Procurement Bill [HL]

Written evidence submitted by Robert Logan

To the PROCUREMENT BILL Committee (PB16).

Dear House of Commons Public Bill Committee,

I am writing to contribute my thoughts to the Committee’s on-going discussion of the Procurement Bill, following your recent Call for Evidence . Note that these are my personal observations only, and do not seek to represent the views of the University of Bristol or any other organisation.  

My central argument is that the Procurement Bill is a timely piece of legislation with much positive potential, and that the iteration of the Bill so far (in the House of Lords and in pre-legislative consultation) has improved the Bill considerably from earlier versions, but that different parts of the Bill still point in different directions, and that there are further improvements that could be made to improve the effectiveness and reduce the costs of the new Regulations, notably from the perspective of stimulating innovation and economic creativity.

I would add that the House is being very well served by a committed and talented group of civil servants, notably within the Cabinet Office, who have demonstrated a marked openness to the ideas and experience of procurement professionals in various sectors.

I want to draw attention to the potential for conflict between four different elements of the Bill:

- The desire to increase levels of innovation and commercial entrepreneurialism in procurement practice. See Section 13 (The National Procurement Policy Statement and Section 20 (Competitive Tendering Procedures).

- The desire radically to increase volumes of statutory declarations associated with increased transparency. See Sections 15 (Planning Procurement Notices), 17 (Preliminary Market Engagement Notices), 21 (Tender Notices and Associated Tender Document), 39 (Dynamic Market Notices), 44 (Transparency Notices), 50 (Contract Award Notices and Assessment Summaries), 53 (Contract Details Notices and Publication of Contracts), 55 (Procurement Termination Notices), 68 (Payments Compliance Notices), 74 Contract Change Notices, 79 (Contract Termination Notices), 86 (Regulated Below-Threshold Contracts: Notices), 91 (Pipeline Notices), and 93 (Notices, Document and Information: Regulations and Online Systems), among others.

- The desire to enhance the involvement of small and medium sized enterprises (SMEs), particularly those geographically local to a given Contracting Authority (CA), in tendering for the supply of goods, services and works. See Section 12 (4) (Duty to have to regard to the fact that SMEs may face particular barriers to participation).

- The desire to improve the status of procurement linked to research and innovation. See Schedule 2 Section 18 (Research and Development Services) and Schedule 5 Section 2 (Prototypes and Development).

1. Innovation

- Government has stated, in the Green Paper preceding the Bill and elsewhere, that one of its aims is to increase the level of commercial flexibility available to CAs and the level of entrepreneurial activity displayed by CAs, with a view to delivering the Objectives identified by the Bill (in Section 12), namely delivering value for money, maximising public benefit, sharing information, and acting, and being seen to act, with integrity.

- The procurement procedures described by the Bill (notably in Section 20 (2) (b) on the ‘competitive flexible procedure’) increase the ability of CAs to develop innovative and flexible procedures by which to deliver the objectives set. This increase in flexibility is welcome.

- To some extent, the flexibility now being offered to all types of procurement is similar to the flexibility currently in place in the ‘Light Tough Regime’ within the existing regulations (which offer similar scope to a defined list of commodities), but to be available more generally.

- It is unlikely that CAs will want to develop bespoke procurement processes every time they wish to buy something; and it is certain the suppliers will not appreciate every CA developing their own processes. However, to the extent that these freedoms will be used, their availability is welcome.

- From a practitioner perspective, the potential to add a Best And Final Office (BAFO) stage to an otherwise simple Open or Restricted Procedure, or to add a phase for on-site Demonstrations, for instance, without the increased timescales and increased costs of the current Competitive Dialogue procedure, is a welcome prospect.

- I would add that the scale and quality of training being developed by civil servants (for a range of technical and general audiences) appears to be able to give a good account of the principles and requirements of these procedures.

2. Transparency

- The requirements for increased transparency appear to arise from completely different aspirations than those that drive the above increase in commercial freedom.

- The new requirements for transparency replace a well-established and proportionate regime (e.g. with the prospect of Prior Information (PIN) Notices if needed, and with published Notices initiating each competition, Debrief Letters to bidders, and Contract Award Notices following each competition).

- The new transparency obligations impose a very considerable increase in bureaucracy, with a large number of new Notices at several stages throughout and beyond the development of a procurement and contract management process. This includes a number of points at which communication with individually affected bodies (e.g. Debrief Letters to unsuccessful bidders) are replacing with public notices, including notices that would need to be published before a formal and/or elected decision-making authority would be in a position to make the final decision. The new regime will add considerably to the costs of implementing the new Regulations, and on an on-going basis.

- The rationale for this radical increase in publication density has not been explained, nor has the decision to base the level of required publication at the same standard as the current Freedom Of Information Act. This means that CAs will in effect have to act as if all contracts had been subject to an FOI request, even if no such request has been made or is likely to be made. This approach may make some sense for national organisations (e.g. Central Government Departments) that may receive very many FOI requests connected to recent contract awards, but it makes very little sense for smaller, locally or regionally-focussed organisations (e.g. District Councils) that may receive very few.

