Amendment 37

Procurement Bill [HL] - Report (1st Day) – in the House of Lords am 6:45 pm ar 28 Tachwedd 2022.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Baroness McIntosh of Pickering:

Moved by Baroness McIntosh of Pickering

37: Clause 11, page 8, line 38, at end insert—“(e) in relation to the procurement of food and drink, achieving a target of procuring 50% of products and ingredients locally.”

Photo of Baroness McIntosh of Pickering Baroness McIntosh of Pickering Ceidwadwyr

My Lords, it gives me pleasure to speak to Amendments 37 and 53 in this group. Before I address them, I associate myself with government Amendment 57, on the needs of SMEs. I am grateful to my noble friend the Minister for meeting me last week to discuss these issues. I am also grateful that she listened in Committee; that is why we see government Amendment 57 in this group.

Before I address Amendments 37 and 53, which raise farming issues, I pay tribute to the late Lord Plumb of Coleshill, whose memorial service was held today. He was a great British patriot and a lifelong European who lived all his life to promote farming at every level and in every position he held. He will be much missed.

Amendment 37 seeks to address an issue that a number of us tried to raise. I recall an amendment I tabled when the Trade Act was going through Parliament, both in Committee and on Report, in which I tried to write into the Bill that, now we had left the European Union, we were told that there would be a great Brexit dividend allowing us to open up public procurement—particularly at local authority level for our schools, hospitals, prisons and defence establishment—and allowing much more locally produced food to be taken at that level. So a number of us, myself in particular, were extremely disappointed to learn that, although we were leaving the European Union and the threshold of €136,000—up until which, I presume, locally produced food could be sourced for local authorities and local establishments—we were nevertheless still bound by the global procurement agreement, which, curiously, comes in at about the same level, $135,000. So in fact, there is no flexibility at all, and a number of us feel disappointed and that we were perhaps misled.

Amendment 37 seeks to add to Clause 11 the procurement objective of,

“in relation to the procurement of food and drink, achieving a target of procuring 50% of products and ingredients locally.”

Furthermore, Amendment 53 follows directly from the conversation I had with my noble friend last week. In it, I try to set down what locally sourced food would be:

“(1) Any public contracting authority catering services must take responsible steps to ensure that at least 50 per cent of food and drink is procured locally.

(2) For the purposes of this Part, “locally” refers to products that have been grown, raised or made within 30 miles of the point of provision, or in the same county.”

Noble Lords who followed the leadership contest closely may remember that we found a great advocate in none other than my right honourable friend the Prime Minister, Rishi Sunak, who committed to these two provisions and expressed the distinct desire that they be enshrined in law. I am very grateful to him that there is an opportunity in the Bill to have this written into legislation. I quote from the letter he wrote at the time, as a leadership candidate, to the NFU:

“As you know, I represent a large number of farmers in my own constituency. I know that times are tough at the moment; the rise in global gas prices has led to a dramatic increase in input costs including manufactured fertiliser, livestock feed, fuel and energy. I want to help; I hope that by bringing forward 50% of the BPS payment we have given farmers some confidence, but I am very willing to listen if there are other measures that we should be taking.”

He went on to say:

“I will also introduce a new target for public sector organisations to buy 50% of their food locally, to back British farmers and improve sustainability.”

In my right honourable friend’s constituency is probably the largest garrison in the country, at Catterick barracks. I had the good fortune to represent the neighbouring seat—originally, the Vale of York and then Thirsk and Malton. I can testify to the number of defence establishments there and the large number of rural schools in that constituency. There was a large prison in York, and other public procurement establishments that would benefit from this provision.

I imagine that, if we do not meet the €136,000 threshold, there must be some flexibility in smaller contracts so that local authorities and other providers that are sourcing their procurement will look to source it locally. Not only will that enable us to be more resilient and improve food security and self-sufficiency, but it will help famers, growers and producers of our food in the UK at what is a very difficult time for them.

