It is not only price and technical matters that can be used to decide who to award public contracts to. So called “social criteria” can also be taken into account. These can include steps to address long-term unemployment, provide training or encourage the participation of SMEs. This has not always been recognised, especially in the UK. This point was re-emphasised in the 2015 update of the UK public procurement Regulations and in the accompanying guidance.
The reasons behind the historic reluctance of UK authorities (and particularly those in England) to use procurement law to effect social change include:
- A risk averse approach: Authorities think that deviating from economic and technical criteria will breach procurement law, exposing them to claims from losing bidders.
- Policy or political doctrine: An emphasis on getting “value for money” means that only economic criteria are used.
- Maintaining the status quo: Getting public procurement right is complex and time consuming, which encourages procurers to use tried and tested methods.
- Blaming Europe: It is often expedient to blame the perceived restrictions of underlying EU law rather than acknowledge our own failure of will or imagination.
This has generally resulted in authorities taking a conservative approach and awarding public contracts on price and technical merit only. However, there is scope for imaginative authorities to try to engineer social change through procurement. There is language in the Regulations (as well as the EU Directive on which they are based) to encourage authorities to embrace social criteria.
The Regulations provide that a winning tender “may include the best price quality ratio, which shall be assessed on the basis of criteria, such as… social aspects linked to the subject-matter of the public contract in question.”
The Directive reinforces the point and also explains that the conditions of contract on which the successful bidder is appointed represent an opportunity to include social criteria:
“Measures aiming at … the favouring of social integration of disadvantaged persons … amongst the persons assigned to performing the contract or training in the skills needed for the contract in question can also be the subject of award criteria or contract performance conditions … such criteria or conditions might refer… to the employment of long-term job- seekers, the implementation of training measures for the unemployed or young persons in the course of the performance of the contract to be awarded.”
There is further EU guidance on how SME participation can be encouraged including:
- reducing the cost of bidding
- reducing the size of contracts or dividing large contracts into smaller lots
- avoiding unnecessarily high limits on the financial size of companies qualified to bid
- encouraging SMEs to establish consortia to bid for contracts.
There are many European and domestic examples of the successful use of social criteria when procuring public works. There is, however, a body of European case law that warns of the pitfalls if social criteria are not used properly or at the right time.
The main pitfalls are:
- Failing to introduce and apply social criteria at the appropriate stage of the procurement process.
- Using social criteria in such a way as to directly or indirectly discriminate against bidders from other EU member states.
Public authorities need to be careful to structure their procurement strategies to comply with the Regulations and underlying EU law. There are, however, genuine opportunities for the boldest and most imaginative authorities to conduct procurement in a way which brings real social benefits to their regions.