- The recent decision to place at bar at which full (albeit commercially redacted) versions of contracts should be published at £5m (rather than £2m) is a helpful reduction in the volume at which this particular level of disclosure will be required, but it does not remove the complexity and risk involved in making these disclosures. It is inevitable that these considerations will increase CAs’ costs in terms of legal and professional advice, and also in terms of a period of discussion with the winning bidder about exactly what content within the contract should be redacted. These costs are inevitable if an individual request has been received asking for a copy of a contract (e.g. under the current FOI rules), but they are not obviously proportionate if no such demand exists.

- The desire for high levels of accountability and integrity in public procurement decisions is a very important one, but one that could be better achieved by clearer legal principles rather than a more inflexible set of bureaucratic procedures, especially given the Bill’s preference for procurement procedures to be more flexible rather than less. If the Bill’s proposals could be made more proportionate, they could achieve these aims more effectively, not less.  

- The Committee may be aware that Bill includes a separate set of disclosure requirements not related to individual procurements, such as information relating to a CA’s performance at paying undisputed invoices within 30 days (Section 68) and information relating to payments over £30,000 (Section 69). The Committee may want to investigate whether such a dense volume of information on both the conduct of individual procurements and on 3rd party is general is proportionate to the aims outlined.

3. SMEs

- The desire to make procurement more accessible to SMEs, particularly those serving a particular geographic area, is widely shared.

- Some CAs have been particularly effective in developing their role as ‘anchor institutions’ for a local economy and ensured that, where possible, ‘the local pound is spent locally’. Achieving this can often include improving local communications and myth-busting about procurement processes, in addition to the technical detail about how tenders are structured (e.g. the number and shape of individual Lots).

- The Bill reiterates these aims, but it is questionable the extent to which the new procedures will lead to a fundamental change in the proportion of tenders won by local suppliers. The requirements for a large increase in the volume and costs of transparency, in particular, are more likely to engender a more cautious ‘safety first’ approach than the reverse. The Committee may want to explore this tension in more detail.

4. Research

- The Bill uses new language to describe how the Regulations are intended to apply to research. This is of great interest to research-intensive organisation, particularly those, like universities and research institutes, that are substantially dedicated to the creation of new scientific knowledge.

- The PCR devotes a considerable section to a particular, and seldom used, form of research collaboration (the ‘Innovation Partnership), and identifies a specific and well-understood scenario whereby the current negotiated procedure without prior publication can be adopted for research purposes (Regulation 32 (5) (a) – this revolves around goods being ‘manufactured purely for the purpose of research, experimentation, study or development, but contracts awarded in reliance on this sub[1]paragraph shall not include quantity production to establish commercial viability or to recover research and development costs’. It is not clear if the Government intends to widen the scenarios in which contracts aimed to advance the creation of new science should be subject to different substantive rules to those covering more mainstream requirements for goods, services and works.

- If the Bill does intend to increase the ways in which procurement processes can be attuned to better contribute to the development of scientific knowledge, this would be a welcome development.

- The Bill refers to research in four places:

o Section 2 (5) (c) where the Advanced Research and Invention Agency is specifically identified as outside the definition of a contracting authority.

o Section 7 (7) (a) which defines research related to Defence and Security Contracts.

o Schedule 2 on Exempted Contracts, Section 18, which describes research and development services, using new terminology, including a definition of research and development services revolving around the acquisition or new scientific or technical knowledge and its development, but specifies that this does not apply to goods or works (implying that it only applies to services).  

o Schedule 5 on Direct Award Justifications, Section 2, which describes Prototypes and Development. This section does apply to goods, although possibly only ‘novel’ goods designed with a specific customer in mind.

- It would be helpful if the purposes between these references were clarified, especially those occasions where research is exempt from the new Regulations (Schedule 2), or is within the Regulations but subject to a specific rationale for a Direct Award (Schedule 5), or neither of these.

- The Committee may be aware that the acquisition of new scientific or technical knowledge often requires the purchase and installation of scientific equipment, and therefore the procurement of goods and works, rather than services. These goods and works may be bespoke in that they are intended to support the development of individual research products, and could not feasibly be used for other purposes, or they may be less bespoke but still intended by the CA for a sole, research-oriented purpose. It would be helpful if the selection of the appropriate procurement procedure could take into consideration the research-intensive purpose behind the purchase and its broader positive impact on the UK’s research and economic base, rather than solely the narrower economic considerations of the purchase itself.

- The Committee may also be aware of a current mixed economy in UK Higher Education around the applicability of procurement regulations, which is governed by the historic ‘50% rule’, whereby organisations are CAs if they obtain more than half of their income from public sources. The Procurement Bill appears to maintain and codify the 50% rule by the use of the new term ‘wholly or mainly funded out of public funds’ (Section 2 (2) (a)).

I hope this contributions are helpful.

Your faithfully

Rob Logan

 

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Rob Logan

Director of Procurement

University of Bristol