1.This Bill was introduced in the House of Lords on 11 May and had its Second Reading on 25 May.
2.The Bill contains 116 clauses and 11 Schedules. According to the Explanatory Notes, “The purpose of the Procurement Bill is to reform the United Kingdom’s public procurement regime following its exit from the European Union (EU), to create a simpler and more transparent system not based on transposed EU Directives”.
3.The Bill deals with—
4.The Bill will regulate public procurements from the point at which a public body that is to be regulated (a “contracting authority”) is considering whether and what to procure, through the process of procurement and contract award, up to the point at which the resulting contract ends.
5.The majority of the provisions in the Bill apply to contracting authorities in England, Wales and Northern Ireland. In general, the Bill applies only to contracting authorities in Scotland which (a) are cross-border bodies, or (b) exercise wholly reserved functions.
6.The Bill contains 53 delegated powers, 25 of which allow for the affirmative procedure. The Cabinet Office has provided a Delegated Powers Memorandum (“the Memorandum”).
7.This report identifies multiple failures in the Memorandum to adequately explain and justify very broad delegations of power which enable implementation of significant policy change by delegated legislation. This would give us cause for concern at any time but is particularly disappointing as it comes so soon after the publication of our report, Democracy Denied? The urgent need to rebalance power between Parliament and the Executive, in November 2021, and of revised guidance for departments on the role and requirements of this Committee.
8.The UK has a complex body of public procurement legislation, much of which is derived from EU law. The UK was required, as a member of the EU, to put in place domestic legislation to achieve objectives set out in EU Directives (a process known as ‘implementation’). EU Directives on procurement were implemented in the UK by—
The Bill repeals those Regulations and creates a new regime for regulating public procurement.
9.Those Regulations were made under a unique delegated power (in section 2(2) of the European Communities Act 1972), the purpose of which was to give Ministers power to make secondary legislation which implemented EU law in the UK. Despite being in many respects a power of considerable breadth (it could be used to make such provision as might be made by an Act of Parliament), the section 2(2) power was subject to a critical constraint: it gave Ministers power to make laws to give effect to EU law—not simply power to make laws that Ministers might have wished to make - and such laws were not open to domestic repeal or amendment in ways that might be inconsistent with EU law.
10.This Bill creates new delegated powers that are subject to no such constraints. Some would give Ministers new and significant scope to determine important aspects of the regulatory regime.
11.We draw the following powers to the attention of the House.
12.In general, the regulatory regime in the Bill applies only in relation to procurements the estimated value of which equals or exceeds financial thresholds that are specified in the Bill.
13.The Bill confers Henry VIII powers to increase or decrease the following such thresholds by regulations—
14.The first six of these thresholds may be changed by regulations subject only to the negative procedure. It is unclear whether the Government intends that the negative procedure should also apply to changes to the last two thresholds (those in clause 70): the Memorandum states that the negative procedure does apply—and provides a justification for its application which is in very similar terms to the justifications provided in relation to the first six thresholds—but the Bill itself provides for the affirmative procedure to apply. It is unclear whether it is the Memorandum or the Bill that contains the error.
15.The argument given for taking the powers is a need for flexibility, to allow Ministers to make changes that take account of, for example, inflation and “other such economic changes” and experience of the new procurement system in practice. However, there is nothing to prevent the powers being used to significantly raise thresholds–with a corresponding reduction in transparency in procurement.
16.We have often repeated our view that there should be a presumption that the affirmative procedure should apply to instruments made under Henry VIII powers. We have no objection to the negative procedure applying to (a) increases in the thresholds in line with inflation, or (b) reductions in the thresholds (since these would serve to increase transparency) but we consider that above-inflation increases—which would inevitably reduce transparency in procurement—merit the fuller scrutiny afforded by the affirmative procedure.
17.We therefore consider that regulations that make above-inflation increases to any of the financial thresholds in clauses 51, 65, 70, 78, 79 and 84 of the Bill should be subject to the affirmative procedure.
