My Lords, this is a rather confusing group, so I will start by speaking to the two government amendments. Amendment 237 removes duplication of the direct award ground, which is adequately covered in Clause 41; and Amendment 245 requires appropriate assessment prior to the direct award of whether a supplier previously submitted an unsuitable tender.
Looking at the group in the round, the noble Baroness, Lady Hayman, and the noble Lord, Lord Coaker, raised Amendment 235A, so that we could rightly debate the direct award of contracts; and the noble Lord, Lord Wallace, in his absence, gave notice of his intention to object to Clauses 40 and 41—I think because he wants to understand what is happening and wants answers to some of the questions that have been put by the noble Lord, Lord Fox.
Clause 40 permits a direct award to a supplier, other than an excluded supplier, if a justification in Schedule 5 is met. This is based on the World Trade Organization’s Agreement on Government Procurement grounds for limited tendering and is similar to the current law. We have been commended by external stakeholders for bringing clarity to the justifications and reducing the risk of unintended use of these provisions. As the noble Baroness said, publication of transparency notices is an extremely important development.
Just to let noble Lords know, I will deal with standstill provisions in the next group so, in the interests of time, will not cover them in this group. But I will deal here, a little later, with sunset clauses, which the noble Baroness also raised.
I was very interested to hear the explanation for Amendments 235ZA and 243A from the noble Lord, Lord Clement-Jones. He made a lot of points that I was not aware of, which I will study, in relation to the important areas of cloud computing and UK businesses. But I make clear that existing frameworks allow contracting authorities to buy cloud-based services separately, rather than in a package. In this way, SMEs are encouraged to provide services directly to the public sector, which is something that we are keen that they do.
Frameworks are of course created following a competition and they create a period of uncertainty on contractual terms, albeit they allow a closed list for contracts to be awarded, so it makes sense that they are for a limited duration—I think that is what the noble Lord was asking about. This should not lock out competitors for too long. Directly awarded contracts have a shorter duration for a different rationale: they allow contracting authorities to put alternative arrangements in place. That is the rationale, and we worry that the amendments put forward by the noble Lord, Lord Clement-Jones, would add more time as an unnecessary burden on contracting authorities by mandating them to check for and use available framework agreements, even where these might not be appropriate. Requiring them to keep within existing arrangements can actually stifle innovation and new entrants, particularly where the prototype in development ground is being used. The framework formalities, which may include a requirement for competitive process, may be impractical in cases such as those of extreme urgency.
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I know we have a lot to learn from Covid-19 and I will come on to talk a little about that. I am not sure that I will be able to answer every point that everybody has made, so I will look at the Hansard again, in the light of the debate this evening on Covid-19. We are actually trying to learn. The inquiry is going on, as noble Lords know, and I am sure we will get more material from it, which will be helpful. We have had the Boardman report and are really trying to learn in the Bill from the experiences of Covid-19.
My noble friend Lady Noakes proposed Amendment 236 to reduce the five-year period during which a contracting authority may award a direct contract for similar goods, services or works to four years in paragraph 8 of Schedule 5, to match the maximum framework duration in Clause 45. There is, she will be pleased to know, a reason for this anomaly. These time periods are unrelated and have different roles, so our proposal is five years from the date of the award of the original contract. Presently, the direct award ground can apply within three years of the previous contract concluding. The existing proposal is appropriate and a significant improvement for open competition. The four years applies to a framework, which is a commercial tool, with a duration of four years for closed frameworks and eight years for open frameworks, defence or utilities.
Moving on, Clause 41 introduces a new power to deal with procurement in case of an extreme event. It allows the Government to respond quickly to an emergency by identifying urgent contracts necessary to protect life or public safety, and allow contracting authorities to procure within specific parameters, as set out in regulations which can be made under Clause 41. Noble Lords will be familiar with the “extreme urgency” ground in Regulation 32 of the Public Contracts Regulations, replicated in Schedule 5. While this will be suitable for nearly all situations where the contracting authority needs to act urgently, it depends on the contracting authority making an individual assessment and cannot be used if the need for urgency was caused by the authority itself or was foreseen. In rare cases, this will need to be overridden via government direction to rapidly procure what is necessary for the protection of life.
