Are you ready for the Public Services (Social Value) Act 2012?

Deborah Ramshaw examines the potential impact of the Public Services (Social Value) Act and provides suggestions for how local authorities can prepare.

The Public Services (Social Value) Act reached the statute books via a private members Bill – with the previously less snappy title of the Public Services (Social Enterprise and Social Value) Bill –and the Bill’s sponsor is the Conservative MP for Warwick and Leamington, Chris White. The Bill was somewhat diluted by the Government on its legislative progress but nonetheless the Act contains an important new duty, which affects public procurement carried out by all public sector contracting authorities. The relevant statutory instrument bringing the substantive provisions into force is expected in May 2012.

The Duty in the Act

The Act applies to all contracts for services and framework agreements to which the Public Contracts Regulations 2006 (“the Regulations”) apply, but not call-offs under those frameworks. The Act does not apply to below threshold contracts or works or supplies contracts. However, it is likely that “mixed” contracts involving services will be subject to similar analysis as is currently undertaken in terms of the dominant value test. As the Act covers service contracts as defined in the Regulations then the duty appears to extend to Part B service contracts since these service contracts are covered by the Regulations albeit the requirements for the procurement of such contracts are less onerous.

The Act covers all contracting authorities as defined in the Regulations.

Where a services procurement is covered by the Act then contracting authorities must consider the following when they “propose to procure or make arrangements for procuring” services:

• how what is being proposed to be procured might improve the economic, social and environmental wellbeing of the relevant area (and this is the authority’s own area (or combined areas if it is a joint procurement) in which it “primarily exercises its functions”);
• how, in conducting the procurement process, it might act with a view to securing that improvement (although the Act makes it clear, in order to remain in line with EU law, that anything under this limb must be relevant and proportionate in respect of the proposed contract);
• whether they need to undertake any consultation about the two limbs of the duty as set out above.

Other issues relating to the duty

If there is an urgent need to commence a procurement process (and by starting a process the Act refers to (a) sending a notice to the Official Journal; (b) publishing an advertisement; (c) contacting a person to seek an expression of interest; (d) contacting a person in respect of an unsolicited offer or expression of interest from that person; and (e) entering into a service contract or framework agreement) the authority can disregard the duty but only where it is impractical to comply with the duty ahead of commencing a process. In addition, the authority cannot rely on this provision where the impracticality arises from undue delay on the part of the authority after the duty is in force. Authorities are therefore well advised to consider how they will implement the duty now as it will affect all procurements started in one of the ways described above.

The Act also dis-applies the “non-commercial considerations” requirement for local authorities set out in Section 17 of the Local Government Act 1988, such that the consideration of social value under the Act will not be treated as taking into account a prohibited non-commercial consideration under the 1988 Act.

Social Value?

In terms of the Act “social value” is defined by reference to considering, at pre-procurement stage, how what is being procured could improve economic, social and environmental well-being and how that improvement could be secured through the procurement process itself. An authority also needs to consider whether consultation on these issues is required. In terms of conducting the procurement process to deliver the well-being improvements then authorities can only consider matters which are relevant and proportionate: in line with the Regulations and case law in this area.

There is no universal definition of “social value” but Social Enterprise UK defines it as follows: “It involves looking beyond the price of each individual contract and looking at what the collective benefit to a community is when a public body chooses to award a contract. Social value asks the question: “If £1 is spent on the delivery of services, can that same £1 be used, to also produce a wider benefit to the community”. [1] In other words, what are the additional benefits to the community, be they social, economic or environmental, which can come from this procurement process over and above the direct purchasing of the services?

Procurers will need to, under this new duty, look beyond the direct purchase of the services and consider wider benefits. A national project led by NHS North-West[2] gave the following examples of commissioning for social value:

• a mental health service which employs people with a history of mental health problems to help deliver the service. The social value of this process amounted to improving well-being for the latter through enhanced job prospects and reduced social isolation;
• in re-tendering a furniture contract for supported accommodation, social value was provided by the contractor establishing a base in a deprived community and employing staff and engaging volunteers from that community;
• an ALMO contracted a private sector company to undertake repair work on their properties. The successful contractor offered social value in the form of promoting careers in construction and trades to local schools, giving a commitment to employing local apprentices and working in conjunction with local communities.

What can authorities do now to prepare for the implementation of the duty?

In preparation for the duty coming into force we suggest authorities consider the following:

• Be clear on the values of your authority – what are the key social values for the authorities and its stakeholders? Make sure the values are within/aligned to your corporate strategy and culture. If you are unsure what the relevant values are then it will be difficult to consider how any procurement process can improve them! If appropriate, engage in consultation with key stakeholders and the third sector;
• Document the relevant social values (if they are not in one place already) and think about how you will consider them in practice;
• Ensure commitment from senior officers and members;
• Review your standing orders, contract procedure rules and/or procurement policies so that reference is made to the duty and commissioners understand the core social values of the organisation. Set out the steps for commissioners to consider, use examples where this is helpful (drawing on the work of Social Enterprise UK and NAVCA in this area);
• Review and update any standard impact forms or processes used in commissioning services so that the duty under the Act is flagged and appropriate action recorded;
• Review and update the standard form reports used for members so that reference to the Act is made and has shown to be considered;
• Review and update the authority’s “outward facing” guidance to make reference to the Act. Such guidance is usually placed on the authority’s website to assist tenderers interested in bidding for authority contracts;
• Consider training the relevant staff within the authority – the aim of the Act is to embed a culture change in the approach to commissioning services. This is unlikely to happen overnight but training will be useful and demonstrate the authority’s commitment to the new duty and how that duty fits in with the overarching EU procurement obligations.

Conclusion

How authorities take account of social value within the context of a regulated procurement can be fraught with difficulties because of the case law and guidance in this area and is beyond the scope of this article. However, it is vital that the Government follow up implementation of the duty with clear guidance. At Committee stage of the Bill the Minister indicated that the Government are investing in a new commissioner support programme, on which they are consulting. We hope that this brings real support to authorities involved in implementing this duty: otherwise the duty will have no real impact if commissioners do not have the confidence to conduct a process which takes full account of the wellbeing issues.

Deborah Ramshaw is Head of Procurement at Dickinson Dees LLP. She can be contacted by email at This email address is being protected from spambots. You need JavaScript enabled to view it. or on 0191 279 9836.