair that even in an emergency we must abide by solid procurement principles if we are to avoid unintended consequences that put public finances and our national security at risk.
I think it is fair to say that we cannot be so arrogant as to assume that this would not be done inadvertently. During her speech on Second Reading, which I have alluded to already, the hon. Member for Rutland and Melton (Alicia Kearns) highlighted several issues that point to the need for tightening up in this area. She said:
“At the moment I have local authorities from around the country writing to me saying, ‘Alicia Kearns, can you please give me advice on whether or not we as the local council should procure from this company?’ That cannot be the way we do this. We must ensure local government is not the entry point for hostile states.”
She added:
“Finally, on supply chains, public authorities need to be able to investigate, and we must ensure that this goes high enough up the chain. Canadian Solar is looking to build a solar plant in my constituency. It sounds lovely—'Canadian Solar? What a great company’—but when we actually look into it, it is GCL-Poly, a Chinese-owned, Chinese-run company that is complicit in Uyghur genocide. We must ensure that the burden to investigate is properly addressed.”—[Official Report, 9 January 2023; Vol. 725, c. 363.]
I do not want to say that all these companies are necessarily a national security threat and need to be addressed by the Bill, but the points made by the hon. Member for Rutland and Melton and others show how easy it is for suppliers that may be of concern to the state to slip through the cracks. All these things concern us, and they should concern the Minister. With such risks present, I do not think there can ever be a proportional use of a national security threat in direct award procurement.
Lloyd Russell-Moyle (Brighton, Kemptown) (Lab/Co-op)
My hon. Friend is making very good points. We have the Committees on Arms Export Controls, which scrutinise not just Government sales but commercial sales abroad. Is there not a case for a similar Committee, or for the existing Committees to have a wider scope, to look at imports that might be national security threats? Would that not be a way to shine some light on this?
Florence Eshalomi
I thank my hon. Friend for that point, and I hope that the Minister responds to it. It shows the many different angles from which, inadvertently, we could see national security threats coming into the country. We must make sure that we avoid that. We need to look at the issue of national security threats when we are directly awarding procurements.
There is very little in the clause in legal terms preventing the use of national security threats in direct awards; as my hon. Friend highlights, there is no guarantee that they will not be used. Our amendments 13 and 14 would prevent threats from entering the system via direct awards. I hope that the Minister will support them.
The Parliamentary Secretary, Cabinet Office (Alex Burghart)
It is a pleasure to serve under your chairmanship again, Mr Efford, as we enter the third day in Committee. We are making good progress through the Bill, and we hope to make even better progress today.
Amendments 13 and 14, tabled by the hon. Member for Vauxhall, seek to prevent contracts from being directly awarded to suppliers that pose a risk to national security. As we have discussed, national security is of the utmost importance, which is why we have chosen to strengthen the protections in our rules by introducing a new discretionary exclusion ground for suppliers that pose a risk. As I have already explained, the provision has to be discretionary, because there will be situations where a supplier poses a threat in one context but not in another.
The amendment envisions circumstances where a direct award justification applies, meaning a competitive award is not feasible. That would include where there are no other suitable suppliers, or where there is an extreme and unavoidable urgency. It is in precisely those situations that it is vital for contracting authorities to retain an element of discretion in the national security exclusion ground; that element of discretion does not in any way lessen the obligation on authorities to consider whether exclusion is appropriate for the particular contract given the risk posed by the supplier.
Those considerations will of course be informed by the publication of guidance produced in partnership with national technical authorities such as the Centre for the Protection of National Infrastructure and the National Cyber Security Centre. I have complete confidence that contracting authorities will use the discretion appropriately. I respectfully ask that the amendment be withdrawn.
Question put, That the amendment be made.
Kirsty Blackman (Aberdeen North) (SNP)
I beg to move amendment 103, in clause 41, page 29, line 10, at end insert—
“(5A) Where a direct award justification applies, before making a direct award to a supplier a contracting authority must satisfy itself that no preferential treatment has been conferred on the supplier by virtue of any recommendation made by a Member of the House of Commons or the House of Lords.”
The Chair
With this it will be convenient to discuss the following:
Amendment 104, in clause 44, page 30, line 23, at end insert—
“(c) any connections between the supplier and any—
(i) registered political party,
(ii) Ministers of the Crown, or
(iii) Members of the House of Commons or House of Lords
where such connections are of a nature likely to be relevant to the direct award of the contract.”
Amendment 111, in clause 44, page 30, line 25, at end insert—
“(4) Any Minister, peer or senior civil servant involved in recommending a supplier for a contract under section 41 or 43 must make a public declaration to the Cabinet Office of any private interest in that supplier within 5 working days.”
This amendment would implement the recommendation of the National Audit Office that any contracts awarded under emergency provisions or direct awards should include transparency declarations.
Kirsty Blackman
These amendments arise mostly, although not entirely, as a result of what happened with PPE during covid. I would be less inclined to move the amendments if the Government had shown any contrition about the situation we find ourselves in. They tend to stand up and say, “Well, we needed to procure things in a rush, so we have no regrets about the situation.” It would be much better for them to stand up and say, “We needed to procure in a rush, but lots of mistakes were made along the way and therefore we believe that we need to do better next time.” A full investigation would also be helpful.
The situation we find ourselves in is this: a significant amount of PPE, of significant value, was unusable; the VIP lane has been considered unlawful; and those who made recommendations—one person, certainly, who made a recommendation—have personally benefited from Government contracts that were awarded. In the light of that situation, it is incredibly important that the procurement rules we set up ensure that such a situation cannot happen again—that there is both a requirement for the people making direct awards to satisfy themselves that no preferential treatment has been given on the basis that the person has been recommended by a Member of the House of Commons or the House of Lords, and that, should there be any connections between the supplier and a registered political party, Ministers of the Crown or Members of the House of Commons or House of Lords, that information is laid out in the transparency notice.
That is not asking too much. We all have a register of interests that we are supposed to keep up to date—the ministerial one slightly less often, or very much less often, than that for MPs. Asking for a higher level of transparency, when we know that those links occur, is not asking too much.
The Conservatives have a tendency to point to the fact that, “Well, we have people in the House of Lords who have come from business, therefore of course they will continue to have business interests.” I am not suggesting that they should not—that is absolutely fine—but we should be transparent about it and we should know if a contract has been granted to somebody who will benefit as a Member of the House of Lords. Is the supplier, or the person receiving the procurement contract—the beneficial owner—a peer or a Member of the House of Commons? Are they linked, in some way, to a political party?
We know from Sky’s investigation that a number of Members of Parliament receive money from companies. That is registered, but there is no requirement in the Bill, as it stands, for it to be noted; there is no requirement, when the contract is being given, for that which is open and registered already. Members of Parliament have to register if they receive a certain amount of money from a company, so it should follow that, if the company is being given a procurement contract, it is registered as part of the transparency notice. That should be noted up front.
That is not asking too much, particularly in relation to amendment 104, which is specifically about transparency notices and ensuring that that stuff is clear. It should not be too much work for anyone doing the transparency notice. Absolutely, it will create a little bit of extra work, but all they will need to do is cross-reference the registered interests, and then put that in the transparency notice so that we are all aware of the links.
Lloyd Russell-Moyle
The hon. Lady is raising some important points about how mistakes were made during the covid period. It is important to note, however, that those same mistakes were not made in Labour-controlled Wales or SNP-controlled Scotland, where transparency seemed to be much higher and fast-track schemes were not implemented. Is there a case for greater light to be shone in this place, where the rot seems to have truly set in?
Kirsty Blackman
I absolutely agree. In fact, that adds to the case that we should be willing for there to be an investigation. It shows that, actually, we can do it right and in such a way that individuals do not benefit from that.
David Duguid (Banff and Buchan) (Con)
I thank the hon. Member for giving way. I look forward to her supporting Scottish Conservative calls for transparency on certain procurements—of ferries and suchlike—by the Scottish Government.
The hon. Member said that it should not be too much to ask. I have heard that argument many times about making amendments, not just to this Bill but to others. She said herself that the registers of Members’ and Ministers’ interests already exist. Does she not feel that making “shouldn’t be too much to ask” amendments to any Bill risks diluting its effect?
Kirsty Blackman
I do not think that that is the case. We should not have such an issue that we need journalists, such as those at Sky, to shine a light and make those links. There should be a requirement for that transparency to be in place. Although we have the registers of Members’ and Ministers’ interests, they stand alone and are separate from the procurement contracts. If we end up in situations where people are benefiting significantly, having that in the transparency notice is important.
Florence Eshalomi
The hon. Member makes a valid point. Does she agree with my concern that only the other week the Paymaster General said that Ministers’ interests will be updated, but not until May, whereas we as Members have to update our entry in the Register of Members’ Financial Interests within 28 days? Why the delay?
Kirsty Blackman
I absolutely agree. The former Chancellor and chairman of the Conservative party, the right hon. Member for Stratford-on-Avon (Nadhim Zahawi), did not update his list of ministerial interests for a significant period after he was put into his role. In fact, some of the most egregious issues did not come to light properly until he updated the list of ministerial interests in January, some three months after he became the party chairman.
I agree that the lack of transparency is a significant issue, and I was disappointed in the Government responses. They do not seem keen to move on the register of ministerial interests being updated more regularly. Surely, given the amount of Executive power in this place and the post-Brexit creep towards increasing the amount of ministerial or Executive power—taking power away from Members—it is even more important for ministerial interests to be registered.
Lloyd Russell-Moyle
Does the hon. Member agree that the proposal would be in the interests of a governing party that is facing so many scandals—from Baroness Mone to the Randox lobbying affair—that have almost brought down Prime Ministers? It would help to protect the Conservative party from some “bad apples”, as Conservatives might put it.
Kirsty Blackman
I agree and would add to that: how many former treasurers of the Conservative party who have given significant amounts to the party have just happened to end up in the House of Lords? Who knows how that has happened? We know that there are people in this House and in the other place with significant business interests, and the amendment is not a criticism of that; it is not a negative thing, but it is about ensuring transparency.
Chris Evans (Islwyn) (Lab/Co-op)
The nub of the issue is that people have been appointed to the House of Lords and, in a particular case—I do not want to mention the name—they are not then taking an active part in proceedings in the other place. We could mention a number of peers who have hardly spoken since they were appointed, or not spoken at all. Rather than using that position to serve the Executive of this country, they have used it to lobby for contracts from the Government. That needs to be stamped out. Does the hon. Member agree that it is now time to look at how we appoint people to the Lords, and perhaps remove appointment to the Lords from the honours system altogether?
Kirsty Blackman
I absolutely agree. Each former Prime Minister is able to put forward whoever they want to the House of Lords, so we end up in this situation of having 850 peers and counting. The numbers are increasing drastically because the Government keep putting in more people to balance the politics in that place.
On the amendment, it is important for the Government to be willing to consider how best to improve transparency. So far, they have shown no willingness to improve transparency or to accept that there have been issues and that mistakes have been made. We need to change the system.
The UK has fallen in Transparency International’s corruption index, which has nothing to do with the Financial Action Task Force one. The FATF index is about corruption when it comes to money laundering, but Transparency International’s is about corruption in the public sector. It looks specifically at such issues as breaches of the ministerial code—in particular, ones that have not been investigated—and the scandals we have seen and continue to see.
The Prime Minister cannot keep sacking people who breach the code; we need to change the system so that they never get to that position in the first place—so that they can never commit the egregious breaches of trust we have seen and can never profit as individuals as a result of their position in this place or the other place. If the rules and systems are changed—which they clearly need to be—the Prime Minister will not need to sack people, because they will never be able to breach the rules and will never be able to profit as individuals simply as a result of their links to this place.
I will push amendments 103 and 104 to a vote when we come to that point and am happy to support amendment 111, tabled by the Labour Front-Bench team.
Florence Eshalomi
We fully support amendments 103 and 104, tabled by the hon. Member for Aberdeen North, which consider how we embed transparency into the system of direct awards. The two amendments highlight why we need additional layers of scrutiny to address glaring areas of conflict of interest in respect of Members of both the Commons and the Lords. It is vital to have additional checks in place.
Throughout the proceedings on the Bill the Minister has talked about the principle of impartiality, and said that the Bill will make VIP lanes, such as those we have seen, illegal and that it is all going to be fine. But that is just not the case. We need only to look at the pandemic to see why we desperately need to make sure that our procurement system is more agile and more transparent. The Tory VIP lane exposed a weakness in the system.
We must remember that we are talking about taxpayers’ money. We are at a time when so many people are feeling real difficulty in their choices and are seeing their household incomes reduce. Council and social housing tenants dread their rents going up. A number of councils have already highlighted how they are going to increase their council tax, including a borough in south London that is proposing to increase council tax by 15%.
Taxpayers’ money was wasted on contracts that were not fit for purpose and wasted as profits for unqualified providers. Worryingly, the Government have written off £10 billion of public funds that were spent on PPE that was either unusable, overpriced or undelivered, and it is worth bearing in mind that we are still spending £700,000 of taxpayers’ money a day on storing unused gloves, goggles and gowns. That money could pay for spaces in after-school clubs. It could pay for 19,000 full-time nursery places. It is public money.
The Bill does not pass the Mone or Paterson test; that waste could still be allowed to happen, over and over again. Handing more power to Ministers in respect of direct awards is not the way we want to go. We support the two amendments, because it is important that we empower local authorities to be able to ask the necessary questions when it comes to conflicts of interest. The current procurement system is not working, and we need to include new checks.
The amendments could be further strengthened by placing the onus on individual Ministers, civil servants and special advisers to make the necessary declarations but, as we have seen, when the onus is on them, they still do not make those declarations. Essentially, they have to be dragged kicking and screaming. We are in a situation in which we will not see the declarations of Ministers’ financial interests updated until May, if we are lucky. Anything could happen before May.
I draw the Committee’s attention to amendment 111, which we think further addresses the aims of amendments 103 and 104. We have an opportunity to learn from past mistakes and to tighten the freedom of Ministers to award direct contracts. It is about hardwiring transparency into our system. That should be a good thing and something we should all support. Instead, it seems the Minister wants to continue to have a back door and a VIP entrance. We must be clear that the Bill offers us a chance to clear that up.
The facts and figures speak for themselves. Some £3.4 billion of taxpayers’ money, in the form of contracts, went to Conservative donors and friends. A former Conservative Minister lobbied for Randox, which then provided 750,000 defective tests that had to be recalled, all while he was being paid £100,000 on top of his salary. Globus (Shetland), a business that has donated £400,000 to the Conservative Party since 2016, received £94 million-worth of PPE contracts.
Millions of people struggled during covid-19. The Government did some good things—including the furlough scheme to help people not to lose their jobs and the support for businesses—but a large group of people missed out on any money, including the 3 million people who form ExcludedUK. For those people who paid their taxes, submitted their returns and did not receive any money to have seen contracts dished out to friends, when those contracts were not even viable, was a slap in the face. When millions of people struggled during covid-19, it was not fair for them to have seen friends and donors of the Tory party prosper. As it stands, the Bill would continue to allow that to happen.
Our amendment 111 takes an important step, with amendments 103 and 104, towards addressing the situation, by asking Ministers to act, ensure genuine transparency in the system and restore trust in public money. This is about trust in the system. A number of members of the public do not trust our system; this is about restoring some of that trust and ensuring that, after years of waste and mismanagement, we do not find ourselves in this situation again.
Our amendment is based on a proposal by the independent National Audit Office and would mandate that:
“Any Minister, peer or senior civil servant involved in recommending a supplier for a contract under section 41 or 43 must make a public declaration to the Cabinet Office of any private interest”.
I hope we all agree that that is a straightforward, pragmatic proposal. It is not about layers of bureaucracy for business; it is about layers of additional scrutiny on Ministers to help to give the public confidence that another PPE Medpro scandal will be stopped and that we will not see a situation in which handfuls of millions of pounds of public money are redundantly spent on equipment that we cannot use.
The three amendments would outlaw VIP lanes once and for all, ensuring that we stop corruption. They would introduce a timeframe for transparency around declarations so that we can have information about conflicts of interests, instead of it being drip fed through the media or journalists. They would ensure that these scandals are not allowed to build up gradually over months and continue the erosion of trust. I hope the Minister agrees that Members of Parliament and the Government should have nothing to hide. If there is nothing to hide, they should support these reasonable amendments, which will help us to clean up our procurement system.
Alex Burghart
Conflict of interest in direct award contracts is clearly an extremely important topic. Amendment 103 would require a contracting authority to satisfy itself, before making a direct award, that no preferential treatment has been conferred on the supplier by virtue of any recommendation made by a Member of this House or the House of Lords. We understand—indeed, we agree with—the intent behind the amendment, but the Bill already covers such a scenario via robust requirements for contracting authorities to ensure equal treatment and address conflicts of interest. The bottom line is that if a conflict of interest puts a supplier at an unfair advantage, they must be treated as an excluded supplier and cannot be given a direct award.
