My Lords, I am grateful to the noble Lord, Lord McKenzie, and to the noble Lords, Lord Mendelsohn and Lord Stevenson for tabling these amendments and giving us the opportunity to debate how these clauses interact with other legislative duties on contracting authorities, which is the nub of this amendment. I also share the noble Lord’s appreciation of the fact that my noble friend Lord Young of Graffham has joined us. I take this opportunity to thank him for all he has done for small firms and for public procurement throughout his distinguished career, and latterly as the Prime Minister’s adviser. My noble friend explained the background but, given the concern expressed by the noble Lord, Lord McKenzie of Luton, perhaps I could add, on the subject of the changes to of pre-qualification questionnaires, that these could disadvantage procurements where there are important special requirements. As my noble friend Lord Young explained, we want to remove burdensome PQQs. However, I understand that special requirements can still be built into contract advertisements or the invitation to tender.
For the benefit of the Committee, perhaps I could stand back and try briefly to answer my noble friend Lord Hodgson’s exam question about what we are trying to achieve. I reassure noble Lords that our intentions are focused and more specific than the amendments tabled and the comments made would suggest. While regulations we may make under the Bill should improve standards across the public sector, they will not remove the autonomy of local authorities to run their own processes and take responsibility for procurement decisions. I associate myself with some of the warm words used by the noble Lord, Lord McKenzie, about local authorities. I was glad to hear about the LGA’s work on procurement strategy because I know, from my many dealings with it over the years, that it comes to issues with an innovative and refreshing approach.
The clauses before us will allow the Government to place some additional obligations on contracting authorities about how they undertake their procurement processes. However, I assure noble Lords that this is not about taking control away from local government procurers, who will remain responsible for securing value for money. Moreover, when making regulations under Clause 38, the Government will ensure that the provisions of other legislation are properly considered and that the regulations do not conflict with them. Frankly, the last thing we would want is to be over- bureaucratic or Napoleonic, in the words of the noble Lord, Lord Whitty. Like my noble friend Lord Hodgson, we would like to see better, simpler documentation that makes contracts more accessible to small business and voluntary organisations. As my noble friend says, we need to bring in standards and yardsticks of good practice, although I am not sure that “comply and explain” would necessarily quite work here.
Turning to Amendment 35D, the Government are committed to both the Localism Act and the Public Services (Social Value) Act. We stand by the principles in those Acts. It is of course important for local authorities to be able to pursue legitimate policies that help suppliers win more business through procurement in support of their local economies. There is, however, a balance to be struck and EU procurement law, which we have implemented in our domestic legislation, places a duty on contracting authorities to ensure that procurements that are above the EU thresholds—essentially, £111,000 in central government and £172,000 outside it—or of cross-border interest, are awarded in a fair, transparent and non-discriminatory way.
To respond to a question that was asked, Clause 38 is not necessary to implement the directive. This is in fact being done under powers in the European Communities Act 1972—I can see that the noble Lord understands that—and we will be bringing forward regulations very shortly. The new Public Contracts Regulations 2015, implementing the EU procurement directive, will make it clear how contracting authorities can achieve policy through procurement in a legitimate way. The regulations will require that the policy to be delivered through procurement is linked to the subject matter of the contract, as well as satisfying the EU principles of fairness, transparency and non-discrimination.
Furthermore, having consulted on the use of the power in Clause 38, we have identified a number of examples on how we might use its regulation-making power. It may help if I mention one or two of those because they might help to meet some of the concerns expressed by the noble Lord, Lord Whitty. One example is of requiring awareness-raising as part of pre-procurement market engagement, which can of course help small businesses; another would be requiring procurement authorities to have due regard to lean procurement principles. This will increase efficiency and reduce timescales. Some of your Lordships will be familiar with these principles, particularly those who have worked in business. I have direct experience of using them on a clothing supply chain exercise to good effect. Of course, it was Dan Jones who did the original pioneering work on lean thinking in the automotive supply chain, which helped our industry to fight back.
We undertook an open consultation on these proposals and there was support from local government and the Local Government Association. The outcome of the consultation is published on the Cabinet Office website and this includes draft regulations to illustrate how we might use the power. The planned uses are complementary to the forthcoming Public Contracts Regulations that I mentioned. They also complement the existing best value duty created by the Local Government Act 1999, as well as the duties created by the Localism Act 2011 and Public Services (Social Value) Act 2012. We have placed the draft regulations illustrating the use of the power in the Library of the House. The noble Lord has obviously already seen them, but others may not have done.
This is not about centralising procurement. It is about ensuring that high-quality procurement processes are in place across the public sector. We are also looking to establish common standards of good practice, as the noble Lord, Lord Hodgson, was encouraging us to do. The noble Lord, Lord Whitty, suggested that we might be able to deal with this through guidance, but I am afraid that in this area guidance will not be sufficient on its own. The power that we are taking will allow the Government to make targeted changes over time and to place legal obligations on contracting authorities in relation to the procurement functions. I hope that that provides some reassurance and an understanding that this clause will not undermine the localism agenda.
On Amendments 35E and 35T, while we strongly support the aims of best value to make sure that contracting authorities consider overall value, including economic, environmental and social value, when reviewing service provision, we consider that there is scope to improve procurement processes and open up opportunities to smaller businesses. The need to improve procurement processes is supported by findings made by our mystery shopper service, which investigates concerns about procurement throughout the public sector. This service has found that over a third of all its new cases relate to concerns with poor procurement practices by local authorities. Therefore, excluding all local authorities from the scope of the regulation-making power and from the scope of the mystery shopper service would mean that we were not able to help local authorities to improve their procurement practices and investigate mistakes. Nor would we be able to help small business to achieve the share in procurement that we all want them to have.
The additional obligations placed on contracting authorities will be proportionate. We are also clear that they are not intended to take control away from local government procurers, who will remain responsible for securing value for money. Retaining the scope of Clause 39 to include local authorities is necessary to help us to continue to improve procurement practices.
To turn to Amendments 35S and 35X, the Government are, as I said, wholly committed to principles that support development of economic and social issues and which are designed to allow contracting authorities to take account of how their decisions affect local business, the local area, the environment and social value considerations. The amendments are not necessary, as Clauses 38 and 39 do not amend or undermine the Localism Act, the Local Government Act or the Public
Services (Social Value) Act. The power in Clause 38 cannot be used to amend these Acts or any other primary legislation. While I do not believe that the amendments are required, I am pleased to reassure noble Lords that, when making regulations under Clause 38, the Government will ensure that the provisions of legislation, including these Acts, are properly considered.
Finally, turning to Amendment 35K, I understand the noble Lord’s wish to see contracting authorities report on how they have met their duties under the Public Services (Social Value) Act. However, we do not wish to pre-empt the review of the Act launched in September 2014 and carried out by a panel led by my noble friend Lord Young, which is due to report in the coming weeks. The review is giving detailed scrutiny to the 2012 Act and is considering whether it should be extended and how it might be extended in a way that continues to help small business. The review may make a number of findings and recommendations and obviously it would not be right to second-guess those findings.
I hope that, in the light of these various reassurances, noble Lords will agree not to press their amendments.