Procurement Bill [ Lords ] (Seventh sitting)
Thursday 9th 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 9 February 2023 - (9 Feb 2023)
The Committee divided: - Ayes: 4 / Noes: 7 - Question accordingly negatived.
The Committee divided: - Ayes: 4 / Noes: 7 - Question accordingly negatived.
The Committee divided: - Ayes: 1 / Noes: 7 - Question accordingly negatived.
The Chair
Before we begin, I remind you that Hansard colleagues will be grateful if Members could email their speaking notes to hansardnotes@parliament.uk. Please switch electronic devices to silent. Tea and coffee are not allowed during sittings.
Clause 80
Conflicts of interest: duty to identify
Florence Eshalomi (Vauxhall) (Lab/Co-op)
I beg to move amendment 116, in clause 80, page 54, line 32, after “who” insert “directly or indirectly”.
The Chair
With this it will be convenient to discuss the following:
Amendment 117, in clause 80, page 55, line 2, at end insert—
“‘person who directly or indirectly influences’ includes but is not limited to—
(a) civil servants;
(b) government contractors or consultants and their employees;
(c) special advisers;
(d) parliamentarians; and
(e) political appointees.”
Clause stand part.
Clauses 81 and 82 stand part.
Florence Eshalomi
It is a pleasure to serve under your chairship again, Mr Mundell.
Clauses 80 to 82 concern cases where a conflict of interest may arise during the procurement process. In particular, the clauses place obligations on contracting authorities to identify and mitigate against conflicts of interests where they may arise. The clauses are important, and it is correct, alongside the principle of non-discrimination, to ensure that suppliers that may be able to unduly influence the decisions of contracting authorities are excluded from the procurement process.
It is critical that taxpayers’ money is spent in the right way. We cannot and must not have a repeat of the back-room deals that we saw during the covid pandemic. The public expect their money to be spent in an open and transparent way, and they expect the value for money that comes with openness and transparency.
We know what happens when that is not the case. I have referred to this figure before, but it is important to keep stating it: the Government have written off £10 billion of public money spent on personal protective equipment that was unusable, unsellable, overpriced or undelivered. With £770,000 a day being spent to store unused gloves, goggles and gowns, that is not acceptable. The companies that got into the VIP lane were 10 times more likely to win a contract, and Ministers have now admitted that many did not go through the so-called eight-stage process of due diligence.
We know, therefore, that much more needs to be done to stand steadfast against conflicts of interests in procurements. We believe that clauses 80 to 82 may offer a step forward, but we also think that we could go even further to capture the wide range of influence on procurement decisions that may give rise to conflicts of interest.
Our amendments 116 and 117, taken together, would achieve that. They were suggested by Spotlight on Corruption in its written evidence to the Committee. We feel that they strike the right balance to increase scrutiny in the procurement system. In justifying the amendments, Spotlight on Corruption stated:
“As the Mone affair and the VIP lane as well as other COVID procurement scandals have shown, indirect influence over procurement decisions pose a real risk to public perceptions about the fairness and integrity of procurement. The fact that a minister, special adviser, or politician referred a company for emergency covid procurement appears to have been at least entertained as part of the decision-making process by procurement officials in awarding contracts. While this was an emergency procurement context, it has exposed the vulnerabilities in the UK procurement regime and the potential for those in political office to influence procurement decisions.
Sir Nigel Boardman’s reviews specifically recommended that conflicts of interest in procurement should be identified in relation to a broad range of actors, including: civil servants, special advisers, contractors, consultants and political appointees. The ‘VIP lane’, as well as the Owen Paterson affair, show that members of parliament, who may have private interests, can also seek to influence government procurement decisions in favour of those interests.
As it is not specified on the face of the Bill what the term ‘influences’ may include, it is not clear whether the term will be interpreted narrowly or more widely by contracting authorities. To ensure that it is interpreted widely, in our view, the Bill should contain specific language to reflect indirect influence (which might include lobbying or financial interests), and the wide range of people who may exert such influence.”
The Opposition agree with Spotlight on Corruption’s arguments and believe that it makes a strong case for the inclusion of such language in the Bill.
If we are asking the public to trust us with their money, we must never let the VIP lane scandal happen again. I hope the Minister will agree that the amendments would strengthen our defence against undue influence, and I urge him to support them.
The Parliamentary Secretary, Cabinet Office (Alex Burghart)
It is a pleasure to serve under your chair-personship again, Mr Mundell. It is good to be back for the fourth day of deliberation in Committee.
Clause 80 is clear that a contracting authority must take all reasonable steps to identify conflicts or potential conflicts of interest on the part of those acting in relation to a procurement. Amendment 116 is impractically broad. The Bill already provides safeguards in clause 82(4), which could lead to the contracting authority taking steps in relation to a person with an indirect influence on a procurement, where the contracting authority believes that such a circumstance would be likely to cause a reasonable person to believe there to be a conflict.
Extending conflicts of interest to be identified in respect of any individual with only an indirect influence over the decisions of contracting authorities, as the amendment seeks to do, would go too far. It would add unnecessary administrative burdens on contracting authorities and potentially make it impossible for them to comply with the requirements of the Bill. It is not reasonable for a procurement officer to be expected to identify all individuals who may indirectly influence a procurement decision, let alone their potential conflicts of interest, in respect of every supplier tendering for every procurement. For example, it could lead to a school, when undertaking any public procurement, having to identify and consider the interests of all senior civil servants and Ministers in the Department for Education and the Treasury. That would be neither practical nor desirable.
Amendment 117 would add a list of certain individuals for contracting authorities to consider when identifying conflicts of interest. Such a list of individuals is better kept in guidance rather than legislation. All the persons listed in the amendment, where they have influence in respect of the relevant procurement decision, will already be caught by the current provision but may not be relevant in every single procurement by every single contracting authority. We therefore respectfully request that the amendments be withdrawn.
Clause 80 sets out the obligations on a contracting authority to take all reasonable steps to identify and keep under review potential or actual conflicts of interest. It is followed by clause 81, on duties to mitigate, and clause 82, on conflicts assessments. When conflicts of interest are not properly identified and mitigated, there can be far-reaching consequences, which can lead to accusations of fraud, bribery and corruption, legal challenges and the undermining of public confidence in the integrity of our public institutions.
Clause 80 details the individuals in respect of whom conflicts, or potential conflicts, should be identified. That includes people acting for, or on behalf of, the contracting authority in relation to the procurement; a person with influence on the decision making; and a Minister acting in relation to the procurement. The clause also defines what constitutes an interest, which can be a personal, professional or financial interest, either direct or indirect.
Clause 81 sets out obligations on a contracting authority to take all reasonable steps to mitigate conflicts of interest. As a rule, it is important that we treat all suppliers the same in our procurements. That is critical for us to ensure fair and open competition and deliver the best value for money. At the same time, a conflict of interest relating to a supplier should not automatically lead to their exclusion. We must therefore ensure that where conflicts of interest are identified, contracting authorities can first attempt to put mitigations in place to avoid a given supplier having an unfair advantage or disadvantage. A contracting authority must take all reasonable steps to do so and may require a supplier to take reasonable steps too. However, to ensure open competition and genuine fairness in the procurement, if a conflict of interest does lead to an unfair advantage that cannot be avoided, or the supplier refuses to take certain steps to avoid it, that supplier must be excluded.
Clause 82 places specific duties on contracting authorities in relation to conflicts assessments. In large part, those duties are to ensure compliance with clauses 80 and 81. A conflicts assessment is a document that includes the details of both the conflicts of interest identified and any steps taken to mitigate them. The structure or format of such a document will remain within the discretion of the contracting authority, and is likely to depend on the procurement. A contracting authority must prepare a conflicts assessment at the start of the procurement and keep it under review, revising it where necessary. When publishing a relevant procurement notice, the authority must confirm that those actions have been undertaken. This is a new duty on contracting authorities that strengthens the existing requirements relating to conflicts.
It is important to clarify that there is no duty to publish the conflicts assessment; rather, contracting authorities must publish confirmation that the assessment has been prepared or revised. Conflicts of interest can adversely impact procurements at any point of the commercial lifecycle, and the Committee will note that the definition of “relevant notice” in clause 82(8), which specifies when there should be confirmation that the conflicts assessment has been revised, reflects that fact.
I respectfully request that the amendment be withdrawn, and commend the clauses to the Committee.
Florence Eshalomi
I understand the Minister’s concern about additional bureaucracy, but we should aim to make sure that there is no interpretation regarding undue influence. There is a view that the Bill should contain specific language to reflect indirect influence. I hope the Minister agrees that the notion of transparency and making sure that no perceived conflicts arise should be fully addressed in order to ensure that we restore public trust, especially as it relates to Government money—taxpayers’ money—and large contracts. We need to stamp out some of the concerns that many people rightly highlighted about what happened during the covid-19 pandemic. Yes, there were some cases in which emergency contracts had to be procured, but as I have already mentioned, on numerous occasions, the proper procedure was not followed. I hope the Minister agrees that the Bill should contain specific language reflecting what is termed indirect influence.
Question put, That the amendment be made.
Alex Burghart
The rules on contracts that are valued below the thresholds set out in schedule 1 broadly represent a continuation of the position under the Public Contracts Regulations 2015 and have four main functions. They apply some basic procurement standards on transparency; they continue the ban on burdensome pre-qualification stages; they ensure that suppliers get paid promptly; and they ensure that small and medium-sized businesses are considered. These rules are justifiably simpler and less onerous for contracting authorities and suppliers, given the low value of the contracts concerned. Taken together with the new duty to have regard to SMEs in clause 85, the rules will help to make Government procurement more accessible to SMEs and voluntary organisations, charities or social enterprises.
Florence Eshalomi
I thank the Minister for outlining the clauses, which, as he highlighted, deal with below-threshold contracts. While such contracts do not meet the threshold for inclusion in many parts of the Bill, they will still need to follow some bits of regulation in how they are processed. In particular, a contract details notice must be published for contracts above £12,000 or £30,000 —known as notifiable below-threshold contracts—after they are entered into. Below-threshold contracts must follow the procedures relating to the 30-day payment rules.
The clauses are almost identical to current regulations, and we support their inclusion in the Bill. We feel that the extra scrutiny is welcome for groups such as SMEs, which may find that these contracts are the right size for their enterprise to deal with. It is important to strike the right balance. In general, we are happy with the clauses and will not oppose them, but I would ask the Minister what protocol will be followed when the threshold figures are altered.
Alex Burghart
It will be in secondary legislation.
Question put and agreed to.
Clause 83 accordingly ordered to stand part of the Bill.
Clause 84 ordered to stand part of the Bill.
Clause 85
Regulated below-threshold contracts: duty to consider small and medium-sized enterprises
Amendment proposed: 2, in clause 85, page 57, line 27, after “enterprises” insert “and co-operative societies”.—(Florence Eshalomi.)
See explanatory statement to Amendment 1.
Question put, That the amendment be made.
The Chair
With this it will be convenient to discuss the following:
That schedule 9 be the Ninth schedule to the Bill.
Clause 89 stand part.
Government amendment 59.
Amendment 102, in clause 90, page 60, line 32, at end insert—
“(1A) A Minister of the Crown acting under subsection (1) must acquire the consent of Scottish Ministers.”
Government amendment 60.
Clause 90 stand part.
Government amendments 69, 77, 79 and 81 to 83.
Government new clause 11—Trade disputes.
Alex Burghart
Part 7 of the Bill is concerned with the implementation of the United Kingdom’s international obligations. The UK is currently party to 24 international agreements that contain procurement obligations, with each listed in schedule 9 to the Bill. They include trade agreements signed before our exit from the EU, such as the World Trade Organisation Government procurement agreement, and the recently signed Australia and New Zealand trade agreements.
