Procurement Act 2023 (Consequential and Other Amendments) Regulations 2025

Motion to Approve

19:39:00

Moved by

That the draft Regulations laid before the House on 12 December 2024 be approved.

My Lords, in moving these regulations, I start by acknowledging the substantial contribution of the noble Baroness, Lady Neville-Rolfe, in bringing the new procurement regime to fruition. This statutory instrument represents the final legislative step in implementing the Procurement Act 2023, the new public procurement regime responsible for over £385 billion in public contracts annually. Commencing on 24 February 2025, the new regime brings our public procurement procedures in line with the Government’s mission-driven approach and will support economic growth by establishing a simpler and more transparent system. It will deliver better value for money across the public sector, lowering costs and burdensome red tape for businesses, and creating a prosperous environment for government and businesses alike. The legislation being discussed today is a technical statutory instrument, with the purpose of updating existing procurement references in a wide range of UK legislation to align with this new regime. For example, references to the Procurement Contracts Regulations 2015 throughout UK law will now reference the Procurement Act 2023. These types of consequential amendments are, as noble Lords will be very familiar with, a routine and necessary aspect of implementing primary legislation. The SI updates the schedules to the Act to ensure compliance with our international obligations. The threshold values are being revised to bring them in line with the current thresholds applied to public contracts, set by the WTO’s government procurement agreement. This merely amends the Act to match the values that we currently apply to public procurement contracts. Additionally, the regulations amend Schedule 9 to update the list of specified international agreements, which identify which countries’ suppliers have the right to access UK public procurement. This implements updates to the UK’s market access coverage in our trade agreements with Ukraine, Moldova, Georgia, Kosovo, North Macedonia and Albania, removing access to contracts for healthcare services and enabling the Health Care Services (Provider Selection Regime) Regulations 2023, introduced in January last year, to work as intended. These updates to the threshold values and schedule allow contracting authorities to correctly grant access to suppliers from partner nations. Further technical amendments include updating the list of central government authorities to reflect the recent machinery of government changes, ensuring that the departmental structures are accurately represented in the new regime. In addition to these technical adjustments, this instrument enhances transparency in public procurement. It supplements the transparency requirements established by the Procurement Act 2023 and Procurement Regulations 2024 on detailed procedural points, including matters such as the issuance of tender documents, direct award procedures, contract modification requirements, self-cleaning procedures and payment compliance notices. These measures provide clarity on specific processes, required by the new regime, which are intended to open up more public sector opportunities to a wider variety of businesses, which helps to drive down costs and promote innovation. This instrument updates how key performance indicators are handled in contract details and performance notices. These changes will help improve how suppliers are evaluated, giving the public sector better information to make more effective decisions to promote value for money. Finally, the regulations outline how to calculate whether the sale of excess electricity, gas or water produced as a by-product of a non-utility activity falls under the Act when the operator wants to sell it to a network. It explains the calculations needed to determine eligibility for vertical and horizontal arrangements, exemptions and the utility contract exemption for affiliated persons. Given the highly technical nature of the instrument, I was somewhat surprised that an amendment of regret was put before the House in respect of these regulations specifically. The powers under which the regulations are made are limited and do not allow for more substantive policy measures to be introduced. The instrument introduces no additional burdens for business and simply ensures that the Act can be implemented smoothly and efficiently. The regulations have been reviewed by the Joint Committee on Statutory Instruments and the Secondary Legislation Scrutiny Committee, neither of which has drawn any special attention to it. Contrary to the amendment proposed by the noble Lord, Lord Robathan, the Act introduces a number of reforms to make it easier for small businesses to access public sector supply chains and removes unnecessary burdens and costs. It introduces an obligation on contracting authorities to have regard to the particular barriers facing SMEs through the procurement life cycle and to consider what can be done to overcome them. In particular, the Act makes bidding easier for SMEs by requiring bidding companies to submit their core credentials only once on to a single digital platform, saving them time and money. It makes it clear that contracting authorities may not, in most instances, require audited accounts to test the financial standing of bidders, nor require insurance relating to the performance of a contract to be put in place prior to contract award. This will encourage start-ups that are not legally required to file audited accounts but can instead show financial capability by other means. The Act ensures that prompt payment flows down the supply chain, making it more and not less viable for SMEs to get involved.

