My Lords, this is quite a large group, led by Amendment 268, and it encompasses a number of issues all of which relate to the structure of contracts and how contracting authorities enter into agreements with their suppliers. I will not attempt to speak to anything other than my five amendments, save to say that the first, Amendment 268, originally went alongside Amendment 269, which has subsequently been withdrawn but was in the name of my noble friend Lady Neville-Rolfe. Were it still there, I would have said that I have some sympathy with what she says, as there can be circumstances in which a contract, in effect, looks for one item of delivery. Therefore, in my view, one quantified key performance indicator may be appropriate and the requirement to have at least three would be unnecessary. The point is that contracts should have key performance indicators.
My point in Amendment 268, which starts this group so I am able to move it, is to replace the reference to “key performance indicators” with “quantifiable measures”. I entirely admit that we know where we are with KPIs, everybody has them and so on. The trouble is that KPIs can be non-quantifiable and qualitative. That is not what we are looking for here. There is a risk that, if we are not precise about it, they will not be quantifiable, and quantifiable is what we are looking for. I do not think key performance indicators should be subjective; they should be objective and demonstrably proven. Suppliers have a significant benefit where that is the case.
That is Amendment 268, and it is more or less probing. Many of my amendments in this group are intended to ask my noble friend and the department whether they will take account of these points in the way they draft the national procurement policy statement in the guidance that follows.
Amendment 270 also relates to key performance indicators and is linked to a point we discussed on Monday, which is that the structure of the relationship and contract entered into with suppliers should relate to the original tender and the specifications in it. The amendment says that the key performance indicators “must relate” to the tender. Likewise, I hope that my noble friend will say that the Government understand that and that that is their intention. Otherwise, we run the risk that people will enter a competitive selection process, win that process and negotiate a contract but, suddenly, the contract asks them to do things that were not in the original specification. That should not be the case.
My third amendment in this group is Amendment 364. As one reads the Bill, one may come across something and think, “How does that work?” This relates to changes in the contract and the definition in Clause 69 of “substantial modification”. The first definition is that the term of the contract is increased or decreased
“by more than 10 per cent”.
Most contracts are expressed in terms of months and years, and 10% is an awkward measure: “10% of an 18-month contract is 1.8 months—let’s work that out in days”. Can we not write this is in a slightly simpler way? One-sixth has the benefit, in my view, of making a substantial modification slightly more than 10%— 16% or thereabouts—but the point is that it is readily transferrable into months and years, particularly months. So, if a contract for 18 months is modified by more than three months, you know where you stand; it is dead simple. The purpose of the amendment is to suggest that it could be done a little more simply.
My final two amendments are Amendments 397 and 400, which relate to the termination of a contract and to Clause 72. The clause states:
“every public contract … can, if a termination ground applies, be terminated by the contracting authority”,
and a list is then given of the termination grounds. I do not know whether this has been left out deliberately, or because it does not appear in the public contract regulations, or because it is intended to be part of general terms and conditions anyway and therefore does not need to be specified in legislation. But force majeure is, I think, a termination ground for a contract, so I am not sure why it is not mentioned. The point is that it should be mentioned—and if it is, there is a problem with it.
I declare an interest, and in doing so revert to what I was saying earlier about the European Commission. This issue arose for us—my wife’s company—during the pandemic. We were contracted to supply a number of events and when the pandemic hit, or shortly thereafter, some of them had to be cancelled. Members will not be surprised to hear that, under those circumstances, a significant amount of expenditure had been incurred, including cash expenditure on locations, suppliers, venues and so on. The term of the force majeure written into the European Commission’s standard contract was that, at the point at which force majeure is notified, payment for the services provided is required. As noble Lords can imagine, initially, they said, “Well, you haven’t provided those services. Those events haven’t happened and we won’t be having them.” I will not
bore noble Lords with all the detail, but the net result was that we lost money. We did not lose as much as we had feared because we had a negotiation, but, according to the letter of the contract, they could have said, “You’ve spent tens of thousands of euros on events that will not now take place, but because they are not taking place, you’re at risk and you will meet the cost.” This a very large public authority expecting an SME to take the hit. We did discuss it and they did come round, but I do not think that that arrangement is sensible.
I cannot imagine that our experience is in any sense unusual. During the pandemic, thousands of businesses must have had exactly the same kind of force majeure complication. In public contracts, the force majeure contract should say what I suggest in the amendment: that, under those circumstances, when the termination ground is notified, there should be a requirement to meet the expenditure
“necessarily incurred in relation to the contract”
up to that point.
I will be happy if my noble friend the Minister is able to say, as with the other amendments, that these are interesting points and she will take them away and look at how the guidance or the statement might reflect them for the future. I beg to move Amendment 268.