The local angle - the impact of the Public Services (Social Value) Act

In March, the Public Services (Social Value) Act 2012 received Royal Assent and its substantive provisions will come into force on a date which has yet to be set by the Government but is expected to be within the next couple of months. The new Act requires that before starting any procurement process under the procurement Regulations for a services contract (including a services contract incorporating purchase of goods) the contracting authority must consider:

  • how the services being procured might improve the economic social and environmental well-being of the area in which the contracting authority primarily exercises its functions and
  • how in conducting the procurement process the contracting authority might act with a view to securing that improvement.

There is also a requirement on the contracting authority to consider whether to undertake any consultation about matters that fall within either of the points above.

All of the requirements above may be disregarded to the extent that an urgent need to arrange the procurement makes it impractical to comply with them but note that this urgency exemption does not apply where the time available for the procurement has been reduced by the delay of the contracting authority.

Chris White MP who put forward the initial Bill to Parliament tells us that:

The aim of the Act was to support community groups voluntary organisations and social enterprises to win more public sector contracts and to change commissioning structures so that a wider definition of value rather than just financial cost was considered.

But will the Act deliver on these aims? After all the new Act does not require contracting authorities to ensure that the goods or services being procured result in a demonstrable improvement to the economic social and environmental well-being of the local area.

Furthermore the procurement Regulations will continue to apply in their current form and so:

  • the procurement must not discriminate against economic operators based outside the UK and/or the contracting authority's local area; and
  • the contracting authority must award the contract to the bidder making the most economically advantageous offer or offering the lowest price.

Clearly there is nothing to stop a supplier from outside the local area delivering a contract in a manner which improves the social and environmental well-being of the public body's catchment area. For example any supplier may choose to use local sub-contractors for elements of the relevant contract.

When the new Act comes into force public bodies will need to consider whether they should include reference to social values in each services specification and whether evaluation criteria referencing the impact on the economic social and environmental well-being of the local area should be included in the procurement process. Care will need to be taken to ensure that any new criteria are appropriately linked to the subject matter of the contract and therefore also remain appropriate to determine the most economically advantageous offer.

However there will need to be a balancing exercise. Public bodies will need to ensure that any criteria looking at the local impact of the proposed contract are not framed in such a way that they might discriminate against suppliers who are not based locally.

It is anticipated that many public bodies will put in place a policy on procurement which includes a statement of their approach to addressing the issues set out in the Act. Public bodies may also elect to carry out consultations locally to discuss their approach which are envisaged by the legislation. Procurements will then need to be carried out in accordance with any such policy.

Social enterprise campaigners hope that the Act will transform public sector purchasing by looking at the collective benefit to the local community of public spending. The impact of the Act remains to be seen but what is clear is that it is a rare example of a private member's bill actually becoming law.

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