19:45:00

The Act will go some way to drive economic growth through a simpler and more transparent public procurement system. However, I agree that the Act does not go far enough. That is why this Government plan to build on this foundation through further reform to stimulate economic growth. The next step will be to publish a mission-led national procurement policy statement, which will set out the objectives that this Government aspire to achieve through procurement spend.

In summary, the regulations are essential to ensuring that the existing legislative framework functions as intended while facilitating a transparent, efficient and effective public procurement regime. This final legislative step in implementing the Procurement Act 2023 will strengthen the system of public procurement across the UK, benefiting businesses, taxpayers and the public sector alike. I hope that noble Lords will join me in supporting these regulations and approve this SI today. I beg to move.

Amendment to the Motion

Moved by

At the end: “but this House regrets that the draft Regulations do not simplify the procurement process; that they hinder economic growth; and that they impose unnecessary burdens on small and medium-sized enterprises, thereby stifling innovation and competitiveness.”

My Lords, I was reading this weekend about the Prime Minister’s comments about various things that are coming forward, and it seemed to me that this was something that needed to be addressed. The regulations address the Procurement Act 2023. It is a Commons question. What are we to think? Are the drafts okay? Are the pieces that are subject to the regulations to be cancelled? The amounts put forward are extremely good—but are they? Noble Lords will understand that people have concerns about the changes that have been made. How much can be seen? How much is numerable and how much is qualifiable and noticeable? Then we look at the occupational pension schemes regulations. What about the lenient one? Leaping on to Regulations 42D, 42E and 42F—what is all that about? The amendment on branded health services—what is that? What about the amendment of the Competition Act 1998 order 2022? What about the healthcare services regulations to exclude a provider that is a threat to national security? Why is this necessary? Then there is debarment in Regulation 20D. It seems okay, but is it? What about Part 6 and Regulation 33(1)? Finally, we have repeals and revocation. Can the Minister tell us what all this is about? It seems good—it seems not too bad. We would like to be certain that this is not a problem. Could the Minister please tell the House how this is to be proceeded with? To be fair, I think that there is a possibility of revocation. Will the Minister please tell us what this is before we let it through?

My Lords, I was the leader of a local council in south Norfolk for about 17 years. I ran the council as a business—after all, I did not like paying council tax any more than anybody else did. It took me nearly 20 years to instil the sense of enterprise into what could have been the dead hand of the state. I provided the framework, but not only did we hope that our officials would go that extra mile, we became richer in every sense of the word when they did. Councils do 140 different things. First elected in 2003, I was conceited enough to think you could run the council as a private business in each of those 140 areas, with strong leadership and the other advantages that only accrue to a council. We do not pay corporation tax; we do not pay dividends; nobody can borrow as cheaply as us, at one notch just below sovereign; and it has been a long time since a well-run council went bust. Best of all, we provide the services that everybody wants, in some cases, every week. How difficult can this be? In my 17 years as a council leader, I outsourced only one thing: legal services, because I objected to paying 1% of the entire council tax take just on the books before we had even hired the staff. However, I did not believe in compulsive competitive tendering. I tried to do everything in-house: it was run as well as the private sector, but without the dividends or corporation tax because the savings got reinvested in the services or passed on to keep council tax down for everybody. We built 100 houses a year, delivering a gross income of 40% of all the council tax raised in our district. We rented homes to generate a higher return than we would get at the bank. The maintenance people could turn their hand to fixing a shelf for an old lady or get people out of hospital more quickly. We taught youngsters to swim, which was a nearly £1 million per year enterprise, and worked with GPs to prescribe fitness in our leisure centres. I needed a 17-year run at this, but when I stepped down to come into your Lordships’ House last year, council tax was 30% lower than inflation over the same period. It can be done. So why am I speaking in this debate? It is because, sad to say, we could have gone further and done more. I direct noble Lords’ attention to new Regulations 42A relating to vertical arrangements and 42B to horizontal ones. A vertical arrangement is where a council wants to run a service itself. A horizontal one is where several councils may club together over a wider area to achieve the same outcome. On too many occasions, having to follow these pointless procurement procedures held us back. They acted as an excuse for work. They were a drag anchor on not just my ambition but that of the talented young graduates we struggled to recruit. If we are to change the state, if we are to be more agile and if government is to work for the people, not the other way round, we cannot afford the sort of verbiage that decorates pages 12-15 of the public procurement regulations that my noble friend Lord Robathan regrets. They achieve nothing for the taxpayer and even less for residents. They encourage huge amounts to be spent on lawyers. They force delay and everybody else pays more as a result. Looking at the small print of the regulations, one sees that the well-meaning but counterproductive way they work is to mark down the entrepreneurial councils which can and should be setting an example, especially in rural areas. These are the sorts of councils that want to earn a shilling by collecting the trade waste from a remote bed and breakfast as the bin lorry passes by every Tuesday and whose proprietor is grateful because no other waste company will touch it. The attributable turnover calculations, the time spent assessments and the relevant period durations are just an excuse to snuff out the sorts of good behaviours that we should be encouraging—not just in councils but across the whole of government. They act as recruiting sergeants for those with an axe to grind. I listened carefully to what the Minister said, but in truth they prevent local firms co-operating with their local councils, lest a large corporation cries foul and challenges in the courts. They foster a risk-negative, rather than an ambition-positive, approach to public services. They stand in the way of councils getting together and co-operating to do the right thing in the public good for the public’s benefit. Where do your Lordships think Birmingham would be if Joseph Chamberlain had had to follow this stuff? Where would the clean water and gas that built that metropolis be if he had had to follow these pettifogging rules? The Explanatory Note explains how new Regulations 42A and 42B will affect councils by giving waste collection as an example. These regs should be consigned to the dustbin of history. I thought this Government had instructed officials to clear a path through the treacle that holds us back, but no—it was just too much to ask. My noble friend is right to regret, and it is something we should all reflect on. We are never going to get growth if we carry on like this.

