Procurement Bill [HL]

Written evidence submitted by Colin M Cram FCIPS (PB08)

PROCUREMENT BILL: WRITTEN EVIDENCE SUBMISSION

My Credentials

After nearly 10 years as a fraud investigator in the then Customs and Excise, when in the Cabinet Office in 1981, I initiated the ongoing drive to improve the management of public sector procurement. Subsequently, I created and led several of the main procurement organisations in central government, higher education, the research councils and my final position was Director of the North West Centre of Excellence, which covered 47 local authorities. In 2013, I recommended to a Parliamentary committee the creation of the Crown Commercial Service. https://publications.parliament.uk/pa/cm201314/cmselect/cmpubadm/123/123vw26.htm

Since 2008 I have spent much time overseas and in the UK providing advice, consultancy and training to many businesses, including many global ones, and government organisations – delegates from 50 nations. In 2013 I set up a conference company, Open Forum Events Ltd, to run conferences to support the delivery of improved public services. https://www.openforumevents.co.uk/

I used to write regularly for the then Guardian’s Public Leaders Network https://www.theguardian.com/profile/colin-cram and for other journals. I have been a Fellow of the Charted Institute of Procurement and Supply for almost 25 years, a member of SOLACE (Society of Local Authorities Chief Executives) since 2005, am an associate member of the Association of Certified Fraud Examiners (ACFE) and have been a Visiting Fellow at Manchester University.

1. Weaknesses that Need Addressing

1.1 There are 4 significant weaknesses in the Procurement Bill.

1) The removal of the current ‘Restricted’ process for tendering. This has an extra step which saves SMEs in particular from much costly and wasted time.

2) A lack of an effective way to combat fraud and, in particular, corruption.

3) A Need to Strengthen the Procurement Investigations section in Part 10 of the Bill.

4) Discretionary and Mandatory Exclusion Grounds. For instance, killing people to use their body parts for medical transplants should result in Mandatory exclusion as should the use of slave or force labour in the supply chain where the supplier or potential supplier knew or should have known this was happening.

2. Need for a Formal Pre-Qualification Stage to Avoid Time Wasting Tenders and Disadvantaging SMEs 2.1 Tendering is expensive and time consuming. The way the UK’s public sector operates all too frequently inadvertently discriminates against SMEs, which will include the most innovative of suppliers on which the UK’s economy and future global competitiveness will depend. Many SMEs - which means most businesses in the UK, do not know how to tender properly and they don’t have the time to do so. According to the Federation of Small Businesses, at the end of 2021 there were 5.5million SMEs employing fewer than 50 people each. Their average turnover was £1.25million. However, only half were registered for VAT, so most will have a turnover well below that. Many of these will be capable of delivering contracts greater than the thresholds (Schedule 1 refers).

2.2 Having to tender for every contract that might interest a small business would prove prohibitively expensive. To illustrate the point, a mid-cap business sought my advice. It was winning just 1 tender in 20 and was thinking of withdrawing from the public sector. I suggested that it should employ 2 full time tenderers. It took my advice, and its win rate went up to 1 in 4 – without changing either the products or services that it was providing.

2.3 To put together the simplest of tenders will cost not less than £1000 if properly costed. So, 4 attempts at tendering for the simplest of contracts would cost £4000 and 20 in order to win at least 1 contract would cost £20,000.

2.4 Tenders for contracts of a size that are above the thresholds of £138,760 for central government and £213,477 other public sector bodies will be much more complex. To stand much chance of winning them, SMEs will need to spend a minimum of £7000 for professional support for each tender. So, if it has a 1 in 4 chance of winning, it will cost a minimum of £28,000 per win. If its chance is 1 in 20, it will cost £140,000 per win. That makes most tendering uneconomic and is why so few businesses are interested in winning work from the public sector.

2.5 If all businesses interested in winning business above the thresholds decided to tender, the volume of tenders would be completely unmanageable.

2.6 The current Restricted Procedure has a formal and very simple, easily understood and low cost approach to shortlisting businesses/organisations before asking them to tender. Typically, this might result in just 4 being invited to tender. That gives each one a decent, though still expensive, chance of winning.

2.7 In short, whilst the current Restricted Procedure is not ideal, it is much better than what is proposed and should be retained.

3. Combating Corruption and Fraud

3.1 The Procurement Bill says little about combating the risks of corruption and fraud. Transparency International puts the UK in number 11 spot with a score of 78 in its Corruption Perceptions Index for 2021. This puts it behind most Northern European nations, one place above Hong Kong and 7 behind Singapore, which has a score of 85.