Amendments 104 and 111 relate to the highlighting of political connections to political parties, Ministers of the Crown, Members of the House of Commons or House of Lords, or senior civil servants. As Members will have already heard, the Bill includes significantly greater transparency around direct awards than we have had in the past, via the new transparency notice in clause 44 and elsewhere. The conflicts provisions have been strengthened against the current procurement rules. A key change is the requirement in clause 82(5), which I will address in a future sitting, for contracting authorities to confirm that a conflicts assessment has been prepared, reviewed and revised as necessary when publishing a relevant procurement notice, which will include the transparency notice for direct awards.
The assessment must include details of any actual or potential conflict of interest identified in the procurement, and steps must be taken to mitigate such conflicts. That would include any political party affiliations the supplier has to any person acting for or on behalf of a contracting authority, and to anyone who influences a decision in relation to a covered procurement. In addition, in accordance with clause 84(4), if a contracting authority is aware that there may be even the appearance of a conflict, it must address that.
Kirsty Blackman
I thank the Minister for his response. I would like to press the amendment to a vote.
Question put, That the amendment be made.
The Chair
With this it will be convenient to discuss that schedule 5 be the Fifth schedule to the Bill.
Alex Burghart
Clause 41 permits a contracting authority to award a contract without first running a full competitive procedure when a justification in schedule 5 is met. The World Trade Organisation agreement on Government procurement contains grounds for limited tendering, on which the justifications are based. They will be familiar to those who use the current regime, and include justifications such as intellectual property, exclusive rights or technical reasons that mean that only a single supplier can deliver the contract.
Direct award may also be permitted where practicalities in the market make competition unfeasible—for instance, when buying commodities such as oil, where demand dictates the price, or when the contracting authority can obtain advantageous terms due to insolvency. There are also defence-specific provisions, and a new ground for light-touch contracts—for example, in adult and children’s social care—which allow for direct award due to “user choice” where the beneficiary of the contract or their carer has a legal right under other legislation to choose the supplier.
Overall, the Bill is clearly designed to support fair and open competition in order to secure the best outcome for the public interest. However, sometimes competition is not possible. For example, a supplier may own intellectual property rights that mean that only it can supply a particular good. Alternatively, competition may not be possible for technical reasons when the application of a particular legislative regime means that a contract can be awarded only to one specific provider. For example, the Children and Families Act 2014 may require special educational needs provision to be delivered by a particular supplier; or extreme and unavoidable urgency, such as the procurement of short-term recovery services following an unexpected flood, may render competition unviable. In such cases, limited exceptions to the requirement for competition are justified to ensure the effective and prompt delivery of critical services.
In respect of cases in which a contracting authority relies on one of the specified grounds, the Bill introduces a requirement for a transparency notice other than the very specific user choice exemption. That important new safeguard brings welcome transparency and accountability, and facilitates pre-contractual challenges if anyone fears foul play. Additionally, before publishing a transparency notice, the contracting authority must undertake a conflicts assessment in accordance with clause 82.
Florence Eshalomi
As the Minister outlined, these clauses relate to the provision of direct awards. Sadly, their abuse under the Government has done untold damage to the public interest, as I highlighted earlier. The current system does not work, and it is disappointing that the Government have failed to take this opportunity to learn from those mistakes. The Minister just said that competition is sometimes not possible, but taxpayers’ money must be treated with respect, not handed out in backroom deals or as a passport to profiteering.
I highlighted the case of PPE Medpro, but it is just the tip of the iceberg of the scandals we have seen unfolding over the past few years. We know that the companies that got into the VIP lane were 10 times more likely to win a contract, and that they did not go through the so-called eight-stage process of due diligence, as Ministers have now admitted. We also know that businesses that had the expertise to procure PPE and ventilators were not awarded contracts. That is worrying.
It is also worrying that no company was referred to the VIP lane by a politician of any party other than the Conservative party. It did not have to be that way. There could have been more transparency and faith in the system. At that time, Governments across the world were dealing with the covid emergency without wasting billions of pounds of taxpayers’ money and relying on backroom deals.
According to the watchdog, the Welsh Labour Government managed to prevent health and care bodies from running out of PPE. It said:
“In contrast to the position described by the…National Audit Office in England, we saw no evidence of a priority being given to potential suppliers depending on who referred them.”
The Welsh Government were able to create an open and transparent PPE supply chain—why were we not able to do that in England? The question that the Committee needs to ask is how we act to prevent a repeat of the waste that we saw during the pandemic.
This is about faith in politics. At a time when people are questioning politicians and Ministers, we have to restore that faith. This Bill gives us an opportunity to fix that. It is disappointing that the Minister has dismissed some of that and has failed to engage properly on the issue of VIP lanes. I hope he will respond constructively to ensure we fix the current system, which is not working.
Question put and agreed to.
Clause 41 accordingly ordered to stand part of the Bill.
Schedule 5 agreed to.
Clause 42
Direct award to protect life, etc
Florence Eshalomi
I beg to move amendment 108, in clause 42, page 29, line 29, at end insert—
“(5) Subject to subsection (6), regulations made under section (1) may remain in force for no longer than three months.
(6) A Minister of the Crown may by regulations provide for the continuation in force of regulations made under subsection (1) for a period of no longer than a further three months.
(7) A Minister of the Crown may exercise the power in subsection (6) more than once in respect of the same regulations made under subsection (1).”
This amendment would restrict the time in force of regulations allowing direct award of contracts to protect life or public order to no more than three months, but provide a power to extend their time in force, by three months at a time, by further regulations (which would be subject to approval by Parliament under clause 118(7)).
Florence Eshalomi
Clause 42 permits a Minister of the Crown to award a contract during an event that is deemed to be a threat to life, health, or public order or safety. The explanatory notes state:
“The purpose of this clause is to ensure procurements during an emergency event (like the Covid-19 pandemic) can be conducted as quickly and transparently as possible, even if the circumstances leading to the event are foreseeable (which may rule out the extreme urgency justification for direct award contained in Schedule 5).”
We all understand that emergency powers were needed during covid-19, and we do not oppose the sort of power that is in the Bill to keep the country as safe as possible in the event of another pandemic or a major emergency. As alluded to in the explanatory notes, the power builds upon the extreme urgency justification in schedule 5, and covers the gaps where events cannot be covered under that schedule. During the covid-19 pandemic we saw that removing the scrutiny of the non-direct procurement procedure can bring major problems. It is worth reiterating the figures that are clear for all of us to see: almost £10 billion of public money went towards PPE that was written off. In answer to a written question in November, the Government confirmed that they are paying £770,000 a day—the figure that I quoted earlier—to store PPE in places such as China. Think what we could all do with such an amount of money in our respective constituencies.
We should not treat procurement during the pandemic as a model of good practice; we should look at learning from those mistakes. As the Bill is introduced, we should not let those patterns continue and just conduct current practices in the same way. It is critical that the use of these powers should not be the norm. Competitive awards must be the default under the direct procurement system, and these powers should be exercised only in the most severe circumstances. Therefore, we have questions about the meaning of subsection (2) and the limits of what is deemed necessary.
The explanatory notes say:
“Subsection (2) provides a definition of what would be deemed “necessary” (i.e. to protect life or public safety). This intentionally limits the discretion afforded to the Minister in subsection (1). Additionally any regulations made under this section would need to be compliant with the United Kingdom’s international obligations, which will in practice ensure that the interpretation of ‘necessary’ is not too broad.”
What does that mean in practice, though? What international obligations would govern how broadly the clause should be applied? On a cursory reading,
“necessary to … protect human, animal or plant life or health”
could be as trivial as tackling the scourge of cats getting stuck up trees. I am sure that, as the explanatory notes say, the interpretation of “necessary” should not be too broad. I hope that the Minister can outline the Government’s explanation and give hon. Members some guidance, to help to put our minds at ease for Report stage.
I question, too, whether the clause is limited to tackling novel or temporarily sensitive issues, or whether it could be used to apply to problems we face constantly and are well known. We all understand that situations may arise in which we may need these powers—in response to a national emergency or a disease such as covid. However, we would be sceptical about their use for something such as a standard winter flu, where surges and needs can be predicted and procured for well in advance. We note that the higher bars are put into place to protect against misuse, and they may tackle some of the problems we have already touched on. For example, regulations must be made via clause 118 affirmative procedures and must be agreed by Parliament. Although these raised bars are welcome, our experiences from covid-19 show us that we can and should go further to ensure that these powers are not abused. In particular, the temporal measures involved in this clause can be beefed up. That is essentially what amendments 103, 104 and 108 would do. Amendment 108 would add a sunset clause to the powers under clause 42 and ensure that every three months Parliament had to approve the use of these powers.
Subsection (4) states:
“A Minister of the Crown must—
(a) keep regulations made under subsection (1) under review, and
(b) if the Minister considers that direct award under section 41 is no longer necessary, revoke the regulations.”
We saw during the pandemic how emergency powers were in place for far longer than some deemed necessary, and prevented extra layers of scrutiny of direct awards. As I have already highlighted, that had consequences in terms of taxpayers’ money, which is still being spent on PPE that is not needed. As the explanatory notes explain, procurement may need to be carried out quickly in an emergency; but after three months, we should be far more aware of the problems we face. Although emergencies may stay unpredictable, the knowledge available to Parliament and to decision makers at the start of an emergency will be significantly less than what we will know later. Parliament should have a say when more knowledge is available about that emergency. It should have a say on whether the powers are still necessary and proportionate to the emergency. The answers can change, so it is right that the House has the ability to respond. In addition, the further we go into an emergency, the more aware we are of the needs of our services to tackle the problems presented and the more confident we can be in carrying out our procurement.
Alex Burghart
Amendment 108 seeks to include a sunset clause on the face of the Bill in relation to any regulations made under clause 42, plus a prohibition on multiple uses of this power.
The fact that the regulations are subject to the made affirmative procedure gives the House a great deal of power. If the House does not wish to accept open-ended regulations, it will not have to. The scope of clause 42 is already suitably confined and restricted to prevent any abuse. The power can be used only in extremely rare scenarios. The regulations will have to be tailored to respond to the situation and their duration kept to the minimum. Further, any regulations made will have to be in compliance with our international agreements, which in practice will help ensure the scope is not too broad.
Any regulations made under this clause must be kept under review, and if the Minister considers that direct award is no longer necessary, the regulations must be revoked. For the avoidance of doubt, the use of the made affirmative procedure means that if regulations are not approved by Parliament, they will lapse after 28 days. Any regulations would likely be time limited through a sunset provision or subject to parliamentary review after a duration deemed appropriate in the context of the emergency event. If they were not, it would be open to Parliament not to approve them. We cannot see that Parliament will be satisfied with open-ended regulations permitting the procurement of goods or services beyond what is necessary to protect life in an extreme emergency event. As such, we respectfully suggest that the amendment is not required.
Clause 42 introduces a new power for a Minister of the Crown via statutory instrument to allow contracting authorities to award contracts directly within specific parameters. The power is crafted deliberately narrowly so that regulations can be made only where it is considered necessary to protect human, animal or plant life or health, or to protect public order or safety. The “extreme urgency” ground in regulation 32 of the public contracts regulations reflected in schedule 5 will be suitable for nearly all situations. But in rare cases, this may need to be overridden via Government direction to rapidly procure what is necessary for the protection of life.
The first Boardman review of covid-19 procurement suggested giving relevant Ministers the power to designate situations as a “crisis”, provided certain criteria were met, naturally with appropriate safeguards. The clause looks to implement these recommendations and aid emergency contracting. The current ground relies on individual contracting authority assessments and cannot be used if the need for urgency is caused by the authority itself or is foreseen. Regulations made in these circumstances would allow contracting authorities to procure with confidence, quickly and within specific parameters to deliver the essential goods or services.
In the extremely rare event that regulations under clause 42 are needed, there are already significant safeguards in the Bill. As I mentioned, the making of any secondary legislation will be subject to the scrutiny of the made affirmative procedure. The regulations will come into force immediately but will require approval from both Houses within 28 days. Without this approval, the regulations will cease to have effect. There is no limit on the regulations’ duration, allowing them to be tailored to the situation. Parliamentary scrutiny will ensure that the scope of the regulations is appropriate.
The obligation to publish a transparency notice prior to awarding a direct award contract remains even when relying on any such regulations. These new mandated notices demonstrate our intent—seen throughout the Bill—to drive further transparency into the procurement regime. We hope that clause 42 will never need to be used, but if direct awards are necessary to protect life or public safety in an ongoing emergency situation, the mechanism under the clause will significantly improve the situation by allowing contracting authorities to procure in confined circumstances, speeding up decisions and ensuring consistency across the public sector. I respectfully ask that the hon. Member for Vauxhall withdraw her amendment, and I recommend that the clause stand part of the Bill.
Question put, That the amendment be made.
Alex Burghart
Sometimes, competitive tendering procedures do not go to plan. Clause 43 allows the contracting authority to switch from a competitive procedure to direct award where no suitable tenders are submitted and it becomes clear competition is not possible. There are only limited circumstances to determine that a tender is unsuitable, which are detailed in subsection (2)—for example, where the price is abnormally low, as we discussed the other day, if there is evidence of corruption or collusion, or if a procedural requirement has been materially breached in a manner that may put the tender at an unfair advantage.
Florence Eshalomi
The clause relates to the switching of contracts under very limited circumstances. The use of the clause is not ideal, but we understand that it may be necessary in certain circumstances. We therefore do not object to the clause.
Question put and agreed to.
Clause 43 accordingly ordered to stand part of the Bill.
Clause 44
Transparency notices
Amendment proposed: 104, in clause 44, page 30, line 23, at end insert—
“(c) any connections between the supplier and any—
(i) registered political party,
(ii) Ministers of the Crown, or
(iii) Members of the House of Commons or House of Lords
where such connections are of a nature likely to be relevant to the direct award of the contract.”—(Kirsty Blackman.)
Question put, That the amendment be made.
Alex Burghart
Our approach in the Bill is clear: transparency is not optional. Clause 44 introduces a mandated requirement to publish a transparency notice when a direct award ground is going to be used. That goes further than the current voluntary notice. Direct award should, of course, be the exception and will be allowed only on the basis of specific and limited grounds set out in legislation. When direct award is relied on, the obligation will mean visibility, further demonstrating our drive to ensure transparency in public procurement.
Florence Eshalomi
As the Minister outlined, the clause covers transparency notices. Although we welcome the limited measures that the Bill takes to move towards transparency—for example, by obligating authorities to issue a transparency notice before awarding a contract—those are small baby steps that barely scratch the surface of what is required. Transparency should be a must; it is not a “nice to have”. It is about restoring public trust and it ultimately saves money. Lack of transparency in the procurement system reduces competition and increases costs, leaving the taxpayer to shoulder the burden. The adoption of open and transparent contracting makes good financial sense and will help to lead to a more competitive procurement system, ultimately, as I mentioned, saving on costs.
Transparency needs to be extended to Ministers. I have spoken at length about what we saw during the pandemic and the lack of transparency. Amendment 111 would go a long way to truly ensuring that Ministers, Lords and civil servants take transparency seriously.
Alex Burghart
The hon. Lady will have heard me say that we are mandating transparency like never before, and that all her concerns are already dealt with in the Bill.
Question put and agreed to.
Clause 44 accordingly ordered to stand part of the Bill.
Clause 45
Frameworks
Question proposed, That the clause stand part of the Bill.
Alex Burghart
This considerable group covers award under frameworks. Clause 45 sets out that a framework is a public contract designed for the future award of contracts to a supplier or suppliers. Frameworks are not the answer for every purchasing need, but they have their place and can result in significant savings, both financially and in time. As a framework is a public contract, it must be awarded in accordance with the procedures set out in the Bill. Once a framework is awarded, subsection (1) allows contracting authorities to award future public contracts in accordance with the framework.
Subsection (3) states that contracts can be awarded under a framework only following a competitive selection process, unless subsection (4) applies. Subsection (4) sets out the circumstances in which a framework can provide for the award of contracts directly to suppliers who are party to the framework, without any further competition. These are where the framework is with only one supplier, or if the framework sets out the core terms of the future contract and an objective mechanism for supplier selection.
Subsection (5) requires that each framework must state the goods, works or services that can be procured under it, the mechanism for defining the price, the estimated value of the business that will be procured through the framework, and the process to award further contracts. Subsection (5) also requires that the framework must state the duration of the framework, the contracting authorities that are able to use the framework, and whether the framework is an open framework. Currently, all frameworks lock suppliers out for their duration as there is no mechanism to open them up, and we are changing that under the Bill.
The provisions ensure that all frameworks will contain basic information about the scope and estimated value of the framework to clearly set out the parameters in which the framework can be used, and to avoid frameworks being used in a manner that unduly or unfairly closes off markets to competition.
Subsection (6) prohibits the award of a contract under a framework to an excluded supplier. Subsection (7) allows for fees to be charged under a framework when a supplier is awarded a contract under a framework. Subsection (8) means that a framework may not be used to award a concession contract, nor may a framework be used to set up another framework. Subsection (9) disapplies certain parts of clause 45 to frameworks that are light-touch contracts.
Clause 46 sets out the process by which contracts can be awarded under a framework through a competitive selection process. Subsection (1) allows for a competitive selection process to include conditions that suppliers have to satisfy to participate. Subsection (3) prohibits conditions that require the submission of annual audited accounts by suppliers who are not already required by law to have their annual accounts audited. It also ensures that alternative evidence can be used when assessing the supplier’s financial capability and that insurances need to be in place only at the point of contract award. That is a major win for small and medium-sized enterprises, removing a substantial barrier that has often held them back from entering into procurement.