I hope that my noble friend will look favourably on these two amendments in particular, Amendments 37 and 53. I beg to move.

Photo of Baroness Neville-Rolfe Baroness Neville-Rolfe Minister of State (Cabinet Office) 7:00, 28 Tachwedd 2022

My Lords, it may aid the House if I set out the government amendments in this group. I thank my noble friend Lady McIntosh of Pickering, and will respond to her when I have heard other contributions. I share her tribute to Lord Plumb, whom I dealt with in all the stages of my career—at Defra, in Europe and in this House—and I am only sorry that government business prevented me from celebrating with others his wonderful life and success today.

There are a number of amendments in my name relating to SMEs. They are important government amendments to help SMEs to win a bigger share of the £300 billion procurement pie. I know that this issue is close to the hearts of noble Lords from across the House. Throughout Committee, noble Lords questioned whether the Bill had gone far enough in removing barriers to SMEs accessing public procurement. It has certainly been a top priority for me since I was lucky enough to become a Cabinet Office Minister. It is right that we support this vital sector of our economy. At the start of 2022, there were 5.5 million small businesses, accounting for 99% of all businesses in the UK, with over 16 million employees and a turnover of over £2 trillion. We must do more to champion these entrepreneurs.

The new measures that I am announcing today complement the existing provisions in the Bill, which make it easier for businesses to enter public sector supply chains and benefit SMEs. They include greater visibility of upcoming public sector opportunities and preliminary market engagement; developing a supplier registration system, meaning that suppliers need to submit their credentials only once; improvements to commercial tools, such as the introduction of dynamic markets and open frameworks; and, crucially, requiring that 30-day payment terms will apply throughout the public sector supply chain.

I am glad to be moving amendments in three areas to add to this momentum. First, we have introduced a new duty for contracting authorities to have regard to the participation of SMEs. It sends a very clear signal that the Government are open for business to this sector. For the first time, SMEs will be on the face of the Bill, which means that authorities have a responsibility to consider them and the barriers they face. To put this in practical terms, contracting authorities will, for example, need to specifically consider through an SME lens whether the requirements they are asking for are proportionate to the contract. Are the bidding times realistic when some businesses do not have a dedicated bidding team? Have they provided clear pipelines of opportunity? Is there a diverse representation of businesses in pre-market engagement?

Secondly, we have further stripped out unnecessary barriers which SMEs face. I thank my noble friend Lady Noakes and the noble Lord, Lord Scriven, for highlighting ideas in Committee. I particularly appreciated the point that he raised, that we need to

“release some of the normal procedures and bureaucracy”.—[GC 385.]">Official Report, 11/7/22; col. GC 385.]

As a result, we have banned authorities requiring the provision of audited accounts to test the financial standing of bidders to bid in procurements, to compete for contracts under frameworks and to join dynamic markets, except in so far as that is required under the Companies Act. This ensures that start-ups and SMEs which are not legally required to file audited accounts due to their size or age will not be shut out of procurements, provided that they can demonstrate their financial capacity by another reliable means.

Thirdly, we are going further to reduce unnecessary costs on businesses by preventing contracting authorities from requiring insurance relating to the performance of the contract, to be in place prior to the award. We know from feedback that this acts as an obstacle to participation.

Following Committee, I have reflected on the points raised by noble Lords during the debates and would like to thank many of them for follow-up discussions on this topic. I have also met trade associations such as the Federation of Small Businesses and the Business Services Association at a recent round table. We hope that the amendments will give SMEs a better chance of winning public sector contracts and allow the public sector wider access to the first-class skills, innovation and ideas that many agile, creative smaller firms offer. In turn, this will allow us to improve and enable the transformation of procurement services. These are all captured in Amendments 40, 122, 57, 70 and 74. Amendments 75, 76, 134, 140, 179, 183, 186, 188, 192 and 203 are consequential amendments, including splitting Clause 43 into two to avoid it becoming unwieldy.

