Economy and Fair Work Committee

Meeting date: Wednesday, October 5, 2022

Official Report 686KB pdf

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Procurement Bill

Item 5 is consideration of a legislative consent memorandum?on the United Kingdom Procurement Bill. This is a UK Government bill that was introduced in the House of Lords on 11 May 2022, which changes the law on devolved matters. I welcome again Ivan McKee, Minister for Business, Trade, Tourism and Enterprise, who is joined by Julie Bain, a lawyer with the Scottish Government, and Alasdair Hamilton, procurement policy portfolio manager with the Scottish Government.

I invite the minister to make a brief statement before questions from members.

Thank you, convener.

The Procurement Bill is intended to reform the regulation of public procurement, primarily in the rest of the UK. The UK Government is keen to present it as a Brexit opportunity, but that ignores the fact that in Scotland we were able to reform public procurement while being a member of the European Union. The Procurement Reform (Scotland) Act 2014 placed a sustainable procurement duty on authorities to consider the economic, social and environmental wellbeing impact of a procurement exercise in their area. It increased transparency by requiring contracts to be advertised on one single portal and requiring that authorities publish a pipeline of expected contracts. The act also contained measures on community benefits, reporting and contracts for health and social care, all of which is compliant with EU rules.

Where the UK bill is most noticeably doing something different is in introducing new flexibility for buyers to design procurement procedures. It says that that will allow for a more responsive procurement system but will also mean that companies will potentially come across a new way of doing things every single time they bid, which will be different again from how contracts are awarded in the EU. We do not share the UK Government’s enthusiasm for dumping EU rules for the sake of being seen to do something. For the most part, therefore, the bill will have no practical effect in Scotland.

There are three specific ways in which the bill engages with the LCM process, however. First, it seeks to regulate the procurement activities of reserved and cross-border bodies operating in Scotland. That mirrors the approach to scope and extent in the Procurement Reform (Scotland) Act 2014, which excludes bodies exercising reserved functions, meaning that they are not covered by the sustainable procurement duty, for example. To that end, it is not unreasonable for them to be subject to this bill, but at present I cannot recommend that the Parliament consents to that, given the concerns that we have with other parts of the bill.

The second area in which the bill touches on devolved competence is cross-border procurement. Frameworks or similar agreements that are awarded under the new UK rules will not be compliant with the Scottish rules and devolved authorities in Scotland would not be able to use those arrangements. Similarly, UK bodies would not be able to use arrangements that are put in place under the Scottish rules. That is a practical issue that needs to be addressed, because buyers from both sides of the border co-operate with each other when it makes sense to do so.

The way in which the issue is addressed in the bill is unacceptable, however. The bill creates powers to address the issue through secondary legislation. Some of those are in devolved areas and are conferred on UK ministers without any requirement to secure the consent of the Scottish ministers before exercise. They are drafted very broadly, including a provision that would allow UK ministers to modify an act of the Scottish Parliament.

Finally, the third area in which the Procurement Bill touches on devolved competence is a power to implement international agreements relating to procurement. We agree that such a power is necessary. However, the power as presented is too broad and is conferred concurrently on UK and Scottish ministers with no requirement on UK ministers to secure the consent of the Scottish ministers before its exercise in devolved matters. There is no justification for that and I cannot recommend consenting to it.

It is a matter of regret that the UK Government did not engage with us more fully in the drafting of those elements of the Procurement Bill in order to arrive at a proposition that was acceptable. Had it done so, we could potentially have recommended consent. We remain in discussions with the UK Government about its plans and I hope that we may be able to secure some improvements, particularly on the practical issue of cross-border procurement, but we are not there yet. Therefore, for now I cannot recommend consent to the bill as it stands.

Thank you, minister. I will take questions from members.

Could you update us on those discussions with the UK Government? What has been happening and when is the next planned meeting. What level is the meeting at? Is it at official level or ministerial level?

10:00  

At the moment, the meetings are at official level. The discussions are on-going, and officials can give you some dates if you require that. There has not been engagement at ministerial level. Of course, the UK Government has just changed all its ministers and we are establishing contact with them as we speak. I do not have any specifics on that.

Engagement has been going on for a number of months with the UK Government at official level, as the minister said, particularly on cross-border procurement. It has been a constructive engagement, but we are not yet at the point where we have a proposal on the table.

We are looking at a number of LCMs today. Is it the intention that there will be engagement at ministerial level on those LCMs and perhaps more generally fairly soon?

On procurement?

Engagement on the LCMs that we have here, plus a general meeting.

