My Lords, I rise as a cipher for my noble friend Lord Wallace, who has tabled a number of amendments in this group. He is unable to attend this and the next day in Committee, so I will be deputising for him.
I too welcome the noble Baroness, Lady Neville-Rolfe, to her new role, and congratulate her on getting to complete this Bill, which must be regarded as the plum legislative job available—so I say “well done” to her. During a debate on the economy a couple of weeks ago, she said from the Dispatch Box that she was very keen on “simplification” and cited simplifying procurement as being in her sights—now, here she is. However, before her well-deserved promotion, on the third day in Committee on 11 July, “Back-Bench Lucy” was more strident. She said:
“The more I listen, the more I feel that this Bill in many respects strikes the wrong note. It is overregulatory and calls for a rethink, which I hope the Government will be thinking about.”—[Official Report, 11/7/22; col. GC 359.]
On those grounds, I suggest that she should exercise her new power, withdraw this poorly drafted Bill and come back with one more in keeping with simplification and with her aversion to overregulation.
In the absence of any enthusiasm from the Minister for doing that, I speak to Amendments 306, 307, 308, 320 and 328, tabled by my noble friend Lord Wallace, some of which I have signed; I do not support all of the others. I thank the noble Baroness, Lady Hayman of Ullock, and the noble Lord, Lord Hain, for their support for Amendment 320.
An effective debarment and exclusion regime protects the public purse from rogue actors and drives up corporate government standards. Exclusion and debarment from procurement are potent anti-fraud and anti-corruption tools. The issue of companies with long records of corruption winning public contracts in this country is appalling. Nearly a quarter of local councils experienced fraud or corruption in 2017-18. Fraud costs the public purse up to 5% of government spending overall. I thank Spotlight on Corruption for these numbers.
The UK’s record on excluding these types of companies from participating in public procurement is not good, at best. The list of companies either from the UK or operating here that have been shown to have engaged in serious corporate misconduct is unfortunately lengthy and well publicised; yet, under the existing debarment regime, it has been, in practice, all but impossible to apply a discretionary exclusion in the absence of a conviction. There has been very little use of exclusion
in the UK to date under current EU-based rules, and the Procurement Bill is an opportunity to address the weaknesses in those rules that have prevented exclusion from being used effectively to protect the integrity of the public purse. I am sure that the Minister would approve of replacing an EU law with a better UK law—these are suggestions for how to make it better.
This Bill as formulated contains some significant issues and crucial gaps that could seriously undermine the effectiveness of the debarment register and exclusion regime. There is a risk that the register will stand empty for many years, which would undermine the reputation of the register and the UK’s anti-corruption efforts in general. It is therefore crucial to get this right at this critical stage of the Bill’s development.
Amendment 306 seeks to make criminal offences for sanctions evasion grounds for exclusion from public procurement. The Bill currently contains no references to criminal offences for sanctions evasion. Given the Government’s current policy of imposing sanctions to ensure its foreign policy goals in relation to Russia’s invasion of Ukraine, and their ambition to use sanctions to achieve important foreign policy goals to be a force for good globally, this is a major omission. Incorporating criminal offences for sanctions evasions in the Bill would make companies across the UK take their obligations to comply more seriously. This amendment redresses this omission.
4 pm
Amendment 307 includes the failure of commercial organisations to prevent bribery as an offence that is grounds for mandatory exclusion. Section 7 of the Bribery Act contains a failure-to-prevent offence for corporates; it is the primary corporate offence under the Act. While the failure to prevent tax evasion has been included in Clause 30 of the Procurement Bill, a failure-to-prevent-bribery offence has not. This is inconsistent and anomalous, and will result in few companies that engage in bribery facing exclusion from public procurement. Although companies can also be prosecuted under Sections 1, 2 and 6 of the Bribery Act, this is subject to the application of the identification doctrine, an antiquated doctrine that is widely regarded by prosecutors at the CPS and the SFO as unfair, as it makes it hard to prosecute large global companies. The effect of this is that, unless Section 7 of the Bribery Act is included in this Bill, SMEs are more likely to face exclusion from public procurement for bribery offences than large companies. The inclusion of Section 7 in the Bill would also encourage large companies facing investigations for bribery to self-report their wrongdoing to authorities and co-operate with them in order to avoid being excluded. This would help law enforcement bodies to develop more effective enforcement of the Bribery Act.