I have also tabled Amendment 55, which requires a contracting authority to provide sufficient information in the tender notice or associated documents to enable suppliers to prepare tenders. It facilitates a clear trigger for the start of the tendering period identified in Clause 51. As the time available for bid preparation is so important, we consider that small suppliers will welcome this practical clarification. Amendments 40 and 122 in my name create new obligations on contracting authorities to consider the removal or reduction of barriers in procurement to small and medium-sized enterprises. We need to make sure that small and medium-sized companies do better in the procurement world.

Photo of Lord Wallace of Saltaire Lord Wallace of Saltaire Liberal Democrat Lords Spokesperson (Cabinet Office)

I rise to speak to Amendments 41 and 123, which are amendments to government amendments. We welcome Amendment 40 but, as the noble Lords, Lord Maude and Lord Lansley, have said, we need in the Bill to make sure that, as well as SMEs, social enterprises, mutuals and non-profits are eased and get around some of the barriers otherwise placed in their way. I hope that the Minister will be able to give a sufficiently strong assurance that this is what is intended for it not to be necessary to divide the House on this issue, and perhaps even to come back at Third Reading with an adjustment to the current Amendment 40.

In the Green Paper that started this process, the importance of social enterprise, mutuals and non-profits was clearly marked; it has now disappeared altogether. Many of us are conscious that there are those on the libertarian right who think that every form of economic activity should be in the pursuit of profit and that the idea that you can do anything without wanting to make a profit is absurd and against free market principles. The libertarian right in the United States, which clings to such theological doctrines, has begun to infiltrate parts of the Conservative Party and, I am told, was a visible presence at the Conservative Party conference—but I am confident that real Conservatives do not share that absurd theological view. They recognise that there are many areas, particularly in personal services and care, where the different approach that comes from mutuals and non-profits makes a considerable amount of difference. There have been a number of scandals in care homes run for profit in recent years. I speak with passion on this subject because I have had a relative in a charitable care home who was wonderfully well treated in the last few years of her life.

I hope that the Minister will be prepared to recognise that the importance of social enterprise and non-profits needs to be here, and that she will give absolute assurance that this is what the Government intend, and that they do not intend to leave them with the barriers that the Government intend to remove for SMEs.

Photo of Lord Aberdare Lord Aberdare Crossbench

My Lords, my principal interest in the Bill has been whether it would achieve its stated objective of giving small and medium-sized enterprises a better chance to compete for and win public contracts, including SMEs providing specialist services in the construction sector, such as those represented by the Actuate UK engineering services alliance. So I very much support the government amendments in this group that seek to reinforce that objective, notably Amendment 40, explicitly requiring contracting authorities to take account of barriers faced by small firms and Amendments 57, 73 and 74, preventing unreasonable requirements for participation, such as providing audited annual accounts even for firms that do not otherwise need to produce them, or having insurance already in place before the award of a contract.

Other issues of importance to SMEs covered in Committee related to improving payment practices for public contracts and resolving payment disputes. However, since these are not specifically addressed in the amendments in this group, it might be more appropriate to raise them when we discuss the procurement review unit on Wednesday. However, I add my support to Amendment 41 in the names of the noble Lords, Lord Wallace and Lord Fox, adding social enterprises and not-for-profit companies to the beneficiaries of Amendment 40.

On that subject, I also thank the Minister for her recent letter confirming the Government’s commitment to resolving a concern I raised in Committee about whether the drafting of Clause 31, concerning reserved contracts to supported employment providers, actually delivers the Government’s intention to implement an approach fully equivalent to that currently in place. I know that community enterprises that use such reserved contracts are much reassured by the commitment given by the Minister and I look forward to the letter she has promised to confirm that the issue has been resolved, and how.

Photo of Lord Lansley Lord Lansley Ceidwadwyr

My Lords, I thank my noble friend for taking up the issue of SMEs, following not least the points she herself made in Committee. We thoroughly agreed with her and I think there was much consensus. I have two amendments in this group, which are by way of probing the issues a little. The first is Amendment 54. The two government amendments on SMEs relate, interestingly, to covered procurements in the first instance and then to below-threshold procurements separately. To that extent, putting it in the Bill and applying it to broader procurement seems to work in this case.