Clause 88 uses the term “treaty state suppliers” to identify suppliers from countries that are entitled to benefit from one of the international agreements listed in schedule 9. The clause ensures that treaty state suppliers have the right to no less favourable treatment than domestic suppliers under the UK procurement regime to the extent covered by their relevant agreement, including the right to seek remedies. As the UK negotiates new international agreements or is required to amend existing agreements, delegated powers under subsection (3) will allow schedule 9 to be revised accordingly. In this way, schedule 9 will continue to reflect our updated international obligations and ensure that the UK remains compliant.
It is important for the Committee to understand that the delegated power in subsection (3) does not allow for substantive changes to the rules set out in the Bill regime, even where required by an international agreement. This is partly the reason why separate primary legislation is required to implement the UK-Australia free trade agreement. It is therefore not capable of being used to implement rule changes that might affect matters such as food standards, environmental standards or control over the health service. For that, the Government would need to return to Parliament with further primary legislation. Schedule 9 to the Bill is a list of international agreements that contain substantive procurement obligations and to which the UK is party.
Clause 89 sets out that a UK contracting authority may not discriminate against a treaty state supplier; that is to say that UK procuring entities may not treat the goods, services and works of treaty state suppliers less favourably than those of UK suppliers. Clause 89 is imperative in order to meet our international obligations. The principle of non-discrimination is firmly embedded in the WTO’s Government procurement agreement and other international agreements to which we are party. Being party to these agreements will ensure that UK goods, services, works and suppliers also receive the same fair treatment from our trading partners. In doing so, the UK will continue to enjoy the benefits of existing and future trade agreements, including guaranteed access to procurement opportunities in some of the world’s largest economies.
The power set out in clause 90 allows regulations to be made in relation to devolved procurement in Scotland to ensure that treaty suppliers are not discriminated against. The power is to be exercisable concurrently by a Minister of the Crown or Scottish Ministers, meaning that in the course of implementing international obligations under the Bill, a Minister of the Crown could also implement obligations for the whole of Scotland, in respect of both reserved and devolved procurement. This recognises both that the implementation and observation of international obligations is a devolved matter, but that the UK Government are ultimately responsible for compliance with our international obligations.
Amendments 59 and 60 seek to address a concern raised by the Scottish Government that the power in clause 90 is broader than is necessary, and in particular broader than the equivalent power that allows the updating of schedule 9 to the Bill to reflect new free trade agreements.
Although I can assure the House that it is not the Government’s intention to use the powers in clause 90 to interfere with Scottish procurement rules, we have listened and added a number of factors that would limit the exercise of the power. These amendments will ensure that either a Minister of the Crown or Scottish Ministers would only be able to make provision that is equivalent to provision in part 7 and only when it is necessary in order to ratify or comply with an international agreement, such as by adding to or amending the list of international agreements in Scottish procurement legislation. It could not be used to amend Scottish procurement rules substantively. I thank colleagues in Scotland for working constructively on this point.
New clause 11 and the consequential amendments 69, 77, 79, 81, 82 and 83 are needed to give the UK the ability to take necessary retaliatory or compensatory action as a result of a procurement-related dispute under the World Trade Organisation’s Government procurement agreement, or with a country with which we have a free trade agreement on procurement.
Under the UK’s trade agreements, if a country does not comply with its international public procurement obligations, we must be able to implement practical retaliatory measures; otherwise, we may not receive the full benefits of the commitments under these agreements. These amendments would give the UK a power to amend its domestic procurement legislation to take such action, for example to remove market access to particular procurement markets for suppliers from a trading partner that is in breach. Similarly, if the UK is in breach, it may need to implement measures to bring itself back into line.
This power is clearly limited in scope to procurement-related disputes and can only be used to make provision relating to procurement. The power cannot be used to address disputes relating to other areas of the UK’s trade agreements. It will also be subject to the affirmative procedure, so that there is a sufficient level of scrutiny in Parliament when it is to be used.
Without these amendments, the UK would be at a disadvantage among its trading partners, because it would not be able to take retaliatory action to incentivise other countries to comply with their procurement commitments and, in the absence of the necessary domestic legislative mechanism to compensate its partners in case of non-compliance, the UK would not be viewed as a trusted international partner.
Chris Evans (Islwyn) (Lab/Co-op)
It is a pleasure to serve under your chairmanship, Mr Mundell, on what is the fourth day of our deliberations in this Committee.
Mr Mundell, you, my hon. Friend the Member for Merthyr Tydfil and Rhymney, the hon. Member for Aberdeen North and I are all members of the Celtic fringe, and we have all been accused in the past, somewhat unfairly, of speaking too fast. However, the Minister put us to shame just now, so I wonder whether he has Scottish or Welsh roots somewhere. [Laughter.]
As the Minister set out, part 7 of the Bill, which includes clauses 88, 89 and 90, sets out the implementation of international obligations in relation to procurement. These clauses have a strong theme of ensuring that no discrimination takes place between contracting authorities and treaty state suppliers, which are set out in schedule 9 to the Bill. Clause 90 also reaffirms this for procurements made by devolved Scottish authorities.
What is important about this part is our commitment to meeting our international obligations. I know from my role as a shadow Defence Minister how important it is to be an active member of the international community. It is important not only for the UK’s standing in the world; I have also found that when we meet these standards, we are also doing the best for this country here at home.
I think that we were all deeply moved yesterday by President Zelensky’s speech in Parliament. The war in Ukraine is a prime example of how important it is to meet our international obligations. By donating weaponry to Ukraine, we are aiding a member of our international community in their fight against an illegal invasion. However, if we are to continue to support the international community, we need to ensure that our procurement system can keep up.
As it stands, we will have a gap in our defence capabilities. In March 2021, the Defence Committee concluded that the Army would be “hopelessly under-equipped” in “obsolete armoured vehicles” and would be “very heavily outgunned” if it was called to fight an adversary, such as Russia, in eastern Europe in the next few years.
The war in Ukraine has shown us how dangerously close we are to this reality. We need to ensure that we are capable of defending ourselves first, so that we can then help others in need. I believe that a commitment to buy, sell and make more in Britain within our procurement system would help us to achieve that. Now, more than ever, we have to ensure we continue our commitment to a fairer world. I believe the way we conduct our procurement has a huge role to play in that.
Kirsty Blackman (Aberdeen North) (SNP)
I agree with the hon. Member for Islwyn that the Minister is giving us a run for our money today. I feel like I was speaking particularly slowly on Tuesday, as I was not feeling great and my brain was taking a while to catch up, but hopefully I can be a bit speedier today and get through with a higher level of coherence. Apologies if I said anything then that did not make much sense.
I will focus on clause 90, the Minister’s amendment 59 and our amendment 102. The Bill seeks to confer the power exercised concurrently by UK and Scottish Ministers to implement the Government procurement chapters of the agreements with Australia and New Zealand by secondary legislation. We agree with that and have no query about the fact that the negotiation of international agreements is a reserved matter but, as the Minister noted, the implementation in devolved areas, such as Government procurement, is a devolved matter. Procurement is devolved to the Scottish Government and Scottish Parliament, and we make our own decisions about how best to implement that.
The correct constitutional and devolution-respecting solution would be to amend the Bill to grant implementation powers solely to Scottish Ministers in this regard. I agree that the Minister has put forward an amendment that changes what clause 90 says, but the amendment also says:
“Regulations under subsection (1) may not be made unless a Minister of the Crown considers, or the Scottish Ministers consider, that the regulations are necessary in order to ratify or comply with an international agreement to which the United Kingdom is a signatory.”
The “or” is what I have a problem with, on the basis that it still allows the UK Government to act in devolved areas. I recognise the restrictions put in place by the rest of the amendment in terms of the breadth of the action that can be taken, and I recognise that the UK Government Minister has worked with colleagues in the Scottish Parliament to ensure that we are getting a bit closer together; indeed, it is closer than in the Bill that originally came to us from the Lords. However, I still feel that amendment 102 is necessary to protect the devolution settlement, because we should not have UK Government Ministers acting in devolved competencies. They should not be able to take this decision wherever they feel it is necessary to do so.
We are not for a second suggesting that we would not act in concordance with our international agreements, because we would. I am sure the Minister would not suggest otherwise, as the Scottish Government do stick to their international agreements—regardless of whichever Government signed up to them, we do our very best to fulfil them. However, this is about the implementation of procurement rules and ensuring that that works in the best possible way for Scotland.
The Scottish Parliament is writing legislation on procurement for Scotland, which, as has been noted a number of times in this Committee, is distinct and separate in Scotland. We already have our own procurement system, which works on a different basis to the procurement system down here. We have already talked about the real living wage running through our procurement rules, where it is not in the rest of the UK. We already have a distinct situation. The UK Government are not elected to take this action in Scotland. The Scottish Parliament is elected to take this action in Scotland and to implement it in the way that will work best for our procurement systems and for the people of Scotland, who elected the Scottish Parliament to do that.
Amendment 102 says:
“A Minister of the Crown acting under subsection (1) must acquire the consent of Scottish Ministers.”
I do not think that is too much to ask on the basis that this is a devolved area. Actually, if the UK Government are making new procurement rules that relate to Scotland’s implementation of its international agreements, ensuring the consent of Scottish Ministers means those rules will work within our procurement frameworks, systems and situations in order that those agreements can be properly implemented.
The Scottish Government want and intend to implement these international agreements properly. However, in order for that to happen as written, the UK Government will need a significant understanding of the Scottish procurement system, which is distinct from that of the rest of the UK. Our system will continue to be distinct in order to be able to write appropriate legislation that will apply in Scotland and work within our devolved legislation. It seems like a burden for UK Government Ministers to have to learn that, when actually, they could just say to Scotland, “How would you like this to be written?” and the Scottish Government could say, “This is how we would write it.” We could then have a discussion about whether or not that implements our international agreements. I am certain that it would, because the Scottish Government are good at acting in compliance.
Lastly, respect for the devolution settlement is an important tenet of our democracy. Devolution to Scotland is what the Scottish people voted for. We have the Scottish Parliament, which is significantly more popular than the Westminster Parliament in terms of the actions taken on behalf of the Scottish people. It is also significantly better regarded in terms of accessibility. I do not mean accessibility simply in terms of the building; I mean accessibility in terms of people being able to come and speak to Ministers and to have Ministers or civil servants listen and take action that improves their lives. It is much closer to people, and people feel that. Moving this process even further away seems like a real negative for people in Scotland.
David Duguid (Banff and Buchan) (Con)
I am listening to the hon. Member very carefully. Given her assertion that only people who are elected to the Scottish Parliament should make these decisions, should not she and I, and indeed the Chairman of the Committee, get our coats and head home early today?
Kirsty Blackman
As I mentioned in previous speeches, we are taking decisions here for the entirety of the UK. Like it or not, I have been elected in the same way as the hon. Member has, as a UK member of Parliament. We therefore have the right in this place to take decisions on procurement in England and procurement in Wales. We do not have the right to take decisions on procurement across the UK, given the agreement that the implementation of procurement and how it works in Scotland is devolved.
In fact, this Bill does not confer any rights on Members of Parliament to make decisions for the people of Scotland. It confers the power on Ministers to make that decision, which is very different from conferring it on Parliament. I have spoken before about the Executive power creep of recent years, which continues to give more power to the Executive and less to parliamentarians and MPs in this place. It is therefore important that the Scottish Parliament gets to take these decisions. I do not think the UK Government should be allowed to override the devolution settlement whenever they feel it convenient to do so, as we saw recently when they used section 35 to stop legislation put through the Scottish Parliament on a cross-party basis.