My Lords, I was not intending to speak but as there seem to be so few people here, I will just say a few words. I draw noble Lords’ attention to an organisation called the Procurement Files, which is actually very good at looking in detail at the 300,000-plus contracts on the UK government public database. When you have a glance at that, it raises a lot of questions. Whenever the Foreign, Commonwealth and Development Office makes a procurement with a contractor for something happening abroad, does every single Minister sign off on it or is it done by officials? I am particularly interested because £25 million has just been agreed to one contractor to do green urban growth in Somalia. I looked at the detail of what that meant and thought, “My goodness, that is surely not a priority for what is happening in Somalia at the moment”. There is another one where it is spending half a million pounds to send 15 Porsches to the embassy in Tirana to be distributed to prisons in Albania. There are a whole range of these things. I appreciate that most of what has been said so far is about what is happening in this country. However, if the Minister is unable to respond today, could she send me something about how these decisions are made? Quite honestly, it looks like we need some detail of the goings on, as is happening in the United States of America. I think the public would be horrified if they knew the detail of what some of their taxpayers’ money is going on.

My Lords, I may be the only person here who actually took part in the Committee and Report stages of the Procurement Act, to which we are considering this SI. The Minister may remember that it was one of the worst-drafted Bills I have seen since coming into this House. The Conservative Government introduced more than 300 amendments between Second Reading and Committee. The amendment to Clause 1 they produced in Committee was so badly drafted that the noble and learned Lord, Lord Hope, intervened to say that it would be wonderful for the legal profession. Therefore, between Committee and Report, the Government had to produce an amendment to its amendment to Clause 1. That was not an easy experience for the Conservative Government nor, I have to say, for the noble Baroness, Lady Neville-Rolfe. She began looking at the Bill as a critical Back-Bencher and then, after the resignation of her predecessor, she found herself as the Minister who had to defend the Bill she knew had many flaws. She did her best to struggle through Committee, which included three previous Conservative Ministers, who were very critical of the Bill. In terms of transparency and simplification, we are struggling with an Act that is imperfect and very complicated. This SI does not make matters much better. I think we are all agreed that transparency and simplification are what we need to pursue, and we do not have them currently. I think we also agree that having public procurement rules which end up unintentionally favouring consultancies which are very good at writing applications and multinational companies that have the staff to write detailed applications over small and medium enterprises and others is not what you want. The Covid experience showed the very worst of that. I recall the early contracts for setting up testing sites which were given by the Government to two multinational companies, one of which had its headquarters in Miami. Surprise, surprise, it put a lot of the local testing sites in the wrong places because they did not know much about where the best places in local communities were.