Amendment 54 would specifically include a reference to the capability of small and medium-sized enterprises in relation to preliminary market engagement, which may well be a place where SMEs in particular need to be supported, because they often do not necessarily have all the credentials and capabilities to hand. The second is an amendment to government Amendment 188, which defines “small and medium-sized enterprises” in thoroughly familiar terms to all of us who deal with these things. I tabled my amendment because the origin of the definition is essentially in European Commission regulations.

The reason that the Commission, in addition to the head-count calculation, adds turnover or revenue requirements is that SMEs have to be assessed by reference to that for the purposes of state aid and subsidy control. In this instance, subsidy control or state aid is not relevant, so, when it comes down to capability, the only issue that really matters is head count. Indeed, the Commission itself, in the regulation it put forward, makes it very clear that head count is the “main criterion”. I think it would be better to rest only on that, rather than to include the necessity for contracting authorities to look at turnover or revenue.

Photo of Lord Maude of Horsham Lord Maude of Horsham Ceidwadwyr 7:15, 28 Tachwedd 2022

My Lords, I support government Amendment 40. This is very worthwhile. I am also very sympathetic to Amendment 41, tabled by the noble Lord, Lord Wallace of Saltaire. The reality is that not-for-profits, social enterprises and mutuals, when they come to retender or bid for different contracts, because a number of mutuals we supported have grown, both by expanding into different areas for the same group of clients but also by expanding into different geographical areas for different public authorities—and this is very worthwhile—but they are subject to very much the same kinds of constraints that the conventional procurement we inherited in 2010 imposed on SMEs.

I take slight issue with the noble Lord, Lord Wallace. I do not actually believe that there is a conflict between this approach—working to remove barriers to SMEs, social enterprises and so on participating in, bidding for and winning government and public sector contracts—and achieving better value and supporting the aims of the free market. When we went down the path, in the coalition Government, of setting an aspiration of 25% by value, at that stage, of public procurement going to SMEs, the immediate response from the conventional wisdom was, “Oh, that means you’re going to abandon best value; you’re going to have to effectively subsidise SMEs”. Precisely the reverse was the case. Opening up procurement got rid of some ridiculous requirements that were not necessary at all but were imposed by safety-first procurers: for example, that bidders should have to show three years’ audited accounts and that there should be turnover thresholds, performance bonds and requirements to show that they had in place the insurance to cover the contract value before they even bid.

The combination of all these things meant that many SMEs and start-ups and some of the most innovative, competitive and dynamic potential suppliers were simply not able to get into the marketplace at all. So there is no conflict between value for money and opening up to smaller businesses: the two objectives go absolutely hand in hand. So I strongly support the amendment the Minister has brought forward, but I urge her to look sympathetically at Amendment 41, because social enterprises, not-for-profits, mutuals and so on suffer from exactly the same disadvantages and obstacles as there were in old-fashioned procurement and it is important, I believe, that they should be included in the same bracket.

Photo of Baroness Noakes Baroness Noakes Ceidwadwyr

My Lords, I have Amendment 164 in this group, to which my noble friend Lord Moylan has added his name. Before turning to that, I echo what other noble Lords have said in thanking my noble friend the Minister for her amendments on SMEs. I am very glad that she has taken into the Cabinet Office the evident passion she demonstrated for the cause of SMEs when she took part in Committee on the Bill. Of course, there is no one silver bullet that is going to solve all the problems of SMEs engaging in public procurement, but I believe that most of the amendments before us here will contribute to an important advance in that area.