Again, the Bill is a further overreach of the UK Government’s powers. We are not suggesting for a second that the UK does not have the right to sign up to international agreements. It absolutely does, but we have the right in Scotland, as part of the devolution settlement, to implement those rules in devolved areas. In that regard, I would like to push amendment 102 to a vote. I am not convinced that I will get terribly much support, but I will do my best anyway. Hopefully the Minister will move Government amendment 59, which is a step forward, as I have said, and I hope he will also agree to the inclusion of our amendment.
Alex Burghart
To address the most pressing issue in this group, I must confess to having a Celtic heritage. Indeed, my grandfather was from south Wales, and his grandfather was born in the workhouse, not terribly far from the constituency of the hon. Member for Islwyn, so he has found me out.
Alex Burghart
One family, one Wales.
I am pleased to hear the hon. Gentleman support NATO and the Government’s actions with regard to our allies in Ukraine. He will know that we have a trade agreement in place with Ukraine, and yesterday was a sign of the ongoing, very close relationships between President Zelensky’s Government and our own, and the necessary partnership in the face of tyranny.
Let me turn to amendment 102, in the name of the hon. Member for Aberdeen North. I must assure her at the outset that this is a power that the UK Government would only need in extremis. I completely understand that Holyrood and the Scottish Government—certainly under the SNP, I am sure—would always want to implement our international agreements. But what if another party that was not so upstanding was one day to be in power? What if another group of nationalists was to seize control from the SNP and wished to hold up our international agreements? There are other nationalist options—the former head of the hon. Lady’s party has formed a renegade bunch running under the name Alba—and perhaps they would not be as reasonable the hon. Lady’s party. Perhaps they would wish to prevent us from implementing our international trade agreements. That would not only prevent us from delivering the benefit of those agreements to the whole of the United Kingdom, but completely ruin our chances of signing future trade agreements. We understand her objections, but we believe that it is essential to ensure that in all circumstances the UK Government can make good on the promises that they sign with partners.
Kirsty Blackman
The Minister is suggesting that clause 90 will be used only in extremis. Do I read that correctly, or is that not his suggestion?
Alex Burghart
Certainly, if there was an international agreement and the Scottish Government wished to legislate or regulate to implement it, that would be our preference. As I say, it is important that we put safeguards in the Bill. On the hon. Lady’s point about burdens being placed on officials by having to keep up with procurement regulations in Scotland, I can assure her that my officials welcome the burden, and that their understanding of such regulations is so strong that they would not notice the extra weight at all. I hope that she will not move her amendment.
Question put and agreed to.
Clause 88 accordingly ordered to stand part of the Bill.
Schedule 9 agreed to.
Clause 89 ordered to stand part of the Bill.
Clause 90
Treaty state suppliers: non-discrimination in Scotland
Amendment made: 59, in clause 90, page 60, line 32, at end insert—
“(1A) Regulations under subsection (1) may only include provision that is equivalent to provision in—
(a) subsection (1), (2), (5) or (6) of section 88 (treaty state suppliers),
(b) section 89 (treaty state suppliers: non-discrimination), or
(c) Schedule 9 (specified international agreements).
(1B) Regulations under subsection (1) may not be made unless a Minister of the Crown considers, or the Scottish Ministers consider, that the regulations are necessary in order to ratify or comply with an international agreement to which the United Kingdom is a signatory.
(1C) In subsection (1B), the reference to being a signatory to an international agreement includes a reference to having—
(a) exchanged instruments, where the exchange constitutes the agreement;
(b) acceded to the agreement.”—(Alex Burghart.)
This amendment would mean that a Minister of the Crown or Scottish Ministers, in making regulations under clause 90, may only make provision equivalent to provision in Part 7 and if the Minister considers, or Scottish Ministers, consider it necessary in order to ratify or comply with an international agreement.
Amendment proposed: 102, in clause 90, page 60, line 32, at end insert—
“(1A) A Minister of the Crown acting under subsection (1) must acquire the consent of Scottish Ministers.”—(Kirsty Blackman.)
Question put, That the amendment be made.
Alex Burghart
A contracting authority is required to publish a pipeline notice if it reasonably expects that, in the coming financial year, it will pay more than £100 million under relevant contracts. The pipeline notice in clause 91 is designed to set out details of public contracts that a contracting authority proposes to enter into in the forthcoming 18 months with an estimated value of more than £2 million. It provides potential suppliers with advance notice of upcoming opportunities and allows them to plan for future work. The notice must be published within 56 days of the first day of the relevant financial year. Private utilities and transferred Northern Irish contracting authorities are not required to publish pipeline notices.
Florence Eshalomi
The clause introduces pipeline notices, which mandate large contracting authorities to publish a pipeline of contracts worth over £2 million every year for the upcoming year. We question why it is £2 million when the Government have altered the other thresholds of that value to £5 million elsewhere in the Bill. Will the Minister clarify that for us? However, we do not oppose the lower number or the pipeline notices in general, so we are happy for the clause to stand part of the Bill.
Alex Burghart
The threshold of £2 million was set following the determination that that was the best balance of realising the benefits of transparency against the efforts made by contracting authorities in providing the information.
Question put and agreed to.
Clause 91 accordingly ordered to stand part of the Bill.
Clause 92
General exemptions from duties to publish or disclose information
Question proposed, That the clause stand part of the Bill.
Alex Burghart
Clause 92 sets out when contracting authorities may withhold—for example, by way of redaction—information that they are otherwise required to publish or disclose under the Bill. The two exemptions are for national security and sensitive commercial information. “Sensitive commercial information” is defined as information that “constitutes a trade secret” or would be likely to prejudice commercial interests if published or disclosed. The exemptions are modelled on their equivalents in the Freedom of Information Act 2000 and are intended to be understood and interpreted in the same way.
However, the FOIA is a scheme for responding to requests for information, whereas the Bill is about proactive publication by contracting authorities. The sensitive commercial information exemption is subject to an overriding public interest test, while the national security exemption is absolute. If the contracting authority relies on either of the exemptions to withhold or redact information, it must notify anyone to whom the information would have been provided that information is being withheld or redacted and why. The latter requirement is suspended if it would be contrary to the interests of national security to make such a notification.
Florence Eshalomi
The clause relates to a small number of reasons why information may not be published where it would otherwise be required under the Bill. Of course, we agree that some information is particularly sensitive and should not be disclosed to the public. I welcome the Minister’s assurance on ensuring that national home security is absolute. The reasons for non-publication in the clause are proportionate and sensible. We do not feel that this is controversial, and we will not oppose its addition to the Bill.
Question put and agreed to.
Clause 92 accordingly ordered to stand part of the Bill.
Clause 93
Notices, documents and information: regulations and online system
Question proposed, That the clause stand part of the Bill.
Alex Burghart
In support of the Government’s drive towards ensuring greater transparency in procurement, there are many provisions in the Bill that place requirements on contracting authorities to publish information. Clause 93 confers a power to set out the form and content of the information to be published or provided as well as the place it is to be sent. That is a broad but necessary power. The World Trade Organisation GPA sets out the core of the detail of many of the notices that we have described in the Bill, which will give hon. Members a clear indication about the sorts of information that will be required to be published using these powers.
However, the Government wish to push further and create additional transparency to that required by the GPA. For that reason, we have created new transparency obligations and proposed the power to set out the detail in clause 93. The flexibility inherent in taking that power allows us to tailor the transparency regime over time to ensure that we can benefit from greater transparency across the procurement landscape. The power allows us to set different requirements for different types of contract or different industries, depending on the needs and benefits of different areas.
Clause 93 also puts an obligation on the Government to establish and operate an online system for the purpose of publishing notices, documents and other information under the legislation. The online system must make notices, documents and other information published under the legislation available free of charge and accessible for people with disabilities.
Florence Eshalomi
Clause 93 is perhaps the most referenced throughout the Bill; it has been mentioned about 24 times. We did not expect the legislation to be all-encompassing, but we are now at clause 93 and we are seeing a little more deflection and can kicking. We support the implementation of a new digital system, but the reality is that we do not have any idea what it will look like based on the clause.
We have high hopes for the system, and it has the potential to be transformative for procurement, which we will get to during the debate on new clause 14. We believe it can be taken even further, as was the case in Ukraine. We can take inspiration from what is happening in Ukraine, and their heroic fight against Putin’s barbarism, as we heard during President Zelensky’s address yesterday. We must also take inspiration from their procurement system, even in the midst of what is going on.
I was pleased to hear the Minister say on Second Reading that he was pleased to let the House know that Ukraine was on our advisory panel and has informed the work on our single digital platform, which takes a lot from what Ukraine has done with ProZorro. The platform will enable everyone to have better access to public procurement data. Citizens will be able to scrutinise spending decisions, suppliers will be able to identify new opportunities to bid and collaborate, and buyers will be able to analyse the market and benchmark their performance against others on spending with SMEs, for example. That will provide better transparency, which will be better for taxpayers. Those are welcome words from the Minister, but at this stage, they are just words.
On Second Reading, the Minister also said:
“The platform is based on a system that we already have. We are confident that we will be able to introduce it in line with bringing this Bill into force. Obviously, we have to pass the legislation and get Royal Assent, and then there will be a settling-in period. But it is going to be functional very soon.”—[Official Report, 9 January 2023; Vol. 725, c. 383.]
How soon will that be? When is that target? We all agree the system has huge potential, but, as we have already seen in the promised version of the Bill and the version before us today, we cannot be certain about anything until it is in the statute book. Will the Minister commit today to introduce the regulations under the clause as soon as possible? I hope that he will deliver on the promises he made on Second Reading.
Alex Burghart
The hon. Lady will have already heard in our debates in Committee, on Second Reading and in Westminster Hall the huge range of areas in which we are bringing in additional transparency. The online digital platform will be the repository of sunlight that she is understandably so interested in. It is necessary at this stage for us to keep the primary legislation broad, so that there will be flexibility for Governments over time.
We intend to bring forward the online digital platform in 2024, bringing the Bill into force and allowing us to see the benefits. It will be a major step change in how we see evidence of public procurement. I hope the Opposition will welcome that.
Question put and agreed to.
Clause 93 accordingly ordered to stand part of the Bill.
Clause 94
Electronic communications
Alex Burghart
I beg to move amendment 61, in clause 94, page 62, line 37, after first “a” insert “covered”.
This amendment would restrict the requirements in respect of electronic communications systems to covered procurements.
The Chair
With this it will be convenient to discuss the following:
Government amendments 62 to 64.
Clause stand part.
Alex Burghart
We are introducing amendments 61 to 64 to clarify the use of electronic communication systems and the application of other systems in various commercial circumstances. Clause 94 currently requires that electronic communication systems must be
“free of charge and readily accessible”.
Our intention is to allow businesses, particularly SMEs, to easily access the necessary documents and systems to bid for contracts, ensuring that access is open to all. However, the term “electronic communication systems” is broad, and concerns have been raised with us that it could inhibit certain practices that are currently commonplace, thereby making the Bill overly burdensome. For example, it could constrict the ability of utilities dynamic markets to charge for membership, and of the Ministry of Defence to make use of systems that charge to preserve secure payments.
Amendment 62 therefore limits the free-of-charge obligation beyond the point when the public contract is entered into and disapplies it to utilities dynamic markets. We have also tabled amendments 61, 63 and 64, which ensure that the clause only applies to covered procurement, and that the security exception in clause 94(3) extends to the whole clause.
