On 25 June 2018, the government announced a package of new measures designed to reform public sector outsourcing so that central government bodies must not only consider social value when procuring public services contracts – they must specifically evaluate social value.
In a speech at the Reform think tank in London, David Lidington MP set out a number of proposed changes to the Public Services (Social Value) Act 2012 (the “Social Value Act”). In the fallout from the Carillion collapse, the changes are intended to help restore public trust and confidence in outsourcing by renewing focus on wider social values, greater participation of SMEs and charities and increasing transparency.
The Public Services (Social Value) Act 2012
The Social Value Act has been force since January 2013, and requires all contracting authorities (not just central government bodies) to consider how they can secure wider social, economic and environmental benefits of the “relevant area" (i.e. the area(s) of whose behalf a public services contract is intended to be made).
The intention of the Social Value Act is that before a procurement process starts, all contracting authorities should carry out a structured consideration of how social goals may be achieved and where appropriate, procure services in a way that achieve them. For example, an authority may include requirements that drive a low-carbon, sustainable service delivery, promote a diverse workforce or delivers training to workers that will have lasting benefits beyond the life of the contract.
The Social Value Act’s weakness is that it lacks teeth. As drafted, it only requires authorities to consider social value, which means that some (but not all) authorities pay lip service to it. There is no consequence if social values are considered briefly, and deemed as secondary to cost savings. The Social Value Act does not require any positive action to improve social value or award contracts on the basis of wider community benefits.
What are the key changes?
The main changes proposed by government have yet to be drafted – and it appears that in the first instance, they will relate only to central government and not to other contracting authorities. Those proposed changes include the following:
- Strengthening obligations under the Social Value Act to ensure all major procurements explicitly evaluate social value, rather than just consider it.
- Challenging major government suppliers to do better on equality and diversity by requiring them to publish data and action plans to address key social issues and disparities, including the gender pay gap, ethnic minority representation and modern slavery.
- A requirement for key suppliers to develop ‘living wills' setting out contingency plans in case the business fails.
- Publication of key performance indicators for major contracts to increase transparency.
- Improving training given to government purchasers.
- Implementing enhanced measures to protect suppliers from cyber attacks.
While we see some very good examples of good practice, where contracting authorities carefully consider how best to incorporate social goals, it is often dealt with as an afterthought – which is perhaps understandable as authorities focus on cost-savings.
These changes come in the wake of the collapse of outsourcing giant Carillion in January this year and a willingness for public service contractors to deliver social benefits as well as a core service on a more consistent basis.
The fact that the changes may only apply to central government bodies is telling. It is likely that government believes that contracts for major infrastructure projects, often procured by central government bodies, will deliver the most benefit. It is also possible that any changes will first be tested with central government bodies before being rolled out on a wider basis to other contracting authorities.
What happens next?
The next step will be to assess the changes to the legislation when they are made (no date has been given, as yet) and the impact that these changes will have on the strategic planning carried out by central government procurers; how the new requirements are incorporated into tender documents; and how, in practice, social values are clearly and effectively evaluated.