I have a concern about Amendment 134, which is one of my noble friend’s amendments. It keeps the new Clause 11 duty out of the enforcement clause, Clause 92. That is a pity, because it means that SMEs, which think that that duty is not being complied with, will have to fall back on judicial review—and, as we know, judicial review is not a practical remedy available to SMEs. I regret that. I similarly regret Amendment 140 in relation to procurement oversight recommendations, and I hope that the Government will have an opportunity to think again about both those areas when the Bill moves to the other place.

My Amendment 164 is aimed at the same target as Amendment 163 in the name of the noble Baroness, Lady Bennett of Manor Castle, who was not in her place when the debate started earlier this evening. I was expecting the noble Baroness, Lady Bennett of Manor Castle, to explain the amendment, and then I was going to come in behind it. They are both sourced from an amendment suggested by the Local Government Association. It concerns Section 17 of the Local Government Act 1988 and the exclusion of non-commercial interests that is required by that section. Clause 107 allows regulations under this Bill to disapply that duty for below-threshold contracts. The issue raised by the Local Government Association was that that should not be just permissive but should be an absolute requirement.

The noble Baroness, Lady Bennett of Manor Castle, tabled an amendment in the form originally suggested by the Local Government Association. I have been around a little longer than the noble Baroness, Lady Bennett of Manor Castle, and have debated may/must amendments in relation to whether regulations should be obligatory or permissive. It is a good technique for discussing issues in Committee, but when we get to the sharp end of the business of legislation, the Government always resist a regulation-making power being obligatory—and for good reason, because it ties the hands of today’s Government and any future Governments. I accept that, and I am sure that the Opposition Benches who may want one day to be making legislation of their own would accept that as well. So I retabled the concept of the amendment by inserting below-threshold contracts into the list of things that could be done with this power, in the hope not that my noble friend would accept the amendment but that she would give a clear commitment at the Dispatch Box today to use the regulation-making power at the appropriate time to ensure that below-threshold contracts are excluded from the ambit of Section 17, as I mentioned. I look forward to hearing what the Minister has to say.

Photo of Lord Hendy Lord Hendy Llafur

My Lords, I rise to speak to Amendment 162A, which rather neatly follows the noble Baroness, Lady Noakes, because it deals with Section 17 of the Local Government Act 1988. Its intention is to remove the prohibition in that provision which prevents local authorities taking into account the terms and conditions of the staff of the supplier, or their legal status. The thought behind this is that public authorities should take into account the terms and conditions and the legal status of those who carry out the work under these public contracts. The restriction applies to local government only and not to other public authorities.

Photo of Lord Fox Lord Fox Liberal Democrat Lords Spokesperson (Business, Energy and Industrial Strategy)

My Lords, I rise to speak on Amendment 73 as my noble friend Lord Clement-Jones is detained in Grand Committee. This amendment requires direct-award contracts included in a framework agreement to be retendered 18 months after the award. This amendment takes a different route from the one we discussed in Committee, but the aim is the same: to prevent direct contracts being used within framework agreements to restrict competition from British SMEs and reinforce the dominance of certain key foreign players in the market. The Minister will remember that we used cloud computing as a major example of where the system has gone off the rails. The SME share of the market has fallen from more than 50% to just 20% in the past five years. In this respect, there is little sign that the Procurement Bill is in reality designed to provide new opportunities to prevent this slide towards—shall we call it “oligopoly”, to coin a phrase that was used by the noble Lord, Lord Maude, in a different context?

Rather than preventing such awards, as we attempted last time, we have instead put down an amendment to time-limit the awards. This would introduce a duty to retender, after 18 months, direct contracts awarded as part of a framework agreement under Clauses 38 and 41. This would provide the opportunity to redress the balance and help support UK SMEs. In Grand Committee, the Minister said that my noble friend Lord Clement-Jones had made a lot of points that she was not aware of and promised to study in relation to the important areas of cloud computing and UK businesses. She also emphasised some of the advantages of framework agreements. We are not arguing with that, but that is not the point. This is about detriment to SMEs through the use of direct contracts which are hidden within framework agreements. The problem can be cured. The Minister also said in relation to these agreements that it makes sense for them to be time-limited. I hope she has studied the words of my noble friend and has something to offer that limits the duration of direct contracts that are made within framework agreements.