Clause 94 sets out how communications relating to a procurement should be undertaken. Electronic communications can help reduce procurement process costs for suppliers and contracting authorities; reduce procurement timescales; encourage access to opportunities for suppliers; facilitate compliance with the rules; and promote traceability and auditability in the procurement process. As such, for covered procurements, we want contracting authorities to, so far as practicable, communicate with suppliers electronically and ensure suppliers do likewise. Electronic communication systems must be free of charge and readily accessible to suppliers, generally available and interoperable with other systems, and accessible to people with disabilities. There is an exemption from the requirement to communicate electronically if doing so would pose a particular security risk.
Florence Eshalomi
These amendments tidy up this part of the Bill by limiting requirements that relate to covered procurement, limiting the obligations on information after the awards of contract or in dynamic markets, and ensuring that all parts of the clause are excluded in the case of security risks. I am pleased to say that we do not feel the amendments are controversial, and that they sensibly fix a gap that could otherwise have caused problems, so we will not oppose them.
Clause 94 concerns electronic communications. In today’s modern world, electronic and digital communication is the norm, and we should expect all suppliers to have access to electronic communication methods. Such methods are the norm in wider society. It is right that information is freely available. We must ensure that it is accessible to everybody, so we welcome subsection (2), which puts some principles of communication in the Bill. We are happy for the clause stand part of the Bill.
Amendment 61 agreed to.
Amendments made: 62, in clause 94, page 62, line 42, at end insert—
“(2A) Subsection (2)(a) does not apply in relation to an electronic communications system used, or required to be used—
(a) after the award of the public contract, or
(b) in relation to a utilities dynamic market.”
This amendment would create an exception to the requirement for electronic communications systems to be free of charge and readily accessible to suppliers where those systems are used after award of a public contract or in relation to a utilities dynamic market.
Amendment 63, in clause 94, page 63, line 1, leave out “Subsection (1)” and insert “This section”.
This amendment and Amendment 64 would extend the exception in subsection (3) to any requirement in clause 94 the contracting authority considers poses a security risk.
Amendment 64, in clause 94, page 63, line 2, after “communication” insert “, or the use of an electronic communication system meeting the requirements of subsection (2),”.—(Alex Burghart.)
This amendment and Amendment 63 would extend the exception in subsection (3) to any requirement in clause 94 the contracting authority considers poses a security risk.
Clause 94, as amended, ordered to stand part of the Bill.
Clause 95
Information relating to a procurement
Question proposed, That the clause stand part of the Bill.
Alex Burghart
Clause 95 provides that regulations may be made requiring certain information to be shared in a particular way. The power will be used to specify that contracting authorities and suppliers must use the central online platform, to be established under clause 93, and to provide detail on the proposed register of suppliers.
As part of the central digital platform, the register of suppliers will allow suppliers to submit the common data needed for procurements, such as their full name and registered office address, date of registration, VAT number and so on, in an evidence locker, so that they can “tell us once” across the public sector. All contracting authorities will be required to use data from the register of suppliers in their procurements.
Clause 95 also requires contracting authorities to keep records of any communication between the authority and a supplier in relation to a covered procurement. All data published on the central digital platform will be aligned to the open contracting data standard, or OCDS. Adoption of the standard will significantly improve data quality and sharing.
Florence Eshalomi
The clause puts in place similar provisions to clause 93, and has huge potential to make our procurement system more efficient—for example, by standardising how information is shared. That would simplify the procurement system for SMEs, which would not have to navigate the surprising number of ways in which the information in the Bill could be presented.
I will not reiterate my points on clause 93, but I have similar concerns that these provisions are just words, before we have seen the regulations laid, but I hope the Minister will make good use of them as quickly as possible.
Question put and agreed to.
Clause 95 accordingly ordered to stand part of the Bill.
Clause 96
Data protection
Question proposed, That the clause stand part of the Bill.
Alex Burghart
Clause 96 sets out that the Bill does not authorise or require a disclosure of information that would contravene the data protection legislation. It defines the data protection legislation as being the same as the meaning set out in the Data Protection Act 2018. The effect of the provision is that there is no requirement to publish information that would otherwise be prohibited from disclosure under the Data Protection Act 2018.
Florence Eshalomi
This clause, as the Minister outlined, considers data protection and ensures that the Bill does not work contrary to the Data Protection Act 2018. It is entirely correct, and we do not object to it.
Question put and agreed to.
Clause 96 accordingly ordered to stand part of the Bill.
Clause 97
Duties under this Act enforceable in civil proceedings
Alex Burghart
I beg to move amendment 65, in clause 97, page 64, line 6, at end insert—
“(6A) A supplier may not bring proceedings under this Part on the grounds that one or more of the following decisions of a Minister of the Crown was unlawful—
(a) a decision to enter a supplier’s name on the debarment list;
(b) a decision relating to the information included in an entry on the debarment list;
(c) a decision not to remove an entry from the debarment list, or revise information included in such an entry,
(see section 64 (debarment decisions: appeals)).”
This amendment would ensure that challenges to debarment decisions are all dealt with under clause 64 (debarment decisions: appeals).
The Chair
With this it will be convenient to discuss the following:
Clause stand part.
Clauses 98 to 103 stand part.
Government new clause 12—Part 9 proceedings and closed material procedure.
Alex Burghart
Clause 97 provides that, where a UK or treaty state supplier has suffered, or risks, loss or damage in consequence of a contracting authority’s failure to comply with certain parts of the Bill, that supplier can hold the contracting authority to account through civil proceedings for breach of statutory duty.
The relevant parts of the Bill govern the award, entering into and management of public contracts—namely, parts 1 to 5, 7 and 8. Clause 97(5) lists the few exceptions, however, where any compliance failure is best challenged through judicial review. Those are a failure to have regard to barriers facing SMEs, which is required by clause 12(4), and a failure to have regard to the procurement policy statements in clauses 13(9) or 14(8). Suppliers can also raise concerns with the procurement review unit, which may engage with the contracting authority on a non-statutory basis to resolve any issues.
Further, proposed new subsection (6A), courtesy of Government amendment 65, will ensure that, where a claim is on grounds that can be challenged through the debarment appeals process—under clause 64—the supplier cannot also bring a claim under part 9 on those grounds. Debarment decisions are taken by a Minister of the Crown, and not a contracting authority, thus it is appropriate for the Minister to respond to that claim. I invite hon. Members to accept the amendment.
Clause 98 says that if a contracting authority has been notified during a standstill period that a claim has commenced in relation to the procurement, the contracting authority is prevented from proceeding with the public contract until the claim is resolved. That is called automatic suspension. However, it is important that the court has a discretion to lift the automatic suspension on application by the contracting authority, and permit the contract or modification to be entered into, where that is necessary, despite a legal challenge. The factors for the court’s consideration when deciding whether it is appropriate to lift the suspension are laid out in clause 99 on interim remedies.
Interim remedies are, by their nature, applicable before the determination of any legal claim, at whichever point it is raised in the procurement—pre or post contract signature. Types of interim remedy under clause 99 may therefore include suspending the procurement process or performance of the contract.
An important aspect of clause 99 is the new test for lifting the automatic suspension. Unlike the current test derived from the 1975 American Cyanamid patent case, the test on the face of the Bill is specific to public procurement disputes, and enables the court to consider the merits of the case with reference to factors that ensure that the interests of the contracting authority, the claimant, the successful supplier and the public are considered in a fair and balanced way. The test will also apply to injunctions made to prevent the contracting authority from entering into the public contract where there is no automatic suspension.
Clause 100 deals with pre-contractual remedies. Suppliers bringing claims to the court at this time are most often seeking a fair opportunity to bid for the public contract. Accordingly, clause 100 includes remedies such as reversing a decision made by the contracting authority, or requiring an action such as the re-evaluation of tenders. The court may also award damages or make any other order it deems appropriate in the circumstances.
Clause 101 sets out the post-contractual remedies—that is, those that apply once the contract or modification has been entered into. For the most egregious breaches, such as failing to honour a mandatory standstill period, where the supply has been denied the opportunity to seek pre-contractual remedies the contract may be set aside by the court. This is currently known as the remedy of ineffectiveness, and an order of this kind makes the contract or modification invalid. Where a set aside ground applies per clause 102, the court must set aside the contract or modification unless there is an overriding public interest in maintaining the contract, in which case the court may instead reduce the scope or duration of the contract, and award damages.
In common with the existing regime, the award of damages to a supplier following a breach of statutory duty is discretionary, and judges can continue to make an appropriate assessment on the award of damages, including quantum, taking into account all the circumstances of the case, including the nature of the breach and its consequences. As I mentioned, clause 102 sets out the conditions that, if met, may result in the contract or modification being set aside, where the supplier has been denied the opportunity to seek pre-contractual remedies.
Clause 103 sets out the timescales in which a supplier must raise a claim under the Bill for breach of statutory duty. For all claims except some for set aside under clause 102, this will be within 30 days from when the supplier knew—or ought to have known—about the breach. For set aside claims, after the contract has been entered into, the time limit is 30 days from the date of actual or deemed knowledge, unless a contract details notice was not published, in which case the 30 days applies up to a long stop date of six months from contract signature. The six month cut-off also applies to claims for set aside of contract modifications. The court may extend the 30 days up to three months, but may not extend the six month cut-off. The timescales aim to give suppliers adequate time to raise legal challenges to the procurement, while also enabling contracting authorities to manage the risk of delay and disruption to their public procurements.
The Government have proposed new clause 12 to be inserted after clause 103 to allow the Minister for the Cabinet Office to apply for a declaration permitting closed material procedure applications in procurement challenge proceedings, as we discussed the other day. Closed material procedure involves the non-Government parties leaving the courtroom while sensitive material is heard.
Florence Eshalomi
Amendment 65 shifts the responsibility for the debarment list remedy to clause 64, rather than being under this part of the Bill. New clause 12 is a simple amendment that extends the power to the Minister for the Cabinet Office, rather than just the Secretary of State. Both amendments make sense and we do not oppose them.
Clauses 97 to 103 relate to remedy against contracting authorities when duties under parts of the Bill are breached. It is right that suppliers have remedy when contracting authorities do not follow due process while carrying out procurement. I listened to the Minister’s explanatory remarks about having a fair and balanced remedy for tenders and contractors, about discretionary damages, and about legal challenges and timescales, but has he given thought as to whether employees or contracted workers, or subcontracted organisations involved in delivering public contracts, can seek a remedy if the employment terms and conditions agreed as part of a contract are not delivered?
At the point of tender or contract, a supplier may commit to providing certain employment conditions—for example, the living wage. However, if the supplier in that example, having won the contract, does not implement an annual increase in the living wage, I hope the Minister agrees that there is little recourse for workers employed under the contract. There is no clear, robust mechanism for workers or parties such as trade unions to complain, or for workers affected to receive remedy if there is a failure to comply. There may be a redress mechanism or a point of contact for them in the contracting authority, but there is no certainty that complaints will be investigated, let alone remedied. We are concerned about that, as workers may miss out on long-term remedies. I would be grateful if the Minister responded to that point, either now or later in writing.
Alex Burghart
I am happy to respond to the hon. Lady with more detail in writing. I think her example relates to where a contracting authority had written in certain terms and conditions for the employees of a supplier, which then receives the procurement deal. In those circumstances, the supplier would obviously be in breach of the contract. That would be as serious as other breaches of contract. I will check the detail and get back to the hon. Lady, but it will obviously be within the supplier’s employees’ rights to contact the contracting authority and let it know that they believe the supplier is in breach.
Amendment 65 agreed to.
Clause 97, as amended, ordered to stand part of the Bill.
Clauses 98 to 103 ordered to stand part of the Bill.
