Public Procurement and the Civil Society Strategy

Lord Haskel Excerpts

Thursday 23rd May 2019 Lords Chamber

[Lord Haskel (Lab)]

My Lords, few of us would argue with the objectives of the Government’s civil society strategy. We all want to strengthen and unify the institutions and organisations which make up our civil society. The noble Baroness is quite right; public procurement has an important role to play in this and I congratulate her on moving this debate.

As the noble Baroness told us, the UK public sector spends over £250 billion, about one-third of public expenditure, on the procurement of goods and services from the private sector. This large amount of money means that directing public procurement can make a real difference. Deliberately choosing providers from the local area can make a difference to local communities. This keeps money in the local economy. Managed well, it can lead to more investment in poorer parts of the country and help revitalise local economies.

By deliberately favouring smaller firms, the Government can promote competition and discourage dependency on large monopolistic providers. Public procurement can favour firms which meet certain ethical standards, as the noble Baroness said—for example, living wage employers or sourcing fair trade products. Public procurement can also favour providers with strong community links. For example, a local authority may prefer to fund a homeless shelter provided by a church which has strong local links and is grounded in the community, rather than a large national organisation. As I said, few of us would argue with these social objectives. Indeed, most of us would welcome them.

So what stands in the way? In short: the law, value for money, public sector bureaucracy and standards. By the law I mean our EU membership and free trade agreements. The EU is relatively relaxed about restrictions on public procurement. On the other hand, far less relaxed are the existing free trade agreements and the proposed free trade in services. The agreement aims to provide equal treatment to foreign service providers as well as promoting competition. Indeed, Liam Fox has repeatedly stated that this will be a priority for UK trade policy after Brexit.

These trade deals include heavy restrictions on local and ethical procurement. Put simply, the Government’s prioritisation of these agreements is at odds with their civil society strategy to use public procurement to strengthen civil society. The free trade ambitions of one government department are at odds with the domestic policy objectives of another. It may be above the Minister’s pay grade to sort this out, but somebody will have to do it.

I can be a lot more helpful to the Minister on value for money, bureaucracy and standards. For some time there has been growing concern about failures in procurement. The care homes fiasco is but one recent example; the noble Baroness mentioned Carillion. These failures have undermined the public’s trust in outsourcing. It is estimated that the recent failure of the privatisation of the probation service will cost the taxpayer some £450 million. Yet the Government aim to achieve value for money. Most believe that, with the exception of IT, this is simply a matter of price, as the noble Baroness said. This seems to have led to the evolution of large monopolies delivering public services, and it is difficult to find an alternative when they fail. Measures of market concentration in this and other sectors have risen sharply in recent years. As a result, there is broad concern about the ethics, quality, transparency and value for money in the procurement process.

It was with these concerns in mind that, many months ago, Tomorrow’s Company—here I declare an interest—approached the British Standards Institution to see whether a well-defined set of criteria could be established to define what “good” looks like and what works in the field of public procurement. To some of us, the British Standards Institution means a kitemark—a mark which tells us that a piece of steel is strong enough to do the job. But the world of standards has moved on a long way. Standards are now a tool that enables firms to set and meet best practice. For example, the British Standards Institution now has the task of laying down the standards strategy for connected and autonomous vehicles. A British standard for public procurement would level the playing field so that UK businesses of all sizes can be included in the public sector supply chain. By meeting the standard, an organisation can demonstrate that it meets the generic requirements for an organisation providing products and services to the public. All of this is this in keeping with the Government’s civil society strategy and the requirements listed by the noble Baroness.

Meeting the standard allows small and start-up organisations to prove themselves suitable and capable. This takes the burden off public sector administrators to perform due diligence, as there will be third-party conformity assessment. It reduces bureaucracy because it simplifies the complex process of tendering for government contracts—a process which deters many small firms from tendering. Indeed, standards can be a form of self or lighter-touch regulation, so that the Government are not obliged to enact legislation establishing best-practice benchmarks.

For this purpose, British Standard 95009 will come into effect on 31 May. The Minister may already know about this, because his department has been consulted. This standard was written with input from a broad range of stakeholders, including government departments, large and small firms, industry organisations—reflecting infrastructure and technology—and charities and welfare organisations; everybody was consulted. This standard also sets out good practice in the supply chain. This is the second time I have raised this issue in your Lordships’ House, and I make no apology. We seem to have lost our way on public procurement and services, and this British standard will point us back in the right direction.

My question to the Minister is: will the Government insist that all public procurement bodies and suppliers to the public sector will have to satisfy British Standard 95009? After all, the British Standards Institution is appointed by the Government as the National Standards Body. This will not only help to restore public trust and confidence in public suppliers and contractors and in the Government’s handling of the supply of these goods and services; by adopting this standard, public procurement will be much more aligned with the Government’s civil society strategy—the purpose of this debate—and it will incorporate many of the points made by the noble Baroness.