My Lords, I am grateful to the noble Lord for his amendment and for the opportunity to return to the public sector procurement issue. I also thank him for his interesting and wide-ranging introduction, which I and the officials concerned will read afterwards with considerable interest. The importance of outputs, not inputs, the value of the mystery shopper and the strength of some local authorities in the procurement area are common ground.
In response, I should like to update the House on where we are. Only last week, we were pleased to announce that in 2013-14 central government gave 26.1% of its total spend to smaller businesses, up from 19.9% in 2012-13. This Government have delivered on the aspiration set in 2010 that 25% of this spend would go to small businesses by May 2015. Looking forward, of course we want to do better.
Furthermore, the Public Contracts Regulations 2015 came into force last week. These make it clear how wider policy issues can be delivered through procurement where this achieves value for money and satisfies EU legal requirements and where the policy is clearly relevant to the contract subject matter. This includes, where appropriate, factors related to stimulating local business and growth.
As a result of the recommendations of my noble friend Lord Young of Graffham, the 2015 regulations help to level the playing field for SMEs, working to remove barriers that prevent them accessing public sector contracts. I pay tribute to my noble friend for the work that he has done in this area. All new procurement opportunities will be accessible on a single portal—Contracts Finder—launched last week. PQQs will not be used for contracts below EU thresholds, and there will be 30-day payment terms in all public sector contracts. Clause 39 will build on these new measures to break down further barriers. Following consultation, and once the final regulations are made under this clause, any published guidance will reflect the new obligations in a proportionate and meaningful way.
I shall now look at the amendments, starting with Amendment 27. The Government’s intention is to improve procurement practice. It is not about taking control away from local authority procurers, whether in Manchester or elsewhere. The noble Lord is completely right to emphasise the scale of local government procurement and the opportunities for SMEs for the benefit of both local government and the businesses themselves.
I assure the noble Lord that Clause 39 complements the Localism Act 2011 and the Public Services (Social Value) Act 2012 rather than conflicts with them. It is true that the clause does not reference social value considerations but it does not prevent a contracting authority considering them under the 2012 Act. The social value Act places duties on contracting authorities
to consider how they might achieve social value in what they procure and how they procure it. The duties in Clause 39 and those in the social value Act are therefore entirely complementary. The Localism Act is designed to devolve more powers from central government to communities and councils. It does not address the need for procurements to be run in an efficient and timely manner.
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Clause 39 is consistent with recommendations made separately in the Local Government Association’s national procurement strategy. That strategy addresses the involvement of small firms, encourages the use of portals, and places more emphasis on pre-procurement market engagement. This is entirely consistent with the 2015 regulations and the way that the Government intend to regulate under Clause 39.
I turn to paragraph (d) in Amendment 27. The Government understand the importance to local authorities of being able to support local business. Such support must, however, comply with EU rules. The noble Lord’s amendment, while well intended, might lead to contracting authorities discriminating in favour of suppliers within a particular region or locality, which would be a breach of treaty principles.
The clause is not about centralising procurement, or taking a “one size fits all” approach. It is about helping all contracting authorities to establish good procurement practice in an effective way across the whole public sector in support of local economies and sustainable growth.
On Amendment 31 on reporting and the adjudicator, as a result of the 2015 regulations, contracting authorities are now required to ensure advertised procurement opportunities on the free-to-use Contracts Finder website and must report on the number and value of contracts awarded to SMEs. For contracts above the EU thresholds, the EU rules require contracting authorities to publish how many SMEs tendered for the contract and whether the successful bidder was an SME.
Regarding the question of a procurement adjudicator, to which the noble Lord referred, I do not consider that an adjudicator would be appropriate or needed as there are already—perhaps I can explain—two distinct and effective systems of redress for small suppliers. First, there is the traditional approach of taking legal proceedings, and all suppliers have clear legal means of redress set out in the remedies directive and in our new regulations. Secondly, there is a less formal scheme that we are setting in statute through this Bill—our mystery shopper service, which investigates referrals about poor procurement practice. I am glad to say that we are giving more teeth to this service, through Clause 40, so that contracting authorities must co-operate with investigations promptly, and suppliers can expect a robust and expedient conclusion, building on the strength that we both agree on.
Turning to the second part of the amendment and the question of requiring the Cabinet Office to publish guidance, I should make it clear that the new Contracts Finder portal will include information on public sector procurement opportunities above specified thresholds. The system will flag which contracts have been awarded
to SMEs. The current rules allow for flexible procurement with appropriate controls, and the Government do not believe we should remove contracting authorities’ autonomy to choose how to award their contracts. Equally, we must not unfairly tip the balance in favour of SMEs by effectively reserving contracts for them. To do so would contravene our policy to deliver value for money through competition and would go against the EU treaty principles. I have spoken at length, but I hope that what I have said gives the noble Lord some assurance on the points that he has raised and has given comfort to the House more generally that we have done this in the right way. I hope that the noble Lord will agree to withdraw his amendment.