Yes, I am very keen to engage with UK Government ministers as often as required. I wrote to my UK Government counterparts when they took office in the past few days. We have a Department for Business, Energy and Industrial Strategy quadrilateral meeting in the diary already and other meetings are happening across my portfolio on a four-nations basis that will allow us to discuss these issues of trade, tourism and all manner of things that I am responsible for, such as digital. That is an on-going process. As those meetings start up again, these things will be discussed as part of that process.

I have the same general observation that I relayed in the earlier session about how scrutiny will be undertaken and how there will be alignment with our priorities—in terms of fair work, conditionality or gender fairness—both proactively and up front and reactively in terms of value for spend and alignment to the national performance framework. That is my first question.

My second question is that it would be helpful for me—and would make your concern live—if you could outline some practical examples of where the fact that the powers are too broad would be a concern in procurement processes.

On the first point, as I said, the current situation is that Scottish law places requirements on bodies that are in devolved areas and bodies that are in reserved or cross-border areas are not included in that. This bill would cover them, so there is a different scope there.

On the practical effects, the problem is that the bill confers powers that could allow UK Government ministers to make changes to acts of the Scottish Parliament, so it is pretty broad and could cover a wide range of areas. The concern, therefore, is that we do not know whether it could have an impact, but it opens a door and what the UK Government chose to do with it would be a concern. We see issues because of the way in which the bill has been drafted and because it confers those powers. From our perspective, it is not acceptable for UK Government ministers to have the power to make changes to acts of the Scottish Parliament.

I appreciate what you have outlined about engagement behind the scenes and at official level. Have any discussions taken place in either of those ways about the breadth of powers and about specific examples? Can you give any more colour to that?

There have been discussions at official level and I am ready to engage with UK Government ministers when they are in place and able to talk on this. Obviously, when they are taking a bill through Westminster, they are considering a range of aspects from different quarters and there will be amendments on a range of things as the bill goes through. We are part of that process of engaging with them to make them aware of our concerns, which we have done, and to address what they may be able to do about it.

In similar situations that I have been involved in previously, sometimes we are able to resolve those through ministerial discussions and sometimes we are not. As we get to that next stage, we will talk about the implications of it directly with UK Government ministers and, hopefully, they will recognise that they are able to make changes to the bill that take account of those.

To go back to my first point, we covered this in an earlier session, but what was said then will belong in a different record. Will the discussions include any consideration of how procurement and the enactment of this bill will align directly with the national performance framework? I call your attention to the fact that the Finance and Public Administration Committee has asked that the UK Government has cognisance of this, because there are specific measurable outcomes that the Scottish Government will be measured against, even if it is not directly linear—we appreciate the complexity of the budget. Has any consideration been given to that or is that an additional area of concern for you?

As I said before, the procurement scope within Scotland covers the devolved aspects, and presently reserved and cross-border bodies are not part of that mechanism or covered by that legislation. That reflects the situation as it stands now. I have responsibility for procurement and I work very closely with officials and others to ensure that the actions that we take on procurement support our policy objectives—community wealth building, sustainable procurement, more work going to Scottish businesses, more work going to small and medium-sized enterprises and so on. That is a relentless and on-going process and we look for every opportunity to take that forward. However, UK Government procurement has been outside that scope up until now and that would not change.

On the importance of procurement post EU exit, it has been recognised by everybody that there had to be legislation put in place. In January 2022, the UK and devolved Governments published the common framework on procurement, which this committee recognised was a practical and commonsense way forward. However, the Scottish Government notes in its LCM that it has not been able to fully address its concerns with the Procurement Bill. How has the common framework been operating in practice? Everybody was looking to that as being the practical means by which there could be that sensible, commonsense co-operation.

The cross-border co-operation on procurement is worth exploring. In effect at the moment, on either side of the border, organisations will put in place framework agreements with suppliers to enable them to make use of more advantageous procurement conditions. Organisations on either side of the border will leverage those agreements with the supply base to best effect. That situation already happens. Agreements are created by Scottish bodies with the supply base that organisations south of the border will leverage, and likewise in the opposite direction. Part of the concern that we have is that one effect of the bill as introduced would be to close off that co-operation because of the way in which the bill is drafted. It is a concern that it makes that process harder than it is at the moment. Do you want to comment on that, Alasdair?

The common framework has been operating. We meet monthly with our counterparts at an official level and there is a six-monthly liaison group meeting. We have expressed in that forum our concerns that the UK’s approach to this bill is not necessarily compliant with the common framework’s principles of respect for devolved competence. That has been noted at that level. Working our way through this process will be the test for how the framework operates in practice.

What amendments do you want to see to enable the LCM to be consented to? What changes would you need to see to the bill for you to be able to bring forward an LCM for consent, particularly in relation to cross-border arrangements?