The first Boardman review of Covid-19 procurement, which I mentioned, suggested giving relevant Ministers the power to designate situations as a crisis, provided certain criteria are met, naturally with appropriate safeguards. The second Boardman report, also published, emphasised that the Government must ensure that emergency procurement freedoms are used only in the most constrained and exceptional circumstances. This is reflected in Clause 41 and provides transparency notice for all direct awards, allowing for monitoring of markets and buyer behaviours during any such exceptional times—the point that the noble Baroness, Lady Hayman, has already said she supports. As such, we hope that Clause 41 will never need to be used and, if it is needed, it would much improve emergency contracting; for example, to protect life or the public by allowing contracting authorities to procure within specified parameters and for a specified period, speeding up
decisions, ensuring consistency across the public sector and avoiding some of the problems we saw during Covid-19.
There are four specific amendments to Clause 41 from the noble Lord, Lord Wallace, and the noble Baroness, Lady Brinton. Amendment 238 probes what is meant by “confer a discretion”. This concept provides for a person referred to in regulations to exercise judgment in some way, as specified. For example, a set of regulations might address what is necessary to deal with the immediate aftermath of a biological incident in a particular area. This would allow the expansion by the Secretary of State of the geographical area covered by the regulations.
Amendment 239 intends to ensure that the principles of transparency, integrity, fairness and non-discrimination are applied. The Bill already requires the contracting authority to have regard to the procurement objectives. These consist of value for money, maximising public benefit, sharing information and acting with integrity, along with the specific rule on treating suppliers the same. The Bill also ensures non-discrimination against treaty state suppliers through specific provision in Clause 82. These apply to all direct awards, so the exact provisions are different, but the spirit is the same as what noble Lords seek to provide.
On Amendment 240, as I said, there were problems during Covid and the Government have learned from those in spades. Part 5 of the Bill places clear and rigorous obligations on contracting authorities on conflicts of interest. The Bill already requires that contracting authorities must take “all reasonable steps” to identify and mitigate interests that would give suppliers an unfair advantage or disadvantage. This means that they cannot favour suppliers recommended by Members of Parliament, or indeed Members of this House. It would be undesirable to legislate specifically to avoid this conflict and to suggest that other conflicts, for example connections with procurement officers, were less significant, but we will discuss conflicts of interest again when we come to those clauses.
Amendment 241 is proposed to provide greater transparency of the decision to make a direct award by requiring that a justification for any such award is submitted to the appropriate committee of both Houses of Parliament. The noble Baroness, Lady Hayman, and the noble Lord, Lord Coaker, have also put forward Amendments 242 and 243 to introduce a sunset clause requiring regulations made under Clause 41 to expire after 60 days, unless approved by Parliament, and to require the Minister to make a Statement to Parliament should they seek to issue new regulations within six months of the end of previous regulations. Although I sympathise with these amendments, from my own Back-Bench experience on Covid—noble Lords will remember all those months, when there were not many of us working away on the SIs—there are already significant safeguards regarding this regulation-making power and provisions to ensure that parliamentarians in both Houses, and the general public, of course, are well-sighted.
First, the making of any secondary legislation will be subject to the higher scrutiny of the “made affirmative” procedure, so every instance, which I emphasise we
envisage being very rare, will be effective immediately but must obtain parliamentary approval within 28 days or the regulations will lapse at that point. As such, we cannot see that Parliament will be satisfied that regulations permitting the procurement of provisions necessary to protect life in an extreme emergency event should be open ended. I recall that we debated this at the time. Importantly, the regulations could contain sunset provisions or be subject to parliamentary review. If they did not, it would be open to Parliament not to approve them. They would then lapse after 28 days.
Secondly, regulations must be kept under review and revoked if no longer necessary. Thirdly, the power is crafted deliberately narrowly: Clause 41 can be used only to the extent that the Minister considers that the contracts provided for under the regulations are “necessary” for one of the purposes in subsection (2). Further, the regulations must be compliant with our international agreements, which in practice ensures the scope is not too broad. Finally, the Bill requires that, before a contracting authority directly awards a public contract in reliance on any such regulations, a transparency notice must be published. These notices are a major safeguard that did not exist during Covid; perhaps I wish they had done.
Given these restrictions around use of the power, we do not believe that further measures are necessary. I would point out that the Clause 41 power did not appear in the DPRRC report, which we hope reflects the fact that sufficient protections are already in place.