Procurement Bill [HL]

Written evidence submitted by the Local Government Association (LGA) (PB18)

Submission to the House of Commons Public Bill Committee

Procurement Bill

1. About the Local Government Association (LGA)

1.1 The Local Government Association (LGA) is the national voice of local government. We are a politically-led , cross party membership organisation, representing local authorities from England and Wales . We work closely with Mayoral Combined Authorities (MCAs) and represent councils which are constit uent authorities of MCAs.

1.2 Our role is to support, promote and improve local government, and raise national awareness of the ir work. Our ultimate ambition is to support them to deliver local solutions to national problems .

2. Summary

2.1 The LGA broadly welcomes the Government’s proposed reforms to public procurement including enshrining in law the objectives of public procurement.

2.2 Following the publication of the Green Paper, Transforming Public Procurement, we have been engaging with Government to help them to understand the way that councils procure goods, works and services, to help design the new regime in a way that is effective and reduces unnecessary costs and administrative burdens for local government.

2.3 We are pleased that many of our concerns arising from the Green Paper have been resolved in the proposed legislation and we are grateful for Cabinet Office officials’ ongoing engagement with us to improve the Bill. However, there are several important issues for local government that we are still seeking to resolve.

2.4 Our primary concern is that wording in the Bill could significantly limit public bodies from using the current vertical and horizontal procurement exemptions, which enable councils and public sector bodies to enter into collaborative arrangements to run efficient public services. Shared service arrangements enabled by these exemptions help to drive significant efficiencies in local government through achieving economies of scale and by pooling resources. Previous LGA research revealed that in 2018/19 these arrangements contributed in part to saving the taxpayer nearly £200 million.

2.5 However, the Bill introduces a new ‘reasonableness’ test which stipulates that these exemptions cannot be used if ‘the goods, services or works representing the main purpose of the contract could reasonably be supplied under a separate contract’ and that contract would not (paraphrasing) be an exempted contract. It will often be the case that public services, whether front-line or back-office, could ‘reasonably be supplied’ by a provider that is not a public entity. As a result, the legislation could be interpreted as requiring the public sector to have to engage the market, even for arrangements wholly within the public-sector, such as one council wishing to work with an in-house company or collaborate with a neighbouring council(s). We have been raising concerns that the wording of this provision could therefore close down the exemptions and certain models of collaborative public service delivery which save public money. Government amendments 85 and 86, tabled at House of Commons Committee Stage, appear to resolve these concerns around the drafting of Schedule 2 on exempted contracts.

2.6 Section 17 (1) of the Local Government Act 1988 currently prohibits local authorities from reserving even low-value contracts to local suppliers, SMEs and voluntary, community and social enterprises (VCSEs). In the public sector this restriction affects local government bodies in the main, placing councils at a disadvantage. This ability is vital to support councils’ place-shaping role, drive economic growth and achieve wider objectives such as reducing carbon emissions and boosting supply chain resilience. We are pleased that the Government has indicated that it intends to use the Procurement Bill, once enacted, to make secondary legislation to disapply Section 17 in terms of it precluding local authorities from awarding lower value public supply or works contracts by supplier location. We understand that this secondary legislation will be laid before the new regime comes into force. We would welcome early engagement from Cabinet Office on the secondary legislation.

2.7 We strongly support the aims of the single digital platform to simplify the public procurement system for both buyers and suppliers and enhance transparency. It is important that the Government now acts to bring differing procurement requirements in existing legislation (the Transport Act 1988 and Service Subsidy Agreements (Tendering) (England) Regulations 2002) into line with the single digital platform to avoid duplication and inefficiency. Any future legislative requirements in relation to procurement, whether under the Act or in sectoral legislation, should also make use of the platform. We hope that government will bring amendments at report stage to achieve this.

2.8 We want to see Government go as far as possible to reduce red tape for both the public sector and businesses and, give councils the flexibility they need to achieve their local ambitions. We will continue to work with Government, as the Bill passes through the Commons to ensure the reforms deliver their intended improvements to the procurement regime.