Photo of Lord Coaker Lord Coaker Shadow Spokesperson (Defence), Shadow Spokesperson (Home Affairs), Opposition Whip (Lords)

My Lords, I have just a few brief remarks on this group. Before I come on to the main point that I want to make, I shall say that I think Amendment 37, tabled by the noble Baroness, Lady McIntosh, about local produce and the local procurement of foodstuffs is something that is growing in importance. All of us know in our own communities that people individually are doing that, as well as local businesses. I think that before long the 50% target she put in her amendment will grow. I think it is an important amendment. Given the other things being talked about, it should not be lost in the general debate.

I thank the Minister for government Amendment 40, which goes to the heart of the discussion in this group, which is about encouraging small and medium-sized enterprises in the procurement process to do better than they are present, and the responsibility of contracting authorities to achieve that. The real question for the Minister—and, frankly, if there are changes of Minister in future—is how we will ensure that that happens, because successive Governments have tried to encourage small and medium-sized enterprises, and it has not been as successful as we wanted. The question is about how we make this procurement system work in a way that benefits small and medium-sized businesses in the way that we would all want.

I am very supportive of Amendment 41, tabled by the noble Lord, Lord Wallace, which talks about the barriers faced by social enterprises and not-for-profit companies in competing for procurement. I think that is something that will become increasingly important.

I know my noble friend Lord Hendy will speak about his later amendment in more depth. His amendment in this group, Amendment 162A, allows procurement to take into account the terms and conditions of staff and the legal status of subcontractors. I think it is an extremely important area, and I thank my noble friend for raising it because all of us would wish to see that people are paid properly for the work they do and that nobody is undercut in the winning of various contracts.

The noble Baroness, Lady Noakes, pointed to Amendment 163 in the name of the noble Baroness, Lady Bennett, and her supportive Amendment 164, which she ably put forward. She made some important points which we can look at in due course and to which I hope the Minister will respond.

However, I go back to where I started: the key amendment in this group is government Amendment 40. We are grateful that it has been brought forward and hope that it will encourage greater success for small and medium-sized enterprises in the procurement business in this country. The key for us is to make sure that this time it works and that we do not have another government amendment in two years’ time trying to achieve the same.

Photo of Baroness Neville-Rolfe Baroness Neville-Rolfe Minister of State (Cabinet Office)

My Lords, the noble Lord, Lord Coaker, is right that the challenge is to make the shift to SMEs a reality. I will take that away as my homework. I thank all noble Lords who have spoken, especially the noble Lord, Lord Aberdare, who progressed matters with me and saved me from a further group of amendments.

I was also very interested in the real-life experience of my noble friend Lord Maude as to the difficulties of getting potential small suppliers to apply for government contracts, because in my experience SMEs can represent very good value for money. They do not have the same costs and scale of central services that some of the bigger operators have, and that can feed through into great prices and great service.

I turn first to Amendments 37 and 53, tabled by my noble friend Lady McIntosh. These both seek to ensure that, when food is procured, 50% of the purchases must be from the UK. The second amendment goes further and stipulates that the purchases must be locally from within the UK, with “locally” meaning within 30 miles of the contracting authority. Under the WTO’s government procurement agreement, and a number of international free trade agreements, the UK has legal obligations not to discriminate against suppliers from a country that is party to one of those agreements, for procurements over certain thresholds. So, requiring quotas for buying local UK food and drink produce at a national level would be a breach of those obligations.

There is, however, the potential for contracting authorities to develop local purchasing strategies. First, authorities may take advantage of the policy of December 2020, that below-threshold procurements may be reserved to UK suppliers only, or to UK SMEs, or VCSEs, in a particular region or county of the UK. While the Local Government Act 1988, Section 17, currently precludes local authorities from awarding public supply or works contracts by supplier location, we intend to use Clause 107 of this Bill, once enacted, to make secondary legislation to disapply that legislation in respect of this policy, so that local authorities, as well as government departments, can take advantage of this flexibility under the Bill for lower-value contracts; I hope this will be welcome.

