Official Report: Minutes of Evidence

The Chairperson (Mr O'Toole): I welcome Sharon Smyth, deputy secretary of Construction and Procurement Delivery (CPD), and Paul Browne, deputy director of CPD's policy and performance division. Thank you both very much for coming. Sharon, I invite you to give a brief opening statement, after which Committee members can indicate whether they wish to ask questions.

Ms Sharon Smyth (Department of Finance): Thank you, Chair, Deputy Chair and members, for the invitation to provide a briefing on the Cabinet Office's proposed legislative reforms of public procurement and the potential exemption of ports from existing procurement legislation. Paul's role requires collaboration and close working relationships with the Cabinet Office and the devolved Administration on public procurement matters.

I will begin with the proposed legislative reforms of public procurement. The most recent changes to procurement legislation were commenced on 24 February 2025, with the introduction of the Procurement Act 2023 and the implementing legislation, which was the Procurement Regulations 2024. Training on the new regulations has been completed, and the new legislation is continuing to bed in as more and more new procurement competitions are taken forward. As of the end of last week, just under 12,000 new tender notices had been published across England, Wales and here. Over 700 of those tender notices are attributed to public bodies here.

In June 2025, the Cabinet Office launched a consultation on its proposed reforms, seeking to further amend public procurement law with proposals that are contained in the proposed procurement (economic security) Bill. The consultation closed on 12 September 2025, with 800 responses received. You received details of the seven proposed reforms in November, so I will tell you the high-level policy intent for each of the reforms. I will then be happy to take any further questions during the session.

The first proposed reform is on social value, which is intended to place more emphasis on social value in procurements in order to ensure that suppliers deliver commitments that contribute to the Government's key priorities. The second proposed reform is on safeguarding strategic domestic supply chains in order to enable contracting authorities to award contracts that are deemed critical for economic security in a way that safeguards local strategic supply chains and sovereign capabilities, promotes regional and national economic growth and prioritises domestic suppliers in certain critical sectors.

The third proposed reform provides flexibilities to award contracts directly for health and social services and to provide contracting authorities with considerable flexibility when procuring health and social services that are deemed to be people-focused services, including making it easier to award contracts without competition. The fourth proposed reform is on strengthening sanctions for contractors that cannot demonstrate prompt payment of their supply chains and subcontractors. That is to encourage suppliers on major contracts to pay their subcontractors promptly and reduce payment times.

The fifth proposed reform is on introducing targets for spend with small to medium-sized enterprises. It will require large contracting authorities to publish direct-spend targets with SMEs, community and voluntary enterprises and social enterprises. The sixth proposed reform is on introducing a public interest test before outsourcing services of over £5 million. The final proposed reform is to increase payment transparency, which really applies only to section 70 of the Procurement Act 2023 and does not apply to this jurisdiction, so any amendments made to that will not affect us.

As you are probably aware, public procurement is a devolved matter. Procurement legislation, however, is primarily drafted to align with the World Trade Organization's government procurement agreement. Trade is a reserved matter, so we have historically joined with England and Wales in the UK public procurement legislation, which is helpful for providing consistency for suppliers that are tendering across the UK. The Cabinet Office's proposed reforms, however, are not specifically linked to trade, so our jurisdiction can decide whether it wants to participate.

The Cabinet Office has requested a decision on whether this jurisdiction will in principle join in with making the reforms. Such an in-principle agreement would be made on the basis that our jurisdiction can withdraw agreement if, as policy development evolves, the proposed Bill would bring this jurisdiction into conflict with the Executive's existing procurement policy or would not be beneficial to our local economy or to suppliers.

As public procurement is a cross-cutting matter, the Minister has written to his Executive colleagues, seeking their views on his consideration of the proposed reforms.

The Cabinet Office has confirmed that the reforms are still in draft format, so they may be subject to further change. The Cabinet Office was intending to publish the draft legislation in 2026. We were informed very recently, however, that the legislation is not likely to be published until autumn 2027 at the earliest. Following Executive agreement on how they want us to proceed, we will continue to engage with the Cabinet Office, and we will inform the Committee of any key developments.

Are you happy for me to move on very briefly to the port exemptions?

The Chairperson (Mr O'Toole): Yes.

Ms Smyth: The potential exemption of ports from existing procurement legislation is still being considered by the Cabinet Office, which is working with the Department for Transport. If an exemption was proposed, it would be via secondary legislation to amend section 6 of the Procurement Act 2023, which allows appropriate authorities to exempt utility activities if they are satisfied that the activities take place within fair and effective market competition and if entry to that market is unrestricted.

You will note from the briefing that we gave you in November that there are five commercial seaports here: Belfast, Larne, Foyle, Warrenpoint and Coleraine. Following consultation with the local ports, the Department for Infrastructure is satisfied that there may be merit in their exemption from the regulations alongside their GB counterparts. DFI colleagues are seeking agreement from their Minister on the way forward.

