Procurement Bill, Second Reading, House of Lords, 23 May 2022

• The LGA broadly welcomes the Government’s proposed reforms to public procurement including enshrining in law the objectives of public procurement.
• Following the publication of the Green Paper, Transforming Public Procurement, we have been working closely with Government to help them to understand the way that councils procure goods, works and services, to enable the new regime to be designed in a way that is effective and reduces unnecessary administrative burdens for councils.
• We are grateful to the way officials have worked with us and are pleased that many of our concerns arising from the Green Paper have been resolved in the legislation as it was introduced in Parliament. In particular, we welcome that the Procurement Bill properly recognises the way that social care is organised and the imperative that users are able to choose their own care.
• The Bill seeks to reform the UK’s public procurement regime to create a fairer and more transparent system. It also aims to support businesses by making public procurement more accessible to small businesses, and voluntary, charitable and social enterprises, by enabling them to compete for public contracts.
• The Bill will enshrine the objectives of public procurement in law, including delivering value for money, maximising public benefit, and acting, and being seen to act, with integrity. The Bill will also require public sector buyers to have regard to the Government’s strategic priorities for public procurement, as set out in the National Procurement Policy Statement. While councils are broadly supportive of the Government’s strategic priorities, we believe that councils should continue to set priorities for procurement based on their local strategic priorities to best meet local needs.
• We are also concerned that some areas of the Bill may have unintended consequences for local government, which will create new difficulties in meeting the procurement objectives and delivering good-quality services; these are outlined in this briefing. We would like to see the Bill go further to reduce red tape and we will continue to work with Government on the granular detail of the Bill, to try to ensure the reforms achieve their ambitions and deliver the best outcomes for local areas.
• Councils are facing significant capacity issues in the procurement workforce, due to challenges with recruitment and retention. We are seeking a further discussion with Government on a nationally funded approach to upskilling council procurement officers, to support the effective implementation of the Government’s proposals.

• Part one of the Bill provides definitions for several of the terms used in the Bill.
• Clause 1 defines contracting authorities as a public authority, other than ones that are specifically excluded.
• A ‘public authority’ would mean any authority with functions of a public nature that is wholly or mainly funded from public funds or is subject to contracting authority oversight.

LGA view

• It is important that the wording in clause one of the Bill makes clear, beyond doubt, that Local Authority Trading Companies established under Section 95 Local Government Act 2003 for a commercial purpose are not considered contracting authorities.
• In passing Section 95, Parliament intended local authorities to be able to form companies to carry out a ‘commercial purpose’. Such companies are required to operate on the market without receiving subsidies from the local authority.
• However, because these companies are “do[ing] for a commercial purpose [something] for the purpose of carrying out the ordinary functions of [the local authority]” there is a risk that it would be caught by the ‘functions of a public nature’ test in Clause 1 and be subject to the same public procurement duties as public bodies.
• A company subject to the constraints of being a public contracting authority cannot be truly commercial, and this would undermine the purpose of councils’ ability to set up commercial companies. Further clarity is needed within the Bill to prevent any issues from this arising.

• Part two of the Bill includes provisions to enshrine the objectives of public procurement in law, which a contracting authority must have regard to when carrying out procurement.
• These include ‘value for money’; ‘maximising public benefit,’ ‘sharing information for the purpose of allowing suppliers and others to understand the authority’s procurement policies and decisions,’ and ‘acting and being seen to act, with integrity;’
• The Bill also enshrines procurement principles, which will require contracting authorities to treat suppliers the same unless a difference justifies different treatment, and to take reasonable steps to ensure they do not put a supplier at an unfair advantage or disadvantage.
• The National Procurement Policy Statement, given legal force by the Bill, is expected to require buyers to take account of national strategic priorities such as job creation potential, improving supplier resilience and tackling climate change.
• The Bill will enable competitions to be reserved for UK suppliers, small and medium enterprises (SMEs) and social enterprises where a contract is below a certain threshold, with the aim of encouraging public bodies to ‘buy local’ and support their local economies. However, Section 17 of the Local Government Act 1988 prevents councils from placing restrictions on procurement on this basis.
• Part two, clause 10, subsection 5 defines a “centralised procurement authority” and states that only contracting authorities can be centralised procurement authorities.

