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Session 2000-01
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Delegated Legislation Committee Debates

Draft Local Government Best Value (Exclusion of Non-Commerical Considerations) Order 2001

Third Standing Committee on Delegated Legislation

Wednesday 17 January 2001

[Mr. John Maxton in the Chair]

Draft Local Government Best Value (Exclusion of Non-commercial Considerations) Order 2001

4.30 pm

The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Ms Beverley Hughes): I beg to move,

    That the Committee has considered the draft Local Government Best Value (Exclusion of Non-commercial considerations) Order 2001.

This debate is about the proper handling of work force matters in local government tendering under best value. Before moving on, and I will be brief, it might help the Committee if I outline the background to the order.

Best value is a duty on local government and the fire and police authorities under the Local Government Act 1999, which was fully introduced from April last year. Best value requires local authorities to secure continuous improvements in the way in which they carry out their functions having regard to economy, efficiency and effectiveness. It aims to bring the standards of service delivery up to those of the best. Best value also recognises that good procurement practice is essential if local government is to obtain those real improvements in service cost and quality. That is why the Government have sought ways to modernise the procurement provisions of part II of the Local Government Act 1988 in consultation with local government, employers and trade unions.

In our consultation paper on best value in July 1997, we indicated that we were willing to look again at the factors that can be taken into account in selecting contractors under part II of the 1988 Act, consistent with our European obligations and the need to achieve value for money. In our White Paper the following year, we said that we would look for an early legislative opportunity to amend the list of factors that authorities can take into account in inviting tenders and awarding contracts, again consistent with our European obligations and with the principle of achieving value for money.

As I am sure all hon. Members know, part II of the 1988 Act defines certain matters as ''non-commercial'' and prohibits authorities from having regard to those matters in the contractual process. We intend to tackle that blanket restriction in this order. Section 19 of the 1999 Act now provides for the Secretary of State to specify by order, for best value authorities, matters that will cease to be ''non- commercial'' for the purposes of part II of the 1988 Act. Section 19(4) also requires authorities to have regard to any guidance issued by the Secretary of State.

On 16 February 1999, in the Standing Committee on the then Local Government Bill, my right hon. Friend the Minister for Local Government and the Regions mentioned that one possibility for using the power in the legislation would be to modify the restriction on consideration of work force matters so that local authorities can have proper regard to them in cases in which there are relevant quality and best value considerations.

The consultation paper that we issued in April last year, entitled ``Best Value and Procurement Handling of work force matters in contracting'' set out our proposal to amend the 1988 Act to enable best value authorities to have regard to relevant work force matters in the contractual process. It was in the form of draft guidance under section 19 of the Act and set out how local authorities could deal with work force matters in selecting tenders and awarding contracts once the necessary order, which we are considering today, had been made.

We received more than 120 responses to that consultation paper from local government and from individuals, and the draft guidance was revised to take account of those views. It will be published as a departmental circular. I sent copies of the draft circular to you, Mr. Maxton, and to members of the Committee earlier this week and I hope that it was helpful, although I understand that at least one member of the Committee did not receive a copy, for which I apologise.

Mr. Nigel Waterson (Eastbourne): I have not received my copy although I am sure that it was sent, as the Minister said. However, it is odd that my hon. Friend the Member for Cotswold (Mr. Clifton-Brown) and I did not receive a copy. I have glanced quickly through the document, and I want to ask the Minister about a typographical matter. In my copy, paragraph 50 on page 23 tails off, as if the writer had succumbed to a fatal affliction. It states:

    In view of their duties other than legislation...

and then just stops.

Mr. Don Foster (Bath): It is like the Prime Minister's briefing.

Mr. Waterson: Exactly. It would also be helpful if the Minister could explain the thinking behind paragraph 5 on page 6, which states:

    The statutory instrument does not relax the restriction on those matters that can be said to be truly ``non-commercial''.

How does that sentence relate to the other paragraph of section 17(5) of the 1988 Act?

Ms Hughes: I will carry on and try to respond to those questions later.

We introduced the proposal because the Government believe that people want good quality services and our modernisation programme for local government is aimed at achieving that. Modern councils should provide services that bear comparison with the best, and best value requires services to be delivered by the most economic, effective and efficient means, while achieving continuous improvement. We are taking steps to assist in that aim, for example, by the review of local government procurement being carried out by Sir Ian Byatt, because good procurement is an essential part of that equation.

