Procurement Bill [HL]

Written evidence submitted by Serco Group Plc to the Public Bill Committee (PB23)

Procurement Bill

Executive Summary

Serco welcomes the Government’s proposed reforms to public procurement, and we are pleased to see a number of proposals that foster greater transparency, efficiency, flexibility and innovation for suppliers and contracting authorities:

· The consolidation of regulations into a single regime is to be welcomed, but the potential of the Bill will depend on successful implementation, a key part of which is effective training for procurement professionals.

· We would encourage the Government to engage with suppliers and other stakeholders during the development of secondary legislation and procurement policy notes, whilst being aware that the more policy notices are published, the more likely it is that the simplicity of the Bill will be compromised.

· Serco has for several years called for and supported the introduction of openly published KPIs for suppliers . You can read more about this at https://www.serco.com/about/our-strategy/shaping-uk-public-services . We wonder whether there would be value in also applying the same performance measures to in-sourced services.

· The Bill aims to remove a number of barriers to the participation of SMEs in the public procurement process. This is to be applauded, but the extent to which SMEs can benefit will also depend on how contracting authorities apply the Cabinet Office’s Social Value Model, and on how the Government can simplify procurement processes more generally.

· We would encourage the Government to make Delivery Model Assessments a statutory requirement of all contracting authorities, and for this to be reflected in the Bill, just as it is in the latest Sourcing Playbook.

· Allowing contracting authorities to choose the "most advantageous tender" , as opposed to focussing purely on the "most economically advantageous tender" marks a positive shift in mindset and procurement practice that allows for a more holistic approach.

Introductio n

1. Serco has provided services to the UK Government since the 1960s, which gives the company extensive experience of procurement regimes across eras and sectors. Today, Serco employs around 25,000 people spread across the UK’s constituent nations, each of whom helps to deliver critical public services on behalf national, local, and devolved authorities. We employ another 25,000 people delivering government services across Europe, Asia Pacific, North America and the Middle East. This exposure allows us to consider the Procurement Bill within an international context.

2. Given Serco’s breadth in the UK, across both sectors and different types of contracting authority, much of the Procurement Bill has relevance to our business. However, in the interests of the Committee’s time, we have chosen to comment solely on areas of specific interest and expertise.

A Single Regime

3. Serco welcomes the consolidation of over 350 individual regulations into a single, uniform framework for public procurement in the UK. We also welcome that the single regime will apply uniformly across government agencies, central government departments, and local government. This should allow for more consistency in the way contracts are assessed and awarded, which will benefit all those involved in the public procurement process whether they be suppliers or contracting authorities.

4. The single regime could also benefit contracting authorities for two, possibly understated reasons. Firstly, a single regime will make it easier for them to share best procurement practice across different authorities. This is an opportunity not to be missed. Secondly, procurement professionals who move from one contracting authority may find it easier to transfer their knowledge and skills, thus improving efficiency across the contracting ecosystem.

5. Connected to this is training. A single regime provides an opportunity to optimise the training provided to procurement professionals. We strongly believe that the potential upsides of the Bill will only be achieved with effective training. For example, the Bill affords contracting authorities increased flexibility in the way they procure goods and services. However, if the training to maximise the benefits of this flexibility is deficient, contracting authorities may use the flexibility to simply fall back on the frameworks they have used in the past.

6. Finally, we note that the legislation in the Bill will be updated and supported through secondary legislation. We would encourage the Government to engage with suppliers and other stakeholders during the development of these policies, whilst being aware that the more policy notices are published, the more likely it is that the simplicity of the new system will be compromised.

Performance

7. Serco has long called for more transparency in suppliers’ performance. As such, we welcome the new statutory requirement for contracting authorities to openly publish at least 3 KPIs for each procurement contract worth £5 million or more. This will make it easier to measure performance. To maximise the benefit of the new statutory requirement, it is imperative that the assessment of the KPIs is impartial and seen to be impartial.

8. Whilst we support more transparency in the way performance is reported, the KPIs selected for each contract must be representative of overall performance. The Bill lacks some detail in how the KPIs will be selected and whether suppliers will have a say in the selection process. Rather than KPIs being chosen arbitrarily, selection should be underpinned by a clear framework.

9. The Committee may want to consider whether in-sourced services should be benchmarked using the same structure of KPIs, as this would clarify the performance data of all services, allowing contracting authorities to more accurately assess the impact of the private and public sectors’ involvement in public service delivery. In addition, comparative data would lay the grounds for improved collaboration and sharing of best practice between contracting authorities and their private sector partners.

Exclusions

10. Serco welcomes more robust and comprehensive exclusions frameworks. It is imperative that suppliers and subcontractors are held accountable in the provision of public services.