LGA view

• We broadly support the principles of public procurement that are included in the Bill. Regarding the principle of ‘maximising public benefit’, we agree that procurement should support the delivery of strategic national priorities including economic, social, ethical, environmental and public safety.  However, in the first instance we believe that council led procurement should support the delivery of strategic community priorities, which are themselves subject to local democratic decision making.  Any other central Government priorities should be considered in addition to these priorities.   
• Local government cannot implement the national procurement policy statement in full – nor would councils be able to reserve lower value requirements for local or UK businesses to support more ‘buying local’– unless Section 17 of the Local Government Act 1988 is amended. The Government have committed to addressing this issue, not within the Bill, but at a later stage. We would like to see a Ministerial commitment to ensure this order will come into effect as soon as possible after Royal Assent.
• We would also like to see a commitment to written consultation in the event of Government changing procurement priorities at a future date.
• Clause 10 of the Bill should be amended to ensure beyond doubt that a local authority or consortium of local authorities may act as a centralised procurement authority, even if that is not their exclusive or main business.
• The current wording of the Bill risks precluding councils from joining together in consortia to procure goods and services and secure best value for money. It is vital that this is resolved.

• Schedule 2 of the Bill sets out what type of contracts are considered exempted contracts for the purposes of the bill, meaning contracts for which a procurement process is not needed.

LGA view

• It is common practice for different local authorities to join together and set up separate entities to carry a local services, for example, to carry out waste services. This allows councils to procure at scale and deliver better value for money services. At present, once a joint entity has been established to carry out certain services, the local authorities which control the entity may award it contracts without going through lengthy and expensive procurement processes as these contracts are ‘exempt.’
• Within the Bill, local authorities which set up ‘single’ entities on their own will continue to benefit from contract exemptions, meaning they can award contracts to an entity without going through a full procurement process. However, contracts that councils award to joint entities, controlled by multiple local authorities, will no longer be exempt and will be subject to a full procurement process. This would undermine the purpose and benefits of councils operating joint entities.
• It is vital that paragraph 2 of schedule 2 is clarified to ensure that local authorities can continue to operate joint entities, as is the case under current legislation. Joint control of local authority trading companies is explicitly permitted by section 73 Local Government and Housing Act 1989, and was affirmed by the Supreme Court in Brent London Borough Council and others (Harrow LBC) v Risk Management Partners [2011]).

• Clause 18 provides that a contracting authority may award a public contract to the supplier that submitted the most advantageous tender in a competitive tendering process. This is the tender that the contracting authority considers best satisfied its awarding criteria.
• Clause 19 requires that before awarding a public contract under clause 18 (award of public contracts following a competitive procedure), a contracting authority must carry out a competitive tendering procedure in accordance with a tender notice (an “advertisement” of the opportunity) and associated supporting tender documents. This ensures potential bidders know what to expect from the procedure.

LGA view

• Clause 19 should be amended to make clear that the assessment methodology may provide that only a subset of award criteria will be applied in the initial rounds of evaluation. In particular, it is important that contracting authorities are able to choose to consider only non-price award criteria in the initial rounds of procurement, adding price as a criterion later in the process.
• Performing the procurement of complex contracts (for example for major works) through multiple bidding rounds is normal practice and the Bill envisages this continuing. At the early stages, a realistic price often cannot be given, because the design will not be known in sufficient detail.
• Bidders therefore need to be whittled down on the basis of what they propose to deliver and how, before the final group of tenderers is invited to submit prices. In the absence of such a provision, tenderers could only be whittled down by reference to their capacity and previous experience of delivery, and not their proposals for the contract being procured. Public bodies would therefore have less information at their disposal during the procurement process, risking a poorer service being delivered.

