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Unleashing localism in procurement: it’s really best value

Shared Services 3 iStock 000009458297Small 146x219Mark Cook examines the increasing significance of social value and community consultation in the light of recent legislation and case law.

With rising demand for public services especially for the vulnerable, but with less money and other resources available from the State, councils play a critical role in holding the loop between citizens and public services.

In commissioning, providing and procuring services, new ways have to be found to sustain economic growth, controlled consumption and social inclusion. There are few pots of money (if any) available for achieving these ends as projects in their own right. Instead many local authorities are rising to the challenge of pursuing these ends across all their functions – these ends have to be achieved through the mainstream of local government activity.

Recent changes in legislation and case law relevant to the commissioning cycle mean that social value and community consultation are much more significant than perhaps appreciated previously and not necessarily for the reasons that most people might anticipate!

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Measures to promote localism

If the Department for Communities and Local Government (DCLG) is to be believed, the Localism Act 2011 heralds a new era for local public services and planning through a range of 'community rights' including:

  • the Community Right to Bid giving community groups the right to prepare and bid to buy community buildings and facilities that are important to them;
  • the Community Right to Challenge allowing voluntary and community groups, charities, parish councils and local authority staff to bid to run a local authority service where they believe they can do so differently and better;
  • neighbourhood planning allowing communities to shape new development by coming together to prepare neighbourhood plans;
  • the Community Right to Build allowing local communities to propose small-scale, site-specific, community-led developments;
  • the Community Right to Reclaim Land helping communities to improve their local area by giving them the right to ask that under-used or unused land owned by public bodies is brought back into beneficial use.

Certainly these measures create some change in the dynamic between councils and communities, but these are no more than push and pull levers. It is significant that some of these provisions do entail consideration by a local authority of social value (in response to Community Right to Challenge exercises) or “community value” (in response to Community Right to Bid scenarios). But they really are tools to be used when local authorities have failed in their relationship with the communities that they serve. These tools are not needed where a council has a vibrant and responsive engagement with the people that they serve.

The same Act brought in a general power of competence for local authorities that authorises them to do anything an individual can do – provided that there is nothing in statute that limits or otherwise caveats what they can do. And so the detailed exercise of checking all legislation relevant to a council in a procurement exercise is still required. The breakthrough in achieving a spirit of endeavour in local government comes from hearts and minds – rarely is it legislation. What is really needed is the consolidation of the Local Government Act 1972 with all the pieces of legislation that since then have been bolted on, to create a simple framework that unblocks legal barriers to councils doing what they must do to stimulate investment and better services. New legislative provisions are not required - rationalisation would be useful.

Best value: the most significant spur for localism

Really the work of stimulating the innovation and change required in local public services was done with the enactment of the best value duty by the Local Government Act 1999. Any council in England has a duty to “make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness”. Since the best value duty came into force, there developed a hive of activity that at times proved to be an aberration of best value in its true sense. A council that starred in its Comprehensive Performance Assessment did not necessarily demonstrate real connectivity with its communities, residents and local businesses. And the central word “value” was often lost. In these times of austerity, value analysis and value management are disciplines needed more than ever.

A council’s undertaking a particular venture can often be justified by saying it is an arrangement to secure continuous improvement of its functions, citing the powers or duties in respect of which it was an arrangement to secure continuous improvement. The word “functions” is important here. It was described as embracing all the duties and powers of a local authority when applied by Lord Templeman to section 111(1) of the Local Government Act 1972 which provided that local authorities should have power to do anything 'which is calculated to facilitate or is conducive or incidental to the discharge of any of their functions' in the 1991 House of Lords judgement in the pivotal case of Hazell v Hammersmith and Fulham London Borough Council and others.

The industry that had developed around best value was swept away when in September 2011 the Secretary of State for Communities and Local Government issued new statutory guidance one page long replacing 56 pages issued by one of his predecessors. And it is noteworthy in several respects. Reminding councils about the definition of best value in the Local Government Act 1999 it then says (and note the “therefore” without any explanation):

“Under the Duty of Best Value, therefore, authorities should consider overall value, including economic, environmental and social value, when reviewing service provision. As a concept, social value is about seeking to maximise the additional benefit that can be created by procuring or commissioning goods and services, above and beyond the benefit of merely the goods and services themselves.”

The statutory guidance goes on to emphasise the related duty to consult:

“To achieve the right balance – and before deciding how to fulfil their Best Value Duty – authorities are under a Duty to Consult representatives of a wide range of local persons; this is not optional. Authorities must consult representatives of council tax payers, those who use or are likely to use services provided by the authority, and those appearing to the authority to have an interest in any area within which the authority carries out functions. Authorities should include local voluntary and community organisations and small businesses in such consultation. This should apply at all stages of the commissioning cycle, including when considering the decommissioning of services.”