11. The Bill stipulates that the "decision-maker" will adjudicate on whether a supplier is excludable. The "decision-maker" is defined as: "a contracting authority or an appropriate authority that is considering whether a discretionary exclusion ground applies to the supplier". The Committee may want to consider if this definition is sufficiently watertight, and whether the Government should more clearly define an "appropriate" authority in this context.

12. T he Bill provides a list of contraventions that would deem a supplier excludable. The list is comprehensive; however, the Committee may wish to consider if each ground for exclusion could be more carefully defined to avoid excessive subjectivity in the decision-making process. In addition, the Bill could acknowledge that suppliers have the opportunity to reform and change after a contravention and, in so doing, have the opportunity to participate in public procurement further down the line.

Small and medium sized enterprises

13. As a major supporter of SMEs in our nationwide supply chain, Serco wants to see such enterprises benefit to the greatest possible extent from public procurement spend and opportunities. The Bill is a meaningful and positive step in this direction. A notable example is how SMEs, in order to compete for a contract, will no longer be required to provide audited accounts or performance related insurance before the contract is awarded. However, the Committee may wish to consider whether there are alternative means by which to consider the financial robustness of SMEs in the stages before contract award. Developing such mechanisms would reduce risk and help to ensure that an entity has the resilience to deliver a contract upon award.

14. We also welcome the measure to create a single digital platform for supplier registration, which will remove barriers for SMEs, and also simplify the system more generally for both large and small suppliers.

15. The measures will boost the ability of SMEs to compete for and win public sector contracts. However, whether this will be a marginal gain or a fundamental shift remains to be seen. Large suppliers, such as Serco, have experience, resource, and expertise in the provision of large scale public sector contracts, which often carry a significant level of risk. SMEs, with their more specific service offering, may not have the resource to deliver these types of contracts, just as Serco may not have the specialisms to deliver some services provided by SMEs – hence why Serco is such a largescale supporter of SMEs in our supply chain.

16. The law, as it currently stands, prohibits contracting authorities from proactively favouring one size of business over another. It may be, therefore, that the most appropriate method by which to increase opportunities for SMEs is for contracting authorities to stipulate that suppliers include more SMEs in their supply chains, most obviously in the Social Value requirements of a tender.

17. When it comes to SMEs, the removal of some administrative barriers is a positive; however, more consideration can be given to the time, complexity, cost, and duration of procurements.

Most Advantageous Tender

18. Allowing contracting authorities to choose the "most advantageous tender", as opposed to focussing purely on the "most economically advantageous tender" , marks a positive shift in mindset and procurement practice that allows for a more holistic approach. The policy will give confidence to suppliers to invest more in innovation and their supply chains. This will also benefit smaller enterprises, giving them more opportunities to benefit from public procurement spend.

Social Value

19. W e recognise that Social Value is already incorporated into public procurement through policy and, therefore, is not included in this proposed legislation. If the Government wishes to change tack and include Social Value in the Bill, Serco is on hand to provide insights into how this might be achieved based on our recent experience of this in tenders .

20. We are extremely supportive of Social Value, but it is fundamental to the functioning of an effective and vibrant market that competitors, and in particular SME’s/VCSEs, know what they have to do to win business, and this knowledge can be carried from one tender to another. Further, while the incorporation of Social Value into the assessment process is positive , it should not outweigh or distract from the core objectives of the service being procured.

Make versus buy assessments

21. The latest Sourcing Playbook refers to Delivery Model Assessments, formerly known as ‘make versus buy’ assessments, which propose that central government departments conduct a proportional delivery model assessment before deciding to outsource, insource or re-procure a service. Serco has long championed this transparent, rigorous, and scientific approach. We would, therefore, encourage the Government to make Delivery Model Assessments a statutory requirement of all contracting authorities, and for this to be reflected in the Bill.

22. Delivery Model Assessments are an objective mechanism to determine whether a tender should be competed for or not. The process tends to show how competition improves the quality of public services by encouraging innovation and new ways of thinking. In addition, independent research using Government statistics has shown that , on the whole , competition results in average savings to the taxpayer of between 5% and 15% , without a deterioration in quality.

International Obligations

23. Serco welcomes the commitment to operate within the guidelines of the WTO Agreement on Government Procurement which, as a major exporter of Government services, we see as vital to promoting transparency, non-discrimination and a level playing field both in the UK and overseas. The ability of UK businesses to compete for international contracts safeguards jobs in the UK, not only those employed by the direct supplier but also those in their supply chain.

End Note

Our response is designed to be concise, focussing on some key points that align with the Committee’s priority areas. We have not exhaustively detailed every aspect of our experience with regard to each clause in the Procurement Bill. However, we would strongly encourage and welcome the Committee to approach us for additional detail on any aspect of the response if it so wishes.

2 nd February 2023