Procurement Bill – Power to the people! (Otherwise known as ‘maximising public benefit’)

Mark Cook examines the concept of "public benefit" in Clause 11 of the Procurement Bill and the approach authorities will need to take.

On a hot day in July, what better repast than to wander on to the Government’s Transforming Public Procurement page and then to meander on to the Hansard record of the House of Lords Committee Stage reading of 13 July?

I have been poised to write about clause 11 of the Procurement Bill (the Bill) for quite some time, but I was spurred into doing so by the balmy discussion that was so in contrast with the temperature that day. I have since read the Hansard record for the reading that took place on 18 July – and it provides an entertaining pastime for any PJ Wodehouse fan. The cricket and pudding analogies of sponsoring Lord True and the travails of the Liberal Democrat’s presence (one at the dentist, one with Covid-19 and a third delayed for four hours on a train) are simply gripping. But – on to the meat (or is it mat?) of my thinking.

Clause 11

This Government is not for turning when it comes to the wording of clause 11. Here is what clause 11(1) says:

11 procurement objectives

(1) In carrying out a procurement, a contracting authority must have regard to the importance of:
(a) delivering value for money,
(b) maximising public benefit,
(c) sharing information for the purpose of allowing suppliers and others to understand the authority’s procurement policies and decisions, and
(d) acting, and being seen to act, with integrity.

Various amendments were put by members of the upper house to clause 11 at the readings on 4, 6, 11 and 13 July, wanting to clarify what was meant by ‘public benefit’ and to seek changes to clause 22 of the Bill regarding award criteria. The concept of social value (economic, social and environmental well-being, and, depending on preferences, cultural well-being and other varieties) was promoted as warranting explicit recognition, building on the ground-shifting (for England) Public Services (Social Value) Act 2012. [1]

As Baroness Hayman of Ullock said: “I think that the minister can see that this is not party political: right across the committee there is concern about what ‘public benefit’ means and what it is going to deliver as part of the Procurement Bill”.

The Minister of State, Cabinet Office, Lord True responded: “I am constantly asked to define ‘public benefit’. One of the reasons why we have different political parties in this country and why politics has evolved is that, at different times, different people define it in different ways. The search for a total, accurate, 100% agreed definition that covers every possible eventuality may be an illusion. However, I understand that noble Lords are saying that they feel that there needs to be more clarity”. He then referred to amendments tabled by Baroness Lady Thornton which seek to change the term ‘public benefit’ to ‘public value’ and add ‘maximising social value’ as a procurement objective.

He went on to say: “As the noble Baroness told us on Monday, ‘public benefit’ is already on the statute book without an accompanying definition in a number of places, including section 4 of the Charities Act 2011, which I think she referred to. It is therefore a term that, while perhaps not in everyday use for public bodies, has a certain degree of understanding. The ‘public benefit’ objective in clause 11(1)(b) already means that contracting authorities need to think about how public money can achieve additional benefit in the way that the contract is delivered, which would include how to maximise social value, so we think an additional objective of ‘maximising social value’ would be duplicative”.

His subsequent discourse included:

• “We believe that the additional objective of maximising social value would be a duplicate, as it is embraced in ‘public benefit.”
• “I am not going to repeat a third time the reason why we think maximising social value is unnecessary and would be a duplicative addition. Each procurement is different and what is appropriate, for example, for a large-scale infrastructure project is not for smaller transactional procurements.”
• “It is always important that policy priorities are included in individual procurements only where they are relevant to the subject of the contract.”
• “Contracting authorities will be able to take account of measures that improve the economic, social and environmental well-being of the relevant area – this may differ from local authority to local authority, for example – where it is relevant to the subject matter of the contract. The Bill already allows this, which is absolutely in line with the Government’s levelling-up agenda.”
• “The term ‘public benefit’ is deliberately undefined; consequently, it is intended to be a flexible concept that gives contracting authorities a degree of discretion. Again, local authorities may have different views from place to place on what the most urgent benefit in their area is. Although all the proposed economic, environmental and social additions, including creating new businesses, jobs and skills, and reducing geographic disparities in the United Kingdom, might be facets of public benefit in different circumstances – I do not challenge that – we do not believe that it would be helpful to elaborate them in the Bill.”

As the minister reflected, ‘public benefit’ is a well-established concept in charity law. But it is not a variation on a theme of social value and does not necessarily include social value. It is in fact relevant to the meaning of ‘charitable purpose’ which is the test that every charity must meet. And ‘charitable purpose’ means any purpose that falls within section 3(1) of the Charities Act 2011 and is for the public benefit (under section 4 of the same Act). The purposes in section 3(1) are a long and glorious list which you can look up.

