On 25 June 2018, David Lidington MP (Minister for the Cabinet Office) set out the Government's latest push to incorporate social value into public procurement.
In the speech at the Reform think tank it was confirmed, amongst other things, that the Public Services (Social Value) Act 2012 (SVA) will be extended to require certain Government departments to not merely consider social value when procuring applicable public services contracts, but to explicitly evaluate social value. It is not currently known when this requirement will take effect, and we understand that the changes to legislation and supporting guidance are yet to be drafted.
The announcement formed part of the Government's overarching restatement of its views on the benefits of private sector outsourcing, amidst the criticism levelled in the wake of the insolvency of Carillion and a desire to promote a move away from the "price only" based evaluations which are frequently used.
The Social Value Act 2012
The SVA came into force on 31 January 2013 and provides a framework for considering (during the pre-procurement process) how the social, economic and environmental well-being of the "relevant area" may be improved by a contracting authority and equally how, in conducting the procurement, it might achieve this goal. The act sits alongside the public sector equality duty in the Equality Act 2010, and only applies to public services contracts (and framework agreements) to which the Public Contracts Regulations 2015 (PCR 2015) applies. The SVA does not currently apply to PCR framework call off contracts, below PCR threshold contracts, or mixed services, goods or works contracts where the services are incidental to the main purpose of the contract.
The SVA currently requires public bodies to "consider" economic, social and environmental well-being when procuring public services, mirroring an approach in Scotland whereby contracting authorities must consider the application of "community benefit requirements".
The SVA complements the PCR 2015, which seeks to promote the use of social and environmental considerations by contracting authorities in their specifications and contract award criteria.
In April 2018, the Department for Digital, Culture, Media and Sport published an introductory guide in relation to the SVA. Whilst the guidance is for public sector commissioners and policy makers, the advice contains a number of practical examples and tips for possible social value programs which would seek to provide social, economic and environmental benefits as part of public sector procurements. The guidance can be viewed here and details a number of links to further, more detailed guidance.
Proposed amendments to the Social Value Act
Whilst contracting authorities are currently obliged to consider social and environmental value, certain Government bodies will, once the new requirement comes into force, be required to explicitly evaluate the scope of added social value as a matter of course in all major services procurements.
It appears that the requirement will only cover central Government contracts, at least initially, and so will not apply to local Government or other public sector commissioners / contracting authorities.
Alongside this new requirement, it was also announced that all central Government departments will be required to regularly report on the social impact of new procurements and that 4,000 of the Government's commercial buyers will be trained "how to take account of social value and procure successfully from social enterprises".
Clyde & Co comment
Given the requirement in EU procurement law that all evaluation criteria must be relevant and proportionate to the subject matter of the contract, contracting authorities will want to ensure that they are not shoe-horning unrelated requirements into all types of services contracts. Requiring more than the market can provide often drives up bid prices to unsustainable levels, and can dissuade bidders from tendering for contracts where the requirements are unattainable.
That said, increasing the requirements and highlighting the importance and benefits of social value in public procurement should act to strengthen public trust and confidence in the outsourcing of public services and this is, in our opinion, welcome, particularly given some of the adverse commentary on the status of private outsourcing following Carillion's insolvency.
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