Amendment 308 is intended to ensure that the full range of criminal offences for money laundering are properly captured for the purpose of exclusion from public procurement. There have been very few, if any, corporate convictions under Sections 327 to 329 of the Proceeds of Crime Act. The recent conviction of NatWest bank for money laundering under the money laundering regulations 2017 shows that criminal offences under
these regulations are an important means of holding companies to account for money laundering and failures to prevent it. It is anomalous, therefore, to include money laundering offences under the Proceeds of Crime Act, but not criminal offences under the money laundering regulations.
I move on to Amendments 320 and 328 in the name of my noble friend. Both focus on expanding the discretionary exclusion grounds in Schedule 7 of the Bill to include financial and economic misconduct. It is unthinkable that companies involved in fraud, corruption and other forms of serious misconduct, either in the UK or abroad, should be considered as reliable business partners to bid on, and win, lucrative taxpayer-backed procurement contracts. These amendments are tabled with the intention of filling those gaps in the discretionary debarment provisions of the Bill, so that contracting authorities, including local authorities, have greater powers to exclude unsuitable companies. We must close the door on companies involved in misconduct both here and abroad from continuing to benefit from public contracts.
Amendment 320 is intended to allow relevant Ministers and contracting authorities the power to exclude suppliers from procurement where they have evidence of financial and economic criminal activity, such as fraud, money laundering, bribery or sanctions evasion, but there has not been a conviction by a court. Currently, under the exclusion and debarment provisions in the Bill, contracting authorities are able to consider excluding only those against whom there has been a conviction, or where there has been grave professional misconduct. There is a lack of clarity in the law as to whether grave professional misconduct fully covers the situation where a contracting authority has evidence, or knowledge of, any of the aforementioned financial and economic offences but where there has been no conviction.
The ability of the contracting authorities to act on evidence is critical to protecting the integrity of public procurement. Under the US debarment regime, debarment officials can act on evidence, rather than wait for a conviction. Furthermore, a 2020 government review of fraud and corruption in local government procurement specifically highlighted that the Government should,
“see if more could be done to allow procurers to exclude bidders from the process (with reasonable cause and without the requirement to disclose), for example when there are known concerns with law enforcement that have not yet resulted in a prosecution.”
Ensuring that contracting authorities can exclude companies where there is good evidence of financial and economic crime, particularly where investigations are under way but might take many years to result in enforcement action—as long as it is accompanied by due process and appeal rights for the companies concerned, which the Bill contains—will incentivise good corporate governance by suppliers and connected persons.
Amendment 328 is intended to ensure that serious wrongdoing that forms the basis for a deferred prosecution agreement, and progress made by a supplier in ensuring that such wrongdoing will not occur again, can be properly considered and assessed by contracting authorities when evaluating a supplier’s reliability as a contractor.
These are technical amendments designed to probe how the Government will properly enforce the policing of corrupt and unethical suppliers. We know that it takes years, sometimes decades, for prosecutions to come forward. During that time, a great deal of money can be made—and, indeed, wasted—on suppliers of this kind. I look forward to the Minister’s comments.
Rather awkwardly, I would like to comment on the probing amendments tabled by the noble Baroness, Lady Noakes; I was trying to encourage her to stand up before I did. If she will excuse me, I will say something briefly; I am sure that I will not steal her thunder. I thank her for tabling Amendment 323 as a probing amendment. She is right to question why the Government would be content for public contracts to be awarded in the event of potential competition infringements. A specific example was brought to my attention by my noble friend Lady Brinton. This August, the Health Service Journal reported that a court had found that three clinical commissioning groups in the south-west of England had infringed procurement rules on the reappointment of a contractor preferred by some senior managers. The judge said that they were guilty of “defending the indefensible”, and another company that had bid and failed took them to court to challenge it. This whole idea of when a bid is appropriate or otherwise is an important element; there are other examples. I hope that this acts as an illustration of the problem and that the noble Baroness, Lady Noakes, will set out—no doubt in a better way than I did—how she wants the Government to respond on such issues.
From the point of view of those of us on these Benches, the Bill needs strengthening to prevent competition infringement. Can the Minister please explain why the looser word “considers” has been used in the legislation and what protection it would offer any suspect behaviour in a procurement process?