18.The Bill “seeks to bring greater transparency to procurement” and, to that end, it imposes obligations on contracting authorities to publish or produce notices, documents and other information.
19.During the Second Reading debate on the Bill, Lord True (Minister of State at the Cabinet Office) stated—
“Running throughout the Bill are requirements to publish notices. These are the foundations for the new standards of transparency which will play such a crucial role in the new regime. Our ambitions are high, and we want to ensure that procurement information is publicly available, not only to support effective competition but to provide the public with insight into how their money is being spent”.
20.However, as the Memorandum acknowledges, “in general [the relevant provisions of the Bill] leave the content of such notices, etc to be set out in Regulations made under [the power in clause 86]”.
21.Clause 86 contains a broad power to prescribe in regulations the information that must be set out in 16 different types of notices. These include notices—
22.We are surprised that the Bill leaves it entirely to regulations (albeit subject to the affirmative procedure) to determine the substance of these transparency obligations.
23.We are also disappointed that the Government have provided no illustrative regulations. Illustrative regulations would have been very helpful and, without them, scrutiny of clause 86 is considerably hampered.
24.The Memorandum provides the following justification for the power—
25.We find this wholly unconvincing—
26.Accordingly, we consider that—
27.Clause 104 gives Ministers a Henry VIII power to make regulations that disapply the duty in section 17 of the Local Government Act 1988. Section 17 requires public authorities to exercise functions in relation to procurement without reference to a range of “non-commercial matters” that are specified in that section.
28.The matters in question include—
29.There is nothing on the face of the Bill to limit the power conferred by clause 104—
30.The power is subject to the affirmative procedure but the Memorandum contains little by way of explanation or justification for taking it, despite—
31.According to the Memorandum—
32.No illustrative examples are given, nor is there any attempt to explain why it might be considered appropriate to allow a contracting authority to take into account any of the matters in question.
33.The Government have failed to adequately explain why Ministers are to be given such a broad power to override the existing statutory bar on public authorities taking into account the matters specified in section 17 of the 1988 Act in the exercise of their procurement functions.
34.Accordingly, we consider that—
35.These six provisions each contain a power to exempt particular types of contracts from the full regulatory regime under the Bill. In each case, the power is of such breadth that the substance of the exemption is left entirely to regulations. The powers are all subject to the affirmative procedure but, in each case, we consider that—
36.The Memorandum gives the following justification for this power—
37.However, it does not explain why it is considered appropriate for the power to be so broad that the issue of which kinds of contracts are to be subject to the “light touch contract” regime is left entirely to regulations. There is nothing of substance on the face of the Bill to limit the discretion afforded to Ministers to allow less rigorous regulation for contracts of a kind that they choose to specify in regulations. Clause 8(4) lists three factors which Ministers must consider but without saying what effect these factors are to have. The Memorandum suggests that the provision made in exercise of the power will simply be a list of CPV codes but the power need not be exercised in that way.
38.We consider that—
39.This power is exercisable only in relation to services within the “light touch contract” regime.
40.The Memorandum explains that “the intention in reserving contracts for public service mutuals is to support public sector mutuals by providing them with a more protected environment in which to compete”.
41.However, it does not explain why it is considered appropriate for the power to be so broad that the issue of which kinds of “light touch contracts” are to be reserved to public service mutuals is left entirely to regulations. There is nothing of substance on the face of the Bill to limit the discretion afforded to Ministers.
42.We consider that—
43.This broad Henry VIII power allows the Bill to be amended in order to reduce the regulation of private utilities.
44.The Memorandum explains that the Government “wishes to exempt [private utility companies] from the Bill to the extent practical” because such companies “are already incentivised by industry regulation and competition to act properly and competitively in the market”. It states that clause 109 provides power “to remove regulations that are unnecessarily burdensome” for private utilities.
45.The justification given for taking the power is that “in a rapidly evolving commercial market it is not possible to set out on the face of the Bill those aspects of regulation that could most usefully be removed from private utilities”.