20:00:00

I make it clear that we on these Benches will not support a vote if one is called on this, while recognising that we all face a problem and that the record of public procurement has been poor over the last 15 years and more and needs to be reversed. I say to those on the Conservative Benches that, if we are going to be critical of this Government, procurement and the balance between local and central issues, please let us get together on the devolution White Paper which has just come out, which—to my horror and amazement—pursues the Michael Gove model of giving everything to directly elected mayors and taking powers away from local communities to strategic authorities that are going to be mayors without proper accountability, except to the Secretary of State.

I say to the noble Lord that in many ways this undermines many of the fundamental principles of local democracy. So let us wait until we get to that and I will be happy to work on that with people with local government experience on the Conservative Benches with some very strong views. But I ask the Minister: when can we expect the new policy statement on national procurement? Will she do her best to ensure that the House has considerable time to consider it when it comes out? We would welcome a policy statement that provides greater simplification and transparency and makes a real effort to make sure that local authorities and companies have greater opportunities to take part in public contracts. This will all be very welcome and will reverse what we have seen over the last 15 years.

Too many consultancies have got fat on public procurement. Too many multinational companies have made very considerable profits and private equity firms have bought in to some of these areas and have also made very considerable profits. Some of them then go on to make political donations to particular political parties, which is not the sort of thing that we would like to see in any event. So there is a large agenda here and I do not think this SI provides an opportunity to address that. I hope that, when the policy statement comes out, we will have a thorough debate on it. I say to the Minister that there is a lot of work to do yet to improve the quality of our public procurement and to push it out from the centre to the regions, the localities and local government.

My Lords, while the Government’s proposals may appear to serve the public interest, we have a lot of sympathy with the regret amendment in the name of my noble friend Lord Robathan. This Labour Government promised to “simplify the procurement process” and “reduce micromanagement” to foster innovation—a noble intention. Yet, as we assess Labour’s position on procurement, we must ask whether the Government are creating a more accessible and efficient system and truly simplifying procurement, as the Bill intended, or whether they care more about stifling competition for their friends in the unions or prioritising costly equality and green add-ons. The Procurement Act 2023, introduced by the previous Conservative Government, aimed to streamline procurement, reduce micromanagement and encourage innovation. Labour claimed to support these principles in its election manifesto, promising a more flexible and accessible procurement landscape, particularly for small and medium-sized enterprises, SMEs. However, this Government have since delayed implementing the Act from October 2024 to February 2025 to publish a new national procurement policy statement. Does this not simply prolong uncertainty, making it harder for businesses, especially SMEs, to engage with government contracts? I turn to the details of the regulations. The regulations propose consequential amendments to align the Procurement Act with previous rules and to comply with international obligations, including the latest updates to the World Trade Organization’s agreement on government procurement. But do these amendments contribute to a more efficient, transparent procurement environment, or are we merely preserving outdated structures that complicate rather than streamline the process? One notable change being made is the revision of thresholds and direct award justifications. Regulation 8(6), for instance, allows contracting authorities to award contracts to previously excluded suppliers if that is deemed in the public interest. This raises the question: where is the accountability? This provision opens the door to increased discretion in awarding contracts, which could undermine transparency and encourage favouritism. Without clear guidelines, we risk creating a procurement environment that is less competitive and more susceptible to conflicts of interest. We also see an expansion in reporting requirements, particularly in terms of key performance indicators. While transparency is crucial, can we expect these new requirements to overwhelm contracting authorities, especially smaller ones already struggling with administrative burdens? The regulations mandate reporting on a broader range of metrics, which could impose significant strain on public bodies, diverting scarce resources from public services. Moreover, these changes place greater responsibility on smaller contracting authorities, local councils and SMEs, which may struggle to comply with a more complex system. Larger organisations may have the resources to absorb these demands, but smaller entities could be disproportionately affected. In our effort to create transparency and accountability, we must be cautious not to stifle innovation or dissuade SMEs from engaging in public procurement. The revisions to procurement thresholds also risk undermining the Procurement Act’s original intent of promoting fairness and inclusivity, particularly for SMEs. By increasing reporting requirements and complicating the procurement process, we may create a system that is more navigable for larger businesses while leaving smaller ones behind. One of the key concerns around Labour’s changes is their impact on small businesses. Labour’s manifesto promised “greater access to government contracts” for SMEs, but new procurement rules risk introducing more red tape, making it harder for SMEs to compete. Rather than fostering innovation and inclusivity, these regulations enforce the status quo, favouring larger, established players with the resources to navigate complex procurement procedures. We must also consider the impact on local authorities and public sector bodies. The delay in implementing the Procurement Act has already caused significant disruption. While the Government claim that the delay allows for a smoother transition, we must question whether this justifies the extended uncertainty. How much longer will it take before the Act is fully implemented, and what are the consequences for time-sensitive procurements? Legal experts such as DLA Piper have warned of potential confusion as contracting authorities try to navigate both the old and new systems. Are we setting these authorities up to fail by forcing them to choose between abandoning projects or managing an overwhelming amount of new bureaucracy? I would also be grateful for clarification on the status of ARIA, the Advanced Research and Invention Agency, which is one of the great innovations in the British state of recent decades. One of the central features of ARIA is that it is not subject to public procurement rules, as of course it cannot be if it is to serve the mandate that Parliament has set for it. Can the Minister give assurances that ARIA will not be subject to the requirements of the Procurement Act, nor the 2015 regulations? While we agree with the Government’s supposed intentions to improve public procurement, we remain sceptical and have yet to see evidence of them. I urge the Government to think carefully about their approach to the national procurement policy statement and align with the Procurement Act’s original vision. We need a procurement system that is efficient, transparent and accessible to all businesses, especially SMEs, the true drivers of innovation and growth. We cannot afford to squander this opportunity for meaningful reform; the economy and public sector deserve better.