Contracting authorities are also free to buy the food and drink that best meets their needs, meaning that they can specify foods that can be grown in the UK, rather than opting for produce that UK growers will be unable to produce. I think that we were all interested and amused to be taken back to the summer, and to hear of the letter written by the then Mr Rishi Sunak to the National Farmers Union. In line with our commitment in the food strategy published earlier this year, Defra has been carrying out a consultation on potential changes to public sector food and catering policy. That is now closed, and Defra will carefully consider the responses before setting out its next steps; I am not in a position to pre-empt the outcome of that process, but we continue to drive progress.

We remain fully committed to supporting our British food producers and farmers on food and, as the noble Lord, Lord Coaker, said, local sourcing is increasingly important—although I would say as a farmer’s daughter that food has to be grown where it makes sense from a weather point of view, so it is important to be able to move food around. I do not think that we can yet grow olives in the UK, but it will come with climate change.

Amendments 41 and 123, in the names of the noble Lords, Lord Fox and Lord Wallace, who introduced it, would extend the new obligations with regard to SMEs to cover social enterprises and not-for-profit companies, particularly in areas such as social care. I am glad to say that the duty I have included in the Bill will apply in respect of any small and medium-sized enterprises that meet the relevant definition, including any social enterprises, not-for-profit organisations and mutuals—to pick up a point made by my noble friend Lord Maude. I am glad to say that, in terms of numbers, the vast majority of organisations will meet the definition—but not, of course, the very biggest, and I think that it is right that they should be subject to normal procurement rules.

Amendment 54, from my noble friend Lord Lansley, would emphasise that contracting authorities should use preliminary market engagement to build capacity among SMEs. I fully agree with my noble friend that preliminary engagement should be used to help build SME capacity. However, the duty to have regard to SMEs contained in the procurement objectives will cover this, and much more. For example, not only do I want to see capacity building for SMEs in preliminary market engagement; I want public sector teams to learn via this engagement about new solutions and ways of working from SMEs, which are often, as we have heard, at the cutting edge of innovation. Further existing provisions in the Bill, such as pipeline notices, and separating contracts into lots, also help with SME capacity-building—and as such this amendment is not required.

As regards Amendment 73, the Bill allows for contracts to be awarded without competition in limited circumstances, and these were outlined in Clauses 39 and 41, with detail in Schedule 5. This is the route to making a direct award under the Bill; it is different from a so-called “direct award” under a framework. An award without a further competitive process may or may not be provided for under the terms of the framework and, as I explained in my letter to the noble Lord, the framework itself is openly competed for, and the framework terms may provide for further competition between suppliers when a contract and/or a permit is awarded without further competition.

Clause 43 is clear that award without further competition between suppliers is permissible only where this is set out in that original framework, and that an objective mechanism for supplier selection is provided. While I appreciate that the noble Lord is concerned with some examples of problematic operation and consequences in respect of certain frameworks, such issues will not be addressed via this amendment. Additionally, the amendment would have the effect of limiting contracts to 18 months. This is unlikely to meet operational requirements, or deliver value for money in most cases, given the short-term duration. Suppliers are always able to raise specific issues with frameworks via the Government’s existing Public Procurement Review Service, which can investigate individual cases such as this one, and in future by the PRU. I believe that the issue of placing contracts without further competition under frameworks is best addressed through our training and guidance, which we will do as part of preparing procurance for the new regime.

Amendment 163 from the noble Baroness, Lady Bennett, would commit English and Welsh Ministers, within six months of the Bill becoming an Act, to make regulations to remove all the obligations on local authorities set out in Section 17 of the Local Government Act in respect of below-threshold contracts. We do not believe that this amendment is desirable. It goes much wider than required, disapplying all of Section 17, not just those provisions which prevent local authorities reserving below-threshold contracts to suppliers, or SMEs, or VCSEs, in a UK region or county. However, detailed secondary legislation will be laid before the new regime comes into force, and disapplication of Section 17 in this regard can be considered as part of that process.