• Clause 42 allows a contracting authority to switch from a competitive tendering procedure to the direct award of a contract in circumstances where no suitable tenders or requests to participate have been received in a competitive procedure.

LGA view

• This section of the Bill seems to indicate that tenders cannot be considered "not suitable" on the basis that they are unaffordable, unless the contracting authority included a stated price cap in their assessment methodology.
• A publicly stated price cap (the budget for the project or service) is undesirable because it results in suppliers submitting bids at just below the price cap, which leads to poor value for money.
• The Bill should be amended to enable a contracting authority to switch to direct award if the tenders are all unaffordable by reference to a budget, which the contracting authority should document in advance. However, the contracting authority should not be required to publish their budget, as this would drive up prices.

• Clause 52 establishes the minimum periods that contracting authorities must allow for submission of tenders (and/or requests to participate) in relation to procurements under Part 3. It also establishes a range of matters to which they must have regard when setting those time limits and any other time limits relevant to Part 3.

LGA view

• We would like to see the Bill permit shorter time limits for awarding straightforward contracts by sub-central contracting authorities (sub-central contracting authorities are all public bodies except central government), for example price-only school transport contracts.
• The turnaround times on these tenders can be short because councils need to quickly respond to local needs. For example, in the instance that a child with special needs and disability to the area, councils would need to arrange transport immediately.
• Without shorter time limits two procurements would need to be conducted – an ‘urgent’ procurement to provide transport, followed by a second procurement with a longer timescale for a longer contract. This requirement will simply increase costs for bidders and local authority alike, if the initial supplier is performing to an expected standard.

• Clause 69 of the Bill sets out the circumstances under which public contracts may be modified during their term without running a full procurement process.

• Currently a contracting authority may modify a contract where the modification is (i) less than 10 per cent of the contract value (and 15 per cent for works contracts) or if the modification is classed as ‘not substantial’, as set out in the Public Contracts Regulations 2015 (Regulation 72(5) & 72(8).
• The Bill introduces significant new restrictions in Clause 69(4) by making these tests cumulative with other tests, which has the effect of making the circumstances in which councils can amend contracts without running a full procurement process much narrower.

LGA view

• This change will result in less flexibility and cause unnecessary burdens for local authorities, as they will need to run full procurement processes when altering a wider range of contracts than was previously required. Therefore, we would like to see the Bill amended to remove this new restriction.

• Clause 86 allows a minister to make provisions about publication of procurement and spend data via a statutory instrument.
• Government’s stated intention is that there should be a single digital platform for procurement data. This will enable suppliers to register their details, that can be used for all bids, while a “single central transparency platform will allow suppliers to see all opportunities in one place”. This aims to help SMEs through prompt payment “on a much broader range of contracts”.

LGA view

• In principle, we welcome the concept of a single digital platform, provided it is well-designed with user input and is sufficiently resourced. However, we are concerned that the objective to streamline the procurement process and allow suppliers to see all public tenders in one place will be undermined by contradictory requirements, laid down in other legislation and in statutory guidance, that require certain types of public tenders to be published in a specific form. In particular:
  • The Transport Act 1985 (Section 89(4)(b) and Section 89(5) requires that tenders for subsidised public transport services are advertised in a particular form. The Bill needs to amend or repeal these provisions so that transport procurements are advertised and documented on the single digital platform in the same way as other procurements.
  • The Service Subsidy Agreements (Tendering) (England) Regulations 2002 and 2004 which lay down requirements for public bus tenders also require tenders to be advertised in a particular form. These regulations similarly need amending.
  • The statutory Best Value Transparency Code also contains publication requirements about contracts that require information to be published in a different place, with different definitions and thresholds.
• The Bill should ensure that all requirements to publish procurement information and contract spend data are encompassed by the regulations, so that the single platform is genuinely the single source of information and so that the current duplication is removed.

Megan Edwards, Public Affairs and Campaigns Advisor, [email protected]