46.We are not convinced by the assertion that the Government’s only option is to leave the exemptions entirely to regulations made under a completely open-ended power.
47.The Government have failed to provide adequate justification for taking such a broad Henry VIII power that leaves it entirely to regulations to determine how the Bill is to apply to private utilities.
48.Accordingly, we consider that—
49.According to the Memorandum, this power is being taken because—
50.However, it does not explain why it is considered appropriate for the power to be so broad that the issue of which kinds of contracts for the provision of “public passenger transport services” are to be exempted is left entirely to regulations. There is nothing of substance on the face of the Bill to limit the discretion afforded to Ministers.
51.We consider that—
52.The Memorandum provides no explanation for taking this power instead of making provision on the face of the Bill. The power is so broad that the issue of which concession contracts for air services are to be exempted from the Bill is left entirely to regulations. There is nothing of substance on the face of the Bill to limit the discretion afforded to Ministers.
53.The Government have failed to provide any justification for leaving entirely to regulations the question of which concession contracts for air services provided by air carriers are to be exempted from the Bill.
54.Unless the Government can fully justify doing otherwise, the Bill should include criteria for determining which such contracts should fall within the exemption.
55.The contracts to which the Bill applies include contracts for the supply of goods, services or works for the purpose of a “utility activity” of a kind specified in Schedule 4 to the Bill. The activities specified in Schedule 4 include the supply of gas, electricity and water and the provision of transport services to the public.
56.Paragraph 7 of Schedule 4 gives Ministers power to make an “exemption determination” in relation to any such activity, the effect of which is to exempt the activity from regulatory requirements under the Bill. An exemption determination can only be made where (a) there is “fair and effective competition in the market in which the activity is carried out”, and (b) “entry to that market is unrestricted”.
57.Ministers are given power to set out in regulations matters including who is responsible for making determinations, who can apply for a determination and the factors to be taken into account in, and the procedure for, making determinations.
58.The Memorandum explains that the regulations will not simply be concerned with “administrative” matters but “will need to include matters such as the criteria to be met for a utility to be exempted from the regime”.
59.The justification given for taking the power is that the Cabinet Office “has not fully determined the detail of the procedure” and “The Bill therefore includes a power for [Ministers] to determine the procedure”.
60.This is, in effect, a skeleton clause as the real operation of the exemption process is to be left to regulations. We are very concerned that the Government appears to have chosen this approach for no other reason than that it hasn’t yet developed the underlying policy. In our Democracy Denied? report, we drew attention to the issue of the inclusion of powers in bills which were, in effect, “a tool to cover imperfect policy development”. We said this was unacceptable and that we looked to the Government to undertake the systemic reforms necessary to prevent its happening. It is disappointing to find evidence in this Bill that this issue has not been addressed.
61.We consider that—
62.Section 15 of the Defence Reform Act 2014 requires provision to be made in regulations for the price payable under a “qualifying defence contract” to be determined in accordance with the formula in that section. A qualifying defence contract is one under which the Secretary of State “procures goods, works or services for defence purposes”.
63.Paragraph 3(3) of Schedule 10 to the Bill amends section 15 so that regulations under that section must instead provide for the price payable to be determined—
Such regulations are subject to the negative procedure.
64.We are surprised and disappointed that the Memorandum does not acknowledge that this is, in effect, a power to disapply primary legislation by regulations subject only to the negative procedure.
65.The Memorandum seeks to justify the use of the negative procedure on the basis that—
66.We find this wholly unconvincing. Unless the Minister can fully justify allowing primary legislation to be overridden by regulations subject only to the negative procedure, the regulations should instead be subject to the fuller scrutiny afforded by the affirmative procedure.
1 See para 1 of the Explanatory Notes to the Bill.
2 See paras 38 to 43 of the Explanatory Notes.
3 Cabinet Office, , dated 11 May 2022.
4 DPRRC, Democracy Denied? The urgent need to rebalance power between Parliament and the Executive, , Session 2021–22, HL Paper 106.