There are two clauses that we can highlight. Clause 83 gives UK Government ministers powers in devolved areas on the implementation of international agreements, which is concerning. Clause 103 likewise gives powers to UK Government ministers on cross-border arrangements. We think that both those clauses need to be amended. Are there any other aspects, Alasdair?

Those are the two in which it should be ensured that there is a requirement to seek or secure the consent of Scottish ministers before their operation. Alternatively, perhaps, in the case of clause 103, which is the cross-border procurement, the measures necessary to give effect to cross-border co-operation should be put on the face of the bill rather than delegated. That might be an alternative way forward.

Do you think that this is more accidental mission creep as opposed to deliberate power grab? I am trying to be generous here. There are degrees of disagreement with LCMs. The Infrastructure Bank Bill looks more straightforward, but this one is so important because it is about procurement and we need to get it right. Is there something that you can try to resolve at ministerial level to get us back on track with the common framework agreement?

It is sometimes hard to tell the difference. The UK Government has many people working in it and a lot of things will come forward that perhaps could be written for different reasons without fully appreciating the implications. That is sometimes the situation and sometimes it is not. I hope that officials will work their way through that and be able to address it. If not, as I said, minister-to-minister engagement would allow us the opportunity to be more direct about the issues that we have with this and how they could be resolved. At that point it will perhaps be clearer as to what the intentions are.

I will ask another question that is more for clarification about how procurement is working. You talked about the Sustainable Procurement Bill and how in Scotland there is a desire—and this committee has also looked at this in its supply chain inquiry—to use procurement in a positive way in areas such as net zero, the living wage and gender. If the Department for Work and Pensions in Bathgate, in my constituency, was conducting its own procurement locally—obviously, a lot of DWP procurement will be centralised and be part of UK-wide common frameworks—would we be expecting it to be subject to the conditionalities that we have or would it be part of what should be happening as part of the UK-wide common frameworks, because the procuring agency is reserved? We do not want the freedom that has been given to the reserved agencies in their procurement to compromise what is done in devolved areas. Some practical clarification would be good.

My understanding is that that is the situation now. In devolved areas, we can legislate for that and require procurement to follow certain processes, but for reserved or cross-border bodies that are outside the scope of devolved procurement legislation now, that will continue. We have that difference at the moment and nothing will change in that regard anyway.

Do we know what the volume is of UK reserved bodies’ procurement in Scotland?

That is a good question. I know that Scottish procurement is about £14 billion. That includes local authorities, the national health service, other public bodies, the Scottish Government and so on. I do not have a figure for UK Government procurement in Scotland. It depends how you look at that—whether it is UK bodies that are operating in Scotland and placing their purchase orders from an entity in Scotland or UK Government bodies as a whole across the UK that may be buying from Scotland suppliers. There are a number of different ways to look at that, but I do not have that information to hand.

That would be interesting to know, if you have that information to share with the committee. I am aware that it is not specific to the area.

I suspect that it would be a broadly similar number, but I do not know for sure.

This is probably a simple question and I am misunderstanding what is before us. Currently the situation is that if it is a reserved organisation or is cross-border, this will not change the way in which—

Yes.

What does it change?

In the way in which it is drafted it gives powers to UK Government ministers to change things that are devolved.

What is a practical example of that?

As it is written, it says that UK Government ministers can make changes to things that they cannot currently change. In a Scottish context, that is pretty broad. Do you want to comment on any specifics, Alasdair?

If you look at the power in clause 83 to implement international agreements, the equivalent power for the UK ministers in relation to the UK act, as it will be, is to amend the schedule to that act so that international agreements are listed in it. We need a similar power in relation to the Scottish regulations to update the schedule to the Public Contract (Scotland) Regulations 2015, but the power as drafted is much broader and concurrently exercisable, which mean that it allows either UK or Scottish ministers to make provision to ensure equal treatment.

There are many different ways of ensuring equal treatment, so that will have scrutiny taken away from the Scottish Parliament and potentially it put in the hands of UK ministers. There is also the Henry VIII provision in that, which would allow amendments to future acts of the Scottish Parliament.

Is the suggestion that we could have the Henry VIII powers or that the Scottish ministers should adopt Henry VIII powers in certain circumstances?

The issue that Alasdair Hamilton has commented on is about updating. If a new treaty was signed with someone else, it would add that to the list of treaties that would need to be taken into account when you take forward procurement legislation. It covers that.

Thank you. I would also like to thank the Delegated Powers and Law Reform Committee for the work that it has done on this that has supported our questions this morning.

That brings the evidence session on this LCM to a close and I briefly suspend the meeting to allow for a change of witnesses.

10:16 Meeting suspended.  

10:16 On resuming—