Florence Eshalomi
Clauses 45 to 49 cover the framework arrangements that are in place and widely used across the public sector, helping to provide efficiency savings in procurement contracts. We feel it is important that there are powers in the Bill to allow for their existence, but we have concerns about the nature of the frameworks. We should make sure that we include strong terms to prevent any detrimental effects that they can have on procurement.
A big problem with the frameworks is that they can lock out suppliers and prevent the breakthrough of innovative and efficient suppliers in our system. That is outlined and emphasised in the Government’s impact assessment:
“The use of frameworks is established in the public sector, however stakeholders raised concerns around lengthy frameworks essentially locking suppliers out of a market for a number of years, without the opportunity to re-bid. This is particularly of concern for SMEs who may benefit from a place on a framework to assist business growth and gain experience in delivering contracts for the public sector.”
The Minister touched on some of that, but the Bill should look to reduce those concerns.
We also have concerns about some of the changes in language in relation to the term limit, which the Minister outlined. Currently, most frameworks have a term limit of four years. It is good to see that carried through in the Bill, even if there is an increase to eight years for defence, security and utilities. However, there seems to be a change to the contracts, whereby some of the terms can be extended. In the Public Contracts Regulations 2015, the time limit exception states:
“The term of a framework agreement shall not exceed 4 years, save in exceptional cases duly justified, in particular by the subject-matter of the framework agreement.”
However, clause 47 states:
“Subsection (1) does not apply if the contracting authority considers the nature of the goods, services or works to be supplied under contracts awarded in accordance with the framework means that a longer term is required…If a contracting authority relies on subsection (2) in awarding a framework with a term exceeding four or eight years, the contracting authority must set out its reasons in the tender or transparency notice for the framework.”
I would be grateful if the Minister confirmed what the difference is between those two terms. Will the clause make it easier or harder for contracts to be extended? If it makes it easier, as he suggested, will he tell us the justification behind the change? As we mentioned, there have been concerns about locking out suppliers through the frameworks, so we should be cautious about why the Government would seek to weaken provisions that prevent locking out. Clarity from the Minister on that point would be helpful.
I welcome the Minister’s comments on the new open frameworks procedure in clause 49, which has the potential to reduce time limits by unburdening contracting authorities from running the tender for a framework from scratch, but will he outline how often he would expect a typical framework to reopen? The legislation sets out a maximum of three years in the first instance, and then five years in the second. However, the explanatory notes state:
“This allows for the open framework to be re-opened on a more frequent basis—for example, annually”.
Again, the Minister touched on some of that, but does he expect the reopening of frameworks on an annual basis, and will there be any incentives in the system to encourage annual reopening?
Alex Burghart
As the hon. Lady heard me say, the great new initiative in the Bill—open frameworks—means that we will not see companies being shut out for long periods of time, which is good. We have seen SMEs being locked out from accessing public sector markets for up to four years at a time, so we have introduced the new open framework and the utilities dynamic market tools to bring down the barriers. I think we can all agree that that is much to the good.
The hon. Lady will also have heard me say that if a contracting authority is to go for a longer term than the four and eight-year maximum, it must be because of the goods, services or works that it will supply. Contracting authorities have to be clear and open about that, but we would expect them to do so only where there are specific reasons—for example, where it will take longer than eight years to recoup investment under the framework, or where contracts have a long lead time and therefore cannot be awarded within the requisite time period. Contracting authorities must have a rationale for that, and they have to be open. We think that the clauses cover that.
The hon. Lady will have seen that the maximum term provisions in clause 47 do not apply to open frameworks, which have a maximum duration of eight years. However, clause 49 requires open frameworks to be reopened for new suppliers to join at regular intervals—first, within the first three years of the framework, and not less than every five years thereafter.
Question put and agreed to.
Clause 45 accordingly ordered to stand part of the Bill.
Clauses 46 to 49 ordered to stand part of the Bill.
Clause 50
Contract award notices and assessment summaries
Question proposed, That the clause stand part of the Bill.
Alex Burghart
Clause 50 requires contracting authorities to publish a contract award notice before entering into a public contract. The notice will publish details about the outcome of the procurement process, alert the market to the fact that a contract is about to be signed and start the standstill period where it applies, which is a mandated or voluntary pause before the contracting authority can sign the contract. I will explain that further under clause 51.
Prior to the publication of a contract award notice issued under a competitive procurement, contracting authorities will be required to provide each supplier whose bid was assessed against the award criteria with an assessment summary containing information about the outcome of the assessment for the supplier’s own tender, to enable suppliers to understand why they did or did not win the contract. Unsuccessful suppliers will also be provided with a copy of the winning supplier’s assessment summary so that they can also see how their tender compared to the winning bid.
Clause 50 does not apply to contracts awarded under a defence and security framework, or to direct awards where the justification is that the contract is a user choice contract.
Florence Eshalomi
This is a simple clause relating to contract award notices and assessment summaries. We welcome these provisions and see it as a good step forward for suppliers and for transparency that each supplier that is not disregarded receives information about why their bid failed and why another bid was successful. That will help suppliers to improve their bids and to understand what a contracting authority desires.
We have spoken a lot about SMEs, and I think they will welcome the clause, because they often struggle to navigate the market and they may feel that the cost of failed bids is part of the reason. We await information on what will come from clause 93, but we will discuss that when we get to it. We are happy to support this clause.
Question put and agreed to.
Clause 50 accordingly ordered to stand part of the Bill.
Clause 51
Standstill periods on the award of contracts
Question proposed, That the clause stand part of the Bill.
Alex Burghart
Clause 51 covers the standstill period, which is a minimum eight-working-day pause following publication of the contract award notice before the contracting authority can enter into the contract. It gives unsuccessful suppliers, in particular, the opportunity to understand the feedback provided and raise legal challenges to the procurement process prior to the contract being signed, where they believe the procurement has been conducted unlawfully.
A claim notified during the standstill period triggers an automatic suspension of the procurement under clause 99, which preserves the potential for the challenging supplier to obtain the contract and protects the contracting authority from entering into an unlawful public contract. That mitigates the risk of a contracting authority paying twice—that is, paying the price of the contract plus compensation for a losing bidder with a successful claim—as after contract signature, the contracting authority is subject to post-contractual remedies under clause 101. That includes damages and the possibility of the contract being set aside—being declared void by the court.
If the standstill period passes without legal challenge, the contracting authority avoids the risk of a set aside claim under clause 101. A standstill period is not mandatory in all cases. Subsection (3) lists the types of contract where the contracting authority can elect to apply a standstill on a voluntary basis. Contracting authorities complying with a voluntary standstill period, which is also envisaged for contract modifications under clause 75, will receive the same protections as that obtained for a mandatory standstill.
Florence Eshalomi
Clause 51 is almost identical to similar provisions in the Public Contracts Regulations. As the Minister outlined, the standstill period will be welcomed and beneficial. The Opposition feel that the clause is necessary and that there is nothing controversial in it.
Question put and agreed to.
Clause 51 accordingly ordered to stand part of the Bill.
Clause 52
Key performance indicators
Chris Evans
I beg to move amendment 4, in clause 52, page 35, line 23, leave out “£5 million” and insert “£2 million”.
This amendment would reinstate the threshold for the setting and publication of key performance indicators for major projects at £2m.
The Chair
With this it will be convenient to discuss the following:
Government amendments 75, 78 and 80.
Clause stand part.
Chris Evans
I outlined the importance of transparency and accountability in a previous debate on procurement. Our amendment 4 is an attempt to strengthen that further and to reinstate at £2 million the threshold for publishing contracts in major projects. I noted previously that the financial threshold was raised in the other place and that the Minister could not explain why £5 million was decided on. If the Bill is an attempt to make procurement more transparent, we have failed at the first hurdle.
On Second Reading, my right hon. Friend the Member for Ashton-under-Lyne (Angela Rayner), the deputy leader of the Labour party, said:
“Being granted taxpayers’ money is a privilege.”—[Official Report, 9 January 2023; Vol. 725, c. 353.]
I remind Government Members that their long-departed leader, Lady Thatcher, once said that it is not the Government’s money, but taxpayers’ money, and that every penny should be accounted for. I am looking at the Minister and hoping that I got that quote absolutely right—I am sure he will correct me if I did not. I believe that is true no matter the sum of money. Every pound represents the work of hard-working people across the country, and we—particularly those of us who serve on the Public Accounts Committee—should be mindful of that.
That is why contracts awarded at £2 million should have the same scrutiny as those worth more. Figures such as £2 million are often bandied about—we hear the value of transfers in sport—but that is still a considerable amount of money. If we are truly committed to reducing waste in procurement, we need more transparency throughout. Introducing key performance indicators at a lower threshold would signal to businesses that the UK requires value for money, and efficiency, from every procurement contract.
While I appreciate that the Government have stated that the changes to the threshold are to reduce any administration requirements, and to address concerns raised by the Local Government Association, the lack of transparency around how the threshold was decided has made me understandably cautious. Transparency and value for money must be priorities when spending taxpayers’ money. Increasing the number of contracts that are scrutinised by requiring key performance indicators would allow for transparency at all stages of a contract’s lifecycle and hold businesses to account on issues of social value.
When we are in the midst of a climate crisis, it is necessary to ensure that suppliers are actively working towards the UK’s net zero commitments. When industries across the country are facing a skills gap, it is necessary to ensure that businesses are committed to apprenticeships and training new generations. And while the country continues to face a cost of living crisis, it is necessary to ensure that jobs across the supply chain are protected.
Alex Burghart
There are few rarer treats than hearing an Opposition Member quote Baroness Thatcher. I am sure the hon. Gentleman will have reflected on, and enjoyed, the fact that she also said, “The problem with socialism is that you quickly run out of other people’s money.”
However, the hon. Member’s probing amendment is fair enough, and it is important that we discuss this issue. Hon. Members will recall that the Bill as introduced had a threshold of £2 million for the publication of KPIs on public contracts, but that the threshold was increased to £5 million in the House of Lords as part of a package of measures designed to reduce the administrative burden placed on contracting authorities, while still providing increased transparency in respect of larger public procurements.
The current financial threshold balances the need for transparency on KPIs with the costs and burdens of implementing the rules at a lower spend value. To reassure the hon. Gentleman, £5 million, which we have now fixed on, aligns with the thresholds that are used by central Government in the playbook for procurement. It is generally seen as the point where things become more complex. We thrashed out the number based on a lot of engagement with industry, and it was felt that that was an appropriate threshold to ensure that we were not including a lot of contracts with lower complexity.
Turning to amendments 75, 78 and 80, there are a number of places in the Bill where we apply financial thresholds that trigger obligations on a contracting authority. The Delegated Powers and Regulatory Reform Committee recommended that the affirmative procedure for secondary legislation should be applied for a number of those, and we made those amendments in the other place. That ensures greater scrutiny where there is a change in transparency requirements. We also indicated in our response to the DPRRC that we considered that the justifications for that applied equally to the amendment of the financial threshold for the setting and publication of key performance indicators. Amendments 75, 78 and 80 achieve this.
Clause 52 describes a requirement for contracting authorities to
“publish at least three key performance indicators”
for public contracts worth more than £5 million. That is a new requirement and it will ensure that we have visibility of how well individual suppliers are delivering in the public sector.
The clause is intended to bring transparency to the management of significant public sector contracts, allowing citizens and others to see how suppliers are performing. It should also ensure that companies that repeatedly fail to deliver do not win additional business—something that is not possible under the present procurement rules. The requirement does not apply if the contracting authority considers that KPIs are not an appropriate measure of contract performance in a given case. The example we give is of a contract for the one-off supply of goods. That is a one-time action and cannot be measured over time or by varying metrics.
The clause does not apply to the establishment of framework contracts—but it will apply to contracts awarded through the framework—utilities contracts awarded by a private utility company, concession contracts or light-touch contracts. A power is given for an appropriate authority to amend the financial threshold above which KPIs must be published. We have tabled an amendment to make the power to change the threshold subject to the affirmative procedure, so that if this Government or future Governments wish to adjust the threshold, they can easily do so, provided that they have Parliament’s consent.
The overall picture is enhanced by the spend data reporting obligation in clause 70. I respectfully request that amendment 4 be withdrawn.
Chris Evans
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 52 ordered to stand part of the Bill.
Clause 53
Contract details notices and publication of contracts
Chris Evans
I beg to move amendment 26, in clause 53, page 36, line 9, leave out “£5 million” and insert “£2 million”.
This amendment would reinstate the threshold for publishing the contracts in major projects at £2m.
As noted in the explanatory statement, the amendment would reinstate the threshold for publishing the contracts in major projects at £2 million. As I have pointed out, the Government seem to have chosen £5 million as an arbitrary figure. I will not repeat the points I have already made. We do not want to place an undue burden on small and medium-sized enterprises to have to employ costly legal advice to redact sensitive company information. However, I believe that, with sums of more than £2 million, it is completely reasonable to expect transparency.
Trust in Government spending is important to overall trust in Government, especially when they are spending sums of public money in the millions. It is not unreasonable for the public to expect transparency about where their money is being spent, and that the information is readily available and easily accessible. Although I understand the need not to make the process too arduous for smaller businesses, the proper balance must be found.
Alex Burghart
The revised threshold of £5 million seeks to ensure that a disproportionate administrative burden is not placed on contracting authorities and, as I have said, it reflects what we have in the playbook. The figure came out of a large amount of engagement with industry. There was recognition that it is around the £5 million threshold that we see additional complexity in contracts. That is why we think that the current financial threshold balances the need for transparency in these important matters with the costs and burdens of implementing the rules at a lower spend value.
It is important to stress, however, that contracting authorities will still be bound by a transparency obligation to publish contract detail notices for contracts above the agreement on Government procurement thresholds, which will contain information on which supplier has won the contract and other information about the contract award. I respectfully request that the hon. Gentleman withdraws his amendment.
Chris Evans
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Alex Burghart
Clause 53 requires contracting authorities that enter into a public contract to publish a contract details notice. This is a significant extension of transparency, which will allow interested parties to see details of public sector contracts. The contract must be published within 90 days of the contract being entered into or, in the case of a light-touch contract, within 180 days. The contract details notice will contain information on the goods and services procured, the value of the successful tender and the procurement method used.
The Welsh Government and the Northern Ireland Executive have decided to include a derogation from publication of a contract, which is their right.
Chris Evans
Clause 53 sets out the need for the publication of contract details for all contracts over £5 million. According to the Government’s own figures, one in every three pounds of public money—some £300 billion a year—is spent on public procurement. Ultimately, the taxpayer deserves to know that money from the public purse is being well spent.
I know from my time on the Public Accounts Committee—sooner or later, we will start doing PAC bingo, as every time I stand up I seem to mention how long I was on that Committee. I was there for five years. I promise that I am not going to speak for five years, Mr Efford—
Chris Evans
Fidel Castro was the master—I think 18 hours was his minimum. If you want me to do that, Mr Efford, I can. With lunch coming up, I think I would be the most popular member of the Committee.
I know from my time on the Public Accounts Committee that transparency leads to improved Government spending. There should be no place to hide poor contract decisions or, in the worst cases, possible cronyism. Unfortunately, there have been several scandals relating to procurement and Government spending. We have already heard this morning about the questions surrounding the procurement of PPE during the pandemic, which led, unfortunately, to the huge sum of £10 billion of public funds being spent on unusable, overpriced and even undelivered PPE.
At a time when so many families are struggling with the cost of living crisis, we cannot allow the public to feel that their hard-earned tax money is not being spent properly, and we all must work to restore public trust in Government procurement. The Government’s own “transparency ambition” document outlines a concerning failure to provide transparency in our procurement system. These reforms are long overdue and I am pleased that we are able to talk about them today. I think we can all agree that it is important that we increase trust in Government, and one of the key ways we can do that is through transparency. Labour would go further in government than the present Conservative Government. We would introduce a Ukraine-style publicly accessible dashboard of Government contracts tracking delivery and performance.
I am pleased that the Government have made some commitments to increasing transparency on large projects. The reforms—particularly the introduction of a number of new procurement notices covering the entire procurement lifecycle from planning through to contract expiry—are a welcome step forward. However, there are a few areas where we need clarity on implementation.
For example, at clause 53(2), the Bill states:
“A ‘contract details notice’ means a notice setting out—
(a) that the contracting authority has entered into a contract, and
(b) any other information specified in regulations under section 93.”
The Minister said on Second Reading that the Government
“will deliver world-leading standards of transparency in public procurement”—[Official Report, 9 January 2023; Vol. 725, c. 343.]
and that there is a
“statutory obligation on the Government to deliver a single digital platform to host this data.”—[Official Report, 9 January 2023; Vol. 725, c. 348.]
However, it is unclear what a contract details notice will look like in practice, and how much detail will be required—in other words, how much transparency will actually be provided. It seems strange that there is no outline of how much data will be provided and what form it will take. I worry that will allow for only the very basic details of public contracts to be provided. Could the Minister explain his understanding of what transparency notices will look like and what information they will be required to contain?
