My Lords, Amendment 9 amends Schedule 2 in relation to exempted contracts. Specifically, it seeks to modify how vertical contracts and horizontal arrangements are allowed to qualify as exempt contracts. I thank my noble friend Lord Moylan for adding his name to the amendment. I should explain that this amendment is in splendid isolation in a group all of its own because I thought that the previous group, which took rather a long time, covered rather too many matters and that the issue I am going to raise would have got lost in it. I apologise for pulling it out separately.
I was prompted to table the amendment by a briefing from the Local Government Association. From our proceedings in Committee, I think that I am in the minority among those who have been following this Bill in that I do not have an association with the Local Government Association to declare because I am not a vice-president or one of those things. However, I did recognise that the point raised by the Local Government Association was important and valid, and that is why I have tabled this amendment, and indeed amendments in two other groups that we will consider on Report.
Before I started on this Procurement Bill, I had little technical knowledge of the vast edifice of EU procurement rules, and I had never heard of the Teckal exemption or, indeed, the Hamburg exemption, which deal with vertical and horizontal arrangements respectively. Those arrangements allow contracts within or between local authorities to be exempt from procurement rules. I now know that these exemptions from the need to engage in competitive procurement processes are important for well-established ways of delivering local authority services. I am generally a competition fanatic, but I can see eminent sense in allowing local authorities to organise themselves internally or in collaboration with other local authorities in a way that delivers services to their local communities without dragging in the full force public procurement rules.
The problem lies in sub-paragraph (2) of paragraph 1, which states that a contract cannot be exempt if the relevant goods or services
“could reasonably be supplied under a separate contract”.
I am advised that this test is not currently part of establishing whether the Teckal or Hamburg exemptions apply under the existing body of procurement law under the EU, so it appears that, in reformulating EU rules for the purposes of the UK in this Bill, we seem to have opened up a new source of challenge for local authorities that want to use the vertical or horizontal arrangements. I cannot see why the Government would want to create by this Bill new barriers for local
authorities in areas where services have been delivered successfully over a long period. So my Amendment 9 seeks to exclude the application of sub-paragraph (2) to vertical contracts and horizontal arrangements under paragraphs 2 and 3 of the schedule. It would leave the reasonableness test in place for all the other contracts dealt with in Schedule 2 but would allow local authorities to continue with their internal structures and their cross-authority collaboration arrangements unhindered. I beg to move.