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Social value and public procurement

Lexis Public Sector 146x219LexisPSL Local Government discusses when and how local government procurement officers should consider the application of the Public Services (Social Value) Act 2012 to procurement decisions.

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The Public Services (Social Value) Act 2012 (PS(SV)A 2012) requires local authority procurers to consider how they can improve the social impact of services they provide before the start of the procurement process.

Who does the PS(SV)A 2012 apply to?

The PS(SV)A 2012 applies to all public sector bodies that fall within the definition of ‘contracting authority’ under the Public Contracts Regulations 2015 (PCR 2015), SI 2015/102. This is a relatively broad definition, which includes:

  • central government
  • local authorities
  • police and fire authorities
  • other publicly financed and controlled organisations

The PS(SV)A 2012 does not apply to certain public bodies in Wales.

What does the PS(SV)A 2012 do?

The PS(SV)A 2012 places obligations on contracting authorities, at the point at which they are proposing to procure or making arrangements to procure certain public contracts, to consider:

References:

Public Services (Social Value) Act 2012, s 1

  • how what is being procured might improve the economic, social and environmental wellbeing of its area — those areas or areas within the UK in which the relevant contracting authority (or authorities, if more than one) primarily exercises its functions and on whose behalf the public services contract or framework agreement (as the case may be) is intended to be made
  • how that improvement might be secured in the procurement process
  • whether to undertake a consultation on the potential improvements or how they might be secured

Does the PS(SV)A 2012 apply to the procurement of all public contracts?

The PS(SV)A 2012 only applies to the procurement of public services contracts, or ‘mixed contracts’ where services are the dominant element of the contract. It will not apply to the procurement of public contracts that are exclusively for goods and/or works.

References:

PS(SV)A 2012, s 1

The PS(SV)A 2012 will apply to the conclusion of framework agreements under which public service contracts constitute the greater part (by value) of contracts that are likely to result from the framework (whether by selecting a supplier from the framework or as a result of mini-completion from the framework). However, the PS(SV)A 2012 will not apply to the individual public service contracts subsequently called-off under the framework.

The PS(SV)A 2012 applies to public services contracts or framework agreements that fall within Part 2 of the PCR 2015, for which the relevant contract will need to be above the EU financial thresholds. The PS(SV)A 2012 also applies to public services contracts for social and other specific services listed in Schedule 3 to the PCR 2015, subject to the applicable EU financial thresholds.

Application of the PS(SV)A 2012 provisions to below threshold contracts, including those covered by Part 4 of the PCR 2015, is voluntary.

For further reading, see Practice Notes: Introduction to public contracts procurement and EU procurement thresholds.

At what stage of the procurement process does the PS(SV)A 2012 apply?

The PS(SV)A 2012 applies to the pre-procurement stage of the procurement process (eg before publishing an Official Journal of the European Union (OJEU) contract notice, inviting tenders or before publishing an advertisement or contacting any person to seek an offer or expression of interest). However, in order to ensure public contracts deliver social value outcomes, social value considerations should be kept in mind at various stages throughout the procurement process including preliminary market consultation, service specification design, tendering and during the contract lifecycle (see below).

References:

Department for Digital, Culture, Media & Sport—Social Value Act: introductory guide

How does the PS(SV)A 2012 interact with the PCR 2015?

The PS(SV)A 2012 only complements the PCR 2015 and does not replace or supersede it. It simply requires contracting authorities to consider how the procurement may improve the economic, social and environmental wellbeing of an area prior to commencing the process and how the procurement process, in accordance with the PCR 2015, may be run in order to secure such an improvement.

Can a public body avoid complying with the PS(SV)A 2012?

A contracting authority may only disregard the requirements of PS(SV)A 2012 in limited circumstances. A contracting authority may disregard the requirements of the PS(SV)A 2012 in circumstances where there is an urgent need to arrange the procurement in question, such that it would be impractical to comply with it. In such circumstances, the PS(SV)A 2012 only permits the contracting authority to disregard the relevant requirements to the extent that it is not practical to comply. However, this exemption would not apply if the urgency is a result of undue delay on the part of the contracting authority.

References:

PS(SV)A 2012, s 1(8)–(9)

What are the consequence for failure to comply?

The PS(SV)A 2012 does not provide for any specific remedies. However the usual public law remedies would normally be available and so a breach could potentially expose contracting authorities to judicial review and claims for breach of statutory duty. Authorities will therefore want to include additional steps in planned procurements to ensure the PS(SV)A 2012 requirements are adequately addressed.

Government guidance

The PS(SV)A 2012 places a requirement on commissioners to consider the economic, environmental and social benefits of their approaches to procurement before the process starts and to consider whether they should consult on these issues.

When the PS(SV)A 2012 came into force, the government published a guidance note, Procurement policy note 10/12, providing guidance for commissioners and procurers. The government has since issued further guidance, which provides a larger range of resources for both commissioners and providers.

In April 2018, the Department for Digital, Culture, Media & Sport’s Office for Civil Society, with support from the Crown Commercial Service, published a PS(SV)A 2012 guide for commissioners and policy-makers procuring services under the PCR 2015. The guide focuses on how to account for social value when developing service specifications. This might include setting out specific social, economic or environmental requirements and outcomes to be delivered (where these are relevant and proportionate to the subject-matter of the contract).

Suggested examples of social value in this context include:

Social

  • employing a diverse workforce for the delivery of the service including the employment of veterans and service spouses/partners
  • collaborating with the voluntary and community sector, including users involved in designing and delivering the service
  • monitoring labour standards through the supply chain
  • improving skills and access to digital technology
  • approaches that encourage wellbeing and mental health

Economic

  • job creation/employing from a local community or disadvantaged groups
  • training and development opportunities/creation of apprenticeships
  • opportunities for Small and Medium Enterprises (SMEs) including Voluntary, Community and Social Enterprises (VCSEs)
  • prompt payment through the supply chain
  • advertising subcontracting opportunities to a diverse supply chain
  • creating a level playing field for UK steel producers
  • enhancing the UK Growth Agenda

Environmental

  • water consumption management
  • environmental policy and prevention strategies
  • monitoring greenhouse gas emissions
  • reduction in waste to landfill
  • heritage protection
  • carbon reduction or offsetting’

The guide includes examples of requirements that can be adapted for use in public contract specifications as appropriate, plus tips for how to use them to best effect to achieve social, economic and environmental outcomes. For further reading on specifications, see Practice Notes: Drafting technical specifications for use in public procurement procedures, A guide to sustainable public procurement and How to draft technical specifications—checklist.

References:

Procurement Policy Note 09/16: Procuring for Growth Balanced Scorecard

The guidance recommends that contracting authorities consider market consultation and use/adaptation of the balanced scorecard approach to assess the wider economic, environmental and social benefits before the public procurement process starts. For more information see Practice Note: Preliminary market consultations and News Analysis: Balancing act—supporting economic growth in public procurement.

In April 2018, the Cabinet Office announced further measures designed to level the playing field for small and medium-sized enterprises bidding for public contracts. Procurement Policy Note 01/18: Supply Chain Visibility requires contracting authorities to include standard terms on supply chain visibility for in-scope public contracts. It applies to central government departments, executive agencies and non-departmental public bodies tendering contracts valued above £5m per year. For further reading, see Practice Note: Encouraging SMEs to bid for public contracts.

This article was originally published in LexisPSL Local Government. If you would like to read more quality content like this, then register for a free 1 week trial of LexisPSL.


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