A concern raised by the Local Government Association is that the clause risks contradicting other pieces of legislation, which, in turn, risks the ability to achieve one single digital platform for procurement. The LGA has suggested that the Transport Act 1985, the Service Subsidy Agreements (Tendering) (England) Regulations 2002 and the best value transparency code may have an impact on the implementation of the Bill. Could the Minister tell us whether that has been resolved, or what plans the Government have to ensure that other legislation does not interfere with the implementation of the single digital platform?
Overall, I welcome the goals of the clause, but I feel that it requires closer attention to ensure that it is properly implemented.
11 am
Alex Burghart
I am happy to play bingo with the hon. Gentleman any time. One particular game that we might play is to call “Bingo!” every time the Ukrainian digital platform is mentioned, because it has been mentioned several times. And well might it be mentioned, because it is a model of good practice. The hon. Gentleman will have heard me say on several occasions that we were grateful to the Ukrainian Government for coming and advising us on the creation of our own digital platform, which he will also have heard me mention. That platform will be the harbour of transparency, enabling suppliers, contracting authorities, central Government, voters and the press to see what is going on and to hold people to account. It will be a great asset.
The precise details of what needs to be published are not fit to be put in the Bill and the requirements may change over time. However, we will set those details out in due course, and what will drive our considerations when we do so is the ability to hold suppliers and contracting authorities to account.
Question put and agreed to.
Clause 53 accordingly ordered to stand part of the Bill.
Clause 54
Time limits
Alex Burghart
I beg to move amendment 34, in clause 54, page 37, line 14, at end insert— “The contract— (a) being awarded is a utilities contract, or (b) is being awarded by a contracting authority that is not a central government authority, and is subject to a negotiated tendering period No minimum period The contract— (a) being awarded is a utilities contract, or (b) is being awarded by a contracting authority that is not a central government authority, and tenders may be submitted only by pre-selected suppliers 10 days”
This amendment would set different minimum tendering periods where tenders may only be submitted by pre-selected suppliers (depending on whether the contracting authority and suppliers agree on a tendering period or not).
The Chair
With this it will be convenient to discuss the following:
Government amendments 35 and 36.
Clause stand part.
Alex Burghart
Government amendments 34 to 36 are technical amendments to allow shorter time periods to be set by utilities and contracting authorities that are not classed as central Government authorities, which will be defined in regulations made under the Bill, for procurements where there has been a prior selection round.
Following completion of that prior selection round, utilities and non-central Government authorities will invite identified suppliers to submit their tenders. The amendments will mean that they can negotiate a suitable time limit with all suppliers or, in the absence of agreement, a minimum of 10 days will apply. This flexibility exists in the current regime and, in common with all minimum time limits in the clause, is GPA-compliant. It was not included in the Bill previously because certain trade agreements did not permit such flexibility. However, following very positive progress in negotiations, we are now confident that we can make the change.
We know from our engagement with industry groups that utilities and sub-central bodies such as local authorities are hugely supportive of the change, because they will benefit from reduced timeframes and faster procurements. This will ultimately result in quicker delivery to the public of goods and services from those entities, benefiting us all.
Clause 54 as a whole deals with time limits during competitive procurements. It is important that suppliers are allowed adequate time during the awarding of public contracts, for example to prepare and submit tenders or requests to participate in a procurement.
The clause sets out minimum time periods that must be met in different circumstances, in line with the requirements of the GPA. These are minimum time limits. Consequently, contracting authorities are also directed to wider considerations for setting time periods, such as the nature and complexity of the contract, the need for site visits, and avoiding unnecessary delays.
Florence Eshalomi
These amendments set out the minimum timescales that apply when a contract is only between authorities and pre-selected suppliers. As these suppliers are verified to be compliant with the conditions of participation, it is logical that they would need less time to prepare a bid and would not be caught off guard by the 10-day minimum period, or the negotiated tendering period if one can be agreed. I thank the Minister for his explanation about why this is necessary, which was helpful. However, I also share the desire to reduce some of the unnecessary bureaucracy on both the authorities and the companies involved.
We do not seek to oppose these amendments. However, in relation to clause 54 there are considerable concerns about the minimum time limits that contracting authorities must abide by within certain circumstances. It is right to strike the balance between bureaucratic obligations on contracting authorities and the need for suppliers to have sufficient notice to compile a tender. As we have already outlined, this is really important for SMEs, which may sometimes lack the necessary staff or may require greater time to consider the consequences of bidding for contracts and to assess the ability of their company to do so.
We must also bear in mind the article 11 time periods of the World Trade Organisation’s general procurement agreement, which sets out minimum deadlines in line with the deadlines in the Bill. That is a step forward. We recognise that the Government’s hands are somewhat tied on this issue, but we should not wish to breach any international agreements. We therefore feel that the current amounts strike the right balance between bureaucracy and providing everyone with a fair chance to bid, so we do not intend to oppose them. As I have highlighted, we welcome the provisions in clause 15, which also interact with this part of the Bill. Trading off time limits in this part of the Bill for a pre-engagement notice is a sensible choice that benefits everyone, and we are happy to support the second part of this provision in the clause.
Amendment 34 agreed to.
Amendments made: 35, in clause 54, page 37, line 35, at end insert—
“‘central government authority’ has the meaning given in paragraph 5 of Schedule 1 (threshold amounts);
‘negotiated tendering period’ means a tendering period agreed between a contracting authority and pre-selected suppliers in circumstances where tenders may be submitted only by those pre-selected suppliers;”.
This amendment would define terms used in Amendment 34.
Amendment 36, in clause 54, page 38, line 2, at end insert—
“‘pre-selected supplier’ means a supplier that—
(a) has been assessed as satisfying conditions of participation before being invited to submit a tender as part of a competitive tendering procedure, or
(b) in the case of a contract that is being awarded by reference to suppliers’ membership of a dynamic market, is a member of that market;”.—(Alex Burghart.)
This amendment would define a term used in Amendment 34.
Clause 54, as amended, ordered to stand part of the Bill.
Clause 55
Procurement termination notices
Question proposed, That the clause stand part of the Bill.
Alex Burghart
Clause 55 requires contracting authorities, except private utilities, to publish a procurement termination notice as soon as reasonably practicable after making a decision to terminate a procurement. Each time a tender or transparency notice, which initiates a procurement, is published it creates a data record of the lifetime of that procurement and any resulting contract. Failure to confirm that a procurement has been terminated will result in the suppliers not being aware of a cancellation and in permanently incomplete data records and inaccurate records on our central platform, because the number of ongoing procurements will incorrectly include terminated procurements, which is unhelpful for anyone monitoring and using that data. A procurement termination notice is required to ensure that the data record and the full story of the procurement are concluded.
Florence Eshalomi
I thank the Minister for outlining that. The clause is simple. It ensures that when a tender or transparency notice is published, there must be a notice if the contracting authority does not award the contract. The clause is necessary, and we are happy for it to stand part of the Bill.
Question put and agreed to.
Clause 55 accordingly ordered to stand part of the Bill.
Clause 56
Technical specifications
Alex Burghart
I beg to move amendment 37, in clause 56, page 38, line 24, at end insert—
“(za) the standard adopts an internationally-recognised equivalent, or”.
This amendment would allow procurement documents to refer to a UK standard if the standard adopts an internationally-recognised equivalent.
Alex Burghart
The Committee will be delighted to hear that Government amendments 37 to 41 to clause 56, which concerns technical specifications, are very technical amendments. They will help to ensure that the Bill’s requirements in relation to standards, certification and accreditation are clear and fully align with how standards work in practice and the Government’s policies in those areas.
We are committed to openness and international trade, so contracting authorities must use international standards, or international standards that the British Standards Institution has adopted via a British standard, before using specific UK standards. We need to ensure that standards are appropriate, and we have strengthened the onus on the supplier to demonstrate that when claiming that it possesses an equivalent to standards requested by contracting authorities. In addition, the amendments make clear that contracting authorities can request evidence to verify that a standard has been met. That may include conformity assessments from certification bodies accredited by organisations such as the United Kingdom Accreditation Service, or UKAS.
Florence Eshalomi
The amendments help to clarify some of the technical provisions relating to the presentation and meeting of United Kingdom standards, as referred to in subsection (5). The Minister said that they are technical amendments. It is fine that we have technical provisions that have reached this stage without amendment, but we will be happy to hear clarification from the Minister this morning. We do not intend to oppose the amendments.
Amendment 37 agreed to.
Amendments made: 38, in clause 56, page 38, line 26, leave out paragraph (b).
This amendment is consequential on equivalent provision being made by the new subsections inserted by Amendment 39.
Amendment 39, in clause 56, page 38, line 29, at end insert—
“(3A) If the procurement documents refer to a United Kingdom standard, they must provide that tenders, proposals or applications that the contracting authority considers satisfy an equivalent standard from another state, territory or organisation of states or territories will be treated as having satisfied the United Kingdom standard.
(3B) In considering whether a standard is equivalent to a United Kingdom standard for the purposes of subsection (3A), a contracting authority may have regard to the authority’s purpose in referring to the standard.
(3C) A contracting authority may require certification, or other evidence, for the purpose of satisfying itself that a standard is satisfied or equivalent.”
This amendment would clarify how a contracting authority is to assess whether tenders, proposals or applications satisfy equivalent standards to United Kingdom standards (including that it may require evidence).
Amendment 40, in clause 56, page 38, line 36, leave out “such matters” and insert
“the matters mentioned in subsection (4)”.—(Alex Burghart.)
This amendment would clarify that the requirement in subsection (5) only applies where the matters mentioned in subsection (4) are referred to in the procurement documents.
Florence Eshalomi
I beg to move amendment 8, in clause 56, page 38, line 38, at end insert—
“(5A) For all procurement which is intended for use by natural persons, whether the general public or staff of the contracting authority, the technical specifications in the procurement documents must, except in duly justified cases, be drawn up so as to take into account accessibility criteria for disabled persons or design for all users.”
This amendment would reproduce on the face of the Bill requirements for accessibility criteria for disabled persons which are included in the Public Contacts Regulations 2015, which this Bill will replace.
Amendment 8, in the name of my hon. Friend and neighbour the Member for Battersea (Marsha De Cordova), addresses the fact that the Bill overwrites requirements that ensure publicly procured goods and services are accessible to everyone and has no clauses specifically relating to accessibility for disabled people or replacing the current regulatory framework for accessibility. Accessibility is included only in clause 94, with regard to electronic communication and in the recommendation. While the reference to accessibility in clause 94(2), which states that any electronic communications utilised as part of the public procurement exercise must be
“accessible to people with disabilities”,
is a welcome addition, it does not address concerns to ensure that public funds are used to drive improved outcomes for disabled people. The Bill does not include any reference to the need for public procurement exercises to take account of accessibility.
Amendment 8 would create a new provision in the Bill to ensure that publicly procured goods and services meet a minimum standard of accessibility. Currently, regulation 42 of the Public Contracts Regulations 2015 states that the specifications for procurement must be
“drawn up so as to take into account accessibility criteria for disabled persons or design for all users.”
The amendment would simply reproduce that existing requirement in the Bill, ensuring that the current regulatory framework for accessibility is maintained.
Legal experts do not believe that the public sector equality duty under the Equality Act 2010 is sufficient. That is recognised by the current system, which incorporates both the public sector equality duty and regulation 42 of the Public Contracts Regulations to ensure that goods and services are accessible to everyone. Even with regulation 42, contracting authorities continually fail to consider their obligations and procure inaccessible products. Accessibility for disabled people must be maintained at the heart of any new public procurement legislation.
In early 2020, the then Prime Minister wrote to every Government Department calling on his Cabinet to increase opportunities and improve access to services for disabled people. From publicly procured ticketing machines to online consultation software, the Bill offers a great opportunity to meet that expectation and ensure that Government services are accessible to all. I hope the Minister will agree that this amendment would help to ensure we do not go backwards on disability rights in procurement.
Alex Burghart
Amendment 8, tabled by the hon. Member for Battersea, with whom I had the pleasure of serving on the Work and Pensions Committee a few years ago, seeks to ensure that in procurements where the end product is intended to be used by people, the technical specifications account for the needs of people with disabilities. I very much want to reassure the Committee that the UK already has legal obligations that dictate how technical specifications are drawn up in these circumstances, with disability accessibility and even broader considerations covered by the public sector equality duty under section 149 of the Equality Act 2010.
The existing procurement regulations are derived from EU procurement directives, which were designed to be applied to member states where domestic laws do not adequately provide for accessibility requirements, as the Equality Act does. When applied to procurement, the Equality Act requirements are more pervasive than regulation 42 of the Public Contract Regulations 2015, and there is no need unnecessarily to replicate EU provisions when our domestic law is fit for purpose. Indeed, the Equality Act goes further than regulation 42, covering other protected characteristics and applying to the whole commercial lifecycle more broadly than just technical specifications.
Although we do not think this amendment is necessary, the Government remain committed to ensuring public procurement drives better outcomes for people with disabilities, and I recognise that implementation is currently patchy. We welcome engagement with charities and organisations supporting people with disabilities, to help ensure that disability accessibility is improved and effectively considered by contracting authorities in public procurement. As a consequence, I respectfully request that this amendment be withdrawn.
Florence Eshalomi
I understand the Minister’s concern and his admission that the Government will consult those disability charities, but does he agree with me that, as it stands, there are currently no requirements for goods and services to meet that standard of accessibility?
Alex Burghart
The hon. Lady will have heard me say that the legal duty that exists within Equality Act 2010 goes further than the EU procurement rules that we are getting rid of. It goes further than the EU procurement directives, so there is no loss of obligation in the creation of the Bill.
I am very happy to meet the hon. Member for Battersea, who is an expert in these issues, in order to reassure her. As far as we are concerned, the Equality Act 2010 goes further than the EU procurement directives, so this amendment is not necessary.
Question put, That the amendment be made.
Alex Burghart
Clause 56 sets technical specifications that contain the required characteristics of the goods, services or works that a supplier has to provide. They are included within procurement documents to present suppliers with a full description of the contracting authority’s needs, to enable suppliers to propose a solution to meet those needs via a tender response.
In line with the broader goal of a simpler regulatory framework and increased flexibility to design efficient, commercial and market-focused competition, the Bill does not dictate how technical specifications are to be drawn up by contracting authorities, or mandate what exactly should be included.
As such, clause 56 simply requires contracting authorities to refer to performance or functional requirements over descriptive characteristics, to focus on the desired outcomes of a contract rather than being overly prescriptive on the method by which this is achieved. Clause 56 also prevents contracting authorities from referring to things like specific trademarks or producers—in essence prohibiting an arbitrary favouring of national or specific products—to avoid narrowing the competitive pool.
Contracting authorities must also use international standards where they exist, or national standards allowing for equivalents. This provision, required by the UK and other parties to the World Trade Organisation’s Government procurement agreement is helpful, as the UK advocates for high standards in the supply of goods and services and was a founding member of standards organisations, such as the International Organisation for Standardisation and the International Electrotechnical Commission.
Question put and agreed to.
Clause 56, as amended, accordingly ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned.—(Julie Marson.)
Procurement Bill [ Lords ] (Sixth sitting)
Tuesday 7th February 2023
(1 year, 3 months ago)
Public Bill CommitteesRead Full debate Procurement Act 2023 View all Procurement Act 2023 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 7 February 2023 - (7 Feb 2023)
The Committee divided: - Ayes: 5 / Noes: 8 - Question accordingly negatived.
The Committee divided: - Ayes: 8 / Noes: 4 - Question accordingly agreed to.
The Committee divided: - Ayes: 5 / Noes: 8 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 8 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 8 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 8 - Question accordingly negatived.
Florence Eshalomi (Vauxhall) (Lab/Co-op)
I beg to move amendment 23, in clause 57, page 39, line 22, after “mandatory” insert “or discretionary”.
This amendment would make a supplier or an associated person on the debarment list for a discretionary ground an excluded supplier.
The Chair
With this it will be convenient to discuss the following:
Amendment 24, in clause 57, page 39, line 29, leave out subsection (b).
This amendment is consequential on Amendment 23.
Clause stand part.
Clause 58 stand part.
Florence Eshalomi
It is a pleasure to serve under your chairship, Mr Mundell. Amendments 23 and 24 would ensure that everyone on the debarment list is excluded from the procurement system, except for under the provisions relating to the public interest test in clause 41.
On Thursday I listened to the Minister explain “exclusions”, “exclusionary” and the debarment list. We had hoped that the Minister would give a more substantive explanation, given the issues that we highlighted, but we remain concerned. I will not go over the debate, but I was not satisfied to hear that a contracting authority will have discretion to award, say, a paperclip contract, as the Minister said, to a company identified as a national security risk. I have my paperclips here, if the Minister would like one. I want to ask a question that most people in this country will have. Why we are giving public money to a supplier who is identified as being a threat? With all due respect to procurement officers, we cannot expect there not to be blurred lines. Something that seems innocuous might actually be an open door, not spotted by a procurement officer or even our own security experts.