Key features of the ‘benefit’ and ‘public’ aspects

Charity Commission guidance [2] describes the key features:

The ‘benefit aspect’

To satisfy this aspect:

• a purpose must be beneficial – this must be in a way that is identifiable and capable of being proved by evidence where necessary and which is not based on personal views.
• any detriment or harm that results from the purpose (to people, property or the environment) must not outweigh the benefit – this is also based on evidence and not on personal views

The ‘public aspect’

To satisfy this aspect the purpose must:

• benefit the public in general, or a sufficient section of the public – what is a ‘sufficient section of the public’ varies from purpose to purpose
• not give rise to more than incidental personal benefit – personal benefit is ‘incidental’ where (having regard both to its nature and to its amount) it is a necessary result or by-product of carrying out the purpose

In general, for a purpose to be a charitable purpose it must satisfy both the benefit and the public aspects. However, charities for the relief (and in some cases the prevention) of poverty need only satisfy the benefit aspect. There is plenty more guidance from the Charity Commission about public benefit and how charity trustees should consider it.

What does clause 11 mean for public procurement in the United Kingdom?

What does this mean for public procurement in England, Wales and Northern Ireland as clause 11, if enacted unaltered, will apply to all these three countries in the United Kingdom?

If we are to maintain a consistent approach to ‘public benefit’ it will mean that for every procurement, a contracting authority will have to consider the following questions:

1. Is the purpose of the procurement beneficial and how is this to be evidenced?
2. Can it be established that the benefit of the procurement is not outweighed by any detriment or harm that it causes?
3. Does the procurement benefit the public or a sufficient section of the public?
4. Might the procurement give rise to more than an incidental personal benefit and, if so, how can the procurement be re-designed so this is not the case?
5. Has regard been had to the importance of maximising the public benefit in carrying out the procurement?

If a contracting authority does not consider these items, it will have failed to take into account a relevant consideration. For a contracting authority that is subject to public law, this will be a factor in determining whether they have discharged their duty to act reasonably in accordance with Wednesbury principles. This could open up the risk of a judicial review challenge, as well as any potential challenge that may be available for a breach of the Procurement Act.

Contrast this with the apparently more straightforward position in Scotland, where the Public Contracts (Scotland) Regulations 2015 and sibling regulations are being retained. There, the radical and new duty to ‘have regard to public benefit’ will not exist. Instead, the relevant affirmation of ‘social value’ is principally to be found in regulation 67 relating to contract criteria. In identifying the most economically advantageous tender based on the best price-quality ratio, the criteria linked to the subject matter of the contract may comprise or include:

‘(a) Quality, including technical merit, aesthetic and functional characteristic, accessibility, design for all users, social, environmental and innovative characteristics and trading and its conditions’.

As the careful reader will see, this is identical to regulation 67(3)(a) of the existing Public Contracts Regulations 2015.

Concluding remarks

So, social value and innovation will still be ‘on the tin’ in the regulations being proposed in Scotland.

The equivalent clause 22 (award criteria) of the Procurement Bill has no such clarity – it contains no reference to ‘quality’ let alone what might be the criteria for ascertaining ‘quality’, except possibly in the distinct arena of ‘a light touch contract’ (clause 22 (6)). And certainly, there is no mention of ‘social, environmental and innovative characteristics’.

So, far from clarifying that price, cost and other economic factors are not to be dominant considerations in public procurement under the Procurement Bill, hence ‘most advantageous tender’, the absence of the language that is retained in Scotland puts at risk the mandate to embrace social value, and indeed quality at all in the rest of the UK.

Except that – with the opposition in the upper house being so mercilessly defeated in this arena – the Government is enshrining the concept of public benefit as a key consideration that any contracting authority must have regard to in the entire procurement cycle. And what is that ‘public benefit’? In my mind, it’s the answer to the question ‘what about the people?’. Who knew that the Cabinet Office could be such advocates for the masses? It looks like unwitting radicalism will win the day after all, with clause 11 driving all contracting authorities to consider the impact and benefit for people other than themselves.

Mark Cook is a partner at Anthony Collins Solicitors.

[1] See Creating a Social Value Economy: A collective vision from the Social Value 2032 programme partners (Social Enterprise UK)
[2] See: https://www.gov.uk/guidance/public-benefit-rules-for-charities