I am very grateful to all noble Lords who have spoken in this debate. As I outlined at the start, this legislation will support the commencement of the new Procurement Act 2023, which embodies our ambition to open up public procurement to a more diverse supply base, making it easier for new entrants such as small businesses and social enterprises to compete and win public contracts, including measures to improve prompt payment and transparency of opportunities on a single platform, and enable basic supplier details to be submitted once only. I am less surprised by the comments made by the noble Lord, Lord Wallace of Saltaire, than by those of the Opposition Front Bench. I have asked repeatedly in briefings about whether this instrument would differ from that of the previous Government, had they introduced it, and have been told that it would not. I am slightly surprised, but I appreciate that we now have a different Government and I very proud to be introducing this on their behalf. I will go through a number of points to make sure that I respond to the questions raised. The key point that came up from both the noble Lord, Lord Wallace of Saltaire, and the noble Baroness, Lady Finn, was on the timing of the updated NPPS. We will be publishing this shortly and it will be in time for the commencement of the Procurement Act. It is perfectly reasonable and right to ensure that the NPPS reflects the Government’s approach and the mission, so I cannot accept that we should have just gone ahead with the previous one. The noble Lord, Lord Wallace, made a point about the time that businesses may have to adapt between the publication of the policy statement and the commencement of the Act. As I said, the Government are going to publish this statement in time for the commencement of the Procurement Act on 24 February this year. We have been consulting with stakeholders in developing the statement, and this has included a series of round-table discussions. It is aimed at contracting authorities and should not place burdens on suppliers, and we have trained 16,000 procurement practitioners in the new rules. The noble Baroness, Lady Finn, raised a point around whether the regulations would be more burdensome. The amendment made by these regulations will ensure that contracting authorities are not incurring an additional burden for having to report against every performance indicator used to manage a contract throughout its life, but only those most material to the performance of the key obligations of the contract at the time the relevant notice is published. This is in line with the original policy intent, as communicated to stakeholders through the passage of the Bill, and the amendment corrects an error in the drafting. I will now address some of the issues raised by the noble Lord, Lord Robathan. In doing so, I hope that I will persuade him that he does not need to regret in the way that his amendment suggests. In relation to what the transparency measures would do, changes have been made in response to feedback on the Procurement Regulations 2024 about the potential burden of, for example, raising the thresholds for certain transparency requirements, removing the proposed requirement for publication of tenders received, reducing requirements for publication of valuation details and creating exemptions for schools and private utilities. The Government believe that the revised requirements represent a proportionate approach. On the noble Lord’s points around what the consequential amendments do in practice, the consequential amendments to existing UK legislation are a technical aspect of this instrument. These regulations amend language and references to the previous procurement regime to reference the 2023 Act and the terminology used in it. The consequential amendments will not impact the way procuring entities conduct procurement as intended under the Act or make new policy decisions. Necessary consultation with departments holding ownership of the legislation to be amended has taken place to ensure that existing legislation can function as intended. For legislation that is relied on by devolved authorities, the Government have consulted officials to ensure that it functions as intended. The noble Lord asked what amendments the regulations make to the Health Care Services (Provider Selection Regime) Regulations 2023. These amendments help to ensure that the provider selection regime’s exclusion requirements align with those set out in the Procurement Act. This will help to ensure consistency across the two regimes and better protect healthcare services procurement from suppliers that pose a risk. The noble Lords, Lord Robathan and Lord Fuller, asked questions about the vertical and horizontal and affiliated undertakings exemptions relating to Regulations 42A to 42F. The detailed and technical explanation of various calculations ensures that thresholds for these exemptions are effective as a form of anti-abuse mechanism. This will prevent any abuse of the activities threshold that would give the controlled person an unfair advantage over other suppliers by being subsidised by the controlling contracting authority. Contracting authorities will also benefit from clear and consistent rules on how to apply the rules. The noble Baroness, Lady Finn, asked why ARIA, the Advanced Research and Invention Agency, is an excluded contracted authority. These regulations only repeal an old amendment to the Public Contracts Regulations 2015 and do not affect the status of ARIA. However, ARIA is now an excluded contracting authority under the Procurement Act. This is due to the nature of ARIA’s work. Most of its procurement would not be considered covered procurement. Therefore, the Act made ARIA exempt from the UK’s domestic procurement legislation.

