Procurement Bill [HL] Debate

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Department: Cabinet Office
Lord Scriven Portrait Lord Scriven (LD)
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My Lords, I have never heard such a reception before speaking. I congratulate the Deputy Chairman of Committees on the professionalism with which she handled that. Many noble Lords will know that we sometimes get through less business in a dinner hour, so well done. On a serious note, when we canter through a Bill in that way on the seventh day in Committee, it shows the lack of scrutiny it is getting.

I speak on behalf of my noble friend Lord Wallace on Amendment 404, and in moving that amendment I will also speak to Amendments 407, 409, 410, 412, 413, 421, 422 and 423. This group deals with conflicts of interest in public procurement, and getting the process and the management of those conflicts correct is absolutely vital to upholding the public’s trust in the use of their taxes when contracts are being laid. It has to be said that the new conflicts of interest provisions in Part 5 are a step forward. They impose some positive obligations on authorities to identify conflicts and give them a duty to mitigate them, including by conducting a conflict assessment. The provisions also ensure that conflicts can pertain to Ministers, not just officials taking procurement decisions. This is especially important given the issues with the VIP lane during the Covid procurement.

However, these new provisions do not go anywhere near as far as did the review by Sir Nigel Boardman, which the Government asked for and which was published in May 2021, in that they do not require a centralised register of conflicts that authorities can consult. Nor does the Bill contain sanctions for non-compliance with these measures. A central plank of the Boardman proposals, that suppliers should also be required to make conflict of interest declarations themselves, is also not included in the Bill. Boardman recommended that when there are direct awards with no competition, additional disclosure of conflicts at a more senior level should be required. Again, that is missing from the Bill.

The Boardman review gave 12 recommendations on conflicts of interest and bias. The amendments I referred to earlier try to put in the Bill the recommendations that the Boardman review gave. What is the point of doing the most detailed review asked for by government about conflicts of interest, based on recent history, if it is totally ignored when a Bill on procurement is written and when Part 5, on conflicts of interest, seems to ignore them altogether?

I will not go through all 12 recommendations, but some of them are quite important. Recommendation 18 says:

“Cabinet Office should strengthen its model for the management of actual and perceived conflicts of interest in procurements, following the ‘identify, prevent, rectify’ sequence.”

That is completely missing from the Bill. The Minister may say that some guidance will come out on that from the Cabinet Office. The difference is that this is primary legislation. If an expert has recommended that this should be the prescribed way that the Government do things on procurement to improve it around conflicts of interest, why is the “identify, prevent, rectify” sequence not identified in the Bill?

Recommendation 20 indicates:

“Declarations of interests should be recorded and logged alongside the departmental gift register and, where appropriate, this and other, relevant information should be made available to those responsible for procurement and contract management.”

I ask the Minister where, or if, a central register of conflicts of interest will be made available so that all public sector bodies that are procuring can have access to it. Remember, it is not just government departments at Whitehall that we are talking about: the Bill relates to all public sector bodies apart from the NHS which, even if it is procuring outside this, should have access to conflicts of interest on a central register.

The Boardman review also goes on to suggest the types of people who should be required to declare conflicts of interest; it goes much wider than the Bill. Recommendation 23 says:

“All guidance should make it clear that the requirement to declare and record actual or perceived conflicts of interest applies to all officials or those working on behalf of Cabinet Office equally, including civil servants, contractors, consultants, special advisers, and other political appointees.”

Where do they sit in the Bill? It is not just individuals whose job it is to procure; there are others who will have potential conflicts of interest that need to be made public, and people need to be aware of them.

Recommendation 24 says:

“There should be a clear process for managing risk regarding conflicts of interest.”

Where in the Bill are the process for managing conflicts of interest and the sanctions? What are the sanctions? Will they be left to each individual contracting body, or is there a central view of what the sanctions for dealing with conflicts of interest should be?

Recommendation 28 of the Boardman review says:

“Suppliers should be required to follow similar processes regarding declarations of actual or perceived conflicts of interest at the outset of a procurement, with appropriate sanctions for non-compliance.”

Where in the Bill is such provision? How will the conflicts, or potential conflicts, of interest of those looking to supply be dealt with?