I am sure we all heard last week about the issue of the spy balloon, and how that created alarm in the USA. In the end, military action was required to shoot it down. A US defence officer has revealed that other suspected spy balloons flew over the US during the Trump Administration. That shows that real threats can pop up anytime and anywhere, and they can take multiple forms. Amendments 23 and 24 reflect some of the dissatisfaction I have outlined. As the Bill stands, a supplier put on the debarment list on schedule 7 grounds would be classed as an “excludable supplier”, meaning the contracting authority could still, at its discretion, award them a contract. I understand from the Minister’s comments, and from conversations with stakeholders, why there needs to be discretion with regard to excludable grounds, but I do not believe that such discretion should extend to suppliers on the debarment list.
The Government have outlined the debarment list is reserved for the most serious cases of misconduct. On 4 August 2022, the then Minister Lord True wrote a letter to the now Minister Baroness Neville-Rolfe, in which he said:
“I should start by explaining that the debarment list is intended to focus on the most serious cases of supplier misconduct, where suppliers may pose a significant risk to contracting authorities or the public. It is not the case that every supplier which meets a ground for exclusion will be considered for inclusion on the debarment list. Rather, there will be a prioritisation policy which governs how cases are selected for investigation. It is likely that only a small number of cases will be considered each year.
It is also important to clarify that meeting a ground for exclusion is not sufficient on its own to justify the addition of a supplier to the debarment list. In addition to considering whether an exclusion ground applies, the Minister must also consider whether the circumstances that led to the application of the exclusion ground are likely to occur again. Only if the circumstances are considered likely to occur again may the supplier be added to the debarment list. This ensures that exclusion is not a punishment for past behaviour but a forward-looking measure based on the risk posed by the supplier.”
In the words of Lord True, suppliers on the list represent a significant risk to the public. It was therefore pleasing to hear the Minister say on Tuesday:
“Suppliers on the debarment list face exclusion across the public sector at all levels. That is a significant step forward in our approach to supplier misconduct.”––[Official Report, Procurement Bill Public Bill Committee, 31 January 2023; c. 63.]
I think most people would welcome the fact that suppliers on the list are automatically excluded. However, under the Bill, the contracting authority will still be able to exclude suppliers on the list on discretionary exclusion grounds. When a supplier represents such a risk that they are one of the few to be on the debarment list, why should they still be allowed access to public contracts? We do not want suppliers who commit egregious breaches near public contracts.
I refer back to the Minister’s example of a paperclip contract. Does he believe that a supplier who has been found guilty of environmental misconduct, has frequently breached contracts and performed poorly, is a national threat, or committed a breach that is grounds for discretionary exclusion, although the Government decided not to put them on the debarment list, should have access to public contracts? Will the public want their money to be spent that way, and handed to that supplier? Every supplier on the debarment list is surely one that the Minister believes should not be near our procurements. Again, we come to the question: why allow this discretion? Our amendment would ensure that those on the debarment list were excluded from all public contracts without question. I urge the Minister to think carefully about that, and to consider whether he can support the amendment.
I turn briefly to clause 58. Although every excluded or excludable supplier must be given the opportunity to prove that they are now a reputable supplier, it is important to remember that procurement rules are there to ensure that public money is spent efficiently and on delivering the public services we need. When it comes to deciding whether a supplier comes under the definitions set out in clause 57, has the Minister considered taking the US-style approach of weighing the reputational and delivery risk to the contracting authority of allowing the supplier to take the contract? There will be disadvantages and advantages to both approaches, but I would be interested to learn whether that was explored, and why the Government adopted the approach taken in the Bill.
The Parliamentary Secretary, Cabinet Office (Alex Burghart)
It is a pleasure to serve under your chairmanship once again, Mr Mundell. Amendments 23 and 24 would require contracting authorities to treat any supplier on the debarment list as being subject to mandatory exclusion, even when it is on the list because a discretionary exclusion ground applies. The concept of “excluded supplier” is by nature a blunt instrument. An excluded supplier faces exclusion from every public contract for five years unless and until a contracting authority is satisfied that the risk of the issues re-occurring has been addressed. For that reason, a supplier is an excluded supplier only when one of the grounds reserved for the most serious forms of misconduct apply—the mandatory grounds.
It is clearly right that when a Minister of the Crown places a supplier on the debarment list because a mandatory exclusion ground applies, and the issues are likely to occur again, authorities awarding contracts should treat that supplier as an excluded supplier. The inclusion of discretionary exclusion grounds in schedule 7 reflects the fact that, for offences where a range of misconduct could be involved, it might be appropriate to take into account factors such as the nature of the contract being tendered or the level of harm caused before deciding to exclude a supplier.
None the less, the Government believe that it should be possible to include a supplier that has fallen foul of a discretionary exclusion ground on the debarment list. This involves contracting authorities having to do their own due diligence on the suppliers’ misconduct and self-cleaning measures. However, given that discretionary exclusion grounds are potentially less serious, a contracting authority should retain some discretion with regard to that supplier, once they are on the list.
Clause 57 sets out the meaning of the terms “excluded supplier” and “excludable supplier”. The Bill provides elsewhere that contracting authorities are either obliged or permitted to consider whether suppliers should be excluded or excludable at various points in a procurement. In most cases, excluded suppliers must be prevented from participating in a procurement or being awarded a contract, while excludable suppliers may be excluded at the discretion of the contracting authority.
Excluded suppliers are defined in subsection (1) as those to whom a contracting authority considers that
“a mandatory exclusion ground applies”,
as set out in schedule 6. The contracting authority must also consider that
“the circumstances giving rise to the application of the exclusion ground are likely to occur again,”
or that the supplier is
“on the debarment list by virtue of a mandatory exclusion ground.”
Excludable suppliers are defined in subsection (2) as those to whom a contracting authority considers that
“a discretionary exclusion ground applies”
as set out in schedule 7. The contracting authority must also consider that
“the circumstances giving rise to the application of the exclusion ground are likely to occur again,”
or that the supplier is
“on the debarment list by virtue of a discretionary exclusion ground.”
In both cases, the supplier is excluded or excludable if they are on the debarment list. Private utilities can treat mandatory exclusion grounds as discretionary; that is set out in subsection (3).
Clause 58 sets out how contracting authorities should assess the risk of the re-occurrence of the circumstances that gave rise to the application of an exclusion ground to a supplier. Contracting authorities may have regard to the range of factors set out in subsection (1) when evaluating that risk. Subsection (2) imposes a duty on the contracting authorities applying the exclusions regime to give suppliers an opportunity to submit evidence to show that the circumstances are not likely to recur—that is, that they have “self-cleaned”. Suppliers are also entitled to make the case that they are not subject to a ground for exclusion, and to make representations more generally.
The self-cleaning evidence must be sufficient to satisfy the contracting authority that the circumstances that gave rise to potential exclusion are not likely to occur again. Importantly, subsection (3) stipulates that contracting authorities must not make disproportionate requests for information or remedial evidence. That protects suppliers by ensuring that contracting authorities focus on the most important aspects of self-cleaning relevant to the particular circumstances.
The hon. Member for Vauxhall understandably takes us back to the issue of discretionary versus mandatory exclusions, which we debated the other day. One thing we need to bear in mind—perhaps with regard to more rarefied objects than paperclips—is that there may be circumstances in which particular substances or items can be procured only from certain suppliers. That may be essential for the operation of certain processes or the response to certain emergency situations.
Florence Eshalomi
As I said, I understand why the Minister says that there should be some discretion, and that it should lie with the contracting authority. However, does he agree that such discretion should not stretch to the point at which an organisation is on the debarment list, and there is an issue of national security?
Alex Burghart
There is absolutely the issue of national security. However, it is important that we retain an element of flexibility, so that in extremis, if there is only one provider of an essential good, the public authorities that need it still have access to it, even if there are concerns about other activities performed by a certain company. Although I completely understand the hon. Lady’s desire to prevent companies whose practices we disagree with from unduly benefiting from the public purse, we have to retain a degree of flexibility so that, in extremis, public authorities can get what they need.
Question put, That the amendment be made.
Alex Burghart
Schedule 6 sets out the mandatory grounds for exclusion. They consist of criminal offences and other misconduct serious enough to merit exclusion if the circumstances in question are likely to reoccur.
Florence Eshalomi
As the Minister highlighted, the schedule covers the grounds on which a supplier can be excluded, with some general provisions on how the suppliers are treated. I have touched on our concerns about excluded suppliers and excludable systems, and we will say more about that when we come to schedule 7. However, we believe that the scope of schedule 6 could be widened to cover issues of national security, to ensure that suppliers who are a risk to national security are not included in our supply chain, even when contracting authorities want paperclips. We support the increase in the scope of the schedule, so that it excludes suppliers who have committed serious offences, and who represent a concern to the authorities in the delivery of services. We are pleased to support the schedule.
Question put and agreed to.
Schedule 6 accordingly agreed to.
Schedule 7
Discretionary exclusion grounds
Alex Burghart
I beg to move amendment 87, in page 110, line 33, schedule 7, leave out paragraph 15.
This amendment would leave out the discretionary exclusion ground relating to forced organ harvesting.
Amendment 87 removes an amendment made to schedule 7 in the other place. It created a discretionary exclusion ground for suppliers with connections to forced organ harvesting, which is, of course, an utterly abhorrent practice. However, serious unethical behaviour particular to a certain industry is already covered by the ground of professional misconduct. The Bill is not the appropriate place to address the issue.
Every exclusion ground, whether mandatory or discretionary, must be considered for each and every supplier for each procurement. I am sure the Committee can appreciate how burdensome that would be when there are thousands of contracts every year. We want to make public procurement simpler and less burdensome for suppliers, particularly those that are small and medium-sized enterprises, and to drive value for money for the public. Adding additional exclusion grounds costs contracting authorities time and money. It is therefore crucial that we limit exclusion grounds to those that pose a major risk to public procurement. No supplier to the UK public sector has been involved in forced organ harvesting, as far as I am aware.
I am, however, pleased to say that the Government have already taken significant steps to make it explicit that the overseas organ trade, or complicity in it, will not be tolerated. Under the Health and Care Act 2022, it is already an offence to travel outside the UK to purchase an organ. That is why I believe that the amendment is necessary to overturn a well-meaning but, in practice, very challenging change to the Bill.
Florence Eshalomi
As the Minister highlighted, amendment 87 would sadly overturn Lords amendment 91, made on Report, in relation to forced organ harvesting. I agree with the Minister that there can be no doubt that organ harvesting is an abhorrent practice, but we should be careful when saying that this measure would just result in additional bureaucracy and time in contracts and procurement.
The practice of forced organ harvesting involves the removal of organs from a living prisoner, which results in their death or near death. It is something that none of us should stand by and watch. Linking this back to taxpayers’ money, no taxpayer would expect a single penny of their public money to go to a company explicitly linked to this practice. Tragically, there is evidence that forced organ harvesting may not be a particularly niche issue.
The Minister highlighted that the measure, although well intended, would add more time and another layer of bureaucracy. I want to go back to the debates in the other place, and some of the powerful words from Lord Alton of Liverpool and Lord Hunt of Kings Heath, who moved the amendment that led to our discussion today. Both made moving and compelling arguments for the inclusion of the measure against forced organ harvesting, providing examples of evidence that the practice is taking place on an extremely depressing scale in China.
The excellent speeches made by Lord Alton and Lord Hunt have been backed up by the Office of the UN High Commissioner for Human Rights, which stated that serious human rights violations have been committed in the Xinjiang Uyghur Autonomous Region,
“in the context of the Government’s application of counter-terrorism and counter-‘extremism’ strategies. The implementation of these strategies, and associated policies in XUAR has led to interlocking patterns of severe and undue restrictions on a wide range of human rights. These patterns of restrictions are characterized by a discriminatory component, as the underlying acts often directly or indirectly affect Uyghur and other predominantly Muslim communities.”
The OHCHR also stated that the treatment of persons held in the system of so-called vocational education and training centres—VETC facilities—is,
“of equal concern. Allegations of patterns of torture or ill-treatment, including forced medical treatment and adverse conditions of detention, are credible, as are allegations of individual incidents of sexual and gender-based violence. While the available information at this stage does not allow OHCHR to draw firm conclusions regarding the exact extent of such abuses, it is clear that the highly securitised and discriminatory nature of the VETC facilities, coupled with limited access to effective remedies or oversight by the authorities, provide fertile ground for such violations to take place on a broad scale.”
That is damning. It shows there is evidence of this already happening. In an April 2022 paper published in the American Journal of Transplantation, Matthew P. Robertson and Jacob Lavee stated:
“We find evidence in 71 of these reports, spread nationwide, that brain death could not have properly been declared. In these cases, the removal of the heart during organ procurement must have been the proximate cause of the donor’s death. Because these organ donors could only have been prisoners, our findings strongly suggest that physicians in the People’s Republic of China have participated in executions by organ removal.”
As a country, we must stand steadfast against these practices and ensure that any supplier with ties to forced organ harvesting is not allowed anywhere near our procurement system. I do not think taxpayers would expect anything less. No one wants to be linked to these horrific practices.
I fully understand and appreciate that the Minister may have covered these and other concerns in his remarks, but we may want to consider that there is no doubt this practice is an exclusion ground. In Committee in the Lords, the Minister, Baroness Neville-Rolfe, said it was almost certain that it would be covered by paragraph 12, but I think we have to ask ourselves, how many times have we heard that something is almost certain, only for it not to be covered when the Bill passes? We cannot and should not take chances on this issue. It is a fundamental and critical issue of human rights. If the Committee is to do its job, we cannot support the attempts to remove forced organ harvesting as a discretionary exclusion ground. For those powerful and valid reasons, I will not be supporting the amendment.
Kirsty Blackman (Aberdeen North) (SNP)
It is tempting to think that forced organ harvesting is so far removed from anything that we consider human, or a normal occurrence, that it does not happen—but it does. As the shadow Minister laid out, the issue was discussed in significant detail in the other place. We know it occurs.
The Minister has given some level of assurance that other parts of the Bill cover this practice. Could he be explicit that he does not believe that any supplier involved in forced organ harvesting would be eligible to receive a public contract through the procurement framework set out in the Bill? If he can give that explicit assurance that he believes the practice is covered elsewhere in the Bill, and that provisions elsewhere in the Bill adequately do the job of this provision, I would be happy not to oppose the amendment. That assurance from the Minister would give us a measure of reassurance and comfort that the Bill covers everything that he intends and expects.
Alex Burghart
We are assured that the absolutely abhorrent practice of forced organ harvesting would qualify as serious unethical behaviour. Consequently, that would mean that, in the Bill, it would be covered by the grounds of professional misconduct. Within the Bill, we have that provision; outwith the Bill, we have the Health and Social Care Act, to which I referred in my remarks. I hope that no one will take away anything other than the fact that the Government are strongly opposed to this practice and to the people who conduct this practice and that we wish public procurement to have no part in it.
Question put, That the amendment be made.
Florence Eshalomi
I beg to move amendment 106, in schedule 7, page 111, line 4, at end insert—
“Failure to consider sanctions regime
16 A discretionary exclusion ground applies to a supplier if a decision-maker determines that the supplier or a connected person has failed to adhere to sanctions imposed by the United Kingdom.”
This amendment would add a discretionary exclusion ground based on the failure to adhere to UK sanctions regimes.
Amendment 106 would add a discretionary ground to give contracting authorities the power to disregard tenders from suppliers who do not comply with the UK sanctions scheme. The amendment takes inspiration from the international reaction to Putin’s illegal and barbaric invasion of Ukraine. We know that many companies did the right thing in response to that invasion and swiftly pulled out from Russia. They withdrew funding, marketing and development, and they all took a stand not to finance Putin’s actions against the people of Ukraine. Sadly, however, some did not.
For example, research from Yale has identified the status of more than 1,000 companies in Russia, rating them from A to F on what presence they still have in the country. I will not go into specific cases, but it noticeable that companies rated D—defined as “continuing substantive business”—have been awarded lucrative public contracts since the invasion of Ukraine.
Alex Burghart
The amendment would introduce a new discretionary exclusion ground in relation to sanctions violations. The Government of course expect all businesses to comply with their obligations under the UK sanctions regime.
In 2016, the Office of Financial Sanctions Implementation was established to ensure that sanctions are properly understood, implemented and enforced. A range of tools are available to encourage compliance, including monetary penalties. However, we do not consider that sanctions violations pose a sufficient risk to public procurement to justify a ground for exclusion.
I am not aware of any evidence that public contracts have been awarded to suppliers that have violated sanctions. It is important that the exclusions regime focuses on the most pertinent risks, because each additional exclusion ground will increase burdens on contracting authorities and suppliers. That is why we have taken a targeted, risk-based approach, informed by extensive consultation across the public sector and with those who are most impacted by the exclusions regime, such as small and medium-sized enterprises. I respectfully request that the amendment be withdrawn.
Question put, That the amendment be made.