3. Schedule 2: Maintaining the current procurement exemptions

3.1 Since the Bill was introduced we have been raising concerns with Government that the current wording of the Bill could, in effect, close down existing procurement exemptions.

3.2 There are two important procurement exemptions under Regulation 12 of the existing legislation, the Public Contracts Regulations 2015, which facilitate co - operation and shared services between entities within the public sector. These exemptions are being carried into the Procurement Bill (but with modified wording) at Schedule 2 on exempted contracts.

3.3 Both these long-standing exemptions allow public authorities to enter into collaborative arrangements with each other , with in-house companies, or with other public bodies for the efficient delivery of public services. ‘Joining up’ the public sector in this way help s to drive significant efficiencies in local government through achieving economies of scale and pooling of resources.  Previous LGA research  demonstrated that in 2018/19 they contributed in part to saving the taxpayer nearly £200 million.

3.4 As it stands, the Bill could significantly limit the use of these long-standing exemptions. Sub-Paragraph 1(2) of Schedule 2 introduces new wording which stipulates that these exemptions can not be used if ‘ the goods, services or works representing the main purpose of the contract could reasonably be supplied under a separate contract’ and that contract would not (paraphrasing) be an exempted contract . It will often be the case that public services, whether front-line or back office, ‘ could reasonably be supplied under a separate contract’ by a provider who is not a public entity. As a result, this provision c ould be read as a requirement for the public sector to have to engage the market to have its requirements met , even for services which are currently being delivered wholly within the public sector. T his new wording could close down models of collaboration and efficient service delivery which save public money. The sub-paragraph also opens up a new avenue of legal challenge against the public sector.

3.5 We understand that t he Government’s view is that paragraph 1(2) of Schedule 2 serves to close a loophole, whereby contracts that are mixed ( in other words, they contain both exempted activities and non-exempted activities) might otherwise be inappropriately exempted from tendering. We understand the necessity for this but we remain of the view that the provision could easily be read in a way that will, in practice, close down the use of the exemptions.

3.6 The LGA has been engaging with Cabinet Office officials on this issue. Government amendments 85 and 86 appear to resolve our concern around the drafting of Schedule 2 on exempted contracts, which could otherwise have been read in a way which would have severely impeded cooperation between local authorities and their ability to contract with entities that, though legally separate, are in substance ‘in house’ to them .

4. Timescales- new restrictions on local authorities

4.1 The Bill introduces new restrictions on local authorities by not including the current wording at regulation 34(12) of the Public Contracts Regulations 2015, which allows ‘sub-central’ authorities, by agreement with all selected candidates, to shorten procurement timescales when using dynamic purchasing systems (DPS).

4.2 A DPS is unlike a traditional framework for the supply of goods, works or services. It an electronic system which suppliers can join at any time, and it is designed to give buyers access to a pool of ‘pre-approved’ suppliers.

4.3 Therefore, suppliers do not have to demonstrate suitability or capability every time they wish to compete for a public sector contract and the approval process is often quicker than a framework and enables councils to purchase and deliver services at pace. Councils use dynamic purchasing systems to effectively deliver a range of services that need to be procured quickly, for example, adult’s and children’s residential social care, apprenticeship training, asbestos removal, cleaning services, home-based care services etc.

4.4 In particular, local authorities heavily rely on DPS for school transport procurement, where a significant number of contracts must be let quickly each summer as children are allocated school places. These contracts are straightforward, with pre-approved suppliers typically competing on price. These contracts have no cross-border implications so don’t disadvantage operators in other countries as no operator without a local base is likely to bid.

4.5 Regulation 3 4(12) of the Public Contracts Regulations 2015 states :  ‘Sub-central contracting authorities may set the time limit for the receipt of tenders by mutual agreement between the contracting authority and all selected candidates, provided that all selected candidates have the same time to prepare and submit their tenders.’

4.6 The Bill no longer allows this, and should therefore be amended to reinstate this important flexibility, to ensure that everything from school transport to social care services can be delivered on time for the individuals who rely upon these them

4.7 Clause 51(2) of the Bill states that "Time limits set for the purposes of this Part must be the same for each supplier". Therefore, any flexibility to apply shorter time frames would continue to be applied to all candidates equally, giving them the same time to prepare and submit their tenders as is the case under the current regime. 

