Amendment 392 makes it clear that the power to change the percentage thresholds in Clause 70 applies to Welsh Ministers as well as a Minister of the Crown.
I apologise in advance for the length of my reply to the substantive points in this important group. I turn first to key performance indicators in Clause 50. My noble friend Lord Lansley’s first amendment would require contracting authorities to set at least three KPIs that are “quantifiable measures” as well as
“such further factors and measures as the contracting authority considers justified in relation to the requirements and value of the contract”.
The very nature of a KPI means that it has to be quantifiable; otherwise, performance cannot be effectively measured. In addition, the Bill already requires contracting authorities to set “at least three” KPIs, but they can set more where they consider it justified. His second amendment relates to where the KPIs are derived from. It proposes that they be tied to the specifications of the tender rather than to the contract itself. Forcing KPIs to be tied to the specifications of the tender means performance is not measured effectively. They need to relate to the final agreement, not to a previous document that may have been changed during the competitive tendering procedure. However, I can assure my noble friend that further regulation and guidance will describe the best way to set and monitor KPIs.
Amendment 269A, tabled by the noble Baroness, Lady Thornton, Amendment 272, tabled by the noble Lords, Lord Wallace and Lord Scriven, and Amendments 273 and 274, tabled by the noble Baronesses, Lady Hayman and Lady Bennett, and the noble Lord, Lord Coaker, would require KPIs to relate to wider policy matters, such as social value, carbon reduction and, as I think the noble Lord, Lord Scriven, mentioned in his intervention, sustainable local improvement. As stated a number of times in Committee already, and for good reason, procurement policy is not fixed and evolves as new strategic priorities emerge, such as our action to address climate change in procurement in recent years. Policy matters such as these should therefore not be included in the Bill and are better addressed in the national procurement policy statement.
Amendment 271, proposed by my noble friend Lady Noakes, suggests that Clause 50(2) should be removed. This provision confers a discretion on the contracting authority not to publish KPIs if the contract in question could not be appropriately assessed by reference to KPIs. Subsection (2) serves a vital purpose. It is not appropriate to measure all contracts by reference to KPIs—for example, a goods contract for an order of IT hardware or office furniture. We therefore need to confer a discretion on contracting authorities, rather
than create a legal obligation that cannot be met in every case and which, in some instances, would add legal and administrative burdens with limited additional benefit that would be hard to justify. Moreover, the discretion in subsection (2) not to publish KPIs can be exercised only when appropriate. The transparency obligation in Clause 51 should, I believe, help to prevent any abuse of the provision. In addition, the Freedom of Information Act, which was mentioned in the discussion, allows stakeholders to exercise scrutiny over the form of KPIs that contracting authorities write into their contracts. It is not in their interest to avoid these requirements as the information will become public in any event.
I thank the noble Lord, Lord Fox, for his Amendments 275A and 276ZA and his thinking on KPIs, although I must confess to having a sense of déjà vu. The balance of benefit against burden is an important matter that we must look at in this Bill, and one that merits investigation by us all. I am therefore grateful for the opportunity to set out our position on this.
The power in Clause 50(4) allows amendment of the £2 million threshold in subsection (1) above which KPIs must be set and reported on. The two proposed amendments probe that power in different ways. The first amendment seeks to remove the ability to amend the threshold in its entirety and the second limits the power to reducing the threshold.
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The power to change the threshold is important. It might, for example, be used to reduce the threshold to increase transparency, or to increase the threshold to take account of inflation. It might also be used to raise thresholds if, in certain types of contract, we find that KPIs are not providing a useful enough source of information to justify additional burdens on some contracting authorities, potentially leading to delays and confusion in the letting of contracts. This system has to settle down. It is important that the Government retain the ability both to react to challenges such as inflation and to take into account the need to balance the burdens on contracting authorities. Use of this power will be subject to the affirmative procedure and Parliament will have the opportunity to provide robust scrutiny and ensure that it is used only in appropriate circumstances.
Amendment 276A from the noble Baronesses, Lady Thornton, Lady Hayman and Lady Bennett, would require contracting authorities to apply the principles of open-book accounting to all contracts awarded under this regime. Open-book accounting has a place in contract management, but it is not necessary or desirable for many public sector contracts as it would place significant additional burdens on contracting authorities and could act as a barrier to new entrants and SMEs, which are exactly the kind of organisations we are all looking to attract through the new regime. Ultimately, the open-book mechanism requires the generation and regular tracking of detailed and complicated financial information and would draw on potentially costly financial accounting resources. This means it is unsuitable for simpler, more transactional requirements.
Amendment 353AA from the noble Baroness, Lady Hayman, and the noble Lord, Lord Coaker, would require contracting authorities, when considering outsourcing services, to undertake a public interest test. There is a case for applying a public interest test for some outsourced services. However, it is not necessary or desirable for all public sector contracts because it would place unnecessary additional burdens on the contracting authorities. In addition, the objectives of this amendment are covered—this may be the source of the amendment—in the Sourcing Playbook, which we think is a better place for them.
I listened with particular interest to the point made by the noble Lord, Lord Scriven, on social care and the need to look at the impact on the NHS in these sorts of cases. I assure him that the decision to pursue an outsource solution would be carefully considered and assessed against the public body’s requirements and capability offering. However, the scope of the Bill begins once a decision has already been taken in principle to approach the marketplace. Therefore, decisions relating to this sit better elsewhere in public spending and other guidance.