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The rise of 'social' procurement post-Carillion

David Hansom

The government has moved to bring more social value into public procurement. What exactly is proposed and what will it mean for contracts?

Towards the end of June, Cabinet Office minister David Lidington set out the government’s latest push to incorporate social value into public procurement.

His speech at the Reform think tank confirmed, among other things, that 2012’s Public Services (Social Value) Act will be extended to require certain government departments to not merely consider social value when procuring applicable public services contracts, but to explicitly evaluate social value. It is not yet known when this requirement will take effect, but it is believed that the changes to legislation and supporting guidance are yet to be drafted.

The announcement formed part of the government’s efforts to restate its views on the benefits of private sector outsourcing, amid criticism in the wake of Carillion’s collapse and calls to move away from the purely price-based evaluations that are frequently used.

The Social Value Act explained

The Social Value Act (SVA) came into force on 31 January 2013 and provides a framework for considering (during the pre-procurement process) how the social, economic and environmental wellbeing of the “relevant area” may be improved by a contracting authority as well as how, in conducting the procurement, this might be achieved.

The act sits alongside the public sector equality duty in the Equality Act 2010, and only applies to public services contracts (and framework agreements) to which the Public Contracts Regulations 2015 (PCR) applies. The SVA does not currently apply to PCR framework call-off contracts, below-PCR threshold contracts, or mixed services, goods or works contracts where the services are incidental to the main purpose of the contract.

The SVA currently requires public bodies to “consider” economic, social and environmental wellbeing when procuring public services, mirroring an approach in Scotland whereby contracting authorities must consider the application of “community benefit requirements”.

“Requiring more than the market can provide often drives up bid prices to unsustainable levels”

The act complements the PCR, which seeks to promote the use of social and environmental considerations by contracting authorities in their specifications and contract award criteria.

In April 2018, the Department for Digital, Culture, Media and Sport published an introductory guide to the SVA. While the guidance is for public sector commissioners and policy-makers, the advice contains a number of practical examples and tips for possible social value programmes that could provide social, economic and environmental benefits as part of public sector procurements. 

Proposed changes 

While contracting authorities are currently obliged to consider social and environmental value, the new requirement will mean certain government bodies will be required to explicitly evaluate the scope of added social value in all major procurements.

It appears the requirement will only cover central government contracts – at least initially – and so will not apply to local government or other public sector commissioners / contracting authorities.

Alongside this new requirement, all government departments will now be required to report regularly on the social impact of new procurements.

Some 4,000 of the government’s commercial buyers will also be trained on “how to take account of social value and procure successfully from social enterprises”. 

What will happen to contracts?

Given the requirement in EU procurement law that all evaluation criteria must be relevant and proportionate to the subject matter of the contract, contracting authorities will want to ensure they are not shoe-horning unrelated requirements into all types of contracts.

Requiring more than the market can provide often drives up bid prices to unsustainable levels, and can dissuade bidders from tendering for contracts where the requirements are unattainable.

That said, increasing the requirements and highlighting the importance and benefits of social value in public procurement should strengthen public trust and confidence in the outsourcing of public services.

This represents a welcome move, particularly given some of the adverse commentary on private outsourcing following Carillion’s insolvency.

David Hansom is a partner and Olivia Blessington a senior associate at Clyde & Co

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