9. & 10. The General Principles of the Social Partnership and Public Procurement (Wales) Bill and The Financial Resolution in respect of the Social Partnership and Public Procurement (Wales) Bill

Part of the debate – in the Senedd at 5:36 pm on 29 November 2022.

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Photo of Peter Fox Peter Fox Conservative 5:36, 29 November 2022

Diolch, Llywydd. I'm pleased to contribute to this debate today on behalf of the Finance Committee. We have made 11 recommendations in total, but given the time available, I will focus on our main concerns.

Whilst we are supportive of the aim of the Bill, a key concern for us was the lack of data and the number of unknown costs contained in the regulatory impact assessment. This consequently made it difficult for the committee to assess the overall financial implications of the Bill. We have on numerous occasions expressed our view that RIAs should contain the best estimate possible. As a result, I am sure that it will not come as a surprise to the Deputy Minister and her ministerial colleagues that many of our recommendations call on the Welsh Government to undertake further work assessing the costs. It is also disappointing that the committee has to continually make these points, and it urges the Deputy Minister to listen to, and act upon, our recommendations.

The Chair of the Finance Committee has previously spoken in the Chamber about our concerns of rising inflation on the cost of legislation. His Majesty's Treasury's Green Book says that the effects of general inflation should be removed when estimating the cost of Bills. However, given the 40-year-high inflation rate and the uncertainty that the Welsh Government's block grant will rise at the same level, we believe that the RIA should take into account inflation when calculating potential costs. The Bill has a five-year appraisal period and therefore rising inflation could lead to additional costs being borne by the public and private sectors. We recommend that the Deputy Minister updates the RIA to model costs based on forecasted inflation data for the duration of the Bill's appraisal period.

Turning to the costs relating to the socially responsible procurement duty contained in the Bill, the RIA notes that the public and private sectors would incur costs of £20.5 million and £6.5 million respectively. There are a number of possible scenarios identified that could arise from the increased expectation on delivering socially responsible public procurement outcomes, including wider use of sustainably sourced materials; staff receiving more training and better terms and conditions; and staff time in attending additional training.

We asked whether attempts had been made to model the possible scenarios to determine potential costs, and the Deputy Minister told us that as the Bill covers a huge range of public bodies, she did not have the data at present to measure the baseline. As a result, our recommendation 3 calls for further work to be undertaken to assess the costs to public and private bodies relating to this duty. This work should include a sensitivity analysis to show the potential range of costs too. However, I am disappointed, as I understand that the Minister hasn't accepted this recommendation.

On the provisions in the Bill relating to bid costs and real living wages, the committee felt that an increased focus on socially responsible public procurement outcomes could, in the short term, increase bid prices. We are therefore concerned that businesses may respond to the increase by reducing employees or passing the cost on to customers. To mitigate this, we recommend that the Welsh Government ensures that the additional requirements placed on businesses are proportionate, and that the statutory guidance provides the necessary support for procurement and contract management staff in Wales.

With an increased focus on fair work, another likely additional cost would be incurred through the increased adoption of the real living wage throughout supply chains. Whilst the Welsh Government cannot mandate the real living wage, the Deputy Minister told us she does expect that the Bill will increase the uptake as one aspect of better employment practices. We very much welcome the increased focus on fair work and we hope that public and private bodies will adopt the real living wage, however, this is an area we would like to keep an eye on, and our recommendation 7 asks that the post-implementation review for this Bill should include information on the uptake of the real living wage as a result of this legislation.

The construction contract management costs are the most significant allocations made in the RIA, with a particular focus on large construction contracts with values above £2 million. Whilst the provisions in this Bill will place additional requirements on organisations managing contracts and additional costs, we hope it will lead to improvements in contracts across sectors and prevent unethical practices, such as modern slavery, from happening in supply chains.

Nevertheless, we are concerned about the impact this will have on small and medium-sized businesses. We recommended that specific support is provided to SMEs to enable them to participate in contracts—to be found in recommendation 8—and that further analysis of how this duty impacts on SMEs is provided—recommendation 9. Again, I'm disappointed—or we will be disappointed—if that recommendation 9 hasn't been accepted.

Finally, Llywydd, as I mentioned at the start of my contribution, we are disappointed with the limited data available on the financial outcomes of the Bill. For this reason, we recommend that the Welsh Government publishes a mid-term report as well as a final five-year evaluation report, which should outline the financial costs incurred as a result of the Bill’s implementation. Diolch.