3.2 Perception matters. Lee Kuan Yew, the first Prime Minister of Singapore argued that combating corruption in a corrupt region was fundamental to bringing in investment and creating a prosperous nation from a very low economic base at independence.

https://www.theguardian.com/public-leaders-network/2015/apr/04/uk-learn-former-colony-singapore-lee-kuan-yew and https://www.straitstimes.com/opinion/britain-can-learn-a-lot-from-mr-lee-kuan-yew-and-singapore With no natural resources it has achieved a GDP per head of population that is almost twice that of the UK.

3.3 To combat corruption and fraud, he created the Corrupt Practices Investigation Bureau (CPIB). This is the organisation that handles all corruption investigations whether public or private sector. It is backed up by strict anti-corruption laws which are applied no matter what position a guilty person holds. If anyone suspects fraud or corruption, they report it to the CPIB.

3.4 UK public sector fraud and corruption is probably much more widespread in the UK public sector that we would like to admit. Accusations of corruption in the letting of PPE contracts have damaged public trust in the government. Two long running corruption investigations in the North West of England have damaged confidence more locally. Public trust in the NHS is damaged by revelations of reprisals against whistle-blowers. However, Brexit means that the UK has to work harder to thrive in a very competitive world and we need to learn from countries such as Singapore.

3.5 Contrast this with the chaotic approach in the UK. I tried to report what I believe to be a fraud case that I had been investigating and which could involve corruption.

· I spoke to a senior person in the National Audit Office who was interested but pointed out that fraud investigation is outside its remit.

· The NAO person suggested the Cabinet Office fraud team, but I was concerned it might not have the necessary independence.

· I approached the Serious Fraud Office who kept promising replies in 2 weeks, but after 6 months and after much prodding decided not to investigate.

· I approached the National Crime Agency and was informed that they only take on cases referred to by the police.

o I asked the NFA person which was the appropriate police force. I was told try Greater Manchester. I pointed out that it was in special measures, which did not fill me with confidence.

o The Metropolitan Police was the next suggestion. I pointed out that it was in special measures and, in any case, I was based in Derbyshire.

o It was then suggested that I try the Derbyshire Police. I felt that the Derbyshire Police might not be too interested in a London case.

3.6 My recommendations are as follows:

1. Merge all the anti-fraud functions into a single body similar to that of Singapore’s CPIB.

2. Ensure it is properly funded.

3. Ensure an independent governance structure, for example similar to that for the National Audit Office, which reports to the Public Accounts Committee.

4. Ensure that anyone can report possible fraud to it and be taken seriously with a guarantee of no repercussions.

5. Make it a requirement on all public sector personnel to report suspicions of fraud and corruption to that body.

3.7 Ideally, the UK equivalent of the CIPB should cover private and voluntary sector fraud also. However, the Procurement Bill applies to the public sector only. My recommendations 1 to 5 above should be incorporated into it and a clear timescale set for implementation. One option could be to incorporate it into the NAO, but that could cause a conflict in that the NAO has to agree its value for money reports with the organisation being reviewed, whilst a UK equivalent to the CIPB could not do so.

4. Procurement Investigations

4.1 Procurement investigations may arise when a supplier feels they have been unfairly treated. At present, one can complain to the Cabinet Office who will make an assessment and can pressurise a public body to reconsider. There must be circumstances where the Cabinet Office should be able to enforce their decision. An issue is the devolution of many responsibilities and accountabilities to many public bodies, e.g. local authorities. However, if there is to be confidence in the system, when all else fails, decisions must be enforceable.

4.2 The Bill should be amended initially for central government departmental families and agreement reached once the Bill has been passed that this provision should extend to local government and the NHS.

5.Discretionary Exclusion Grounds. Chapter 6 Paragraphs 57-65

and Schedule 7

5.1 Certain exclusion grounds in Schedule 7 should be made mandatory and included in Schedule 6. These include "Involvement in Forced Organ Harvesting" (Schedule 7, Paras 15 (1) (a) and 15 (2), which is defined in para 15 (2) as follows: "Forced organ harvesting" means killing a person without their consent so that their organs may be removed and transplanted into another person" – in other words "murder".

5.2 Paragraphs 57-65 propose making involvement in slavery and human trafficking ‘Discretionary Exclusion Grounds’. These should also be made mandatory where organisations knew or should have known that that this was happening.

5.3 Organisations that use forced or slave labour in their supply chains, when they knew or should have known, should also be included in the Mandatory Exclusion Category in Schedule 6.

©Colin M Cram FCIPS

January 2023