Clause 104
Procurement investigations
Question proposed, That the clause stand part of the Bill.
Alex Burghart
Clause 104 enables the appropriate authority—a Minister of the Crown, a Welsh Minister or a Northern Irish Department—to investigate relevant contracting authorities’ compliance with the requirements of the Bill. It also obliges the relevant contracting authorities to provide reasonable assistance to the investigation within notified time periods, and allows the findings of investigations to be published.
Although the legislative definition of a relevant contracting authority in clause 104(5) excludes Departments, they may be subject to investigation; it is simply that Ministers do not require statutory powers to do this. Ministers already have the authority to investigate the procurement activities of Departments and ensure that any recommendations resulting from an investigation are duly taken into consideration. The Cabinet Office has established routes for co-operation with such investigations within Government. The new procurement review unit will utilise the statutory powers afforded by clauses 104 to 106, as well as non-statutory powers, on behalf of Ministers of the Crown.
Clause 105 allows the appropriate authority to make statutory recommendations as a result of an investigation under clause 104, where the investigation has identified that a contracting authority is engaging in action giving rise, or likely to give rise, to a breach of any requirement of the Bill. Clause 106 allows the appropriate authority to issue statutory guidance to contracting authorities, following an investigation under clause 104. This guidance will share the lessons of matters considered in the procurement investigation where those lessons are relevant to a larger number of, or indeed all, contracting authorities, including Departments, not just those that were the subject of the investigation. Contracting authorities are required by clause 106 to have regard to the published guidance when carrying out their public procurements and considering how to comply with the requirements of this Bill. It is left to the discretion of the appropriate authority to determine which contracting authorities would benefit from having regard to the guidance.
Subsection (3) highlights clauses 107 to 109, which restrict a relevant authority’s ability to issue guidance to particular contracting authorities. A Minister of the Crown can, with express consent from the devolved Administrations, issue guidance to all authorities, including devolved and transferred contracting authorities.
Florence Eshalomi
Clauses 104 to 106 concern oversight of procurement. Compliance with such is critical and it runs through the Bill.
As stated previously, the success of things such as the 30-day payment will ultimately come down to compliance with the Bill at all levels. We do not oppose these clauses, but we are concerned about the lack of ambition compared with what was outlined in the Green Paper. To take the Minister back to those proposals, the Green Paper states that the Government propose
“establishing a new unit, supported by an independent panel of experts, to oversee public procurement with powers to review and, if necessary, intervene to improve the commercial capability of contracting authorities. This unit would aim to improve capability and practices for the benefit of all contracting authorities and suppliers rather than provide remedies for an individual supplier on a specific procurement. This will be facilitated through greater information about purchasing and supply markets and behaviour, allowing targeted interventions to be implemented, optimising policy delivery and driving improvements in capability, behaviour and practice.”
We understand that proposals change between Green Papers and Bills—the Minister has touched on that before—but will he explain the reason for this reduction in ambition? What is proposed now?
There is a genuine question about to who will oversee compliance, especially as, despite the promises in the Green Paper, nothing has been done to reform the remedies system. The Bill contains little information on how the system will be overseen. It does not mention a procurement review unit, and refers only to an “appropriate authority”. Worryingly, the remit of the unit does not extend to central Government, Welsh Ministers or Northern Irish Departments, among other things. That seems like a large and inexplicable gap, which means that the unit will not be able to investigate compliance by any central Government Departments.
The “appropriate authority” has power to carry out an investigation of compliance by an authority under the Bill, and to make a recommendation; but it cannot make recommendations on compliance with a multitude of matters, including compliance with the national procurement policy statement, the national objectives in clause 12, or a specific procurement. On the face of it, that is relatively toothless, leaving the unit with limited remit and no enforcement powers. It also does not seem to be independent. That replicates the existing position, which we have discussed.
The Bill offers an opportunity to go further and to deliver better procurement systems across the country. Clearly, the Government do not wish to make the PRU into an appellate body, but the court system is an expensive and random way of enforcing compliance, tilted against challengers and small and medium-sized enterprises. While reforms of the court system belong outside the Bill, there is no evidence that any such reforms are being brought forward. We will not reject clauses 104 to 106, nor have we proposed amending them, but I hope that the Minister will address my concerns. I will welcome any feedback he can offer.
Alex Burghart
The hon. Lady will have heard me refer a number of times to the procurement review unit. We considered making the PRU an independent arm’s length body, but on consideration we felt that to do so risked creating unnecessary bureaucracy and cost and would lead to confused and overlapping responsibilities, with duplications of interactions with contracting authorities. Positioning it within the Cabinet Office best aligns it with other related functions to improve commercial standards among contracting authorities that are covered by the Government’s chief commercial officer.
We did not feel the need to put the PRU in the Bill, because it will not be a non-departmental body established in statute. The approach we are using here is similar to how the current public procurement review service utilises statutory powers under section 40 of the Small Business, Enterprise and Employment Act 2015, but is not specifically mentioned in that Act.
There are great opportunities for the PRU to assist in procurement processes across the country, which have been outlined during the debate.
Question put and agreed to.
Clause 104 accordingly ordered to stand part of the Bill.
Clauses 105 and 106 ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Julie Marson.)
Procurement Bill [ Lords ] (Eighth sitting)
Thursday 9th 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 9 February 2023 - (9 Feb 2023)
The Parliamentary Secretary, Cabinet Office (Alex Burghart)
I beg to move amendment 66, in clause 107, page 70, line 3, leave out “only” and insert “wholly or mainly”.
This amendment would mean that a public undertaking or private utility that operates “wholly or mainly in relation to Wales” will be treated as a devolved Welsh authority.
The Chair
With this it will be convenient to discuss the following:
Government amendment 67.
Clause stand part.
Clause 108 stand part.
Government amendment 68.
Clauses 109 and 110 stand part.
Government amendments 70 to 73.
Clause 111 stand part.
Alex Burghart
It is a pleasure to open this afternoon’s proceedings with this substantial grouping. I will begin with amendments 66 and 67. The Bill provides Welsh Ministers with various powers, and clause 107 sets out the parameters for their exercise by specifying the bodies that Welsh Ministers may regulate. Welsh Ministers may exercise powers under the Bill only in relation to devolved Welsh authorities and procurements covered
“under a devolved Welsh procurement arrangement.”
The Bill adopts the definition of a “devolved Welsh authority” found in section 157A of the Government of Wales Act 2006 and extends it, for the purposes of the Bill, to include certain public undertakings and private utilities, and other contracting authorities that ought reasonably to be regulated by Welsh Ministers for pragmatic reasons.
As the Bill was introduced, we recognised that the competence was ill-defined with respect to Welsh contracting authorities, and that it would have the effect of requiring devolved contracting authorities that operate principally in Wales but have some operations in England to follow two sets of rules. We have been working closely with the Welsh Government to include a pragmatic approach to the definition in the Bill. As such, we have agreed with the Welsh Government to include in their competence, for the purposes of the Bill, any contracting authority that is a private entity or utility that operates
“wholly or mainly in relation to Wales”
and whose activities
“do not relate to reserved matters”.
For example, Welsh Water, a not-for-profit private company providing water services in Wales, would fall into that category.
Finally, we have also agreed to extend Welsh Ministers’ competence in relation to a contracting authority that is not a devolved body for the purposes of the 2006 Act, but the functions of which are exercisable “wholly or mainly” in Wales and, wholly or mainly,
“do not relate to reserved matters”.
I am pleased to introduce the amendments and recognise that this is a pragmatic solution for many public bodies who operate, for example, in Herefordshire and across the border in Powys.
Turning to amendment 68, clause 109, which we will cover in a moment, establishes that
“A Minister of the Crown may exercise a power under this Act for the purpose of regulating a contracting authority that is a devolved Welsh authority only in relation”
to certain areas. The Welsh Government raised concerns that, as drafted, clause 121 would give an appropriate authority—in this instance defined as a Minister of the Crown—the power to
“by regulations make supplementary, incidental or consequential provision in connection with any provision of this Act.”
The provision set out in clause 121 is used to amend other legislation, where necessary, to ensure the functioning of the Bill, and it is right that Welsh Ministers should be able to agree to any subsequent amendment to legislation within their competence. I am pleased to change this so that any power for Ministers of the Crown to make consequential provision requires consent. That respects the devolved competence of procurement and makes practical sense for the Bill. I thank Welsh Government officials and Ministers for working closely to agree these important amendments.
As we have discussed, clause 107 sets out the parameters for the exercise of powers provided to Welsh Ministers by specifying the bodies that they may regulate. The Bill provides a Northern Ireland Department with various powers, and clause 108 sets out the parameters for their exercise by specifying the bodies that a Northern Ireland Department may regulate. A Northern Ireland Department may exercise powers under the Bill only in relation to “transferred Northern Ireland authorities”, as defined in the Bill, and any
“procurement under a transferred Northern Ireland procurement arrangement.”
For example, the Northern Ireland Department sets up a framework for services that could be used by UK or Welsh contracting authorities.
The starting point of the competence of Northern Ireland Departments is that conferred on them by the Northern Ireland Act 1998, which is that they are competent in respect of a public authority whose functions are exercisable only
“in or as regards Northern Ireland”
and are wholly or mainly transferred functions—that is, neither reserved nor excepted.
In addition, we have agreed with the Northern Irish Government to include within their competence, for the purposes of the Bill, any public or private utility that operates only in, or as regards, Northern Ireland and whose activities do not relate to reserved matters. For example, Northern Ireland Water Ltd, a company providing water services in Northern Ireland, would fall within that category.
Clause 109 sets out certain restrictions on how a Minister of the Crown may exercise powers created by the Bill, taking into account that public procurement is largely a devolved matter in Wales and Northern Ireland and that, as such, certain functions fall within the regulatory ambit of Welsh Ministers or a Northern Ireland Department. The clause sets out how, where two bodies can both exercise powers, those concurrent powers are to be exercised.
The clause establishes that a Minister of the Crown may exercise a power under the Bill for the purpose of regulating a devolved Welsh authority only in relation to procurement under a reserved procurement arrangement or transferred Northern Ireland procurement arrangement. In respect of Wales, this means that if a Welsh devolved authority uses a framework or dynamic market established by a reserved body such as the Crown Commercial Service, it must do so in accordance with reserved rules. That means, for example, that they must have regard to any national procurement policy statement issued by a Minister of the Crown, rather than a policy statement issued by Welsh Ministers.
That restriction, however, does not extend to clause 66 on electronic invoicing or to clause 106 on the issuing of guidance following a procurement investigation. Instead, these powers, and the powers in clause 121 on consequential provision, can be exercised in respect of devolved Welsh procurement only with the consent of Welsh Ministers. No such consent is required if the regulations or guidance relate to a devolved Welsh authority’s participation in a reserved or a Northern Ireland procurement arrangement.
Clause 109 also establishes that a Minister of the Crown may exercise a power under the Bill for the purpose of regulating a transferred Northern Ireland authority only with the consent of a Northern Ireland Department, unless the regulations relate to procurement under a reserved or a devolved Welsh procurement arrangement authority. As in the Welsh example, this means that, if a transferred Northern Ireland authority procures via a reserved framework or dynamic market, for example, it must follow regulations made by a Minister of the Crown. Similarly to the position on devolved Welsh procurement, a Minister of the Crown may not publish guidance under clause 106 that would regulate a Northern Ireland Department without consent, unless the guidance relates to reserved procurement or devolved Welsh procurement.
Finally, clause 109 provides that the restrictions on the powers of a Minister of the Crown in respect of devolved Welsh procurement and transferred Northern Ireland procurement do not apply in relation to certain named powers, including the powers to update schedule 9 to the Bill to ensure the application of new or amended free trade agreements and to ensure their implementation in respect of devolved Scottish procurement, and the power to make provision to allow the UK to respond to trade disputes.