5 DPRRC, , November 2021.
6 See clause 107 of, and Schedule 11 to, the Bill.
7 Save that Schedule 2 to the 1972 Act prevented the use of the power for taxation, retrospective provision, conferral of powers to legislate or the creation of criminal offences punishable by more than 2 years’ imprisonment.
8 A “below-threshold contract” is a contract the value of which is below the financial thresholds set out in Schedule 1 to the Bill. The Bill provides for such contracts to be subject to less onerous regulation. Clause 77 defines “regulated below-threshold contract” as a below-threshold contract that is not (a) an exempted contract (see Schedule 2), (b) a concession contract (a contract for the supply of works or services where at least part of the consideration for that supply is a right for the supplier to exploit the works or services) or (c) a utilities contract (a contract for the supply of goods, services or works mainly for the purpose of a “utility activity” of a kind specified in Schedule 4).
9 A “transparency notice” is a notice under clause 43 setting out (a) that a contracting authority intends to award a contract directly, and (b) any other information specified in regulations under clause 86.
10 In clause 110(4)(f).
11 See paras 75, 98 and 137 of the Memorandum.
12 See para 139 of the Memorandum.
13 Hansard, 25 May 2022, .
14 See para 139 of the Memorandum.
15 These are listed in para 142 of the Memorandum.
16 See clause 20 of the Bill.
17 See clause 43 of the Bill.
18 See clauses 48 and 51 of the Bill.
19 See clause 56 of the Bill.
20 See clause 65 of the Bill.
21 See clause 66 of the Bill.
22 See clauses 70 and 73 of the Bill.
23 See para 143 of the Memorandum.
24 See para 145 of the Memorandum.
25 Section 17 applies to the public authorities listed in Schedule 2 to the 1988 Act. These include local authorities, urban development corporations, fire and rescue authorities, combined authorities and National Park authorities.
26 This means actual or potential membership of, or actual or potential support for, respectively, any political party, any employers’ association or trade union or any society, fraternity or other association (see section 17(8) of the 1988 Act).
27 With the exception of devolved Scottish authorities.
28 Clause 12 gives Ministers power to publish a national procurement policy statement setting out the Government’s strategic priorities in relation to procurement. A contracting authority must have regard to the statement. Clause 13 gives the Welsh Ministers an equivalent power in relation to the Welsh Government’s strategic priorities in relation to procurement.
29 See para 173 of the Memorandum.
30 See para 176 of the Memorandum.
31 See para 42 of the Memorandum.
32 Common Procurement Vocabulary (CPV) codes were introduced by the EU to categorise procurement contracts.
33 Clause 33(6) provides that a “public service mutual” is a body that (a) operates for the purpose of delivering public services, (b) is run on a not-for-profit basis or provides for the distribution of profits only to members, and (c) is under the management and control of its employees.
34 See clause 8 of the Bill.
35 See para 58 of the Memorandum.
36 Paragraph 185 of the Memorandum explains that ““Private utilities” are non-public sector entities that carry out utility activities on the basis of special or exclusive rights granted to them… [for example] a water company providing drinking water to the general public. Private utilities are generally covered by the Bill in the same way as public sector utilities”.
37 See para 187 of the Memorandum.
38 See para 189 of the Memorandum.
39 See para 188 of the Memorandum.
40 See para 190 of the Memorandum.
41 See paras 231 and 232 of the Memorandum.
42 These are contracts for the supply of works or services where at least part of the consideration for that supply is a right for the supplier to exploit the works or services.
43 Paragraph 34 provides that “air services” means a flight, or a series of flights, carrying passengers or cargo (including mail); and “qualifying air carrier” has the meaning given by regulations made under the power in that paragraph.
44 See clause 5 of the Bill (utilities contracts).
45 See para 7(2) of Schedule 4 to the Bill.
46 See para 257 of the Memorandum.
47 See para 256 of the Memorandum.
48 , Session 2021–22, HL Paper 106, para 129.
49 See section 14(2) of the 2014 Act.
50 See para 277 of the Memorandum.
51 See para 278 of the Memorandum.