How do we maximise social value?

What is the challenge?

Councils want to maximise the value of every pound they spend including in terms of jobs, skills and supply chain opportunities in the local community (Buying into Communities).

This is established practice in regeneration projects and construction and infrastructure projects more generally. It is being extended to other services (West Midlands Procurement Framework for Jobs and Skills).

The Public Services (Social Value) Act 2012  provides a framework for considering, pre-procurement, how the social, economic and environmental well-being of the area could be improved when buying goods and services.

The Act sits alongside the public sector equality duty in the Equality Act 2010.

The old EU rules sometimes hampered implementation of the preferred approach. One of the main objectives of the new EU rules is to enable authorities to use procurement more ‘strategically'. Social and environmental issues can now be taken into account at many points in a procurement procedure. For short, this is referred to as a ‘cross-cutting social clause'.

This stops short of allowing preferential treatment of UK nationals or UK suppliers (including ‘local' suppliers within the authority's boundary) but it represents an important change to the rules.

The new opportunities to consider ‘social value', including SME-friendly procurement and contracts with businesses employing disabled and disadvantaged people, are outlined below. See also What are our options for major projects? on procurement from social enterprises and mutuals.

How can we use the PCR 2015?

Take a cross-cutting approach to social value  
Under PCR 2015 social and environmental considerations can now be addressed in many different parts of the procurement procedure (a ‘cross- cutting social clause') including:

  • Specifications, including specification of production processes and social and environmental labels, and special contract performance conditions (procurement documents)
  • Selection criteria, including references and environmental management systems, and exclusion grounds (which also apply to sub-contractors)
  • Contract award criteria including lifecycle costing and rejection of abnormally low tenders.

This provides an extensive opportunity to implement plans developed using the Public Services (Social Value) Act framework. 

Make contract packaging SME-friendly 
The new rules challenge councils to consider whether requirements should be divided into lots (see procurement documents). 

This can be used as an opportunity to stimulate thinking on innovative procurement models including those which increase the flow of contracts to SMEs where this provides value for money. 

Reserve contracts for  social businesses employing disabled/disadvantaged people 
It is now possible to reserve contracts for businesses whose main aim is the integration of disadvantaged people (it was previously only disabled people) or to provide for the contracts to be performed in the context of supported employment programmes.

Only 30% of the workforce need qualify as disabled or disadvantaged (it used to be 50%).

‘Disadvantaged' is not defined. It could include, for example, the long-term unemployed, members of disadvantaged minorities or otherwise socially marginalised groups.

What do the ‘Lord Young' rules say?

Note also that the PCR2015 include additional rules intended to improve SME access to public contracts. These follow a review by Lord Young and do not come from the EU.

The ‘Lord Young' rules -

  • introduce a standardised approach to pre-qualification questionnaires (PQQ) for above-threshold procurement
  • oblige councils to publish information on the Government's Contracts Finder portal when above-threshold opportunities and below-threshold opportunities valued £25,000 or more are advertised and when contracts are awarded
  • abolish the pre-qualification stage for below-threshold procurements
  • require payment of invoices within 30 days (including payments along the supply chain).

28 January 2016