I wish to speak to other amendments in this group that talk about not just direct employees. For example, Amendment 423 says that people who have left public service but are then employed or subcontracted by or give paid advice to a company should not be allowed to do so for a period of six months. That is not just for government but for all public sector bodies. If that is not in the Bill, it will be left to individual councils or individual procurement bodies to make their own rules and there will not be a uniform approach across the public sector. Is it the Government’s view that there should not be a uniform approach across the public sector for conflicts of interest for people who leave the public sector and are going to be employed, subcontracted or paid to give advice, or should it be down to each individual contracting authority outside of government departments to make up their own view? If so, how will suppliers be able to understand that individuals are complying, based on the complexity that will require?

Amendment 422 is a probing amendment to understand how the Government anticipate managing conflicts of interest and to make sure, again, that that is standardised across the public sector, not just what happens under the procurement rules for government departments.

There are a number of issues here, and I know that my noble friend Lady Brinton will raise the NHS and Palantir, where senior officials who were working on a multimillion-pound procurement for IT left the Department of Health and subsequently went to work for a company that was bidding for that particular contract.

These are serious amendments, which, as the new Prime Minister said on the steps of Downing Street yesterday, seek to rebuild trust. Rebuilding trust to ensure that taxpayers’ money is used appropriately and no one is getting an unfair advantage means that we have to have a standardised system to deal with conflicts of interest across the public sector, for all bodies, and a system of managing those in a way that is appropriate. I hope that the Minister will be able to answer those questions. I beg to move Amendment 404.

Baroness Brinton Portrait Baroness Brinton (LD)
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My Lords, it is a pleasure to follow my noble friend Lord Scriven. I have signed Amendment 423, but I support all his amendments and those of my noble friend Lord Wallace of Saltaire in this group.

My noble friend Lord Scriven has set the scene for the reason why these amendments are needed, with the background of the Boardman recommendations. I want to give one example of how the culture has allowed one particular firm to get its feet very firmly under the NHS desk over the last three years—it is now a bit more than three years—and why, had stronger conflict of interest arrangements been in place that did not permit very senior staff to go and work for someone who is about to bid for NHS contracts, in line with these amendments, we would have benefited.

In April 2020, the United States tech firm Palantir was awarded a contract for an NHS Covid datastore under the Crown Commercial Services G-Cloud 11 Framework. This meant that it did not need to be publicly tendered or the results published. During 2020, campaigning organisations Foxglove and openDemocracy, as well as a number of parliamentarians in both Houses, including my noble friend Lord Scriven and me in the Lords, raised repeated concerns about the contract. It then emerged that part of the cost-effectiveness of this contract was that Palantir bid very low in return for access to every patient’s medical and personal data held on the Covid datastore. No permission had been asked for or given by any individual about this highly confidential data, and of course it breached GDPR—that is not formally within the scope of this Bill.

The first contract, from April 2020, was for three months, and the value of that contract in return for the data was £1—not £1 million but £1. A further continuation contract for a further four months was for £1 million, and in December 2020, a two-year contract was issued, again under the same arrangements, for £23 million. As details started to emerge, and after the public outcry, the contract was ceased in April 2021—not least because Foxglove and openDemocracy had initiated a court case against the Department of Health and Social Care.

What has emerged is that, in 2019, a number of private meetings were held between senior NHS managers and senior managers of Palantir, described by the NHS managers as very positive—I bet they were. A November 2021 National Audit Office report on government contracts during the Covid pandemic found that a lack of transparency and adequate documentation was very evident.

During 2020, Palantir did not just have contracts with the NHS, it had contracts worth £46 million with UK government or public bodies. Palantir, which in conjunction with Cambridge Analytica provided data support for Donald Trump’s 2016 presidential election campaign and for the Vote Leave campaign, is known for working below the radar. I am very mindful of the comments that the noble Lord, Lord Mendelsohn, made earlier about people gaming the system.

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Baroness Neville-Rolfe Portrait Baroness Neville-Rolfe (Con)
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My Lords, we come to Part 5 of the Bill on conflicts of interest, where the Government have sought to give greater clarity on these obligations, partly in the light of the difficult experience during Covid-19.

On the one hand, it is critical that the public and businesses trust our approach in procurement. They must trust that we are acting with integrity—an important word today—spending public money responsibly and that suppliers will be treated fairly. The Bill is a step forward, as the noble Lord, Lord Coaker, has been kind enough to acknowledge. On the other hand, we must not have a process which overall has a chilling effect because good honest suppliers who do not understand the arrangements are needlessly put off participating in procurement.

I turn to the various amendments tabled by the noble Lord, Lord Wallace, and spoken to with great passion by the noble Lord, Lord Scriven: Amendments 404, 407, 409, 410, 412, 413, 421, 422 and 423.