Clause 110 defines the different types of “procurement arrangement” referred to in the Bill. The term is used primarily in clause 111, which provides powers to ensure that all UK bodies, devolved and reserved, can continue to work with one another and across the UK’s internal borders when undertaking procurements under one another’s procurement arrangements.
I turn to amendments 70 to 73. As the Committee is aware, procurement is a devolved matter, and Scotland already has its own procurement rules. Hon. Members may not be aware that Scottish devolved bodies are presently able to access commercial deals set up in the rest of the UK, and vice versa. Therefore, to enable devolved Scottish bodies to continue to use commercial tools such as frameworks established under the new regime, and to provide access for reserved contracting authorities to Scottish frameworks, the Scottish procurement regulations will need to be amended. As the Bill is drafted, a Minister of the Crown, as well as Scottish Ministers, can amend Scottish regulations for that purpose.
For context, having the power for a Minister of the Crown to amend Scottish regulation was a contingency power, should we be unable to agree with the Scottish Government on how the Bill would be implemented. I am pleased to say that we have an agreement in principle on how to proceed, subject to the normal parliamentary arrangements in both Parliaments, and there is therefore no requirement for the UK Government to be able to amend the Scottish procurement regulations. We are therefore amending the Bill to remove that power for Ministers of the Crown.
At the same time, the UK Government will lay regulations to ensure that devolved Scottish contracting authorities can access frameworks and other commercial tools established under the new regime. When that happens, it will be necessary for Scottish Ministers to disapply their regulations, as they have agreed to do. We propose amending clause 111 to ensure that they can do so and expanding it slightly to ensure that the power covers all Scottish procurement rules.
Clause 111 therefore sets out a series of regulation-making powers that will be used to ensure that procurement bodies across the UK can continue to work with one another and across the UK’s internal borders when undertaking procurements. First, the clause provides powers for a Minister of the Crown to regulate procurements by devolved Scottish authorities under purchasing arrangements set up by reserved authorities or by devolved Welsh or Northern Ireland authorities. That will ensure that devolved Scottish authorities can make use of frameworks and dynamic markets established by other UK authorities, benefit from procurements undertaken by centralised procurement authorities, and jointly procure with other UK authorities acting as the lead authority. In those circumstances, devolved Scottish authorities will be required to follow certain rules in the Bill, details of which will be set out in secondary legislation.
The clause also provides powers for a Minister of the Crown to disapply the Bill’s provisions for reserved authorities, devolved Welsh authorities and devolved Northern Ireland authorities when they are procuring under purchasing arrangements established by devolved Scottish authorities. That will allow those authorities to benefit from arrangements put in place under the Scottish regulations and to undertake joint procurement with devolved Scottish authorities acting as the lead authority.
The clause also creates new powers giving Scottish Ministers the competence to amend Scottish procurement legislation to apply it to reserved authorities subject to the Bill when procuring under purchasing arrangements established by devolved Scottish authorities. Scottish Ministers are also given a power to disapply devolved procurement regulations where a devolved Scottish contracting authority procures using commercial tools set up under the Bill. That arrangement was reached after lengthy consultation with the Scottish Government, and I am delighted to say that they are pleased with the results.
Florence Eshalomi (Vauxhall) (Lab/Co-op)
I thank the Minister for outlining the discussions with Scottish and Welsh colleagues. As he said, clauses 107 to 110 set out the devolutionary roles and responsibilities of the Welsh, Northern Irish and UK Ministers. Although Wales and Northern Ireland have opted to be part of this procurement system, they will still keep the appropriate regulatory powers within the Bill.
I will not repeat the excellent speech from my Front-Bench colleague, my hon. Friend the Member for Islwyn, on clause 14—it is fair to say that he has had more exposure to Welsh procurement than I have. However, we Labour Members are very proud of our colleagues in Wales and their strong record on procurement.
We are pleased that the Welsh and Northern Irish Governments are adopting the Bill. As my hon. Friend mentioned on clause 14, this is about respect for devolution and for the will of the people of Wales and Northern Ireland. These clauses are about enshrining that respect into law, ensuring that all authorities under the Bill discharge their powers in the right and appropriate manner, and giving everyone involved the flexibility to set the system that their people want. As such, and following the Minister’s remarks, we do not find the clauses disagreeable and will not oppose them.
Lastly, amendments 66 to 68 and 70 to 73 make minor tweaks to the balance of this part of the Bill. Again, we feel that the amendments are fine and are not disagreeable, so we will not oppose them.
Amendment 66 agreed to.
Amendment made: 67, in clause 107, page 70, line 12, leave out paragraph (b)—(Alex Burghart.)
This amendment would mean that a contracting authority whose functions are exercisable “wholly or mainly in relation to Wales” will be treated as a devolved Welsh authority regardless of the subject-matter of a particular procurement.
Alex Burghart
I beg to move amendment 113, in clause 107, page 70, line 14, after “section” insert “and section 123 (commencement)”.
This amendment is consequential on Amendment 115.
Alex Burghart
Amendment 115, on commencement powers, will amend clause 123 and require consequential amendments to clause 107. The amendment will make the commencement of devolved Welsh aspects of the Bill subject to the consent of the Welsh Ministers, and allow UK Ministers to amend the Act resulting from the Bill so that it no longer applies in respect of devolved Welsh procurement and could be commenced without consent in respect of procurement in England and Northern Ireland, and all reserved procurement, including that in Wales.
Amendments 113 and 114 are consequential amendments that amend clause 107, which we have discussed already.
Florence Eshalomi
It is reassuring to hear the Minister’s additional update from the Welsh Government and that they support the arrangements. The amendments mandate the consent of Welsh Ministers while making procurement, and allow for the exclusion of Welsh procurement from the provisions of the Act. In essence, they mean that Welsh Ministers have to consent to the Act, but that UK Ministers can exclude Welsh procurement from the regime. In practice, I assume that the proposals will ensure that Wales consents to the Act but that, should it not, a UK Minister can remove it from the system and then commence the Act without the consent of Welsh Ministers.
This is a sensible amendment that underlines the respect for the Welsh Government, and we are right to expect that from the Bill. As the Minister outlined, it is good that there is support. We are content with the amendments and will not oppose them.
Amendment 113 agreed to.
Clause 107, as amended, ordered to stand part of the Bill.
Clause 108 ordered to stand part of the Bill.
Clause 109
Minister of the Crown: restrictions on the exercise of powers
Amendments made: 68, in clause 109, page 71, line 12, after “section 66” insert “or section 121”.
This amendment would mean that a Minister of the Crown could not make consequential provision for the purpose of regulating a devolved Welsh authority without the consent of Welsh Ministers.
Amendment 69, in clause 109, page 71, line 32, at end insert—
“(ba) section (Trade disputes) (trade disputes);”.—(Alex Burghart.)
This amendment would allow a Minister of the Crown to exercise the trade dispute power under NC11 in relation to devolved Welsh authorities and transferred Northern Ireland authorities.
Clause 109, as amended, ordered to stand part of the Bill.
Clause 110 ordered to stand part of the Bill.
Clause 111
Powers relating to procurement arrangements
Amendments made: 70, in clause 111, page 73, line 4, leave out—
“A Minister of the Crown or”.
This amendment would remove the power of a Minister of the Crown to amend Scottish procurement legislation to apply it to procurement under devolved Scottish procurement arrangements by contracting authorities.
Amendment 71, in clause 111, page 73, line 5, leave out from “of” to end of line 7 and insert—
“(a) applying it in relation to procurement carried out by contracting authorities under devolved Scottish procurement arrangements;
(a) disapplying it in relation to procurement carried out by devolved Scottish authorities under—
(i) reserved procurement arrangements,
(ii) devolved Welsh procurement arrangements, or
(iii) transferred Northern Ireland procurement arrangements.”
This amendment would give the Scottish Ministers power to amend Scottish procurement legislation to disapply that legislation where procurement by devolved Scottish authorities may be regulated by provision made by a Minister of the Crown under subsection (1).
Amendment 72, in clause 111, page 73, line 8, at end insert—
“(za) the Procurement Reform (Scotland) Act 2014 (asp 12),”.
This amendment would extend the definition of “Scottish procurement legislation” to include the Procurement Reform (Scotland) Act 2014.
Amendment 73, in clause 111, page 73, line 13, leave out “those regulations” and insert “that legislation”.—(Alex Burghart.)
This amendment is consequential on Amendment 72.
Clause 111, as amended, ordered to stand part of the Bill.
Clause 112
Disapplication of duty in section 17 of the Local Government Act 1988
Question proposed, That the clause stand part of the Bill.
Alex Burghart
The clause ensures that authorities to which section 17 of the Local Government Act 1988 applies are not prevented by that section from complying with their obligations under the Procurement Bill. It also enables a Minister of the Crown or Welsh Ministers to make regulations to disapply, when required, a duty under section 17 of the Act.
The clause ensures that authorities covered by the 1988 Act can take advantage of domestic procurement policies. As stated in the other place, we intend to use clause 112 for the first time, once enacted, to make regulations so that local authorities may take advantage of the policy of December 2020 so that below-threshold procurements may be reserved to UK suppliers only, or to UK small and medium-sized enterprises or voluntary, community and social enterprises in a particular region or county of the UK.
As section 17 of the Act precludes local authorities from awarding public supply or works contracts by supplier location, tabling regulations under the clause will ensure that local authorities can take advantage of that permitted flexibility, already available to central Government Departments, in respect of lower value contracts.
Florence Eshalomi
The clause interacts with section 17 of the Local Government Act, which placed a duty on certain authorities not to consider non-commercial elements when awarding or managing certain contracts. The amendment to the section is necessary for the new procurement regime, in particular given the move from most economically advantageous tender to most advantageous tender. The clause will also give Ministers the power to disapply the Act via regulations. That could be used, to give an example from the explanatory notes, to allow relevant authorities to reserve below-threshold procurements by location and/or small and medium business size status. We support and welcome the measures and will not oppose clause stand part.
Question put and agreed to.
Clause 112 accordingly ordered to stand part of the Bill.
Clause 113
Single source defence contracts
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss that schedule 10 be the Tenth schedule to the Bill.
Alex Burghart
The clause introduces schedule 10, which amends the Defence Reform Act 2014 to enable reforms to the Single Source Contract Regulations 2014. The regulations continue to work well to deliver their objectives of ensuring value for money for the taxpayer and a fair price for industry. However, delivering the defence and security industrial strategy and building on experience since 2014 means some reforms are needed. They will ensure that the single source procurement regime can continue to deliver in traditional defence contracts and be applied effectively across the breadth of single source defence work in the future.
In paragraph 2(2) and 2(4) of schedule 10, we are taking a power to clarify that some cross-Government single source contracts with a substantial defence element will come under the Defence Reform Act regime. That will provide assurance on value for money on a greater proportion of single source defence expenditure.
We are increasing the flexibility of the regime by taking a power in paragraphs 3(2) and 3(8) of schedule 10 to enable contracts to be considered in distinct components with different profit rates being applied to different parts of a contract, where that makes sense. Further flexibility in the regime will be provided by a power in paragraph 3(3) to specify circumstances under which a fair price for all or part of a contract can be demonstrated in ways other than by reference to the pricing formula in the Defence Reform Act. Circumstances for using such an approach will be set out in regulations and will include, for example when an item has previously been sold in an open market or where a price is regulated by another regime.
