The UK procurement regime is based on the European Procurement Directives and focuses on open access to suppliers from all EU member states, incorporating the EU Treaty cornerstone principles of equal treatment, transparency, non-discrimination and proportionality. In the UK recently concerns have been expressed about the impact on the national economy of high value contracts being awarded to manufacturers whose factories are located in other EU countries in the context of the perceived need to rebalance the economy following the financial crisis. The results of the Thameslink train procurement in which Bombardier, who would have assembled the trains in Derby, was unsuccessful aroused considerable concerned comment from a wide range of stakeholders and commentators. There have been calls for procurement processes to recognise the importance to the UK economy of supporting the wider supply chain, and providing opportunities for training, apprenticeships and small and medium size enterprises.

Local authorities have for some time been alive to “wise purchasing” in order to promote employment opportunities, social inclusion, accessibility, and ethical trade. In fact, “sustainable procurement” is not a new concept and the European Commission issued an interpretative communication in October 2001 setting out the possibilities offered by procurement law at that time to integrate social considerations into procurement processes.

Despite this, there is often a nervousness on the part of public bodies to incorporate anything more than very basic requirements on social and community benefits into their procurement processes. The principle that processes should not favour local suppliers, and should not discriminate on the grounds of nationality, whilst still being perfectly correct, leaves many running scared when they detect any hint in a procurement that there is any obligation or advantage available to potential suppliers if they to use local labour, buy from local suppliers or intend to benefit the local community in any way through their contract.

Social impact is of course not at odds with procurement law, but does need to be carefully considered so that it fits in with, and does not impinge on, overriding principles such as the need to treat all suppliers in a manner that is not discriminatory on the grounds of country of origin. There are opportunities at each stage of a process to incorporate social considerations, for example, when setting technical specifications, choosing selection and award criteria (provided that the requirements are linked to the subject matter of the contract in question) and contract performance clauses.

The Public Services (Social Value) Act 2012 came into force earlier this year and applies to public services contracts (including those with an element of supply of goods or works). It is a step towards redressing the balance and encouraging public bodies to “think socially” when they are procuring. When awarding contracts, the Act requires contracting authorities in England (and some in Wales) to look beyond the price and quality of the services to be provided, consider the social impact of the award of the contract and consider what the benefit is to the local area and community in terms of its economic, social and environmental well-being.

The Act does not provide any derogation from the basic procurement principles and it does not require or permit the award of contracts in favour of local suppliers where there is no objectively justifiable basis for doing so on the basis of the evaluation criteria and methodology in question. However, what it does do is bring to the forefront of public authorities’ procurement processes the need to consider the outcome of a procurement holistically and not in isolation in terms of, for example, price alone.

Examples given in the guidance which accompanies the Act of where there can be additional scores available at evaluation stage include:

  • a proposal for a mental health service to be provided by an organisation which actively employs people with a history of mental health problems to help deliver the service; thereby achieving an “added value” benefit to the community through access to work, social inclusion and a reduction in local unemployment;
  • a contract between a housing Arms Length Management Organisation and a private sector repairs company requires them to provide greater social value by promoting careers in construction and trades to local schools, a commitment to targeting young people for employment and the long term unemployed – the social value comes from the creation of local jobs and raising the career aspirations of local pupils;
  • a proposal for NHS consultation events to be run by a patient group. The group can use its profits to increase beneficial activities in the local community and is not required to distribute those profits to shareholders.

The Act suggests, but by no means expressly states, that it is within the gift of the public body to include higher scoring criteria for such social benefits. It is likely that this will only ever be justifiable where it is appropriate and directly linked to the subject matter of the contract.

Will it make any difference in practice? This remains to be seen. It applies only to services contracts so as for preserving the jobs of many in the traditional manufacturing industries, that is unlikely, and as drafted it would not go far enough to do that in any event. What it does fit well with is the Localism Act 2011 which contains provisions to encourage community participation in service provision where there are clear benefits to the public body for doing so. This, together with other initiatives such as the “Big Society” agenda and the move towards social enterprises shows that the Government is clearly keen to encourage communities to work together.

When the new procurement directives are finalised by the European Commission there is likely to be wider scope to incorporate social and community benefits into procurement processes (in particular, selection and award criteria) and this is the first step to a regime which actively encourages these considerations.