Maximising benefits for society through contracts for public services

The Public Services (Social Value) Act 2012, passed on 28th February 2012, has the potential to significantly impact the well being of communities for whose benefit services are procured.  The Act requires every public body operating in England and Wales, e.g. local authorities, government departments, NHS bodies, housing associations (but not the Welsh government itself) procuring services to consider whether an improvement of the  economic, social and environmental well-being of an area can be achieved as part of the services procured for it, as well as just having an eye to the financial efficiency of expenditure.  Where appropriate, public bodies are now required to write these social value objectives into the procurement process.

To what sort of contracts does it apply? And what about the contracts it does not expressly mention?

The Act requires contracting authorities to have regard to economic, social and environmental well-being in connection with public services contracts, i.e. a contract in which a contracting authority engages a person to provide services.  A contracting authority is any body that is obliged to comply with the public procurement rules reflected in the Public Contracts Regulations 2006.

However, the Act does not apply to contracts purchasing works or goods although it does apply where an element of works or goods are procured alongside services.  Even in those contracts not directly the subject of the legislation, the Government is apparently encouraging public bodies to consider maximising social value.

“By focusing on services, the legislation rightly focuses on the types of contract with the greatest direct impact on individuals and communities, and consequently where wider value is likely to be most relevant. I stress that it is not the Government’s intention to suggest that there would not be benefits in considering wider value in other forms of contract, but we do not believe that they warrant legislation at this time.“ Nick Hurd (Minister for Civil Society, Cabinet Office, Public Bill Committee, 19 October 2011).

What does this Act mean in practice for commissioners?

In practice three things will happen:

• All contracting authorities in England and many in Wales will have to consider the relevance of social, economic and environmental requirements when commissioning  services, whatever the type of service and whatever the value of the contract;
• This should lead them to develop a policy that puts sustainable procurement at the heart of their commissioning practice, and in this context many such bodies will consider the application of social value not only to service contracts but also  to contracts for works and also the supply of goods, as is already the practice with many local authorities;
• The Act amends Local Government Act 1988, thereby enabling councils to rebut any of the “non-commercial issues” that they have been barred from taking into account in procurement processes since 1989.

If you are a service provider, how should you respond?

Many of our clients deliver a wide range of social benefits in the public services that they provide, most of which are not recognised or measured by the commissioning public body. This Act provides service providers with the hook to widen the scope of their offering and to scrutinise the extent to which, especially in pre-procurement market sounding exercises commissioners are embracing the requirements of this new legislation.

Why isn’t the Act more directive in its approach? Where are the sanctions?

The Act does not start a revolution but it nurtures seeds of change that cannot die. It brings good behaviour to the forefront of public services and provides a useful counter balance to incompetent commissioning and procurement practice.

For more information

Hot off the press is an introductory guide, [media type="link" id=38], that Social Enterprise UK published on 28th February 2012, written with the assistance of Anthony Collins Solicitors.

Mark Cook has been involved with the shaping of the Act since the Bill’s inception, as the country’s leading legal expert in community benefits in public procurement. He can be contacted on 0121 212 7472 and mark.cook@anthonycollins.com.