We are simplifying the contract negotiation process by amendments in paragraph 9(3)(a) of schedule 10, which will ensure that the contract better reflects the financial risks involved, and in paragraph 8(3)(e), by taking a power that will clarify how the incentive adjustment should be applied. We are also removing two steps from the current six-step profit setting process. The amendment in paragraph 9(3)(b) will abolish the funding adjustment for the Single Source Regulations Office or SSRO. The same paragraph will also remove the adjustment that ensures that profit can be taken on a contract only once. That issue is dealt with through allowable costs by virtue of paragraph 12(3) of schedule 10.
We are simplifying some reporting requirements by way of amendments in paragraph 13 of schedule 10 to reflect concerns expressed by suppliers and to make compliance with the regulations more straightforward. We are making better use of the expertise of the SSRO by way of the amendments in paragraphs 18 and 19 by enhancing its power to issue guidance, and clarifying and expanding the range of issues on which it can adjudicate. That will empower the SSRO to play a greater role in speeding up the contract negotiation process.
Chris Evans (Islwyn) (Lab/Co-op)
I thank the Minister for his explanation of the clause, which is related to the Defence Reform Act 2014, which created the Single Source Regulations Office. I have only a question or two about the clause: is there any effect on that office? How does he envisage the regulations he mentioned developing over time? He has already said the regulations will be laid in due course, but can he give the Committee any idea of what they will look like in the new regime proposed in the clause?
Alex Burghart
With reference to the SSCR, where we procure in the absence of competition it remains vital that we strike the right balance between, on the one hand, paying contractors fair prices for the goods and services we buy and, on the other, providing assurance that the taxpayer is getting value for money. Experience from before 2014 showed that a non-legislative approach was insufficient to achieve that balance. The amendment in schedule 10 will apply only to contracts that are substantially for defence purposes. The criteria for including a contract will be set out in secondary legislation. To the hon. Gentleman’s point, that is necessary because it is not generally possible to price the defence elements of such contracts separately in primary legislation, so we need the flexibility in secondary legislation.
Chris Evans
I hear what the Minister says about regulations. Will that have any effect on the profit margins set by the SSRO?
Alex Burghart
That will depend on what the regulations were, which is for discussion at a future point.
Question put and agreed to.
Clause 113 accordingly ordered to stand part of the Bill.
Schedule 10 agreed to.
Clause 114
Concurrent powers and the Government of Wales Act 2006
Question proposed, That the clause stand part of the Bill.
Alex Burghart
The clause makes it clear that certain restrictions on the legislative competence of the Senedd do not apply in relation to powers granted to Welsh Ministers under the Bill. That ensures that Welsh Ministers can exercise the legislative powers granted to them under the Bill, and amendments to the Government of Wales Act 2006 are not uncommon in Westminster legislation that grants powers to Welsh Ministers.
Florence Eshalomi
As the Minister said, the clause contains provisions about the Welsh Government and actions that they can and cannot take on procurement. The clause makes a short and technical amendment that removes the prohibitions on the Senedd to legislate on qualified devolved functions in this area. We see no reason to oppose the removal of the prohibition, so we are happy for the clause to stand part.
Question put and agreed to.
Clause 114 accordingly ordered to stand part of the Bill.
Clause 115
Repeals etc
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss that schedule 11 be the Eleventh schedule to the Bill.
Alex Burghart
The clause and schedule 11 between them set out the legislation that will be repealed, revoked and disapplied once the Bill comes into effect. That includes the Public Contracts Regulations 2015, the Concession Contracts Regulations 2016, the Utilities Contracts Regulations 2016 and the Defence and Security Public Contracts Regulations 2011, which make up the existing procurement regime for England and Wales, and for Northern Ireland.
Florence Eshalomi
The clause repeals a number of pieces of primary and secondary legislation, as outlined in schedule 11. In practice, the clause and schedule will repeal the current procurement system under the likes of the Public Contracts Regulations 2015.
It is a little unusual that, under schedule 11, we will repeal part of a Bill that is matching this Bill stage for stage in its passage through this House. In fact, I believe that the Trade (Australia and New Zealand) Bill had its Second Reading in the other place just hours before we had Second Reading of this Bill. I know from the Minister’s references that he is fond of boxing, and I wonder which one of those two titanic pieces of legislation will win the bout against the rigmarole of getting a Bill through Parliament? We need to get the Bill through, but perhaps the trade Bill will be one of the fastest enacted pieces of legislation to pass through the House. Labour Members understand why the measure is necessary, however, to ensure that there are no gaps should this Bill take longer to pass through Parliament.
We also understand why we cannot have two procurement systems in place at the same time. As previously stated, we feel that the Bill is a step forward in addressing some of the issues in our procurement system that were introduced by the likes of the public contracts regulations. Many provisions that are part of those regulations have been brought into the Bill, and others have been improved on. We feel that the Bill could have gone further in many ways, and we will continue to argue for amendments in those areas for the rest of our proceedings in Committee and on Report, but we share the view that it will bring benefits to our procurement system as a whole. We will therefore not oppose the repeals alongside the enactment of the Bill.
Question put and agreed to.
Clause 115 accordingly ordered to stand part of the Bill.
Schedule 11 agreed to.
Clause 116 disagreed to.
Clause 117
Power to amend this Act in relation to private utilities
Question proposed, That the clause stand part of the Bill.
Alex Burghart
The clause provides a power for an appropriate authority to make regulations to reduce the regulation of private utilities under the Bill. That power may be used, for example, to disapply particular provisions or to modify them to reduce the regulatory burden, such as to reduce financial costs or administrative burdens.
In the UK, regulators such as Ofgem and Ofwat have promoted competition in many utility markets and provided a proxy for competition, with protection of consumers’ interests at its heart where that is not feasible. That oversight of private utilities justifies minimising the regulatory burden on them to avoid passing costs to customers.
As the Bill provides in clauses 89 and 97 that contracting authorities owe a duty to “treaty state suppliers”—that is, suppliers entitled to the benefit of international trade agreements—to comply with a substantial part of the Bill, the power can be exercised to make amendments only where they do not put the UK in breach of its obligations to those suppliers. The Bill already includes a number of measures that reduce the regulatory burden for private utilities, such as the transparency requirements being pared back to the minimum required by international trade agreements.
Parliament and interested parties will have ample opportunity to scrutinise any amendments proposed to be made under the power, as clause 117 requires consultation prior to making regulations. Parliament will rightly be able to scrutinise the regulations under the affirmative procedure.
Florence Eshalomi
The clause pertains to the ability to reduce regulations in relation to private utilities. It is important that the Bill does not create regulatory burdens where they are not necessary. The clause gives powers to ensure that the Bill can be amended to disapply parts of it in relation to private utilities.
Several exceptions for private utilities already exist throughout the Bill: for example, on the policy statements, the publication of certain information and assessing contract performance. Of course, that does not mean that private utilities do not go unregulated. It is important that groups such as Ofgem regulate the gas and electricity market, but it would be burdensome to have several different frameworks of regulation applying to bodies where they are not needed. That can end up duplicating regulation and creating unnecessary bureaucracy, and simplifying frameworks is one of the main reasons that the Bill is before us.
We believe that our private utilities should be regulated, particularly at a time when we see so many people up and down the country feeling the pain of skyrocketing energy bills this winter, but it must be done via the appropriate channels. For that reason, we are minded not to oppose the clause. However, I hope the Minister can briefly justify when the clause will be necessary and say that the powers will not be used overzealously.
In its report on the Bill, the Delegated Powers and Regulatory Reform Committee said:
“The Committee considered that there was inadequate justification for taking a power to make regulations for the deregulation of private utilities under the Bill. They considered that Ministers should explain more fully the proposed use of the power and unless the Government can fully justify it, the breadth of the power should be narrowed.”
In their response, the Government said:
“The power is limited by our international obligations. This means that we must retain some regulation of private utilities in order to comply with our trade agreements such as notice requirements and rules on conditions for participation and award criteria.”
How does that limitation play out in practice? What parts of regulation will be hard-locked into the system by it, and what parts will be open to amendment by the clause? In addition, does a mechanism exist to reapply regulation where it has been disapplied by the clause? It seems wrong for it to be the case that we could disapply bits of the Bill quickly but, should we realise that it was a mistake or maybe want to disapply the provisions only temporarily, the bar to reapply an existing regulation under the Bill would be a lot higher. Can the Minister inform me how that can be done, and what can be done in those cases?
As I mentioned, we are minded not to oppose the clause, but I would be grateful if the Minister could address some of those points.
Alex Burghart
Under the Bill, we have already reduced the regulatory burden for all types of contracting authorities, not just private utilities. Because the four sets of regulations will be streamlined into a single regime, it will be clearer for public authorities, which may currently need to use two or three of these sets of regulations, what rules they need to follow. All contracting authorities will benefit from a simpler, more flexible and commercial system that better meets our country’s needs while remaining compliant with our international obligations. We think it is right to go further for private utilities, as they operate in markets that are regulated in other ways—for example, by regulators such as Ofgem—and are more competitive and commercial.
As the hon. Member for Vauxhall said, the UK is party to trade agreements—for example, the UK-Switzerland trade agreement and the UK-EU trade and co-operation agreement—that require us to ensure that private utilities allow suppliers from those countries to participate in procurements covered by the relevant agreement. Under those agreements, suppliers from those countries have access to procurements by private utilities operating in sectors such as gas and heat, electricity, water, transport services and ports and airports. It is right that we are deregulating utilities, because they operate in different markets and we must have a pragmatic approach.
Question put and agreed to.
Clause 117 accordingly ordered to stand part of the Bill.
Clause 118
Regulations
Amendments made: 75, in clause 118, page 75, line 21, at end insert—
“(da) section 52 (key performance indicators);”.
This amendment would apply the affirmative procedure to an exercise of powers by a Minister of the Crown under clause 52.
Amendment 76, in clause 118, page 75, line 23, leave out paragraph (f).
This amendment is consequential on the Government‘s intention to replace the power in clause 64 with the substantive provision in NC15.
Amendment 77, in clause 118, page 75, line 29, at end insert—
“(la) section (Trade disputes) (trade disputes);”.
This amendment would apply the affirmative procedure to an exercise of powers by a Minister of the Crown under the new trade disputes clause in NC11.
Amendment 114, in clause 118, page 75, line 39, at end insert—
“(ua) section 123(6) (exclusion of devolved Welsh authorities);”.
This amendment would subject the power added by Amendment 115 to the affirmative procedure.
Amendment 78, in clause 118, page 76, line 21, at end insert—
“(ca) section 52 (key performance indicators);”.
This amendment would apply the affirmative procedure to an exercise of powers by the Welsh Ministers under clause 52.
Amendment 79, in clause 118, page 76, line 26, at end insert—
“(ha) section (Trade disputes) (trade disputes);”.
This amendment would apply the affirmative procedure to an exercise of powers by the Welsh Ministers under the new trade disputes clause in NC11.
Amendment 80, in clause 118, page 76, line 47, at end insert—
“(ca) section 52 (key performance indicators);”.
This amendment would apply the affirmative procedure to an exercise of powers by a Northern Ireland department under clause 52.
Amendment 81, in clause 118, page 77, line 1, at end insert—
“(da) section (Trade disputes) (trade disputes);”.
This amendment would apply the affirmative procedure to an exercise of powers by a Northern Ireland department under the new trade disputes clause in NC11.
Amendment 82, in clause 118, page 77, line 15, leave out from “under” to end of line 16 and insert “any of the following provisions”.
This amendment is preliminary to Amendment 83.
