The Public Services (Social Value) Act 2012 (the Act) came into force on 31 January 2013 and applies to all services procured under the Public Contracts Regulations 2006. This article considers the new obligations the Act imposes on contracting authorities and highlights the opportunity created by the change in the law.
The Act affects both part A and part B services, to the extent those distinctions continue to exist, and procurements incorporating services alongside either goods or works elements are also affected. The Act does not apply to goods or works contracts with no services aspect.
The Act introduces an obligation on contracting authorities to consider ways in which services they are procuring may improve the economic, social and environmental wellbeing of the relevant area. The relevant area is defined as the area or areas for whose benefit the contracting authority is procuring the services. In cases where contracting authorities are collaborating to put in place, for example, a joint framework agreement, the ‘relevant areas’ may be wide and diverse. Considerations of what steps may bring an economic, social or environmental benefit in one area may therefore conflict with steps to best achieve that in another area. There is no guidance at present on how contracting authorities may best balance any conflicts which may arise. It is; however, open to the contracting authority to consult on the matters to be taken into account.
The Act requires that the contracting authority consider how, in the process of conducting the procurement, any economic, social or environmental improvement identified may be secured. The obligations under the Act are therefore wide-ranging, extending to both the process of the procurement as well as what is to be procured. The obligation is subject to the overarching consideration of proportionality.
The new obligations must be complied with prior to starting the process of the procurement. The events which trigger the start of that process are set out in the Act and while some are obvious (publication of an OJEU notice) others may occur early on in the contracting authority’s planning stages (such as contacting a person in order to respond to an unsolicited expression of interest). Any communication with potential bidders regarding a prospective procurement must therefore be carefully considered to ensure that the procurement process is not unintentionally deemed to have commenced prior to the new obligations having been complied with.
There is an exception to the obligation where the procurement is urgent. There are no guidelines on what will constitute such urgency, however, the Act makes clear that the contracting authority’s own delay is not sufficient justification to avoid considering social value.
A new opportunity
The creation of a new obligation for contracting authorities to undertake additional work as part of the procurement process is not something which may be immediately welcomed in straightened economic times, albeit that the intention behind the change is obviously laudable. The new obligation does, however, create a new opportunity. Market engagement is not always done as thoroughly as best practice might encourage but there is much to be gained from it.
The market engagement stage of procurement is an important vehicle to test market interest in what the contracting authority intends to buy. A well conducted market engagement will allow the contracting authority to define better its requirement and understand feasibility, deliverability and risks. This is also an opportunity to understand better the market’s capacity and capability. Seeking ideas from the market as to ways in which the social benefits of a service may be optimised, encourages innovation and allows value to be added before the procurement has progressed to later, potentially more rigid, stages. The new obligations therefore fit well with an active market engagement strategy.
There are concerns which may arise over possible breaches of the Public Contracts Regulations where certain parties are engaged with and others not contacted. Provided market engagement does not have the effect of precluding competition, however, it is permitted and the new obligation creates a new driver to engage more fully in pre-procurement discussions with suppliers