The Cabinet Office commissioned Sir Nigel Boardman to review communications procurement in the department. His first report was published in December 2020 and focused on Covid-19 and the difficulties then. A major public inquiry is now on the way, and of course we need to learn the lessons of that. However, his recommendations in that report have been substantially implemented by the department. For example, Procurement Policy Note 04/21 includes comprehensive guidance for authorities on how to ensure that conflicts are managed appropriately.

Before I comment on the individual amendments, I will try to reply to the comments made by the noble Lord, Lord Scriven. I emphasise that the Boardman recommendations have not been ignored. The Cabinet Office has implemented them in its commercial operations. It is not appropriate to put every recommendation into legislation, which of course applies for many different types of contracting authority and procurement —large and small. Our provisions allow for a framework in which authorities can implement best practice in accordance with their governance structures.

The noble Lord raised the subject of sanctions. Boardman’s recommendation 26 highlighted that there needed to be sanctions and that these should be made clear in policy and guidance. The Procurement Bill is not the place to detail every possible sanction for every breach. Disciplinary action should be for each authority to enforce as well. If a supplier believes there to be a breach, the Bill provides appropriate remedies in Part 9.

The noble Lord, Lord Scriven, also questioned the recommendations on direct award. As mentioned on Monday, we have introduced a new requirement that contracting authorities must now publish a transparency note before they award a direct award contract. This obviously did not happen during Covid and is a major safeguard.

Amendment 404 would require contracting authorities to take all steps to identify conflicts. This risks creating an impossible threshold for authorities to meet. It could always be argued that more steps should have been taken.

On Amendments 407 and 409, we agree that the Bill’s current scope of those “acting in relation” to the procurement is the right one. We have set out more detail on different groups of individuals involved in commercial guidance, as obviously there are broader groups now involved, in the Procurement Policy Note 04/21, which is the right place for that information. Amendment 410 would add obligations on suppliers relating to conflicts. Suppliers of course also have a role in mitigating conflicts, and this can be seen in Clause 75(2).

The Bill has generally sought to avoid regulatory obligations on suppliers, and such prescriptions are better placed in guidance than in legislation. This ensures that a proportionate approach can be applied by both smaller local councils and large central government departments. The purpose of Amendment 412 is to broaden the evaluation of conflicts. We do not think that this is needed, as the Bill already includes the principle of integrity, in Clause 11.

Amendment 413 requires that suppliers declare, during the procurement process, whether they have given a donation or loan of more than £7,500 to a political party in a calendar year. This was mentioned by the noble Baroness, Lady Bennett. UK electoral law already sets out a stringent regime of donation controls, which I am very familiar with. Donations from the same source that amount to over £7,500 in one calendar year are included. Donation reports are published online by the Electoral Commission for public scrutiny, providing an appropriate level of transparency. We do not see the need to add this to the Bill.

Amendments 421 and 423 concern former Ministers and civil servants. We certainly want to avoid the risks of individuals leaving the public sector and exploiting privileged access to contacts in government or sensitive information. To mitigate these risks, the Civil Service Management Code includes business appointment rules, which apply to all civil servants who intend to take up an appointment after leaving the Civil Service. They replace requirements on former civil servants which include standing aside from involvement in certain activities: for example, commercial dealings with their former department or involvement in particular areas of their new employer’s business.

Baroness Brinton Portrait Baroness Brinton (LD)
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I am grateful to the Minister for allowing me to intervene. I absolutely accept the point about the change to civil servants’ arrangements. The example that I gave is outside the Civil Service, as would be many other contracts issued through this Bill when it becomes an Act. Can she assure me that every member of staff in any body or agency would be covered in the same way?

Lord Scriven Portrait Lord Scriven (LD)
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Before the Minister answers that, a number of times in my intervention I highlighted that there must be a standardisation not only for the Civil Service. Billions of pounds of procurement is carried out by non-central government departments. The rules need to be clear and uniform across the procurement process for the whole public sector, not just for government departments. That is a key issue and why many of these provisions need to be in the Bill, so that they are applicable to all public sector procurement bodies.

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Baroness Noakes Portrait Baroness Noakes (Con)
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Could my noble friend help me on the legal effect of the Civil Service management rules? It is my understanding that they cannot actually be enforced in a court of law because it would act as a restraint on the individual’s ability to earn a living. So the rules might exist and there might be advisory bodies et cetera, but it has always been my understanding that they cannot actually be enforced in a court of law. I am not trying to speak for the amendment, but the advantage of it is that it creates a statutory basis for it to have legal effect.