Amendment 83, in clause 118, page 77, line 18, at end insert—
“(a) section 90 (treaty state suppliers: non-discrimination);
(b) section (Trade disputes) (trade disputes);
(c) section 111 (powers relating to procurement arrangements).”—(Alex Burghart.)
This amendment would apply the affirmative procedure to an exercise of powers by Scottish Ministers under the new trade disputes clause in NC11.
Question proposed, That the clause, as amended, stand part of the Bill.
Alex Burghart
Clause 118 sets out the relevant procedures associated with the making of regulations under the Bill. They must be exercised by statutory instrument or equivalent powers in relation to Scotland and Northern Ireland.
Where a power is exercised by a Minister of the Crown, the powers listed in subsection (4) are subject to the affirmative procedure, those made under clause 42 are subject to the made affirmative procedure and, with the exception of commencement regulations, the rest are subject to the negative procedure.
Where powers are exercised by Welsh Ministers, those set out in clause 118(10) are subject to the affirmative procedure and all other powers are subject to the negative procedure. Similarly, where powers are exercised by a Northern Ireland Department, those set out in subsection (12) are subject to the affirmative procedure, and all others to the negative. Regulations made by Scottish Ministers under clauses 90 and 111 are subject to the affirmative procedure applicable in proceedings of the Scottish Parliament.
Florence Eshalomi
Clause 118 outlines the powers and restrictions related to regulations that can be passed under the Bill. We all understand the point of secondary legislation. We do not oppose its use in this Bill, nor do we oppose the clause. However, we share the concern of the Delegated Powers and Regulatory Reform Committee about the scale of the use of delegated powers. Its report states:
“This report identifies multiple failures in the Memorandum to adequately explain and justify very broad delegations of power which enable implementation of significant policy change by delegated legislation. This would give us cause for concern at any time but is particularly disappointing as it comes so soon after the publication of our report, Democracy Denied? The urgent need to rebalance power between Parliament and the Executive, in November 2021, and of revised guidance for departments on the role and requirements of this Committee.”
The DPRRC’s concern was shared by Chris Smith, e-procurement and procurement consultant at CA Procurement Consulting Ltd. In his written evidence to this Committee, he said:
“The latest version of the Bill relies heavily on secondary legislation, which has not yet been published, and I am concerned that the level of compliance of Contracting Authorities with transparency regulations and policies will not be improved by this Bill as it is currently worded.
Currently, there remains a significant gap in transparency and the data captured in the existing online systems that not only undermine accountability and scrutiny of the use of public funds but also means that the government cannot rely on obtaining accurate data from these systems, for example, on SME participation. The same goes for the private sector.”
I think it is fair to say that I have made my feelings clear to the Minister throughout the Committee’s proceedings about the use of secondary legislation. I will not go through all those points again—I am sure he can refer back to them—but I still have concerns about how heavily the Bill relies on secondary legislation.
It is not that we object to the use of secondary legislation, nor do object strongly to an instance of its use throughout the Bill. At the end of the day, it is an option that the Government can use to legislate. However, as the Minister knows, it was well within the Government’s gift to set out more information in the Bill so that we could scrutinise further what some of the powers will mean in practice. They could have either set out the scope of what regulations should do, or scrapped the need for regulations entirely and spelled out the provisions in the Bill. Instead, we have had hypothetical debates—some powers may be granted, and some may not; they may transform our procurement system, or they may go unused. It is a bit frustrating to produce legislation in that way.
Alex Burghart
Well, Mr Mundell, I reassure the Committee that my batteries are, if not at 100%, still perfectly green; I have many Duracell hours left in me.
We have consulted with the DPRRC. The hon. Lady will know from earlier discussions that we require a very high degree of flexibility in a lot of areas of the Bill, and that requires secondary legislation, but she can rest assured that a lot of the secondary legislation will see public consultation before it is formulated. She will also have heard me refer to the affirmative procedure, which we intend to use for a lot of the secondary legislation. That means that it will be considered in Parliament, which will give it a good level of public scrutiny. I hope that she will take that as reassurance.
Question put and agreed to.
Clause 118, as amended, accordingly ordered to stand part of the Bill.
Clause 119
Interpretation
Question proposed, That the clause stand part of the Bill.
Alex Burghart
Clause 119 defines words and phrases of general application in the Bill that are not listed elsewhere—for example, “appropriate authority” is defined as a Minister of the Crown, Welsh Minister or Northern Ireland Department. Importantly, the clause also sets out the definition of “small and medium-sized enterprises”, and provides that an appropriate authority may amend by legislation the definition of an SME. The clause includes some concepts of wider application in the Bill, setting out, for example, that value of money thresholds are inclusive of VAT.
Clause 120 sets out where in the Bill the definitions of certain concepts of wider application can be found.
Florence Eshalomi
Clauses 119 and 120 relate to interpretation and definitions. Clause 119 defines terms, such as SME, that are common in the Bill but are not defined in individual clauses where they are mentioned; clause 120 contains a useful index of defined terms and where their definition appears in the Bill. We believe that the clauses are necessary and useful for navigating the many different terms that appear in the Bill, and we do not intend to oppose them.
Question put and agreed to.
Clause 119 accordingly ordered to stand part of the Bill.
Clause 120 ordered to stand part of the Bill.
Clause 121
Power to make consequential, etc, provision
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clauses 122 and 123 stand part.
Government amendment 84.
Clause 124 stand part.
Alex Burghart
Clause 121 provides a power to make regulations that make supplementary, incidental or consequential provision. It is a standard clause that means that the Government can make regulations that ensure that the Procurement Act—as it will be—works effectively with the rest of the statute book. It includes the power to amend primary legislation.
Clause 122 explains the extent of the Bill—that is to say, the jurisdictions in which it will form part of the law. The Bill’s provisions extend to each of the jurisdictions of the UK. The majority of provisions apply to all procurement by contracting authorities in England, Wales and Northern Ireland, including matters that we agree are within the scope of devolved competence. The Bill also extends to Scotland and applies, in limited respects, to procurement by devolved Scottish contracting authorities.
Clause 123 is a standard clause setting out when the Bill’s provisions will have effect as law. Some provisions will commence when the Bill is passed and some will commence upon regulations being made by a Minister of the Crown. As we have discussed, however, and following agreement with the Welsh Government, that power can be exercised in relation to devolved Welsh procurements only with the consent of the Welsh Ministers.
We have committed to provide six months’ notice of the new regime coming into force from when the Bill is passed. We expect that to be spring 2024 at the earliest. The existing legislation will apply until the new regime goes live, and it will also continue to apply to procurements started under the old rules. Frameworks, dynamic purchasing systems and qualification systems let under the old rules can remain live for their planned lifespan.
Clause 124 is mainly for citation purposes, and does not necessarily cover all aspects of the Bill. Once the Bill receives Royal Assent, it will be cited as the Procurement Act 2022. Amendment 84 will remove the amendment made in the other place in respect of the financial privilege of the House of Commons.
Florence Eshalomi
Amendment 84 is a privilege amendment. It is added to Bills by convention to avoid the violation of the privilege that the House of Commons rightly enjoys over the ability to charge people and public funds. The amendment is a quirk of our constitution for Bills beginning in the Lords, and we are, of course, happy to affirm the privilege of this House.
Clauses 121 to 124 are standard parts of Bills in this House. Although there can sometimes be contention about when Bills should commence, it is welcome that, on this occasion, there is no such controversy and the Bill will commence on the day it passes. Of course, we do not object to that, or to the other provisions of the clauses. We are happy for them to stand part of the Bill.
Alex Burghart
I am grateful to the hon. Lady for supporting the clauses. As we are nearing the end of our debate today, I will come back on a couple of points that the hon. Lady made so that we have covered everything off.
Before the lunch break, the hon. Lady kindly supported the clauses in part 9 of the Bill. As mentioned, if suppliers are breaching contractual terms, that will be a matter to be resolved pursuant to those contractual terms. The contracting authority will actively monitor compliance of these types of matters under its usual contract management and monitoring procedures, which will be strengthened by the Bill. I hope that adequately answers the hon. Lady’s question such that there is no longer any need to confirm in writing.
Similarly, in the closing stages of Tuesday’s sittings, the hon. Lady asked whether contracts already entered into following a procurement process will be terminated automatically if a contractor subsequently becomes an excluded supplier. Termination of contracts is often covered by contractual terms, but clause 77 gives contracting authorities an implied right to terminate a contract should a contractor become an excluded or excludable supplier. Although it is not automatic, authorities are able to terminate in the circumstances set out in clause 77.
Given the range and variety of contracts that contracting authorities will enter into, they need to be able to consider individual circumstances and the fulfilment of contract deliverables. Automatic termination of contracts when a supplier becomes excluded or excludable takes no account of other contractual obligations and would have serious implications for the delivery of the essential goods, services and works on which the public rely.
There is no need to mandate automatic termination. Contracting authorities should be trusted to exercise discretion appropriately, including in relation to national security. As with excluding a supplier prior to contract award under the national security ground, a contracting authority will be required to seek approval from a Minister to terminate a contract on this ground. I hope that gives the further detail the hon. Lady was looking for.
Kirsty Blackman (Aberdeen North) (SNP)
If I can crave your indulgence, Mr Mundell, I will not be present at the Committee’s next sitting, so I want to say thank you very much to the Clerks, to Hansard and, in particular, to two staff members, Josh Simmonds-Upton and Sarah Callaghan, who have been excellent in providing me with valuable support.
The Chair
Thank you for putting that on the record.
Question put and agreed to.
Clause 121 accordingly ordered to stand part of the Bill.
Clause 122 ordered to stand part of the Bill.
Clause 123
Commencement
Amendment made: 115, in clause 123, page 81, line 14, leave out subsection (3) and insert—
“(3) A Minister of the Crown may not make specified regulations under subsection (2) without the consent of the Welsh Ministers.
(4) In this section, “specified regulations” means regulations to bring into force provisions regulating procurement by a devolved Welsh authority other than procurement under—
(a) a reserved procurement arrangement, or
(b) a transferred Northern Ireland procurement arrangement,
but ‘specified regulations’ does not include regulations to bring into force provisions in Part 7 (implementation of international obligations).
(5) In this section, ‘devolved Welsh authority’ has the meaning given in section 157A of the Government of Wales Act 2006.
(6) A Minister of the Crown may by regulations make such provision as the Minister considers appropriate for the purpose of ensuring that—
(a) Parts 1 to 6 and 8 to 13, or particular provisions in those Parts, so far as not already brought into force under subsection (2) do not regulate procurement by a devolved Welsh authority other than procurement under—
(i) a reserved procurement arrangement, or
(ii) a transferred Northern Ireland procurement arrangement;
(b) existing legislation continues to regulate procurement by devolved Welsh authorities and procurement under devolved Welsh procurement arrangements.
(7) Regulations under subsection (6) may modify this Act.
(8) In this section—
“existing legislation” means any enactment, other than this Act or regulations made under this Act, that is passed or made before section 11 (covered procurement only in accordance with this Act) comes into force;
a reference to a provision regulating procurement includes a reference to a provision conferring a function exercisable in relation to procurement.”—(Alex Burghart.)
This amendment would make commencement of devolved Welsh aspects of the Bill subject to the consent of the Welsh Ministers, and would allow UK Ministers to amend the Act resulting from this Bill so that the Act no longer applies in respect of devolved Welsh procurement and could be commenced without consent.
Clause 123, as amended, ordered to stand part of the Bill.
Clause 124
Short Title
Amendment made: 84, in clause 124, page 81, line 18, leave out subsection (2).—(Alex Burghart.)
This amendment would remove the technical amendment made by the House of Lords in respect of the financial privileges of the House of Commons.
Clause 124, as amended, ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Julie Marson.)