The remaining sections (sections 1 and 2) of the Public Services (Social Value) Act 2012 (“the Act”) came into force on 31st January 2013. Sections 3 and 4 came into force on 8th March 2012, when the Act received Royal Assent.
The Act will affect organisations subject to the Public Contracts Regulations 2006 (as amended) (“the Regulations”), and it will only apply to procurements for service contracts (Part A and Part B services) and framework agreements for service contracts (“the Relevant Contracts”) to which the Regulations apply.
The Act does not apply to procurement processes for goods, supplies and works. The Act will apply to mixed contracts where:
- The procuring authority requires a contract for goods and services, and the value of the services exceeds the value of the goods;
- The procuring authority requires a contract for works and services, and the works are incidental to the services or core element of the Relevant Contract.
Section 1 of the Act requires the procuring authority to consider the following before the procurement process commences:
- How what is proposed to be procured might improve the economic, social and environmental wellbeing of the relevant area.
The “relevant area” is defined in the Act as “...the area consisting of the area or areas of the one or more relevant authorities on whose behalf the public services contract is, or contracts based on a framework agreement are, intended to be made”.
Guidance issued by the Cabinet Office (Procurement Policy Note – Information Note 10/12) (“the Guidance”) provides clarification as to what extent the relevant area should be taken into account when considering social values, which is relevant when procuring authorities collaborate. The Guidance states as follows:
“...a local authority thinking of letting a contract for its own use would have to make considerations for its own geographical areas, even if the contract is only directly relevant to part of the local authority’s area. A local authority procuring a framework agreement for use by itself and neighbouring authorities would have to consider that wider area, even if the framework agreement is only likely to be directly relevant to part of that wider area. Authorities whose functions extend throughout the UK would have to consider the area of the UK, even if the contract or framework agreement is only directly relevant to a part of the UK”.
The Act does not apply to areas outside of the UK.
- How, in conducting the process of procurement, the procuring authority might act with a view to securing that improvement, considering only matters that are relevant to what is proposed to be procured and the extent to which it is proportionate to take those matters into account.
- Whether to undertake consultation in respect of points 1 and 2 above. The Act does not specify who the procuring authority should consult with or how the feedback from the consultation should be utilised. The Guidance states that consultation with the supply market in order to inform the procurement process and outcomes in the technical specification by taking into account the requirements in the Act can lead to “...more innovative and cost effective solutions...” being procured. The Guidance also supports consultation with end users, particularly where citizens are affected, unless only the procuring authority will benefit from the procurement process.
The Guidance also provides that any consultation should be ‘digital by default’ and carried out on line as far as possible but the procuring authority should always consider how appropriate this is in terms of the consultees.
The procuring authority will not be required to comply with the requirements of the Act where there is an urgent need to arrange the procurement and it would be impractical to do so because. However, this exemption will not apply if the urgency has arisen as a result of the procuring authority’s actions causing undue delay.
As stated above, these considerations need to be taken into account at the pre-procurement stage. Considering the requirements at this stage will shape the procurement process, and enable the procuring authority to draft the procurement documents and outcomes in the technical specification with the Act in mind. The Act defines the procurement process as commencing when one of the following occurs:
- The contract notice is issued or an advertisement is published calling for offers or expressions of interests in respect of the Relevant Contract;
- The procuring authority contacts a person in order to seek an expression of interest, or responds to an unsolicited offer or expression of interest;
- The parties enter into or conclude the Relevant Contract.
The Act does not contain any reporting requirements, but the Guidance states that as a matter of good practice the procuring authority should do the following:
- Keep a formal record to show that the requirements under the Act have been considered, and the rationale for subsequent decisions; and
- Indicate in any subsequent notice or advertisement that the requirements of the Act have been considered.
Although the Act applies specifically to the pre-procurement stage, the Act is bound to impact on subsequent stages of the procurement process - the requirements will also be considered in the assessment of economic operators at selection stage and their bids. The procuring authority may wish to take into account an organisation`s experience at delivering or improving those factors set out in point 1 above, and this will feed into the selection criteria. How these economic, social and environmental issues will be delivered when performing the contract may be reflected in the evaluation criteria. The Guidance states that "...procurers should be taking a value for money approach - not lowest cost - to assessing contracts...". Provisions within the awarded contract will also reflect the procuring authority`s requirements as specified by the Act.
In order to assist procuring authorities in complying with the Act, we have set out below the following practical points:
- Train employees to raise awareness and ensure buy-in for all relevant procurement processes going forward;
- Update your procurement policies to include reference to the requirements of the Act, and include details on your website to inform organisations interested in bidding for work what will be expected of them;
- Review and revise, as appropriate, contract procedure rules to reflect the requirements of the Act;
- Amend the format of reports to senior officers or executive committees to comment on the requirements of the Act as standard;
- Amend standard tender documentation to include the considerations set out in the Act;
- Engage in discussion with neighbouring authorities to understand how they intend to comply with the Act from a practical point of view. This will assist in any procurement process where procuring authorities collaborate; and
- Review previous procurement processes, as the Act complements existing law set out in the Regulations. For example, regulation 25(2)(h) – assessing at selection stage the environmental management measures that the service provider is able to perform when performing the contract, where necessary for the performance of the contract. Or, regulation 30(2) - taking into account the environmental characteristics of a tender for contract award. Where the procuring authority has previously taken issues, such as these, into account it will have communicated its requirements in tender documents. The procuring authority may be able to identify (to a degree) how it will comply with the Act from looking at the social value it was able to obtain from past procurement processes.