Review urges change to Social Value Act thresholds ahead of procurement reforms
A Government-commissioned review has called for the threshold at which the Social Value Act 2012 applies to be changed to avoid “an unwelcome side-effect” of recent procurement reforms.
Writing in the foreword to his report, Lord Young, the Prime Minister’s Adviser on Enterprise, noted that recent, “welcome” changes to EU law had raised the threshold for contracts to be advertised in the OJEU dramatically, from €134,000/€207,000 to €750,000.
“This contained an unwelcome side-effect however, as the application of the Social Value Act is tied to that threshold, meaning that upon implementation of the change the Act would cease to apply to the vast majority of public service contracts,” he warned.
“I think this is quite the wrong direction of travel for the Act, and so I have asked the Minister for the Cabinet Office to enact an amendment to the Act through the Public Contracts Regulations 2015 (PCR 2015), so that the current threshold remains until further legislation might be able to prescribe a new level.”
He added that this would maintain the current position and “send a clear message about the importance and relevance of social value”.
Lord Young concluded overall that where the Act had been taken up, it had had a positive effect, “encouraging a more holistic approach to commissioning which seeks to achieve an optimal combination of quality and best value”.
He claimed that significant cost savings had been generated and a more responsive way of delivering better services had been demonstrated.
However, the report noted that there was still work to be done to fully develop the legislation’s potential.
Three main barriers currently existed, it said. These were:
- Awareness and take-up of the Act was “a mixed picture”. Despite the growing awareness of the Act amongst public bodies, the incorporation of social value in actual procurements appeared to be relatively low when considered against the number and value of procurements across the whole public sector. Local authorities and housing associations led the way ahead of central government and health commissioners, but even within this the extent or depth of take-up varied;
- Varying understanding of how to apply the Act could lead to inconsistent practice, particularly around: knowing how to define social value and how and when to include it during the procurement process; applying social value within a legal framework and procurement rules; clarifying its use in pre-procurement;
- Measurement of social value was not yet fully developed.
Lord Young said it was important to make clear that the Act, applied well, did not need to be bureaucratic and could help commissioners secure real value for money.
“However, improper application of the Act (for example asking for social value not relating to the subject matter of the procurement, or failing to engage with the local market before procurement starts) risks a return to the bureaucracy we have been working hard to eliminate from the procurement process - in particular, the abolition of complex pre-qualification questionnaires, which have routinely shut small suppliers out of bidding for public sector contacts,” he added.
Lord Young concluded that these issues needed to be overcome before any extension of the Act should be considered.
The report therefore rejected – at this stage – extending the legislation: to cover contracts for goods or works (or other types of contracts such as asset disposal or planning); to cover contracts with a value below the OJEU threshold; so that commissioners would have to consider it at later stages of the procurement process; to mandate that commissioners would have to include social value.
“During the review, it emerged that this could in effect mean extending it ‘vertically’ (to make it more mandatory throughout the commissioning and procurement process) or extending it horizontally (to make it apply in more situations, but only at the pre-procurement stage), or indeed both,” the report said.
“The review found that extending the Act to make it more mandatory at this stage could risk adding a level of bureaucracy to the procurement process and shutting down the essentially innovative and non-prescriptive nature of the Act, and that this should therefore be avoided.”
Lord Young recommended that a further review of the Act be undertaken within the next two years.
In a letter to Lord Young, Minister for Civil Society Rob Wilson said he was pleased to see that the review found the Act having such a positive effect where it was being taken up.
“The range of stakeholders who see exciting potential in the Act and the sheer breadth of innovation that is starting to be uncovered, helps us to place the Act in a clearer light, to fully understand its potential and think about how we can now support this,” he wrote.
The minister added that “preventing the Act’s thresholds from increasing to 750,000 euros for many services when the new Public Contracts Regulations 2015 come into force is an important first step in doing this”.
Wilson added that he was keen to investigate the report’s various recommendations further.
Responding to the report, Peter Holbrook, chief executive at Social Enterprise UK, said: “We are disappointed that there is no statutory guidance underpinning the Act and seemingly little support to extend the Act to goods and works. However, there remain positive indicators for the country’s growing number of social enterprises in the recommendations. We welcome the suggestion of another review in two years’ time to see how much progress has been made against these recommendations and what more should be done.
“After much campaigning we are optimistic that the Government will show greater ownership of the Act by embracing the recommendations in the report. We are also buoyed that the rhetoric is moving to greater implementation of the Act.”
The majority of the provisions contained in the Public Contracts Regulations are due to come into force on 26 February, after the regulations were laid before Parliament earlier this month.
