What is this about?
The regulations introduce a new opportunity to reserve contracts for certain services for social enterprises and mutuals.
This is now available as an option for councils exploring new service delivery models. But there are limitations which are explained below including a three-year cap on contract duration.
What is new?
The services which are covered are a selection of the Light Touch Regime (LTR) services defined in the regulations. They are predominantly health, social care, education and cultural services. The rules on reserved contracts apply to requirements above the LTR threshold.
Health commissioners in England procuring clinical services are exempt.
The mechanism is similar to the longer-established reservation for supported businesses. Only qualifying organisations can bid. In summary, to qualify an organisation must meet all of the following conditions:
- has a public service mission linked to the delivery of the services.
- reinvests profits in order to achieve its objectives (and any distribution must be on a participatory basis).
- involves a degree of employee ownership or participation in management or requires the active participation of employees, users or stakeholders.
- the authority has not awarded it a reserved contract for the services in the past 3 years.
Social enterprises and mutuals (including ‘public service mutuals' in England) are capable of qualifying.
The Light Touch Regime procedure must be followed which includes advertising so a contract cannot be awarded directly to a spin-out without a limited form of competition.
Three years is the maximum duration for a contract awarded in this way.
While a further contract cannot be awarded to the same supplier under the reserved contract rules after the initial three year contract has ended the supplier can compete for the next contract in an open competition under the normal rules.