5. Facilitating the single digital platform

5.1 The Bill will enable the creation of a single digital platform for public procurement, where all public procurement opportunities will be published and viewed in one place. This aims to simplify the procurement system, improve data sharing and transparency, and reduce barriers for SMEs which can sometimes struggle to navigate the public procurement system and win contracts.

5.2 The LGA supports the Government’s intention to create a single digital platform. We hope that this proposal will simplify the system for both buyers and suppliers.

5.3 However, there are long-standing requirements in existing legislation and statutory guidance, which specify where and how public bodies must publish procurement information. To meet the ambitions of the single digital platform, where all public procurement information is centralised in one place, this legislation and guidance will need to be updated.

5.4 The LGA has been calling on the Government to amend the following legislation and guidance within the Bill to avoid duplication and inefficiency:

4.4.1 Transport Act 1985:   Section 89,  subsection (4)(b) and subsection (5)   should be disapplied. These sections require local authorities to individually issue notices of tender to all suppliers who have given written notice that they wish to be notified.

4.4.2 Service Subsidy Agreements (Tendering) (England) Regulations 2002:   Regulations 4 and 5 should be disapplied. These regulations require local authorities to publish tender information relating to transport service subsidies to the general public ‘at times and in places which are convenient to the public’ and publish notices of tender in local newspapers.

5.5 The statutory  Best Value Transparency Code   also contains yet more publication requirements about contracts that require information to be published in a different place, with different definitions and thresholds, and this will need to be reviewed. LGA’s request is that the procurement and contracts requirements of this code be brought into line with the requirements of the proposed Procurement Act ( and of future regulations made under it ) and that any procurement data that the code requires councils to publish in future should be published on the single digital platform .

5.6 We note that councils are already one of the most transparent parts of the public sector. They publish all spend above £500 on at least a quarterly basis, as compared with a £25k threshold for central government and the NHS.

6. Supporting SMEs and VCSE organisations

6.1 We welcome the Bill’s aim to make the public procurement system more accessible to SMEs. In 2015 the Government committed to direct 33 percent of public spending to SMEs by 2020, but recent research   shows that only 21 percent of public sector procurement spend went to SMEs in 2021.

6.2 The Bill introduces a number of measures to remove barriers SMEs face in bidding for, and securing, public sector contracts. This includes allowing smaller suppliers to provide alternative evidence where the ir audited accounts are not available, and to only put the required insurance cover in place when a contract is awarded to them, rather than incurring the costs upfront.

6.3 The Bill will also introduce a new duty on contracting authorities to have regard to the fact that small and medium-sized enterprises may face particular barriers to participation and consider whether such barriers can be removed or reduced. We are pleased that this duty should also benefit a majority of voluntary, community organisations and social enterprises (VCSEs) , which play a vital role in local service delivery.

7. Enabling councils to ‘buy local’

7.1 In December 2020,   Procurement Policy Note 11/20  gave public sector bodies the right to reserve below-threshold contracts for local suppliers (for example, county level), SMEs or Voluntary, Community, and Social Enterprises (VCSEs). The option to strategically reserve below threshold contracts in this way enables public sector bodies to support their local economies and businesses by ‘buying local’, as well achieving other important objectives such as increasing supply chain resilience, reducing carbon emissions in supply chains and attracting new entrants to public procurement markets.

7.2 But Section 17(1) of the Local Government Act 1988  currently prohibits local authorities ( together with a few other named public authorities) from using this power and reserving contracts, whatever their value, to local suppliers and SMEs. In the public sector this restriction affects local government in the main , creating an uneven playing field , and hampering the ability to promote local growth

7.3 At the Bill’s Report Stage in the House of Lords, the Minister, Baroness Neville-Rolfe stated that the Government’s intention is to amend Section 17 (1) of the Local Government Act 1988 and rectify this issue in secondary legislation, which will be published once the Bill is enacted . We would welcome early engagement from Cabinet Office on the secondary legislation.

January 2023