Florence Eshalomi
I beg to move amendment 112, in schedule 7, page 111, line 4, at end insert—
“Labour law infringements
15A (1) Subject to paragraph (2), a discretionary exclusion ground applies to a supplier if a contracting authority determines that a supplier, within the three years leading to the date of tender—
(a) has been found by an employment tribunal or court to have significantly breached the rights of an employee or worker engaged or formerly engaged by it,
(b) has admitted that it significantly breached the rights of an employee or worker engaged or formerly engaged by it, or
(c) has made a payment to an employee or worker engaged or formerly engaged by it in respect of a significant breach by it of the employee or worker’s rights,
and the contracting authority may treat the supplier as an excluded supplier in relation to the award of the public contract.
(2) Where a contracting authority determines that a supplier fulfils one or more of sub-paragraphs (1)(a), (b) or (c), the contracting authority must determine that the supplier is not an excluded supplier in relation to the award of the public contract if the contracting authority is satisfied that the supplier has provided convincing evidence to the effect that measures taken by the supplier are sufficient to demonstrate that it is in the public interest and in the interest of the contracting authority that the supplier should not be excluded from the procurement procedure.
(3) The evidence referred to in sub-paragraph (2) must include proof that the supplier has—
(a) paid or undertaken to pay without delay compensation in respect of any damage caused by the breach of rights,
(b) clarified the facts and circumstances in a comprehensive manner by actively and without delay collaborating with any relevant employment tribunal or court process and the parties thereto, and
(c) taken concrete technical, organisational and personnel measures appropriate to prevent further breaches of rights of a similar kind.
(4) Any such measures taken by the supplier must be evaluated taking into account the gravity and particular circumstances of the breach or breaches of rights.
(5) Where the contracting authority considers such measures to be insufficient, the contracting authority must give the supplier a statement of the reasons for that decision.
(6) ‘Rights’ in paragraphs (1) to (4) means any entitlement or benefit of an employee or worker engaged or formerly engaged by the supplier or of a trade union of which he or she is a member deriving from common law (including contract and tort) or statute, or protected by the international obligations of the United Kingdom referred to in Article 399 of the Trade and Cooperation Agreement (within the meaning of section 37 of the European Union (Future Relationship) Act 2020).”
This amendment is intended to give contracting authorities the discretion to exclude suppliers who have significantly breached the rights of staff in the last three years unless they have “self-cleansed”.
We hope that amendment 112 will be a step toward recognising that being granted public money via a public contract is a privilege, and that in return for this privilege suppliers should be upholding high standards in the workplace. The Bill provides us with an opportunity to drive up standards and ensure public procurement is used as a means to promote decent work throughout the supply chain and to reward businesses that treat their workers right, so we can raise standards right across the economy. We must all back the workers and employers who are creating Britain’s wealth. We must use procurement as an opportunity to raise the bar for all on working conditions. We believe this is a strong amendment. It seeks to include good work and the promotion of quality employment as a strategic priority.
Alex Burghart
Amendment 112 would introduce a new discretionary ground for exclusion in relation to labour law infringements. There are already robust grounds for exclusion for the most egregious violations of the rights of workers. These are based on the serious labour offences within the purview of the director of labour market enforcement. Compared with the mandatory grounds in existing legislation—the Public Contracts Regulations 2015—they represent an expansion in the scope of the grounds on which suppliers can be excluded from procurements for labour violations, with new grounds including failure to pay the national minimum wage and offences relating to employment agencies.
It is right that exclusion is reserved for the most serious circumstances or behaviour that could, if not addressed, raise a sufficient risk to contracting authorities or the public as to make the supplier unfit to bid for public contracts. Nevertheless, where the treatment of workers and the protection of their rights is relevant to the contract being procured, contracting authorities are entitled to set conditions of participation in these areas and to evaluate treatment of workers as part of the award criteria in assessing tenders. This may be the case, for example, for the procurement of contracts for labour-intensive services. I respectfully urge the hon. Member to withdraw the amendment.
Question put, That the amendment be made.
Alex Burghart
I beg to move amendment 88, in schedule 7, page 111, line 44, at end insert—
“‘event’ means a conviction, decision, ruling, failure or other event by virtue of which a discretionary exclusion ground would apply to a supplier;”
This amendment would insert a definition of “event” for the purposes of paragraph 16 of Schedule 7.
The Chair
With this it will be convenient to discuss that schedule 7 be the Seventh schedule to the Bill.
Alex Burghart
Amendment 88 is a technical amendment that inserts a definition of “event” for the purpose of the five-year look-back period in schedule 7. It mirrors the same definition already included in schedule 6, but refers to an event by virtue of which a discretionary exclusion ground applies to a supplier.
Schedule 7 sets out the discretionary grounds for exclusion. Discretionary grounds involve a range of circumstances, some of which are potentially less serious and might not merit exclusion. It might depend on the circumstances relating to the exclusion ground, the type of contract being procured such as its urgency or criticality, or facts specific to the procurement—the number of bidders, for example.
Similar to the mandatory exclusion grounds, the discretionary grounds are subject to a five-year, look-back period, as set out in paragraph 16, whereby only convictions or other events that the decision maker was aware of within the past five years count when assessing whether grounds apply. Again, that is subject to a transitional regime to avoid the unfair retrospective effect of new exclusion grounds for events that would not have given rise to exclusion prior to the coming into force of the Bill.
The discretionary grounds generally apply to misconduct or circumstances involving either the supplier or a connected person of the supplier. Connected persons are defined in paragraph 44 of schedule 6, as I explained earlier. As with schedule 6, I hope that we have achieved our objective of making the exclusion grounds both clearer and more consistent.
Florence Eshalomi
As the Minister outlined, the amendment seeks to define the events, with reference to the relevant paragraph of the schedule on determining temporal cut-off points for events that may make a supplier excludable. We believe that it is a tidying-up amendment to ensure that the event is defined in the schedule, so we do not wish to oppose it.
More widely, there are some faults with the schedule and its implementation, but the Opposition view it as a step forward in procurement versus the Public Contracts Regulations 2015. We recognise the importance of clauses on matters such as labour markets and environmental misconduct, but the appropriateness of the scope of schedule 7 will depend on how stringent the rules on excludable suppliers are applied by contracting authorities. We should consider that when assessing how well the terms of the schedule will work in a few years’ time.
I would be grateful if the Minister explained why different timescales have been used in different parts of the Bill, as set out in paragraph 16. How were the decisions made for different grounds? We do not seek further amendments to the schedule, which we are happy to support.
Alex Burghart
I thank the hon. Lady for her comments and support of the schedule. She asked about the look-back periods in paragraph 16 and why they differ—perhaps she could intervene to clarify her question.
Florence Eshalomi
I asked about the different timescales outlined in paragraph 16. I would like a better understanding of how those decisions were reached.
Alex Burghart
I am embarrassed to say that my memory is failing me, but I will let the hon. Lady know later in the afternoon.
Florence Eshalomi
Thank you.
Amendment 88 agreed to.
Schedule 7, as amended, agreed to.
Clause 58 ordered to stand part of the Bill.
Clause 59
Notification of exclusion of supplier
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clauses 60 and 61 stand part.
Government amendments 42 to 44.
Clause 62 stand part.
Government amendments 45 to 47.
Clauses 63 and 64 stand part.
Government amendment 76.
Government new clause 9—Debarment decisions: interim relief.
Government new clause 10—Debarment proceedings and closed material procedure.
Government new clause 15—Debarment decisions: appeals (No. 2).
Alex Burghart
We move on to a monster grouping. The clauses, which concern the debarment list, are important, ground-breaking provisions that will support contracting authorities to reject bids from suppliers that pose the most serious risk.
Clause 59 requires contracting authorities to notify either a UK, Welsh or Northern Irish Minister—depending on the status of the contracting authority—whenever action is taken under the exclusions regime against a supplier or subcontractor. Subsection (1) sets out the relevant actions, which include exclusion from a procurement, rejection of a tender, rejection of an application to join a dynamic market or removal from a dynamic market, or the replacement of an associated person or intended subcontractor.
The obligation to notify a relevant appropriate authority is in subsection (2), and must be made within 30 days of the relevant action. Subsection (3) sets out the information that must be in the notification. There is also an obligation in subsections (4) and (5) to notify within 30 days where a challenge is brought under part 9 of the Bill against a contracting authority with regard to any exclusion, and also on conclusion of any such proceedings.
Florence Eshalomi
This group of amendments and new clauses pertains to the debarment regime and a new interim relief scheme that suppliers can use when they wish a decision to be put on the debarment list. We support the addition of a debarment list to the Bill. It is right that suppliers that represent a significant risk to contracting authorities and the public are identified. Clearly, this is a strong step and represents a higher bar than simply excluding a supplier from a procurement tender process.
That high-bar intention for the list has been made clear by the Government and in the Minister’s remarks. I refer back to the letter of the then Minister Lord True to Minister Baroness Neville-Rolfe:
“I should start by explaining that the debarment list is intended to focus on the most serious cases of supplier misconduct, where suppliers may pose a significant risk to contracting authorities or the public.”
Ministers must also consider whether the circumstances that led to the application of the exclusion ground are likely to occur again. However, the Government might have changed their mind since then. Will the Minister confirm whether that is still the intention in that case?
Clarity is needed. The need for clarity highlights a potential flaw in the existing clauses: there is still some ambiguity about what the bar actually is to be placed on the debarment list. As drafted, any supplier deemed to be an excluded or excludable supplier can, in theory, be added to the list. It is also possible that no suppliers, even those with egregious cases, are added to the list.
The only other issue that I will raise is that of the threshold. Will there be additional guidance for suppliers and contracting authorities? The list can involve severe reputational and financial damage, so it is right to have safeguards. We will support the measure if the Minister can outline the additional safeguards.
Alex Burghart
The hon. Lady is right that Lord True wrote to a Member of the House of Lords about this, and we do not believe that the Government’s position has changed since then. I am afraid I cannot remember her second point—if she is happy to intervene on me, that will refresh my memory.
Alex Burghart
I look forward to receiving the hon. Lady’s letter.
Question put and agreed to.
Clause 59 accordingly ordered to stand part of the Bill.
Clauses 60 and 61 ordered to stand part of the Bill.
Clause 62
Debarment list
Amendments made: 42, in clause 62, page 43, line 30, leave out from “section” to end of line 39 and insert
“and, as part of that entry, must—
(a) state the exclusion ground to which the entry relates, and whether it is a mandatory exclusion ground or a discretionary exclusion ground, and
(b) indicate the date on which the Minister expects the supplier to cease to be an excluded or excludable supplier by virtue of the stated exclusion ground (and, accordingly, expects the entry to be removed from the list).
(4) A list kept for the purposes of this section is the ‘debarment list’.”
This amendment would make it clearer that each entry will relate to one exclusion ground and, as such, could be challenged individually.
Amendment 43, in clause 62, page 43, line 44, at end insert—
“(5A) The Minister may not enter a supplier’s name on the debarment list before the end of the period of eight working days beginning with the day on which the Minister gives notice to the supplier in accordance with subsection (5) (the ‘debarment standstill period’).
(5B) The Minister may not enter a supplier’s name on the debarment list if—
(a) during the debarment standstill period—
(i) proceedings under section (Debarment decisions: interim relief)(1) (interim relief) are commenced, and
(ii) the Minister is notified of that fact, and
(b) the proceedings have not been determined, discontinued or otherwise disposed of.”
This amendment would ensure that an application for interim relief under the new clause inserted by NC9 would suspend the Minister’s decision to add a supplier’s name to the debarment list.
Amendment 44, in clause 62, page 44, line 1, leave out from “review” to end of line 5 and insert—
“(b) may remove an entry from the debarment list at any time, and
(c) may revise a date indicated under subsection (3)(b).
(7) If a Minister of the Crown voluntarily removes an entry from the debarment list in connection with proceedings under section 64 (debarment decisions: appeals), a Minister of the Crown may reinstate the entry only after the proceedings have been determined, discontinued or otherwise disposed of.
(7A) A Minister of the Crown must remove an entry from the debarment list if the Minister is satisfied that the supplier is not an excluded or excludable supplier by virtue of the ground stated in the entry.”—(Alex Burghart.)
This amendment would restrict modifications that could be made to the debarment list, provide for the Minister to voluntarily suspend a decision to add an entry to the debarment list in connection with proceedings, and clarify that the Minister must remove an entry where a particular ground no longer applies.
Clause 62, as amended, ordered to stand part of the Bill.
Clause 63
Debarment list: application for removal
Amendments made: 45, in clause 63, page 44, line 16, leave out from “for” to end of line 17 and insert—
“(a) the removal of an entry in respect of the supplier from the debarment list, or
(b) the revision of the date indicated as part of such an entry under section 62(3)(b).”
This amendment would ensure that a supplier can apply to change the date indicating when it will cease to be an excluded or excludable supplier.
Amendment 46, in clause 63, page 44, line 21, leave out from “since” to “, or” and insert
“the entry was made or, where relevant, revised”.
This amendment would allow for the fact that a supplier may make different applications in respect of the same or different entries.
Amendment 47, in clause 63, page 44, line 23, after “subsection (1)” insert
“in relation to the entry or, where relevant, revision”.—(Alex Burghart.)
This amendment is consequential on Amendment 45.
Clause 63, as amended, ordered to stand part of the Bill.
Clause 64 disagreed to.
Clause 65
Timeline for removal of suppliers
Question proposed, That the clause stand part of the Bill.
Alex Burghart
Clause 65, which was added to the Bill in the other place, requires the Government to publish a timetable for the removal of Government surveillance equipment where there is evidence that a provider has been involved in modern slavery, genocide or crimes against humanity. That would require the Government to undertake a review of evidence that existing surveillance suppliers or subcontractors have been involved in those matters. Given the size and complexity of technology supply chains, any review of that nature would be costly and resource-intensive; it would need to cover hundreds, if not thousands, of companies.
The measure is intended to target Chinese suppliers, but it is not guaranteed to lead to action against them. The evidence surrounding the complicity of surveillance suppliers in the oppression of Uyghurs in Xinjiang is highly contested, and it would likely be difficult to show that any supplier had been involved in the matters set out in the clause. Although it is unclear what precisely is meant by “established evidence” that a provider has been “involved” in the specified abuses, proving that those suppliers knowingly provided technology for use in human rights abuses would be especially difficult. Even if there were sufficient evidence to do so, the cost and disruption of removing such surveillance equipment from across the entire Government estate would be significant. For that reason, public procurement policy has tended to focus on preventing unfit suppliers from participating in future procurements, rather than requiring the termination of existing contracts.
However, the Government are deeply concerned by both the accusations of modern slavery and the national security implications posed by such equipment, and they are taking action. In November, they announced that all Government Departments will be expected to remove such equipment from sensitive sites and to avoid procuring it in the future. We are also strengthening our powers in the Bill by introducing an exclusion ground for suppliers considered to pose a threat to the national security of the United Kingdom. Combined with the new powers for a centralised debarment list, that will mean that where the risk is sufficiently serious, Ministers can act quickly to ensure suppliers that threaten national security face exclusion from all contracts across the public sector.
I believe that we have taken decisive action in this area, both in the written ministerial statement and in the Bill. However, we are mindful of the concerns raised in both Houses, and we will continue to reflect carefully on those views as we move forward with the legislation and its implementation.
Florence Eshalomi
I thank the Minister for his closing remarks on that and the need to address some of the concerns. The clauses mandate the eventual removal of physical technology or surveillance equipment from the Government’s procurement system supply chain, where there is substantiated evidence of modern slavery, genocide or crimes against humanity.
Kirsty Blackman
Throughout the discussion of Hikvision and other companies in relation to human rights abuses, genocide and crimes against humanity, the Minister has missed the point. The shadow Minister has absolutely got the point.
For a start, the US has already blacklisted Hikvision. If the US believes that there is enough evidence to do that, and the Scottish Government are getting rid of the Hikvision cameras we have in Scotland, I do not see why the UK Government are unable to act in that regard. Two other jurisdictions have found enough evidence to debar Hikvision from providing cameras involved in our public life, yet the UK Government feel that there is still not enough evidence. They are somehow suggesting that perhaps the situation is over-egged, but it appears that the Foreign Affairs Committee does not think the situation is an over-exaggeration, and that it thinks that there is actually a risk and danger.
This is not just about the threat to our national security, although that is obviously incredibly important, and the Labour Front Benchers have been clear about national security throughout our discussion of the Bill. This is also about supporting a company that is committing human rights abuses. It does not matter whether a company is committing them here or elsewhere; the reality is that through public procurement, we are funding a company using facial recognition in mosques and committing atrocities against Uyghur Muslims in the Xinjiang region. How is that okay just because it is not causing any problems here?
Even if the company were not causing any threat to national security, this is about the direction of travel. On modern slavery, for example, the Government are pretty clear that no matter where that is happening, we do not want to be entangled with suppliers involved in modern slavery and enslaving people. We should not want to be involved with, and companies and suppliers should not be giving public money to, the people committing these crimes. Just because this is not modern slavery, it does not mean that they are not creating significant problems and putting people in severe danger as part of the extreme regimes that they are working for.
I do not see the justification in allowing public money to be given to any of these organisations. As I said last week, it is not as though this is a high bar; it is a low bar. We are saying that modern slavery and genocide are crimes against humanity. Those are pretty much the most serious things we can think of. Any organisation involved in those should not get public money, whether or not it is a threat to national security.