We shall use the powers in the 1999 Act to update part II of the 1988 Act to enable best-value authorities to have regard to certain work force matters in the contractual process. The amendments will enable authorities properly to consider work force matters where relevant to the delivery of best value. On the hon. Gentleman's second question about page 6, the statutory instrument does not relax the restriction on those matters that can be said to be truly non-commercial. Neither the order, nor our proposed guidance, changes the original essence of part II, which was to prevent local authorities from introducing political or other irrelevant considerations into procurement, but it will remove the lack of clarity about what that means in practice in relation to work force matters.

Work force matters that are not directly related to the delivery of the service in question should not be taken into account as a result of this order. The guidance gives some examples. For instance, the training of corporate directors of an organisation would not necessarily be relevant to the training and expertise of people who deliver the service, so it could still fall within non-commercial matters as regards part II of the 1988 Act. Relevant work force matters are germane to the contract.

At present, because work force matters in general are specified as non-commercial in part II of the 1988 Act, it can be argued that—and has been seen as if—they are completely off limits, even when they may be relevant to the performance and value for money of a contract. That is a hindrance to proper assessment of the quality of potential contractors and also casts doubt on the extent to which Government advice on the Transfer of Undertakings (Protection of Employment) Regulations—set out in staff transfers in the public sector statement of practice published by the Cabinet Office early last year—can be applied to local government.

The present legislative position helps neither the public nor the private sector. In specifying work force matters in a blanket way as non-commercial, part II prevents local authorities from assessing whether private companies have the wherewithal to carry out contracts satisfactorily and, from the private sector point of view, part II also prevents tenderers from demonstrating that their enterprises are well run with good management practices and good staff relations policies and practices. At present, part II may proffer advantages to companies with poor management practices, which therefore provide poor services.

We take the view that local authorities will want to consider employment matters such as staff training and management practices, particularly where they directly affect the cost and quality of services or where new procurement rules apply. The order therefore provides that relevant work force matters will cease to be defined as non-commercial for the purposes of part II of the 1988 Act.

Mr. Waterson: Again, to save time in the long run—my eternal quest in Committees—will the Minister confirm a few matters? First, on section 17(5), are we talking only about paragraphs (a) and (d), so that (b),(c), (e), (f), (g) and (h) are unaffected by the order? Secondly, will the Minister confirm—she may have mentioned it already—that those two paragraphs are limited to work force issues that are directly relevant to the particular contract? Thirdly, will she provide a real-world example of where the order would make a difference? She has stated where it might not be relevant, but a positive example of what will be covered that was not covered would help the Committee.

Ms Hughes: I shall certainly try to help the hon. Gentleman. I can confirm, on his second question, that relevant work force matters are the decisive factor. I can provide only general examples, but if the hon. Gentleman read the draft circular, he would find some specific examples intended for the benefit of local authorities. An obvious example is the quality and frequency of training provided to staff of a private sector company: its delivery of the service could be directly related to the training it provides. That is a relevant example, but it is difficult to be more specific because it all depends on the nature of the contract and the services provided, which can be many and varied. That forms part of the context in which local authorities will have to decide which work force matters are relevant enough to be specified in pursuit of their contracts.

It may be helpful if I describe the key elements of the order. Paragraph 1 provides that the order shall come into force the day after it has been made and provides a definition of

    public supply or works contracts

to which the order applies. Paragraph 2 provides for the order to apply to all best value authorities in England and police and fire authorities in Wales.

Paragraph 3 sets out the substance of the order, which I have already described in some detail. It provides for certain specified matters to cease to be ''non-commercial'' for the purposes of section 17 of the 1988 Act. These matters relate to the terms and conditions of employment of a contractor's work force and the conduct of contractors or their workers in industrial disputes. To respond to the hon. Gentleman's question, such matters cease to be non-commercial only so far as it is expedient or necessary to permit or facilitate compliance with the best value duty under the 1999 Act, or where there is a transfer of staff to which the TUPE regulations, as amended, may apply.

I hope that members of the Committee will accept the change. I think that it sufficiently acknowledges the importance of people delivering services in regard to the quality and efficiency with which contracts are delivered. I will be happy to deal with any questions.


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