In search of social value

Janet Lewis assesses the likely impact of the new social value duties introduced for public bodies with the passing of the Public Services (Social Value) Act 2012.

Public bodies will soon be required to consider how the services they are proposing to procure might add economic, social and environmental value and how they will secure such improvements through the procurement process. The changes, introduced by the Public Services (Social Value) Act 2012 which received Royal Assent this month, have not received extensive coverage so are likely to catch many public bodies unaware. It is important to note that:

  • The new duties apply to all public bodies and all public services contracts which are covered by public procurement law.
  • They are relevant at the pre-procurement stage and during the procurement, so are likely to affect evaluation criteria, contract scope, and performance regimes.
  • The duties are an opportunity for mutuals, social enterprises and community organisations bidding for public service contracts. Private sector bidders should consider how their offering on public service contracts will add social value.

Adding value

The new Act requires a public body which is subject to the Public Contracts Regulations 2006, before starting a procurement process, to “consider (a) how what is proposed to be procured might improve the economic, social and environmental well-being of the relevant area and (b) how, in conducting the process of procurement, it might act with a view to securing that improvement”.

This consideration must occur before the public body:

  • publishes an OJEU notice or otherwise publishes an advertisement seeking offers or expressions of interest;
  • contacts anyone in order to seek an offer or expression of interest;
  • responds to an unsolicited offer or expression of interest;
  • enters into a contract or concludes a framework agreement.

Key points

The key points to note are as follows:

Application

The duties apply only to public services contracts and framework agreements (under which the majority of contracts to be let will be services contracts) which are subject to the Public Contracts Regulations 2006. In other words, the duties will not apply to contracts which are not covered by the public procurement rules, including for example contracts with a value below the relevant threshold. They will however apply to Part B services contracts, even though these are only subject to the procurement rules in a limited way.

Procurement law

Under procurement law, public bodies are only able to take social and environmental matters into account in the decision to award a services contract to the extent that those matters are directly relevant to the subject matter of the contract. That hasn’t changed. However, public bodies are now required to consider (within the confines of public procurement law) how such economic, social and environmental improvements can be achieved through procurement.

The Local Government Act 1988, which prohibits local authorities from taking into account “non-commercial considerations” in public procurement decisions is amended by the Act to make it clear that it does not prevent a public body from exercising its duties under the Act. In other words, public bodies will not be in breach of the prohibition in relation to non-commercial considerations by complying with their new duties in relation to economic, social and environmental matters.

Implications

The duties apply in the pre-procurement stages (before the opportunity is put to market) and during the procurement process itself. Public bodies will be required to structure their procurements and their contracts in a way which secures the relevant improvements. Evaluation criteria linked directly to economic, social and environmental matters are likely to become more common, but must still be related to the subject matter of the contract. In addition, the duties could impact on the way in which contracts are scoped and specified, how services are bundled together or let separately and the way in which performance is measured.

Economic, social and environmental considerations

Pre-procurement

  • Packaging of services
  • Scope of services
  • Procurement procedure
  • Form of contract
  • Performance regime

During procurement

  • Evaluation criteria
  • Weighting given to social matters
  • Linking criteria to the subject of the contract
  • Award decision

Déjà vu

The language of the Act will be familiar to many in the public sector as echoing the recently repealed “well-being powers”. Section 2 of the Local Government Act 2000 gave local authorities the power to do anything which they consider is likely to achieve the promotion or improvement of the economic, social or environmental well-being of their area. These powers have now been replaced by the new general power of competence under the Localism Act 2011. It is somewhat ironic that only a few months after the well-being power is repealed, new duties using the same language are introduced. The difference of course is the permissive nature of a power and the obligatory nature of a duty.

Opportunity or hindrance?

The Act, which started life a private members bill, is being hailed by some as a major opportunity for mutuals, social enterprises and community organisations who add social value in a way which the private sector does not. This is very much in line with current government policy on localism and the Big Society.

Some hope that the Act will make it easier for such organisations to win contracts, resulting in “responsible capitalism” within the public sector. Others go much further and welcome this as a move away from private firms who make profit out of public sector contracts.

The spotlight is now focused on economic, social and environmental values in the procurement of public services. The public sector will need to review their procurement and contracting approaches accordingly, whilst private sector bidders are likely to focus more on how they can demonstrate economic, social and environmental improvements in the services they deliver.

Only time will tell whether the new duties will deliver genuine social value through public services or whether this might just turn into another procurement tick box exercise.

Janet Lewis is a Senior Associate at Nabarro. She can be contacted on 020 7524 6067 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it..