Community Right to Challenge

The Government has published a document on its proposed approach to implementing the community right to challenge which is expected to be introduced by the Localism Bill.

The Localism Bill introduces a community right to challenge, which would give voluntary and community bodies, parish councils and employees of a local authority the right to express an interest in running a service which is provided by a local authority.  The local authority would be required to consider any expression of interest it receives and, if it accepts the expression, it must carry out a procurement exercise for the provision of the service.  In considering an expression of interest, the local authority would need to consider whether acceptance of the expression would promote or improve the social, economic or environmental well-being of the authority's area.  The Government carried out a consultation from 7 February 2011 to 3 May 2011 on the community right to challenge.  The Government's latest document on the community right to challenge sets out the Government's proposed way forward on the issues in that consultation. It also seeks to address some of the issues that were raised when the community right to challenge was considered at the Lords Committee stage of the Localism Bill.

Issues raised during the Lords Committee stage

The Government's document addresses the following issues:

  • Relevant bodies
  • Procurement exercises triggered by acceptance of expressions of interest
  • Powers to provide advice and assistance.

Relevant bodies

The Bill requires a relevant authority to consider an expression of interest which is submitted by a "relevant body".  The Bill defines "relevant body" as: a voluntary or community body; a body of persons or a trust which is established for charitable purposes only; a parish council; two or more employees of the relevant authority, or such other person or body as may be specified by the Secretary of State by regulations.  "Community body" is defined as "a body that carries on activities primarily for the benefit of the community.  The Government proposes to amend this definition to clarify that it does not include a public or local authority.

The Government also proposes to amend the provision for the Secretary of State to add relevant bodies, to make this power exercisable by affirmative resolution. The Government does not propose to specify the type of organisation that employees of a relevant authority should use to exercise the community right to challenge, so this could include mutuals established by authority personnel for profit as well as social enterprises.

Procurement exercises triggered by acceptance of expressions of interest

The Localism Bill requires an authority that accepts an expression of interest to carry out a procurement exercise and this must be appropriate having regard to the value and nature of the contract that may be awarded as a result.  The Government's document says that the provisions do not make any changes to procurement law.  It says that where the service is of a nature or value to which the Public Contracts Regulations 2006 apply, the authority will need to follow the procedures set out in those regulations; but where they do not, authorities have the discretion to decide how to procure the service.

Powers to provide advice and assistance

The Localism Bill provides the Secretary of State with power to provide assistance to a relevant body in relation to exercising the right to challenge.  The Government's document says that the Government has taken this power to provide the necessary parliamentary approval for continued expenditure on the right and that details of advice and assistance will not be included in regulations.

Issues raised in consultation

The Government's document addresses the following issues:

  • Information to be included in an expression of interest
  • Grounds for rejecting an expression of interest
  • Exempting services
  • Extending the application of the right to other public bodies
  • Timescales associated with the process for the right
  • Guidance
  • Support.

Information to be included in an expression of interest

In its consultation, the Government proposed that it should specify certain information to be included in an expression of interest.  Having considered the responses to the consultation, the Government now proposes to specify that the following information should be included in an expression of interest:

  • Details of the relevant body.
  • Details of the relevant body's financial situation.
  • Details of the relevant service to which the expression of interest relates.
  • The relevant body's case that it will be able to participate in any procurement exercise
  • The relevant body's case that it is capable of providing the service.
  • Details of the outcomes to be achieved, including how it meets service user needs and the social value of the proposal.

Grounds for rejecting an expression of interest

The Localism Bill provides that a relevant authority may only reject an expression of interest on grounds specified by the Secretary of State in regulations.  The consultation proposed some grounds. Having considered the responses to the consultation, the Government now proposes the following grounds:

  • The relevant body is not suitable to provide the relevant service.
  • The service is exempt from the right.
  • The service has been stopped or decommissioned or a decision taken to do this.
  • The expression of interest is submitted outside a period specified by the authority during which they can be submitted.
  • The relevant service is already the subject of a procurement exercise or negotiations for a service agreement.
  • The expression of interest is frivolous or vexatious.
  • The relevant body provides unsatisfactory, inadequate or incorrect information in the expression of interest.  (The Government has changed this from the previously proposed drafting of "the expression does not include all the required information" in order to ensure consistency with the pre-qualification questionnaire template for procurement provided by the Office for Government Commerce.)
  • The authority believes that acceptance of the expression of interest would lead to contravention of an enactment or a rule of law.  (The Government has amended this from the previously proposed drafting of "acceptance of the expression of interest would mean the authority could not comply with its best value duty" in recognition that relevant authorities must comply with a wide range of legislation and in order to ensure that they are not required to accept an expression of interest that would mean that they would breach other legislation.)
  • Where the relevant authority has not specified a period during which expressions of interest can be submitted for a relevant service and there is an existing contract or other service agreement in place - except when the authority is considering the future provision of the service.

