We come now to Amendment 1, which, strangely enough, is not the first amendment, but there we are. Amendment 1 and Amendments 2, 3, 4, 5, 6 and 7 all go to the same point; it is just that Amendments 2 to 7 are concerned with the schedules that flow from Clause 3.
We have now moved to the question of the Procurement Act. The noble Lord, Lord Purvis of Tweed, is correct that the trade hacks have got together for this one, but there were procurement hacks as well, of which I was one. Some of us have returned; not many, but one or two of us—and I see that the noble Lord, Lord Alton, a procurement hack, is in his place. It is quite amusing really because it is only a matter of a few months back that we were debating the Procurement Bill. Among other things, it created a mechanism by which the Government could designate, under statutory instruments, that additional countries with which we had entered into an international agreement should be added to Schedule 9 to the Procurement Act as treaty state suppliers, and by extension therefore get the benefit of the treaty state supplier provisions under that Act.
However, the Procurement Act, notwithstanding that it passed through Parliament, has not yet been commenced. We are reliably informed that that will not happen until October 2024, whereas under the CPTPP we are looking to achieve ratification before 16 July 2024—and some time earlier than that, I hope. There is a gap between the commencement of the provisions under the CPTPP and our treaty obligations and the point at which the Procurement Act comes into force and those procurement-related obligations are in our domestic legislation.
This legislation fills that gap by doing two things: using the opportunity to amend the Procurement Act when it comes into force by adding CPTPP as an international agreement in Schedule 9, and, further—which is why the other six amendments are linked—changing the public contract regulations in various respects between now and the point at which they are all replaced by the Procurement Act being brought into force.
Just to make life even more entertaining, the Procurement Act repealed the Trade (Australia and New Zealand) Act, which we spent quite a bit time on. I am hoping that the power to bring Australia and New Zealand in was achieved by that Act, and it will be overtaken by the Procurement Act.
We come to procurement. Clause 3(3) adds CPTPP to the list of treaty state suppliers in the Procurement Act. It may be that we have a debate about whether Parliament should approve these things in future, but the fact is that, in future, when we have free trade agreements, we will see regulations brought forward under the Procurement Act to add treaty state suppliers, so this is perhaps the last time that we will do this through primary legislation rather than secondary legislation.
Schedule 2 to the Procurement Act 2023 sets out which are exempted contracts under the Act. Paragraph 24 of Schedule 2 specifies that, among those exemptions, is,
“A contract awarded under a procedure … adopted by an international organisation of which the United Kingdom is a member, and … that is inconsistent in any material respect with the procedure for the award of the contract in accordance with this Act”.
That latter sentence is pretty much the same in all these provisions, but it is helpful for noble Lords to remember the first part, as that is where this legislation will sit.
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However, that is not what the relevant chapter of the CPTPP says. Article 15.2, paragraph 3(e)(ii), specifies as an exemption from funded procurement that which is
“funded by an international organisation or foreign or international grants, loans or other assistance to which procurement procedures or conditions of the international organisation or donor apply”.
What has clearly been picked up here is the intention that we should incorporate this into our legislation, which is what we see going on in Clause 3(2) of the Bill: a contract that is
“wholly or mainly funded by an international organisation”—
the key point is that it is an international organisation providing funds—
“of which the United Kingdom is a member”,
and which is awarded under a procedure of that organisation. It then goes on to mention being
“inconsistent in any material respect”.
The CPTPP says
“funded by an international organisation”
and under the procurement procedures of that organisation—we need to hold on to those two points.
What we have here in the Bill is that it is
“funded by an international organisation”
and “awarded under a procedure” adopted by that organisation. So we have the same two points, but the Government have inserted “wholly or mainly” before “funded”. My starting point was: why the difference? Why have we inserted “wholly or mainly” for the purposes of our legislation, when our legislation’s purpose is to incorporate the provisions of the CPTPP? The CPTPP article does not say “wholly or mainly funded”, “co-financed” or “funded for the most part”; none of that language is in the CPTPP text. I thought I had better find out a bit more about why that might be the case.
The CPTPP provision relies, to an extent, on the exclusions under Article II:3(e)(iii) of the Agreement on Government Procurement, which specifies procurement
“under the particular procedure or condition of an international organization, or funded by international grants, loans or other assistance where the applicable procedure or condition would be inconsistent with this Agreement”.
The Agreement on Government Procurement therefore has a similar provision—it is not precisely the same—that is about those two things: “funded by” and “under the … procedure … of”. Again, it does not say “wholly or mainly funded”. What is the reason for the difference?
I am indebted in my research to a 2015 paper in the Trade, Law and Development journal by Annamaria La Chimia, of the University of Nottingham. She examined exactly this question. Why is there, under the Agreement on Government Procurement, this exemption from the procurement rules for these organisations? The answer, essentially, is that it is about development aid—the noble Lord, Lord Purvis of Tweed, has forgotten more about this than I know.
The World Bank is a good example. Where the World Bank is funding, it has to decide under what procurement rules its grant or loan is being used for a given procurement. Ideally, developing countries become consistent with, or join, the Agreement on Government Procurement, but many have not, so in practice their procurement activity is conducted under the procedures of the World Bank, which specifies them. It may be that the World Bank provides the money, or most of it, but quite often a range of different organisations provide the resources for such a procurement. That is how development aid often works; it may indeed be leveraging resources within the developing country itself.
These are complex matters. Sometimes the development aid is tied aid, which adds another difficulty because very often that precludes the possibility of making it a procurement under the GPA, because it is tied to the donor country’s sale of goods or provision of services. Why, then, do we get into this question of whether it is “wholly or mainly” funded, when nobody else has included those words?
In practice, if you include those words, every time the exemption is claimed, somebody—in fact, many people—will ask to see it demonstrated that the majority of the funding has come from an international organisation of which we are a member. That is unwise. We would be much better off sticking to the chapter of the CPTPP and the proposition that what really matters is that the procurement is conducted under the procedures of an international organisation of which we are member, and that it is funded by that organisation. The degree to which it is funded, the nature of the funding and where it comes from is not an area into which we wish to tread.
I know this is a probing amendment, but when I tabled it I thought I had better go and find out what it is all about, and I did. The conclusion I have reached is that, with respect, the Government ought to accept the amendment—maybe not at this stage, but certainly on Report. I beg to move.