I am slightly pleased that the Government and the Minister seem a bit more willing to look at the possibilities regarding Hikvision. I appreciate that removing it from secure and sensitive sites, particularly, is a priority for the Government—they have agreed that they will do that—but that is not enough; we should not fund these organisations at all. Asking the UK Government to make a move in that regard in order to remove this technology and ensure that Hikvision does not get any more of our money is incredibly important, and not too much to ask.
I stress again the point made by the hon. Member for Vauxhall: the clause does not ask for immediate removal. It gives the Government six months to publish a timeline for removal—it is not giving them six months to remove the stuff, but to produce a timeline. They are not being asked for something entirely unreasonable. There are other camera providers and technologies out there that could be used instead to provide safety and security for places that we want to be safe and secure, without our supporting a company propping up a regime that is profiling and committing crimes against humans just because they happen to be Muslim. That is completely unacceptable, no matter where in the world it is doing that. Whether or not this is being done in the UK, the Government should take action on that.
I will therefore strenuously resist any attempt to remove clause 65 from the Bill. I used this phrase earlier, but it should not be too much to ask for the Government to take action on this issue. I am pleased that the Minister seems to have moved his language slightly since our previous debate, but it is not good enough and we are not there yet. We need a firm commitment from the Government to remove this technology that is causing so much harm to the lives of so many and to remove the support for the people causing such harm.
Alex Burghart
I thank hon. Members for their remarks. As I said, we think that the clause as drafted would be unworkable. On what the hon. Members for Vauxhall and for Aberdeen North said, we are moving to a new debarment regime, and I am not able to prejudge who will be covered by that regime. Suppliers will be considered for addition to the debarment list based on a rigorous and fair prioritisation policy. That policy is under development, and it is too early to say which suppliers will or will not be added to the debarment list.
We should remember that the new regime will give broader exclusion powers to authorities that have primary responsibility for applying the exclusions regime. The sorts of crimes we have touched on this afternoon, such as organ harvesting, modern slavery and the like, are very serious crimes against people and humanity, and no doubt that will have a bearing on future judgments. I appreciate where the amendment in the Lords came from, but we do not think the clause is workable. As a Government, however, we continue to consider the issue carefully.
Question put, That the clause stand part of the Bill.
Alex Burghart
I beg to move amendment 50, in clause 66, page 45, line 30, at end insert—
“(5A) The implied term does not prevent a contracting authority—
(a) requiring the use of a particular system in relation to electronic invoices;
(b) in the case of a defence authority (as defined in section 7(5)), requiring the use of a system that requires the payment of fees by the supplier.”
This amendment would ensure that a contracting authority can require the use of a particular system in relation to electronic invoices, and that a contracting authority that is a defence authority can require that the system is one that requires the payment of fees by the supplier.
Alex Burghart
Before I discuss Government amendment 50, I will take this opportunity to go back to the question that the hon. Member for Vauxhall asked me about timescales for exclusion. Generally, the look-back is five years, but for some offences, we have transitional provisions to avoid creating retrospective offences in the early years of implementation. I am happy to write to her with a more detailed explanation if that will be useful.
Amendment 50 will ensure that the clause, which governs electronic invoicing, does not inadvertently prevent contracting authorities from requiring suppliers to submit electronic invoices via invoice processing systems. Invoice processing systems are used by many contracting authorities and we want to make it clear that their use is permitted under the clause.
The amendment will also ensure that defence authorities are allowed to charge suppliers for using such systems. For security reasons, the Ministry of Defence does not permit suppliers to have direct access to their internal system to submit invoices and track payments in relation to its contracts. Suppliers are thus required to use and register with a third-party system in order to carry out invoicing and payments with the MOD. They are charged a fee for use of that system. Amendments 51 and 52, and 61 to 64 are all related to that, and we will return to them later in Committee.
More broadly, the clause applies a term to every public contract to ensure that invoice processing is done electronically. That is essential for swifter payments to suppliers, proper audit trails and increased visibility on public contract spend. It retains the principles of the existing regime with regard to e-invoicing. Nothing in a contract may restrict or override the implied term.
Florence Eshalomi
I thank the Minister for introducing the amendment. As he highlighted, the clause mandates contracting authorities to accept non-disputed electronic invoices as an implied term in every contract. The amendment provides clarity that contracting authorities can require the use of a particular system for electronic invoicing, with extra provisions relating to defence contracts. We think that neither the original clause nor the amendment are disagreeable, and they are not controversial. We support their addition to the Bill.
Amendment 50 agreed to.
Clause 66, as amended, ordered to stand part of the Bill.
Clause 67
Implied payment terms in public contracts
Florence Eshalomi
I beg to move amendment 110, in clause 67, page 46, line 32, at end insert—
“(10A) Within six months of the passage of this Act, the Secretary of State must prepare, publish and lay before Parliament a report on the effectiveness of this section in ensuring prompt payment of small and medium-sized enterprises.
(10B) Not later than 6 months after the report has been laid before Parliament, a Minister of the Crown must make a motion in the House of Commons in relation to the report.”
This amendment would require the Government to report to Parliament on the effectiveness of this section in ensuring prompt payment of SMEs.
The amendment would add provisions to mandate that, within six months of passing this Act, the Government produce and publish a report on the effectiveness of implied payment terms in public contracts in ensuring the prompt payment of small and medium-sized enterprises.
One of the problems we see in procurement is the failure to promptly pay suppliers down the supply chain. Many of those suppliers are small and medium-sized enterprises, which require prompt payments to pay wages and bills, and, in some cases, to keep their company going. Failure to pay SMEs the money that they are owed can lead to serious repercussions.
The Government talk about improving the chances of SMEs when it comes to procurement, but for far too long, this has just been a lot of talk and no action. The statistics for SMEs and procurement are truly shocking. Analysis by the Spend Network found that big corporations still win the lion’s share—more than 90%—of contracts worth £30 billion a year that are deemed to be suitable for bids from smaller businesses.
Research from the British Chambers of Commerce and Tussell found that just over one in every five pounds, or 21%, spent by the Government on public sector procurement in 2021 was awarded to SMEs. They also found that SMEs now receive a relatively smaller amount of reported direct Government procurement spending than they did five years ago.
As a proportion of the overall procurement budget, direct spend with SMEs by local government bodies was the highest at 38%. NHS bodies across England spent 22% of their procurement budget with SMEs, while central Government was significantly lower than the average, awarding only 11% of contracts to SMEs.
We have touched on the issue of subcontractors and why they should be paid on time by those contracting out their services, whether that is a contracting authority, a prime supplier or a supplier three or four rungs down the supply chain. We are pleased to see terms to protect the 30-day payment standard between contracting authorities and prime suppliers, but, as the Bill stands, we have concerns about its ability to properly protect subcontractors down the supply chain.
On Second Reading, the Paymaster General said:
“On the prime, that is easy: we will be paying the prime contractor within the 30-day period. People in the supply chain will be aware of the contract under which they are supplying to the prime, and we expect that 30-day payment to trickle all the way down the chain. It is the first time that such a measure has been incorporated. It really will be for primes to be held to account. I say to hon. Members of this House that if partners to a contract are not being paid without good cause, it will call into doubt the contract with the prime supplier, so it will be very much in the interest of the prime supplier to deliver. Every effort the Government have made to improve the payment terms through the supply chains has so far been adhered to pretty well by industry. Across Government, we have seen a significant improvement in payments out to industry, and we are expecting a ripple-down effect as a result of the Bill.”—[Official Report, 9 January 2023; Vol. 725, c. 347.]
Although we recognise what the Paymaster General was saying, we are left with some concerns, especially for the SMEs that are waiting for that vital payment. I do not think we can expect these terms to ripple down the supply chain, and it may take a while for a ripple-up effect to take place if a subcontractor down the line misses payments to another subcontractor in the supply chain, which could be serious. The Government say that that would reflect badly on the prime contractor, but what methods will the Minister use to track this? How will he be able to tell whether it is effective?
Our amendment would add a requirement to assess the effectiveness of the Government’s claims about the ripple-down effect within six months of the Bill passing. As the Paymaster General highlighted on Second Reading,
“This is the first time that such a measure has been incorporated.”—[Official Report, 9 January 2023; Vol. 725, c. 347.]
Surely the Minister owes it to suppliers across the supply chain to check whether this method is effective. This should not be an arduous report to comply with, but it could provide a crucial stress test for the new system and feed into tweaks that go even further to ensure that all suppliers are paid on time. I hope that the Minister will agree with us about bringing SMEs into the procurement system and that those SMEs need to be paid in a timely manner. I urge him to support our amendment.
Alex Burghart
Amendment 110 would require Ministers to report to Parliament within six months of the Bill’s passage, detailing how effective the implied payment terms in clause 67 have been in ensuring prompt payment of small and medium-sized enterprises. The new regime will not come into force immediately on passage of the Bill; secondary legislation will be needed prior to the go-live, as will the comprehensive programme of learning and development and the digital platform to support the increased transparency obligations. I am afraid, therefore, that the time period in the amendment is impractical.
In addition, there is already a requirement for contracting authorities to publish payment information, set out in clause 68 on payments compliance notices, which requires reports to be published on the speed of invoice payments one month after the end of each successive six-month period. Those reports will enable interested parties, including taxpayers and suppliers, to see for themselves how prompt payment performance has changed as a result of the new regime without the need for additional reporting. The reports will address payments to all suppliers of a contracting authority, rather than just SMEs, and will be publicly available for all to inspect. I therefore respectfully request that the amendment be withdrawn.
Question put, That the amendment be made.
Alex Burghart
I beg to move amendment 51, in clause 67, page 46, line 33, at end insert—
“(za) ‘electronic invoice’ and ‘required electronic form’ have the meanings given in section 66(3);”
This amendment would clarify that “electronic invoice” and “required electronic form” in clause 67(8) have the same meanings as in clause 66(3).
Alex Burghart
Amendments 51 and 52 are technical amendments. Amendment 51 clarifies that clauses 67 and 66 mean the same thing when they refer to “electronic invoice” and “required electronic form”. Amendment 52, similar to amendment 50, ensures that contracting authorities can require the use of a particular system in relation to the processing of electronic invoices.
Florence Eshalomi
The two amendments are uncontroversial and clarify points covering the terms of use. We will not oppose them.
Amendment 51 agreed to.
Amendment made: 52, in clause 67, page 46, line 36, after “address” insert
“, or through an electronic invoicing system,”.—(Alex Burghart.)
This amendment would clarify that a reference to a contracting authority receiving an invoice for the purposes of clause 67 includes receiving an electronic invoice through a system specified in the contract.
Question proposed, That the clause, as amended, stand part of the Bill.
Alex Burghart
Briefly, clause 67 will set the standard by which all contracting authorities will be expected to pay their suppliers. The clause will imply 30-day terms into public contracts. Any attempts to override those payment terms will be without effect, unless the arrangements are to pay quicker than 30 days. Ministers may, by regulations, vary the number of days, provided that the number of days to pay suppliers does not exceed 30 days. SMEs will benefit from 30-day payment terms on a much broader range of public sector contracts, including those previously covered by public utilities and defence. The clause does not apply to concession contracts, utilities contracts awarded by a private utility or contracts awarded by a school.
Question put and agreed to.
Clause 67, as amended, accordingly ordered to stand part of the Bill.
Clause 68
Payments compliance notices
Alex Burghart
I beg to move amendment 53, in clause 68, page 47, line 18, at end insert “, or
(d) in relation to a concession contract.”
This amendment would exempt contracting authorities from the requirement to publish a payments compliance notice in relation to a concession contract.
Alex Burghart
Amendment 53 will exempt concession contracts, and payments made under them, from the scope of payments compliance notices. This minor technical amendment aligns with the scope of clause 67 on implied payment terms in public contracts, from which concession contracts are excluded, and brings consistency across the payment clauses. It will also save contracting authorities from additional bureaucracy, as they will no longer have to produce a payments compliance notice where concessions are the only payments they are making.
Clause 68 will require contracting authorities to publish a payments compliance notice—specified information detailing how quickly they have paid suppliers—every six months. We are strengthening payment legislation to ensure that the public sector is held to account on its own performance. We are aligning how the public and private sectors report on their payment performance, and we will report against the same set of metrics. By creating a central repository of Government payment information, we will increase transparency of public sector payment performance and make external scrutiny of that performance easier. The clause does not apply to private utilities, contracts awarded by schools or Northern Ireland contracting authorities.
Florence Eshalomi
The amendment will exclude concession contracts from the provisions of the clause. Given that the nature of these contracts is to give the right to exploit a developed resource, it makes sense to exclude them from this part of the Bill. We will not be voting against the amendment and we welcome the provisions in clause 68. Contracting authorities should report on their compliance with the 30-day payment term. As we have touched on previously, sunlight is the best disinfectant, and the clause shines a light on whether contracting authorities are complying with payment terms.
As I highlighted in the debate on clause 67, however, I have concerns as to whether this will lead to a ripple-down effect, although benefits may arise from suppliers feeling some level of scrutiny when they are responsible for paying subcontractors, many of which, as I mentioned, will be SMEs—the same SMEs that are currently struggling in the procurement system. I have touched on the value of those contracts and the fact that the big corporations continue to win the lion’s share of them, as shown by research from the British Chambers of Commerce. That research also found that direct spend is still quite a small proportion of the overall procurement budget.
I am disappointed that the Government did not see the sense of our amendment 110. I hope that will take action to ensure that suppliers are acting in the spirit of the clause.
Alex Burghart
We intend to issue guidance separately to contracting authorities, setting out how to include spot checks on the payment performance of supply chain members through terms and conditions. We do not think that needs to be done in legislation; it can be addressed through guidance. Furthermore, contracting authorities are often better placed to use civil remedies and can have a significant influence over suppliers, so they should hold suppliers to account and ensure that payment terms are passed down the supply chain to subcontractors, enforcing such terms through contractual remedies if necessary.
Amendment 53 agreed to.
Clause 68, as amended, ordered to stand part of the Bill.
Clause 69
Information about payments under public contracts
Question proposed, That the clause stand part of the Bill.
Alex Burghart
Clause 69 requires contracting authorities to publish specified information about any payment of more than £30,000 made by the authority under a public contract. That information must be published before the end of the period of 30 days beginning with the last day of the quarter in which the payment was made. The financial threshold and time limit for publication may be amended by regulations.
The clause does not apply to public contracts awarded by private utilities or schools, or to concession contracts. Its purpose is to bring transparency to the expenditure of public money, and to allow interested parties to ascertain the value that was specified in the tender, the value of the contract at the point of award, and how the contract spend is progressing. The Northern Ireland Executive have decided to include a derogation from this publication obligation.
Florence Eshalomi
As the Minister outlined, the clause relates to the publication of information on payments of over £30,000 by contracting authorities. Its impact will be heavily affected by the ultimate state of the online system, as specified in clause 93. It is frustrating that many aspects of the Bill are to be set out in secondary legislation: we will not know whether this is a sensible and proportionate measure until we know how the online system promised by the Government will work. However, we believe that this is an important provision of the Bill, and as such we do not intend to oppose it.
Question put and agreed to.
Clause 69 accordingly ordered to stand part of the Bill.
Clause 70
Assessment of contract performance
Question proposed, That the clause stand part of the Bill.
Alex Burghart
Clause 70 has two main functions. First, it requires contracting authorities that have set key performance indicators in their public contracts under clause 52 to assess performance against each KPI, and to publish the results at least once every 12 months. The exact nature of the information required in each case will be set out in regulations made under clause 90. The purpose of this provision is to bring greater transparency to the performance and management of public contracts.
Secondly, the clause requires contracting authorities to publish a notification in certain circumstances relating to breach of contract or poor performance by a supplier. The circumstances are equivalent to those that constitute the discretionary exclusion ground for breach of contract and poor performance in paragraph 13 of schedule 7. The purpose of the provision is to provide verifiable information for contracting authorities on suppliers that meet the exclusion ground for breach of contract or poor performance. Clause 70 does not apply to private utilities, and the subsections relating to poor performance do not apply to light-touch contracts.
Florence Eshalomi
As the Minister outlined, the clause relates to key performance indicators and lays out how they will be assessed in the system. Subsection (2) mandates an annual assessment of the key performance indicators and the publication of information in this area. Again, this subsection makes reference to clause 93 in terms of how information relating to the key performance indicators is to be published. It might be useful to consider what information should be part of that system.
There could be merit in having an obligation to publish information on performance workflows and the relationships between contracting authorities and suppliers. The obligation could mean that contracting public bodies must publish the following on a six-monthly basis in respect of service contracts: operational performance against contracts; changes to staff terms and conditions; financial performance and payments made to contractors; costs of client contract management; any financial penalties or service credits; and details of meetings between decision makers. They could also publish the contracts within three months of them being let.
Subsection (5) relates to information that must be published within 30 days where a contracting authority believes a supplier has breached a contract to the point of termination or remedy. It also covers instances where suppliers provide an unsatisfactory service following a proper opportunity to improve performance. The powers are important to ensure that the process is properly followed when a supplier is not delivering for the public. It is right for the supplier involved and for the public that the information is published. We therefore support the inclusion of the clause in the Bill.
