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Bill imposes key shift to public procurement contracts

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Councils face new burdens as proposed leglislation attempts to give social enterprises a leg-up in competition for public sector contracts.

DCLG has identified 1,294 statutory duties and that is before the Department of Health and Home Office have chipped in with their list. So when new duties are proposed in a private member’s bill, which shows every sign of making it onto the statute book, we need to take a close look.

Unusually, the Public Services (Social Enterprise and Social Value) Bill, introduced by the Conservative MP for Warwick and Leamington, Chris White, has cross party support and that of the Cabinet Office. The Bill is currently at committee stage in the Commons.

Life might begin to get a little difficult for the local authority, as (the Bill) imposes a number of new requirements in respect of its public procurement contracts

So what does the Bill do and why is it significant? The first part aims to assist social enterprise by requiring the Secretary of State and local authorities to publish strategies in connection with promoting social enterprise and to enable communities to participate in the formulation and implementation of those strategies. Nothing overly controversial there, very much “Big Society” and unlikely to significantly add to the pile of burdens which DCLG has identified.

However, it is the second part of the Bill where life might begin to get a little difficult for the local authority, as this imposes a number of new requirements in respect of its public procurement contracts.

The new duties for the local authority are

  • to consider how such a contract might promote or improve the economic social or environmental wellbeing of its area
  • to consult the beneficiaries of such contracts
  • to consider how to take into account matters identified by it in its initial consideration of social value
  • to include provisions within the contract relating to such matters

The coverage is just about as broad as it could be. It captures any public procurement contract from a strategic PPP to the purchase of paper clips. For every contract local authorities will need to carry out and demonstrate this initial consideration of social value, even if it decides not to do anything further.

But this is no mere extension of the duty to promote the role of social enterprise into an active requirement to open out its contracts to this sector. Instead, the provisions go much further in capturing “social value”, utilising the “well-being” wording from section 2 of the Local Government Act 2000.

It is here that one can see a synergy with provisions in the Localism Bill, which introduce the community right to challenge. There, the duty upon the local authority to consider an expression of interest in providing a council service is subject to an obligation to consider whether acceptance of such expression would promote or improve social, economic or environmental wellbeing. Where it accepts such expression and carries out a subsequent procurement exercise, it must likewise consider how this “social value” is promoted or improved in that exercise.

Why then is it that a Bill to promote the role of social enterprise contains these much broader provisions regarding social value and what is it that the Bill is trying to achieve by such considerations?

What is certain is that these provisions will fundamentally add to the obligations upon councils when letting their contracts

Chris White’s speech at second reading gives something of a clue, in that it is seeking to break authorities free from lowest price considerations in awarding tenders, which is quite a different thing (and certainly much broader) from opening out local government contracts to deserving contractors. He gives an example of a renovation contract for social housing, where one bidder goes above and beyond the base requirements by taking on long-term unemployed and teaching them skills in the construction sector as well as providing hands on training in local schools. All very laudable.

However, what local authority lawyers will need to get to grips with, is how these considerations may challenge the general basis of award of a contract under EU procurement law of most economically advantageous tender.

The inclusion within EU procurement of social considerations has long been a complex and difficult area. It is however quite unusual, certainly for UK authorities, to include specific duties upon certain contracting authorities to cover such matters. The similar provisions in the Localism Bill do not interfere with contract award in a way these duties may, so it remains to be seen, as the Bill passes through Parliament, whether the Cabinet Office in its role as custodian of European public procurement law, will seek certain amendments.

What is certain is that these provisions, together with those in the Localism Bill, will fundamentally add to the obligations upon councils when letting their contracts. These duties will require councils at several points in its procurement cycle to assess “social value”, which is, putting it mildly, not the most straightforward concept.

Michael Mousdale is a partner with legal firm Trowers & Hamlins LLP

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Readers' comments (1)

  • Warren Escadale

    I think we have slipped into a set understanding of EU Procurement that needs to be shaken up. The telling line above is: "It is however quite unusual, certainly for UK authorities..." and I think our approach to EU procurement regulation can be partly explained by our legal (and business) culture/history which is different to the rest of Europe.

    My example does not relate to charities or social enterprises but to Bombadier in Stoke. Our procurement practice takes an excessively narrow perspective of value and consequence which is not applied elsewhere in Europe.

    A decent social value clause or even a procurement scoring system, like Manchester City Council's, that incorporates sustainable development, would not create a merciless system that utterly disregards consequence.

    Social value could empower the public sector and give it greater control over the impact of its spend. It could for instance, identify postcodes that score higher and encourage regeneration.

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