Baroness Brinton Portrait Baroness Brinton (LD)
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My Lords, if I might try to assist, employment tribunals in the private sector have taken the view that you can have fairly tight, limited terms. I am sure that one of the reasons my noble friends Lord Wallace and Lord Scriven chose six months was that that is the sort of term that is acceptable.

Baroness Neville-Rolfe Portrait Baroness Neville-Rolfe (Con)
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I will look into the point about the Civil Service, but certainly people are very careful about the Civil Service rules when they leave. I say that as someone who left many years ago. The rules are observed by civil servants on the whole and we try to emphasise that. As has been said, what we are trying to do here is have a regime that covers not only the Civil Service but elsewhere. However, as always, my noble friend Lady Noakes has bowled a good ball, so I will look into that.

I turn now to Amendment 422, which proposes to introduce a power specifying how conflicts of interest are to be managed on a day-to-day basis. The Bill covers the plethora of organisations which make up the public sector and gives clear obligations on all contracting authorities to identify and mitigate their conflicts. It would not be wise to start dictating the implementation of such a process for each and every authority, so we do not think the power is right.

My noble friend Lady Noakes has spoken to Amendments 415 and 419 on the definition of a conflict of interest, and the noble Baroness, Lady Bennett, came in helpfully too. I recognise that Clause 74 does not explicitly define “conflict of interest” as it does “Minister”, for example. However, Clause 74(2), combined with the definitions, does give conflict of interest a meaning, so it is correct to say elsewhere, as in Clause 75(5), that conflict of interest has the meaning given by Clause 74.

By inference, then, a conflict of interest is where a personal, professional or financial interest of a relevant person, as set out in Clause 74, could conflict with the integrity of the procurement. Essentially, this is where there is a risk that someone from the contracting authority, who is involved in the procurement, could benefit from taking a decision that might not be in the best interests of the contracting authority itself.

Finally, there is Amendment 417, which would remove Clause 76(4). I reassure my noble friend that the purpose of Clause 76(4) is to help, not hinder, contracting authorities. A perceived conflict, as provided for in Clause 76(4), is where a person might wrongly believe there to be a conflict when in fact no actual or potential conflict arises. We must obviously make sure that the public and suppliers are confident that the public sector is conducting its procurements in a fair and open way. We therefore need to consider what others may perceive about the procurement process. I have asked officials to look at the precise wording in Clause 76(4) to ensure that this is properly expressed and is not misleading. I hope that at this late hour my contributions have helped noble Lords to understand the balance that we are trying to draw and what we are trying to achieve. I respectfully request that the amendment be withdrawn.

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Baroness Bennett of Manor Castle Portrait Baroness Bennett of Manor Castle (GP)
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My Lords, being aware of the hour, I will be extremely brief, but I just want to express support particularly for Amendment 441, in the name of the noble Lord, Lord Purvis. I think we have to look at this in the context of, as the Committee may be aware, the current movement in relation to the Energy Charter Treaty and the way in which increasing numbers of states—most recently France but also the Netherlands, Spain, Poland and Italy—have found that this treaty that they entered into years ago has really restricted their ability to act on the kind of environmental, social and labour matters identified here. It is really important that we do not bring in new laws that create further restrictions.

On the amendment from the noble Lord, Lord Lansley, there has been lots of criticism of the CRaG process and that it was essentially designed for long ago when trade treaties were something very different from what they are today. Just to illustrate that point, this morning I was with the Commonwealth Parliamentary Association for a visit of Canadian lawmakers. We learnt then, very interestingly, that Canada had wanted to include the issue of frozen pensions—the fact that the UK does not uprate its pensions for people in Canada while it does so for people in the United States. That is the kind of way in which trade deals can become far more complicated today. Unfortunately, on the account we heard this morning, the UK Government refused to countenance this being included in the trade deal, but it is really important that we see how broad trade deals can be today and that they have the maximum democratic scrutiny. That is what I think this amendment seeks to achieve.

Baroness Brinton Portrait Baroness Brinton (LD)
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My Lords, I will speak to Amendment 436, from the noble Lord, Lord Lansley, and to my noble friend’s Amendment 441. It is a pleasure to follow both of them.

I want to talk a bit about some of the problems that we face inside our own government structures and Parliament. The noble Lord, Lord Lansley, and I spent quite a bit of time earlier this year on the Health and Care Act. Indeed, there was a section in there about healthcare arrangements with other countries. But that was the end of a story, and at each stage from 2014 onwards we kept finding people trying to relax the EU directive on procurement rules, which we had to abide by then, in order to enlarge the gift that we could give under a treaty. For health, this is an extremely important matter.