Question put and agreed to.
Clause 70 accordingly ordered to stand part of the Bill.
Clause 71
Sub-contracting: directions
Question proposed, That the clause stand part of the Bill.
Alex Burghart
Clause 71 covers subcontracting, which is an important part of the delivery of public contracts. It enables businesses to use specialist suppliers to increase their overall effectiveness and efficiency. It also encourages SMEs to participate in public sector procurement, which helps to encourage innovation and deliver value for money for the public. The clause applies when a contracting authority either requires or permits a supplier to subcontract, and also where that subcontractor has been relied on to pass conditions of participation. In such circumstances, a contracting authority may direct a supplier to enter into a legally binding agreement with the proposed subcontractor, failing which the contracting authority can refuse to enter into the public contract, require an alternative subcontractor, or terminate the contract if already commenced.
Clause 72 will ensure that the 30-day payment terms set out in clause 67 will apply throughout the public sector supply chain, regardless of whether they are written into the contract. That will ensure that businesses in the supply chain that substantially contribute to the performance of a public contract benefit from the prompt payment and the liquidity benefits it brings. Unlike the equivalent provisions in the Public Contracts Regulations 2015, clause 72 includes defence and public utility contracts, benefiting SMEs in the supply chain across a much broader range of public sector contracts. Those rules do not apply to utilities contracts awarded by a private utility, concession contracts and contracts awarded by a school.
Florence Eshalomi
Clauses 71 and 72 relate to the treatment of subcontractors in the system. We welcome the clauses as a step forward in the attempt to ensure the prompt payment of subcontractors. The Bill makes a slight alteration from the current system by making a 30-day payment an automatic term for subcontractors rather than requiring the contracting authority to include an obligation on its suppliers to flow down. We have spoken at great length about the issue of subcontractors being paid on time, and the fact that many smaller businesses rely on prompt payment. We do not see any issue with the clauses, which we are happy to support.
Question put and agreed to.
Clause 71 accordingly ordered to stand part of the Bill.
Clause 72 ordered to stand part of the Bill.
Clause 73
Modifying a public contract
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
That schedule 8 be the Eighth schedule to the Bill.
Government amendment 54.
Clauses 74 and 75 stand part.
Government amendments 55 to 58.
Clause 76 stand part.
Alex Burghart
I will take a deep breath. Clause 73 sets out when a contracting authority may modify a public contract or when a contract, as a result of a modification, will become a public contract—that is to say, a convertible contract. It provides that a contract may be modified in one of the following circumstances: where the modification falls within one of the grounds permitted under schedule 8; where the modification itself is not a “substantial modification”; or where the modification itself is below a threshold that makes it de minimis in effect. Certain contracts, such as below-threshold contracts and light-touch contracts, are exempt from the constraints on modifications.
A “substantial” modification in this context is one that increases or decreases the duration of the contract by more than 10%, or materially changes the supply of the deliverables under the contract, or makes the contract materially more economically beneficial to the supplier.
Clause 73(4) clearly defines what constitutes a “below-threshold modification”. Those low-value modifications, to be properly considered as such, must not materially change the contract in either value or scope. A cap is placed on successive modifications permitted under this ground, as the aggregated value of below-threshold modifications made during the lifetime of a contract should be less than the Government procurement agreement threshold amount for the type of contract. Overall, these provisions give contracting authorities more usable grounds to make modifications that are not sufficiently material to justify requiring contracting authorities to run a new competition.
Schedule 8 sets out seven grounds, in addition to the two provided in clause 73, on which contract modifications are permitted. Four of those grounds are based on policy retained from existing legislation, as consultation established that contracting authorities wished to retain those commonly relied on “safe harbours”. Those four grounds are where the modification is provided for in the contract; where the modification has arisen due to unforeseeable circumstances; where the modification is for additional goods, services or works in specific limited circumstances; and where the modification is to effect a transfer of the contract following a corporate restructuring. I would like to be clear that that concise ground on corporate restructuring is intended to cover all the circumstances, such as insolvency, detailed in the Public Contracts Regulations 2015.
We have also introduced three new grounds, to provide for greater flexibility that stakeholders have indicated is needed, and to give greater legal certainty to contracting authorities than the existing grounds currently afford. The new ground of
“Urgency and the protection of life, etc”
will enable contracting authorities to act swiftly and efficiently in extraordinary circumstances and modify existing contracts to adapt to those urgent requirements.
The new ground permitting modifications on materialisation of a known risk will give contracting authorities legal certainty that they can modify contracts to adapt to a risk that, although identified as such at the outset, could not be addressed in the initial contract document in clear and unequivocal terms. The risk must have materialised through no fault of the contracting authority or supplier and must have been identified in the tender or transparency notice.
For example, if, due to quickly emerging cyber-threats, a requirement for a new software system to hold personal information needs to be adapted in order for it to operate safely and adequately protect that information, the contracting authority can adjust the requirement accordingly, provided that the risk of the new cyber-threat was identified up front in the required notices.
Florence Eshalomi
I thank the Minister for the points he has outlined. Amendment 54 is largely uncontroversial, removing an unnecessary provision from clause 74.
Amendments 55 to 58, taken together, would reduce the burdens on contracting authorities to publish contract modifications, requiring them to do so only where they are required to under clause 74, which does not cover changes that only change the value or length of the contract to a relatively small degree. Without the amendments, even minuscule contract amendments would be required to be published. Although these measures cover the larger contracts affected by the Bill—in particular, those valued over £5 million—it would be a disproportionate burden on contracting authorities to be required to publish every change to a contract. We understand the rationale for the amendments and we do not intend to oppose them.
On clauses 73 to 76 more widely, we understand that it is necessary, on occasion, to alter public contracts. It is important that the circumstances are justified, and we are pleased to see schedule 8 set out proportionate reasons to modify contracts. However, it is important to ensure that contracts are drawn up in a way that does not open this part of the Bill up to abuse.
As noted in paragraph 1 of schedule 8, modifications can be made if they are agreed in the contract and do not
“change the overall nature of the contract.”
However, there must not be a free-for-all. Contracting authorities must draw up contracts that provide the right flexibility for change. We should not expect service levels to vary massively because contracts are written in a way that would allow modification under this part of the Bill. For example, our engagement with stakeholders has revealed concerns that modifications are seen as an alternative to remedy and clawback, and that expensive legal fees put authorities off using clawback clauses, with those authorities instead opting to renegotiate terms with suppliers. That should not be the case.
We do not believe the best way to tackle that is necessarily through the Bill, but it is an important point. In an answer to a parliamentary question dated 20 December 2022, the Government admitted that money was wasted and that only £18 million had been clawed back from PPE contracts. That was only highlighted after the National Audit Office revealed that the Government had effectively written off quite a lot of that money, and auditors had rebuked the Department of Health and Social Care for its management of taxpayers’ cash during the pandemic.
It is a shame that the Government are still locked in legal battles with companies that failed to deliver on their contractual obligations. The public expect their money to be clawed back when contracts are broken, but if even the Government find it difficult to claw back money from contracts, it is little wonder that smaller contracting authorities apparently rely on contract alterations to seek remedy. The result is that suppliers that have not delivered for the public keep winning contracts to deliver services.
I understand why people may look at a supplier and say, “This supplier has failed to deliver services to an acceptable standard. Why are they still delivering our services? Why has this supplier not had this contract taken off them? Why have we not got our money back?” They are all valid questions. I hope that the Minister will outline his understanding of the use of contract modification as a substitute for clawbacks, and what steps he is taking to ensure we get our money back from suppliers.
We feel it is right that contract changes are published. Clauses 74 and 76 allow for the publication of a notice of change and, for larger contracts, publication of the changes and the altered contract. Those measures are proportional to the provisions of clause 53, relating to publication when a contract starts.
Clause 74 refers to the terms of clause 93. We agree with the introduction of a new online programme, but it is disappointing that we do not have the detail of what will be expected as part of that system. We should not leave future Governments with their hands tied, unable to go beyond what we can achieve today, but we do think that the Government could show some base level of ambition and outline the basic level of transparency that we think the system should allow. I hope the Minister will touch, even just briefly, on how the system will work and what information will be expected under clause 74, via the provisions of clause 93.
Alex Burghart
To the hon. Lady’s first point, we all accept that, in exceptional circumstances, contracting authorities may have to move very quickly to procure essential goods, services and works with minimal delay. Launching a new procurement procedure can take time. When time is of the essence and when a supplier has proven in-contract its ability to deliver to time, cost and the expected standard, it makes sense to take the modification route. To be clear, these are areas where the urgency and protection-of-life grounds must exist in the first place.
With the new transparency rules in clauses 74 and 76, taxpayers will be able to see exactly where we propose to spend their money, including where there is additional expenditure through use of modification grounds. The transparency rules will require contract change notices to be published in circumstances where the urgency ground is used and, where such modifications are made to contracts over the £5 million threshold, the modifications themselves will need to be published.
On the hon. Member for Vauxhall’s general point about what happened during the pandemic, she will have heard me say on a number of occasions that the Department of Health and Social Care, despite the circumstances in which it was working, had robust contracts in place. That means it is capable now, where it was given defective goods, to enter mediation. If that proves insufficient, it will be able to enter into litigation. The whole purpose of the exercise in which we are currently engaged—at length—is to ensure that we have better procurement processes in this country. That is what the Bill is going to deliver.
Question put and agreed to.
Clause 73 accordingly ordered to stand part of the Bill.
Schedule 8 agreed to.
Clause 74
Contract change notices
Amendment made: 54, in clause 74, page 51, line 5, leave out paragraph (c).—(Alex Burghart.)
This amendment would remove unnecessary provision, as light touch contracts are excluded from the whole clause under subsection (6)(b).
Clause 74, as amended, ordered to stand part of the Bill.
Clause 75 ordered to stand part of the Bill.
Clause 76
Publication of modifications
Amendments made: 55, in clause 76, page 51, line 40, after “modification” insert “—
(a) in respect of which the contracting authority is required to publish a contract change notice under section 74, and”.
This amendment would limit the requirement to publish a copy of a contract as modified or a modification to those modifications in respect of which the contracting authority was required to publish a contract change notice.
Amendment 56, in clause 76, page 51, line 43, leave out paragraphs (a) to (c).
This amendment is consequential on Amendment 55.
Amendment 57, in clause 76, page 52, line 3, leave out
“or a transferred Northern Ireland authority”.
This amendment is consequential on Amendment 55.
Amendment 58, in clause 76, page 52, line 7, leave out
“or a transferred Northern Ireland procurement arrangement”.—(Alex Burghart.)
This amendment is consequential on Amendment 55.
Clause 76, as amended, ordered to stand part of the Bill.
Clause 77
Implied right to terminate public contracts
Question proposed, That the clause stand part of the Bill.
Alex Burghart
Clause 77 sets out that it is an implied term of public contracts that a contracting authority can terminate a contract if one of a number of termination grounds apply. These are where a contracting authority considers that the contract was awarded or modified in breach of the Bill and regulations made under it, where a supplier has become an excluded or excludable supplier, or where a subcontractor is an excluded or excludable supplier.
These last two grounds considerably expand the implied right to terminate on exclusion grounds and are a good example of how we are tightening the rules on poor suppliers. Contracting authorities must still give suppliers that subcontract to an excluded or excludable supplier the opportunity to cease their arrangements. Contracting authorities must also communicate any intention to terminate the contract on these grounds before proceeding to terminate.
Clause 78 requires contracting authorities to obtain approval from a Minister before terminating a contract in reliance on the discretionary exclusion ground for suppliers that pose a threat to national security. Subsection (1) states that this requirement applies when contracting authorities are seeking to rely on the implied termination right in clause 77 where a supplier or subcontractor is excludable in respect of the national security exclusion ground. Subsection (2) says that this requirement applies to all contracting authorities other than a Minister, a Department or a corporate officer of the House of Commons or House of Lords.
The clause is essential to ensure that contract terminations on the basis of national security are not made without ministerial consideration of the risk posed by the supplier and the impact of the decision. The requirement to seek ministerial approval will allow for the views of those tasked with protecting national security, including the security services, to be taken into account.
Clause 79 sets out the mandatory transparency requirement that all contracting authorities must publish a contract termination notice on termination of all public contracts, with the exception of private utilities contracts and user choice contracts that have been directly awarded. It specifies the time period by which it must be published, which is 30 days after a public contract has terminated. It also sets out that contract termination notices will contain information that will be specified in the regulations made under clause 93.
Clause 79(3) makes it clear that a reference to termination includes: discharge, expiry, termination by a party, rescission, or set aside by court order, whether or not under part 9 remedies. That list does not exclude other references to termination, and a contract termination notice should be issued at the conclusion of a contract, however that contract has ended.
Florence Eshalomi
Clauses 77 to 79 relate to provisions that allow for the termination of contracts in specific circumstances. The implied circumstances include the contract being awarded or modified in a material way in opposition to this Bill, or a supplier becoming an excluded or excludable supplier. They also provide for termination when a supplier is subcontracting all or part of the contract to an excluded or excludable supplier.
The Opposition understand and support the need for these provisions, but we have some concerns about the meaning of the clauses. When a contractor becomes an excluded supplier, will the contract be terminated automatically? It would seem strange that, although a contract cannot be awarded to a supplier under those terms, an excluded supplier is not automatically stripped of a contract when they become excluded.
Some of the provisions included under the excluded schedule are extremely severe. They include human trafficking offences, slavery offences, corporate homicide and even terrorism. We must make it clear that, when suppliers are convicted of such crimes, they must not provide contracts for public services. I hope we all agree on that. Does the clause allow for contracts with excluded suppliers to be automatically terminated, or is that at the discretion of the contracting authority? That is a really important point, and I hope the Minister will be able to clarify it. The public would not expect a supplier that has been convicted of terrorism to still be carrying out public contracts, even if the contracting authority decides it is right.
We also have concerns about how discretionary exclusion grounds are treated in this part of the Bill. As I have previously said, we want consistency in the Bill on when these grounds are applied. We do not believe that it makes sense for a company to have its contract terminated by one contracting authority for, say, environmental misconduct, but in the same breath keep a similar contract with similar risk with another contracting authority based simply on the decision of the authority. A lot of that is inconsistent and confusing, which has been highlighted, and it means suppliers that fall foul of discretionary exclusion grounds to the degree that a contract can be stripped from them may still be providing services to the public in other areas. The Minister has highlighted the need for discretion, which we understand, but surely there should be some level of consistency.
I also raise the inconsistency between national security in clause 78 and how the Minister laid it out previously. We do not wish to vote against clause 78, and we believe that it is the right way to carry out public procurement when considering national security. As the name suggests, national security is a national issue. However, during the Minister’s remarks on our amendments 15 to 19, he said:
“Amendments 15 to 19 seek to make exclusion on national security grounds mandatory, rather than discretionary. Any risk to national security should of course be taken very seriously indeed, but it is right that we leave some scope for nuance and flexibility in the application of the exclusion ground. Suppliers may pose a risk in some contexts, but not in others.”
The Minister went on to say:
“It is important to note that contracting authorities must consider all exclusion grounds, mandatory and discretionary, against every supplier in each procurement.”
He also said:
“There would be a balance of risks. Not all security threats are proven. Of course, it is up to the authority to assess the concerns”.––[Official Report, Procurement Public Bill Committee, 2 February 2023; c. 113.]
Based on what the Minister said in response to our amendments, there is some inconsistency in this approach. We need verification to identify a national security threat on a national scale and to disregard a contract on that basis, but to say that awarding or terminating a contract for a national security threat is at the discretion of authorities is a little contradictory.
For example, let us take what happens when a contracting authority identifies a threat. If the authority decides not to terminate the contract regardless, the contract is awarded with no follow-up from the Government and no check that it is a threat. If the authority decides to terminate the contract, it needs to go through a check with the Minister and confirm whether it is a threat. We think that is the right course of action, but why should the decision effectively be taken at different levels? Surely there should be an obligation to check with the Government regardless of whether the contract is terminated or not. At the very least, the Government can advise on the decision not to terminate the contract based on the threat.
As I and those who submitted evidence have highlighted, we can see procurement departments in many organisations being overstretched. We cannot expect those very same contracting authorities we want to come forward to bid for public contracts to act as MI5 or national security experts.
The Chair
I call the Minister, mindful that there will be a vote in the House at 4.12 pm.
Alex Burghart
I will try to contain my remarks to the next few minutes. Before I get to the specifics, I should for the sake of posterity record that, by working so hard today, hon. Members have reached the end of the selection list. Had more groupings been available, they would no doubt have wished to go further—[Interruption.] Cries of “More, more!” were heard from the Opposition Benches.
I will return to some of our previous conversations. As I said earlier to the hon. Member for Vauxhall, there will be times when a supplier may have made errors and got itself into trouble. It may be the case that there are times when a company has suppliers over which there are national security concerns, but they supply goods that cannot be found anywhere else and do not in themselves present a risk to national security. That is the role of the difference. The Division bell is ringing, but I am happy to pick up on this when we meet again on Thursday.
Question put and agreed to.
Clause 77 accordingly ordered to stand part of the Bill.
Clauses 78 and 79 ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Julie Marson.)