The Cabinet Office is aiming to have a final position towards the end of February 2026. If the regulations are going to exempt ports, it will look to have those laid by the end of this year. If the Cabinet Office brings forward the regulations, agreement from this jurisdiction to be included in the ports exemption will be sought by the Finance Minister through formal Minister-to-Minister letters.

I am happy to take questions.

The Chairperson (Mr O'Toole): Thank you very much, Sharon. Just so that we are clear, on the broad question of public procurement reform, will that be done through new secondary or primary legislation?

Ms Smyth: It will be done through an economic security Bill, which will be primary legislation.

The Chairperson (Mr O'Toole): Basically, it is at least 18 months off.

Ms Smyth: Yes.

The Chairperson (Mr O'Toole): The Finance Minister is seeking very initial views from his Executive counterparts on whether they want to go along with — what would it be? In all probability, it would be a legislative consent motion (LCM), would it not?

Ms Smyth: Yes. At the minute, he is just seeking an in-principle agreement because the reforms are still in draft and could be subject to change. The in-principle agreement gives us the ability to sit in on the discussions on the reforms. Without involvement in those discussions, we will just be getting updates from the Cabinet Office.

The Chairperson (Mr O'Toole): Does the Minister have a preference? Has he expressed a view?

Ms Smyth: That is with his Executive colleagues. He has submitted to his Executive colleagues his proposals on how we move forward.

The Chairperson (Mr O'Toole): Can you tell us what that recommendation is?

Ms Smyth: The matter is with the Executive, so —. [Laughter.]

The Chairperson (Mr O'Toole): OK. I understand that there must be an Executive discussion, but that makes it hard for the Committee. Given that the Minister has published a multi-year Budget that is yet to be agreed by the Executive, it is somewhat strange that we cannot be told his preference on hypothetical procurement reform in 18 months. I am not asking you to comment on that.

Ms Smyth: There are seven reforms, each of which will have its own merits, so the discussion will be on that basis. You are quite right to say that we have devolved policy and can develop our own legislation. Ministers' decisions will be about whether it will be best to go with reforms that the Cabinet Office is taking forward or whether it will be better for our own jurisdiction to bring its own reforms forward. Each will have its own merits. We have to understand that our supply base is completely different to that in England. Over 80% of our businesses are microbusinesses, which is not the case in England, so we have to be very mindful that some of the proposed reforms might not suit our sectors.

The Chairperson (Mr O'Toole): Are you examining potential cross-border impacts and how those might interact with the protocol or Windsor framework?

Ms Smyth: Those are taken into consideration for any reforms.

The Chairperson (Mr O'Toole): I ask that we are kept abreast of the discussions given that we do not know the Minister's view or much yet about the UK Government's position. It is helpful to know that there are, at least, discussions taking place and an agenda moving forward.

What is the view of the Department on the ports? Will it happen sooner?

Mr Paul Browne (Department of Finance): The Cabinet Office is weighing up its options based on its analysis. We are primarily involved because the powers in the Procurement Act will be used to exempt ports, which are the responsibility of DFI.

The Chairperson (Mr O'Toole): Again, the question is whether the Executive agree with that position and, therefore, allow the UK Government to legislate on Northern Ireland's behalf to remove the ports from the procurement regulations. DFI owns the policy for ports, I presume.

Ms Smyth: DFI has a paper with the Minister for consideration on the way forward. Once that comes back from the Minister, there will be engagement with the Cabinet Office.

The Chairperson (Mr O'Toole): Is there an agreed position on that?

Ms Smyth: No.

The Chairperson (Mr O'Toole): Finally, do the Executive have a position on the procurement amendment regulations? Have the Executive opined on the regulations?

Mr Browne: The amendment regulations are very technical in nature and do not cut across any policies or require any decisions on any policies or options. The Finance Minister has given his approval to them on that basis.

Ms Smyth: Most of the amendment regulations correct things that were not implemented in the way that had been intended.

The Chairperson (Mr O'Toole): OK. I will bring in my colleagues. The Deputy Chair is first.

Ms Forsythe: Thank you both for being here. The Chair has touched on the question that I was going to ask, which is about the financial governance for the ports exemption. You are here, representing the Department's CPD branch, in a centralised role, which does procurement for the Department for Infrastructure. If the ports here become exempt from procurement legislation, what will the financial and procurement governance structure look like? You alluded to responsibility sitting with the Department for Infrastructure to satisfy CPD that procurement has been achieved.

Ms Smyth: It is a strange one. DFI does not do the procurement for the ports, because a lot of them are privately owned. The Department can provide loans and grants, but it does not carry out any procurement activity. It is strange that the ports are caught under the provisions of Act, which is why, when it was being brought forward, the ports in England, which are much larger and much more commercial, asked, "Why are we being bound by this?". That is why this consultation has come forward. Do you want to add anything, Paul?

Mr Browne: Based on the market assessments, you may be concerned that the legislation does not apply to the ports, but it is quite clear that they already operate in a very commercial environment in which value for money and other such matters are a prime concern.

Ms Forsythe: Warrenpoint harbour is in my constituency, and it is the port with which I am most familiar when it comes to operations. It is not absorbed into the departmental structures like DFI Roads, so there is no accountability to the Minister.