The Government is also considering providing an additional ground that allows for assessment of whether an expression of interest will improve the quality of the service and better meet service users' needs.

Exempting services

The Localism Bill gives the Secretary of State power to specify in regulations services that may be excluded from the community right to challenge.  The consultation sought views on which services should be excluded and whether there were any general principles that should be applied in considering services for exemption.  The Government's document has reported that although suggestions were made as to the services and principles, there was no clear consensus behind the suggestions.

Extending the right to other public bodies

The Localism Bill gives the Secretary of State power to specify by regulations other persons and bodies to be within the definition of "relevant authority" and so subject to the application of the community right to challenge.  The consultation sought views on which public bodies this might apply to.  The Government's document reported that respondents suggested a wide range of other public bodies and many suggested that the application of the right should be extended to all public bodies.  It said that the Government is discussing suggestions for extension with key interested parties.

Timescales

The Localism Bill included provision to enable the Secretary of State to specify in regulations a number of timescales associated with the process for the right.  The consultation sought views on whether these timescales should be set in regulations and, if so, what they should be.  In the light of responses to the consultation, the Government now proposes that the power should be removed and replaced with a requirement for relevant authorities to set and publish these timescales, having regard to factors which will be set out in guidance to which they will be required to have regard.  Details of the Government's proposals for the factors to which relevant authorities will be required to have regard include:

In respect of the minimum period for submitting expressions of interest:

  • The need to provide relevant bodies with sufficient time to prepare and submit expressions of interest.
  • The nature, scale and complexity of the service for which a period is being specified.
  • The timescale for any existing commissioning cycle relevant to the service for which a period is being specified or any other relevant authority processes.

In respect of the timescale for notifying a relevant body of a decision on an expression of interest:

  • The need to notify relevant bodies of a decision within a reasonable period.
  • The nature, scale and complexity of the service to which expressions of interest relate.
  • The complexity of the expressions of interest received.
  • The likely need to agree modifications to expressions of interest in order to accept them.
  • The timescales for any existing commissioning cycle relevant to the service which an expression of interest relates to or any other relevant authority processes.
  • Where the relevant authority has specified a period for submitting expressions of interest in a particular service, the number of expressions of interest received should also be a factor.

The Government also proposes that relevant authorities should be required to notify relevant bodies of the timescale for a decision within 30 days.

In respect of the minimum and maximum period between an expression of interest being accepted and a procurement exercise starting:

  • The need to provide employees of the relevant authority and other relevant bodies with a fair and reasonable and realisable opportunity to bid in the procurement exercise for the service.
  • The nature, scale and complexity of the service being procured.
  • The timescales for any existing commissioning cycle relevant to the service being procured, or for any other relevant authority processes.

Guidance

The Localism Bill requires a relevant authority to have regard to any guidance issued by the Secretary of State on the community right to challenge.  The consultation sought views on whether there were any issues on which the Government should provide guidance.  The Government's document says that the Government is considering carefully the suggestions made and that the guidance will include the factors to which relevant authorities will need to have regard when specifying timescales, and further information in relation to the information to be included in an expression of interest and the grounds for rejecting an expression of interest.

Support

The Localism Bill gives the Secretary of State power to provide advice and assistance to relevant bodies to help them exercise the community right to challenge.  The consultation sought views on what support would be most helpful.  The Government's document says that the Government is considering carefully the suggestions made and is developing proposals in consultation with key interested parties.  It expects advice and assistance to be focussed on those that need it most, which is likely to mean smaller and newer voluntary and community bodies benefitting from support.

Comment

The publication of further details on the community right to challenge is likely to be useful to authorities that will find themselves subject to the right and to any bodies which may be interested in exercising the right.  However, in view of the need to comply with public procurement law, and the recognition of this in the Localism Bill, it seems that in practice all a successful expression of interest will achieve for the body which submits it will be the right to compete in a procurement exercise.  Relevant bodies may welcome the availability of a right which at least makes the relevant authority consider the provision of its services and potentially to decide to run new procurement exercises for them.  However, it remains to be seen as to whether many relevant bodies will find themselves running local services as a result of exercising the community right to challenge.  Coupled with the proposals in the Open Public Services White Paper to require an "open commissioning policy" and potentially compulsory tendering for a range of services, procurement departments are likely to see an increased volume of work with increasing political interest.