20:15:00

The noble Baroness, Lady Finn, asked how the new regime would help more SMEs and VCSEs win contracts, which is really key to this evening’s debate. The new regime places a new duty on contracting authorities to have regard to particular barriers facing SMEs throughout the procurement life cycle, and to consider what can be done to overcome them. Bidding companies will have to submit their core credentials only once on to a single digital platform. This will make it easier and cheaper for SMEs that do not have dedicated bid teams to bid, saving the time and associated costs of having to provide the same information each time.

It also makes clear that contracting authorities may not require the provision of audited accounts to test the financial standing of bidders, except where they are already required to under the Companies Act 2006, nor require insurance related to the performance of the contract to be in place prior to contract award. This will benefit and encourage start-ups, which are not legally required to file audited accounts, as they will no longer be shut out of the procurement process and can show financial capability by other means.

SMEs and VCSEs will not incur costs of having to have insurances in place when they have no guarantee of winning the contract. In addition, the regime ensures that the prompt payment flows down through the supply chain, making it more attractive for SMEs to get involved. The legislation will enable SMEs to benefit from 30-day payment terms on a broader range of public sector contracts, including defence and public utilities contracts.

On the question from the noble Baroness about how the new rules help British businesses, I stress again that they will make it simpler, quicker and cheaper for suppliers, including SMEs and social enterprises, to bid for public sector contracts, lowering barriers to entry to the market.

I am almost at the end of my responses. The noble Baroness, Lady Finn, asked why we are updating the thresholds now when they were updated last year. The replacement thresholds in this SI are already applicable to UK procurement. However, as the thresholds raised these levels after the Act received Royal Assent, they are not yet reflected in the Act. This instrument updates the text in the Act to bring the thresholds in line with the values that have been applicable since last year.

In conclusion, these reforms will shape the future of public procurement in this country for many years to come, ensuring a modern and flexible procurement regime that we think will deliver the best outcomes for taxpayers, service users and businesses.

My Lords, I thank the Minister for her comments. We will not push this to a Division. I thank the Minister for what she has given us, and I thank all noble Lords for their time.

Amendment to the Motion withdrawn.

Motion agreed.

20:19:00

Sitting suspended.