Ms Smyth: No. The only sanction is if the port breaches the Act: an aggrieved supplier can take it through the courts. It would not come back to the Department because the port has been caught under the legislation. As you can see from our paper, the ports have cited a lot of the benefits of not being caught by the Act, which include:

— encouraging greater investment in ports —

Ms Forsythe: It makes sense for the ports to trade and operate in that way. You have said that there is effectively no risk to the public purse from the exemption being put in place, because they will continue to trade as they are currently.

Ms Smyth: Yes.

Ms Forsythe: Thank you.

Mr Kingston: Thank you for your attendance. Belfast harbour does sterling work. Its expansion and the investment in the harbour estate over recent years has been first class, not just in the port activities but also in the office developments at City Quays. It is a shining light in the city. Your paper refers to the ports in GB and Northern Ireland applying for the exemption. Do you have any information on the number of GB ports that are seeking an exemption? Are the majority seeking an exemption? Is that the standard request?

Ms Smyth: I think that there were 27. Is that right?

Mr Browne: Yes, 27 port owners or operators and nine ship owners responded to the survey. All have asked to be exempt.

Mr Kingston: Twenty-seven.

Mr Browne: On the mainland.

Mr Kingston: All of them, basically.

Mr Browne: Twenty-seven port owners and nine ship owners or operators responded to the survey that was carried out by the Department for Transport.

Mr Kingston: Is that virtually all ports in GB?

Mr Browne: Yes.

Mr Kingston: It is all of them.

Mr Browne: The initial assessment was done following a request from the ports and the formal ports authority that they be made exempt.

Mr Kingston: That seems to be the preferred option across the board. I am cautious about asking this, but does the Windsor framework have any bearing on Northern Ireland ports following suit? Is the pathway clear for them, or is that likely to create obstacles?

Ms Smyth: It has not been brought up in discussions and, because this is about how ports operate, it is difficult to see how it could cause issues. Obviously, DFI is taking the lead on the consultation and bringing forward the proposals. The Procurement Act is simply the vehicle, pardon the pun, for doing that. It is, however, always a consideration when any change is going through.

Mr Kingston: No legislation is required locally, then.

Ms Smyth: No.

Mr Kingston: This is Westminster legislation. Do we have any role in this process? Are we just keeping ourselves informed?

Mr Browne: Secondary legislation will be brought forward through the Act if the Cabinet Office agrees to pursue the exemptions and writes to the Finance Minister. After receiving advice from DFI and its market assessment and summaries, we will proceed.

Mr Kingston: Would the ports apply through our Departments?

Mr Browne: DFI has already done a market assessment. We are not in receipt of that. Based on that, it has given advice to its Minister. It has contacted the ports and done an all-island assessment of the impact across the border. That is with the Infrastructure Minister. If the Cabinet Office formalises agreement in the coming months, we will seek approval from DFI as to how it would like to proceed. However, the Finance Minister is responsible because the vehicle that is being used to exempt the ports is the Procurement Act.

Mr Kingston: The ports have formally applied and the Finance Minister has to submit that.

Mr Browne: They have responded to a DFI market assessment, and they all wish to be exempt.

Ms Smyth: The impact on the ports, if they are given exemption, is that they will not have to comply with procurement regulations. That will simplify how they go about their commercial operations and how they buy goods, services and works.

Mr Kingston: It is probably in your briefing, but what is the expected timescale for the legislation at Westminster?

Ms Smyth: The end of this year; I think that they are still hoping for the end of 2026. That said, this is all being considered by the Cabinet Office. We have not been told the final decision on whether it is proceeding with possible exemptions. It is hoping to conclude that discussion by the end of January.

Mr Browne: The end of January or the start of February.

Ms Smyth: Yes.

Mr Kingston: I am sure that we will keep an eye on it.

Ms Smyth: We will keep you informed.

The Chairperson (Mr O'Toole): Good. No one else has indicated that they wish to come in. Members, thank you for that, and thanks to Sharon and Paul for the update.

I suggest that we be kept abreast of the broader procurement reform agenda, which may not crystallise in this mandate, let alone this year. I also suggest that we are kept abreast of developments on the port exemptions, which, again, are not certain, but it would be helpful to get an indication of when it will be on its way. We will expect those regulations at some point when they are, finally, agreed by the Executive.

Ms Smyth: They are amendment regulations.

The Chairperson (Mr O'Toole): They will come before us.

Ms Smyth: No, they have already been agreed; they are just corrections.

The Chairperson (Mr O'Toole): They are going to have to come to the Committee, at some point, in secondary legislation.

The Committee Clerk: They are statutory instruments.

The Chairperson (Mr O'Toole): So, no.

Thank you for coming in. It is helpful to understand that. We will be kept abreast as this agenda continues. I do not think that we asked for any follow-up information. If members are content, we will, in due course, send the transcript of this discussion to the Infrastructure Committee, flagging anything else that arises.

Thanks, again, Sharon and Paul, for coming in.

Ms Smyth: Thank you.

Mr Browne: Thank you.