Opening up public sector procurement, creating opportunities for local enterprises

This coming Friday I will introduce the Second Reading of a Bill which has the capacity to permanently change the way in which public sector bodies procure services – whether local authorities, NHS trusts or Government Departments. It will require them to consider how what is being procured will improve the economic, social and environmental well-being of the area in which the services are being provided. This means that, whilst they will obviously still have to take price very much into account, they will have to assess the social value which different potential suppliers can add to their performance of the contract.

The Bill – with the distinctly ungainly title of the Public Services (Social Value) Bill – started life as a private members’ bill in the Commons. Chris White the new Conservative MP for Warwick was successful in the ballot for private members’ bills and introduced the bill within months of being elected. With some amendments it gained Government support, with Nick Hurd, the Cabinet Office Minister strongly helpful. If it achieves its Second Reading on Friday and we can avoid a Committee Stage in the Lords (both highly likely outcomes) it will become law before Easter.

Why does it matter? At present many public sector procurers choose large companies as a matter of course rather than even considering smaller, local mutuals, social enterprises and small businesses, even though these can offer additional value by supporting local employment, offering training (often to particularly disadvantaged groups) and simply providing a better quality service than mega-companies with a profit-maximising approach. At a time when civil society organisations are feeling the effects of the cuts particularly harshly, the Bill will help tilt the playing field back in their direction. Several local authorities do follow a social value led approach to commissioning – including Durham, Camden and Wakefield, but this is the exception rather than the rule.

That is why, on the eve of its Third Reading in the Commons, Social Enterprise UK co-ordinated a letter from the CEOs of 15 umbrella organisations which said that “the Bill will play a key role in enabling social enterprises, voluntary organisations and small businesses to bid for public sector contracts.” Signatories included the CEOs of ACEVO, Co-operatives UK, NCVO and the Race Equality Foundation.

Although the Bill has Labour support, it is only happening because of coalition action. And although I don’t expect it to feature very heavily in anyone’s Focus leaflet, I hope very much that Liberal Democrats will point out at every opportunity that it is through measures such as this that this Government is fulfilling its commitment to support mutual and social enterprises. In so doing, we not only get better value for our public services but also help develop the kind of inclusive, empowering society for which we strive.

* Dick Newby is the Leader of the Liberal Democrats in the House of Lords.

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  • Malcolm Todd 24th Jan '12 - 5:15pm

    Hm. Localism, huh?

  • Daniel Henry 24th Jan '12 - 5:54pm

    Paul, if you read the article you’ll see that some.councils are already doing it. Haven’t yet heard the EU complain.

    Your “reduce tax” argument missed the point. The problem stated was big companies out-pricing smaller ones but would cost more through externalities. Sounds like this legislation takes externalities into account.

  • Richard Shaw 24th Jan '12 - 5:55pm

    Paul, I don’t think this would fall foul of EU competition rules because it isn’t explicitly excluding or restricting EU-based suppliers but is judging all potential suppliers against an open set of criteria against which everyone may compete, regardless of location.

    For instance, if the rules said “Must be based within x miles of y” then that would fall foul of the rules. However rules stating “The carbon footprint of x product must not exceed y kilograms” or “The % of recycled paper in toilet roll must be greater than y” would not contradict legislation because they are not restrictive to the location of supplier.

    Likewise the criteria to consider how a supplier would “improve the economic, social and environmental well-being of the area” does not exclude EU suppliers. There is nothing to prevent a German or Irish supplier from hiring local people or contributing funds to a local environmental cause to improve its standing in those criteria. Basically the Bill is asking potential suppliers to compete on factors other than just price.

    Of course IANAL or competition expert however the above is my current interpretation based on what I’ve read elsewhere.

  • To whom does the phrase “many public sector procurers choose large companies as a matter of course ” refer to? Which government departments, PCTs or LAs have broken long established rules for such matters? Evidence based policy so much more effective than loose spin.
    And surely the Bill should require bidding suppliers to state the impact on economic, social and environmental well-being, rather than just considering the Improvements? New jobs may be good, but environmental impact of new factory, say, less so. And is there an example of a bid evaluation model that might show how the proposed Improvements are to be assessed?

  • This is a good idea in theory, but I thought the coalition was pressing for centralised procurement as much as possible, to cut costs? (Yes, I know this completely contradicts localism, but no-one expects consistency from this government!)

  • Malcolm Todd 25th Jan '12 - 9:26am

    “Procurement should be based on how an organisation propses to meet the terms of the tender (including any social benefit) and cost not on the scale and reputation of the organisation.”
    — In principle, yes. But I think the justification for looking at the ‘scale and reputation’ is that you want to be sure your partner/contractor is going to be around to deliver. Giving a small, untried business a role in a big project with a timeline of several years is potentially very risky — no councillor or officer wants to explain why they’ve poured money into a project that’s fallen over half way through because the contractor’s gone bust.

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