Amendment 164, proposed by my noble friends Lady Noakes and Lord Moylan, would ensure that regulations made under Clause 107 can exclude below-threshold contracts from the duty in Section 17, but I hope that they are reassured by the remarks that I have made in respect of the amendments in the names of my noble friend Lady McIntosh and the noble Baroness, Lady Bennett.

I was glad to hear from the noble Lord, Lord Hendy, and to see his Amendment 162A, which seeks to immediately disapply provisions within Section 17 that prevent local authorities, when carrying out certain procurement functions, considering the terms and conditions of a supplier’s contracted employees, or subcontractor terms. As I have explained, the Government are confident that it is more appropriate to include a power for the disapplication of Section 17 on a case-by-case basis, in order to ensure alignment with current and future procurement policy; it is not therefore necessary to do this as a separate amendment. It is an important topic, and I want to reassure the noble Lord, Lord Hendy, that there are other mechanisms to ensure that UK companies, and any company bidding for public sector work, are abiding by legal requirements in respect of employment conditions.

Finally, Amendment 189, tabled by my noble friend Lord Lansley, seeks to redefine “small and medium-sized enterprises” by considering only the business’s number of staff, not other factors such as turnover. UK government policy sometimes considers SMEs only in relation to staff numbers: for example, BEIS’s publication of business statistics. In other circumstances, for example in the Companies Act, alternative criteria are used; it depends on the purpose. However, we have substantially retained the current definition used for procurement, which is well recognised and established. If we lose the turnover and balance-sheet total criteria, we potentially include well-resourced businesses with significant capital that have acquired, or taken over, government contracts in their portfolio through acquisition, while playing a role in procurement. These are not the types of business we are looking to focus on in the duty to have regard to SMEs. We have, however, included an additional power, my noble friend will be glad to hear, in Clause 114 to ensure that we retain flexibility to amend this definition—for example, if we wish to align with other definitions in future.

Finally, my noble friend Lady Noakes asked why we had exempted the new duty from being enforceable in civil proceedings. We want to ensure that this new duty in the Bill drives cultural change in procurement and improves access for SMEs, as I have already said. However, we do not believe that it is appropriate to make this new duty subject to the remedies regime in Part 9. Any failure to comply will be better suited to a procurement review unit investigation under Part 10, or indeed to a judicial review. SMEs want the opportunity to win public contracts. We believe that this duty will achieve that, but the purpose of the new duty is to stimulate the market for SMEs, not facilitate a new avenue for creative court claims.

I am sorry to end on that slightly negative note; I feel that this has been a very useful debate. I look forward to the House’s support for the government amendments, and I respectfully suggest that noble Lords do not press their amendments.

Photo of Baroness McIntosh of Pickering Baroness McIntosh of Pickering Ceidwadwyr 7:30, 28 Tachwedd 2022

I am extremely grateful, particularly to the noble Lord, Lord Coaker, for saying that the way forward is obviously to procure more food locally, and to my noble friend for pointing out that Section 17 of the Local Government Act will in fact be lifted. That is good news. It is pleasing to see that her work has formed a coalition of support for Amendment 40, and I congratulate her on that. I am not suggesting that olives should be grown in this country any time soon, but she will probably be aware that we are only 16% self-sufficient in fruit and vegetables in this country. It is wrong that we should be so dependent on foreign imports. It is a matter of personal regret to me that the scheme that was intended to bring Ukrainian women in to pick fruit and vegetables this year never appeared to come into force, so I hope we can look at that in future years. With those few remarks and the assurances she has given, I beg leave to withdraw Amendment 37.

Amendment 37 withdrawn.

Amendment 38 not moved.