The EU procurement directive, which governs all public sector procurement in member states, defines fair process and standards to ensure that all businesses, including the NHS, have fair competition for contracts. It also, incidentally, prevents conflicts of interest through robust exclusion rounds and protects against creeping privatisation. It is that latter point that is really important in particular for the NHS, but there are other sectors of the public realm where that matters too.

On 18 November 2014, I asked the noble Lord, Lord Livingston of Parkhead, whether the EU procurement directive protected the NHS. He replied:

“Commissioner de Gucht has been very clear:

‘Public services are always exempted ... The argument is abused in your country for political reasons.’”

The noble Lord, Lord Livingston, went on to say:

“That is pretty clear. The US has also made it entirely clear. Its chief negotiator—

this was in relation to TTIP—

said that it was not seeking for public services to be incorporated. No one on either side is seeking to have the NHS treated in a different way … trade agreements to date have always protected public services.”—[Official Report, 18/11/14; col. 374.]

Again in 2018, I raised these points with the noble Lord, Lord O’Shaughnessy, in a debate and he said:

“I can tell them that we have implemented our obligations under the EU directive. The Government are absolutely committed that the NHS is, and always will be, a public service, free at the point of need”—

and the current Government repeat that point.

“It is not for sale to the private sector, whether overseas or here. That will be in our gift and we will not put that on the table for trade partners, whatever they say they want.”—[Official Report, 29/3/18; col. 947.]

That was very helpful because it came in advance of President Trump’s attempt to broaden what could be in a possible trade agreement, which would definitely have included health. Those of us who are concerned about these matters therefore relaxed a bit, until the Healthcare (International Arrangements) Bill came before your Lordships’ House, which was intended to replicate the reciprocal healthcare arrangements that we used to have under EHIC. The problem was that it had a clause that also gave rights under international trade agreements for health services to be part of those trade agreements, with no reference back to Parliament. It was an expedited process but, during the passage of that Bill, we managed to revert to it being just about reciprocal healthcare arrangements in the European Economic Area and Switzerland.

However, this year, we went through exactly the same process again when the Health and Care Bill was introduced, as it contained a much looser series of clauses that would have allowed health to become part of trade agreements. During the Bill’s passage, a cross-party group of Peers fought very hard and were really grateful that the Government recognised the risk that they were putting the NHS under and conceded. Now, the provisions under the Health and Care Act are the equivalent of EHIC but for other countries.

I wanted to raise these points because it seems to me that we must have Parliament’s involvement before things are signed and sealed. We also need to let those people who are negotiating our trade agreements understand where some of the clear red lines remain across Parliament—and certainly across this nation—for certain public services, including the NHS.

Baroness Hayman of Ullock Portrait Baroness Hayman of Ullock (Lab)
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My Lords, I shall be very brief, as time is ticking away. I start by saying that we completely support Amendment 436 in the name of the noble Lord, Lord Lansley. It is really important to get proper reassurance and clarification in this area, and I hope that the Minister will be able to give that to us today.

We also absolutely support what Amendment 441, in the name of the noble Lord, Lord Purvis, is trying to do. Environmental, social and labour conditions are incredibly important when looking at who you are procuring with. The noble Lord introduced it very thoroughly, so I will not go into any further detail, but he is absolutely right that we need clarification on this.

One thing I have found with this Bill is that different bits are cross-referenced all the way through and, on occasion, I have got somewhat confused, to say the least. This might not be important at all but I ask for some clarification. Schedule 9 is on the various parties with which we have trade agreements, and we have been talking about trafficking, slavery, exploitation and so on, which are all mentioned in Schedule 7. We welcome the fact that Schedule 7 covers all these areas, but paragraph 2 of that schedule says that engaging in conduct overseas that would result in an order specified in paragraph 1—trafficking, exploitation, modern slavery and so on—if it occurred in the UK constitutes a discretionary ground for exclusion from procurement. Does that conduct overseas, as referred to in Schedule 7, cover anything that happens with procurement coming out of a trade agreement? That is what I do not understand. If it does, it alters what we have just been talking about. If it does, how does that operate and how is it enforced? Who manages it? If it does not, how do we address that when we are negotiating trade agreements in order to achieve the outcomes that we would all like to see? It may be that the Minister does not know and needs to talk to officials, but that is something on which I would like clarification.