So, at all stages of commissioning but also when de-commissioning local authorities should consult representatives of council tax payers, business rates payers, users of services or other possible stakeholders identified by the councils. A few local authorities have made progress in establishing the forums for consultation with community and other stakeholders, but many councils have not embedded this in their practice as a continual exercise.

Finally the statutory guidance emphasises the importance of authorities engaging with the voluntary and community sector and small businesses.

“Authorities should be responsive to the benefits and needs of voluntary and community sector organisations of all sizes (honouring the commitments set out in Local Compacts) and small businesses.

Authorities should seek to avoid passing on disproportionate reductions - by not passing on larger reductions to the voluntary and community sector and small businesses as a whole, than they take on themselves - and in particular:

  • An authority intending to reduce or end funding (where ‘funding’ means both grant funding and any fixed term contract) or other support to a voluntary and community organisation or small business should give at least three months' notice of the actual reduction to both the organisation involved and the public/service users.
  • An authority should actively engage the organisation and service users as early as possible before making a decision on: the future of the service; any knock-on effect on assets used to provide this service; and the wider impact on the local community.
  • Authorities should make provision for the organisation, service users, and wider community to put forward options on how to reshape the service or project. Local authorities should assist this by making available all appropriate information, in line with the government's transparency agenda.”

With diminished resources this guidance reinforces the importance of councils engaging with those who offer wider resources in their area to deliver vital services and also to help stimulate economic growth.

The Barnet case – a judge wanders into Best Value

So, it is in the context of the above that the recent case involving the London Borough of Barnet [1] needs to be considered. In this case on behalf of a lot of local concerned people the claimant sought to challenge the lawfulness of moves by the council to outsource to private contractors a new customer service organisation, back office services and also development and regulatory services. It was claimed that the council had failed to comply with its consultation responsibilities under the best value legislation, and had neither fulfilled its public sector equality duty or its “fiduciary duty” to council tax payers.

For reasons that are not entirely coherent or cogent (but possibly expedient) the claim failed because it was out of time in respect of the non-consultation ground, the council had complied with its public sector equality duty and there was no breach of fiduciary duty.

However, the judge did consider in some detail the best value requirements for consultation on the basis that “it may be some wider value if I expressed my views”(!!). After describing what sort of engagement the council did undertake with its communities and other interested parties in general about its services, the judge did his own potted history of the best value legislation. This is good in parts. And it misses the fundamental point that the word “functions” in the best value duty is about a council’s powers and duties – not “Human Resources functions” as apparently detailed in the note provided by Leading Counsel for the local authority: “Human Resources” are activities of a council, not its functions.

Nevertheless, in any event, the judge made his damning statement: “I do not see how it is possible to consult for the purpose of deciding whether to undertake a major outsourcing programme without inviting views on the proposal to undertake that programme. Consultation only about 'priorities', or about other general matters that might 'assist' the authority in deciding whether to outsource, is not the same thing and is not what is required.”

And, so, albeit of strong interest rather than being binding, we have the beginnings of a jurisprudence around the best value duty, as the judge goes on to make four further points:

  • consultation is not required about the detail of a particular operational decision, but is about “high-level issues”;
  • “The essential is simply that the representatives should have been given the opportunity to express views or concerns about outsourcing the functions or services in question that could inform the Council’s decision-taking both on whether to proceed and on matters requiring attention in the arrangements eventually made.”;
  • the judge had “no difficulty” with the propositions that “useful responses are most likely to be obtained if consultees are informed of the broad context in which outsourcing decisions have to be taken, or … that consultation is best timed as part of the annual budgetary process”. He was not happy with “the submission that consultees need not in fact be asked about outsourcing at all, as long as they are consulted generally about priorities and expenditure.”;
  • consultation with representatives of the stakeholders listed in connection with the best value duty was sufficient for compliance.

The judge concluded that if the claimant’s action had been within the time allowed he would have held that the council had not fulfilled its consultation obligations in connection with the best value duty. However, he might still have not allowed the claimant to stop the council proceeding on the basis that “a case of detriment to good administration could be made out”.

None of what the judge said really addresses the Secretary of State’s statutory guidance of September 2011 which makes it clear that consultation should be undertaken in relation to the whole commissioning and de-commissioning process, of which outsourcing is really only one aspect.

The Public Services (Social Value) Act 2012

Not in force when the Barnet procurements started but now applying to all English contracting authorities that have to comply with the EU procurements, the quietly revolutionary Public Services (Social Value) Act 2012 came into force on 31st January 2013. Very simply, it requires every such contracting authority whenever it is about to procure services, to consider:

(a) how what it proposes to buy might improve the economic, social and environmental well-being of the area where that public body exercises its functions, and

(b) how, in conducting the procurement process, it might act with a view to securing that improvement.

The Act replicates tests set out in the leading EU case on policy-driven procurement [2] so that the authority must consider only matters that are relevant to what is proposed to be procured and, in doing so, must consider the extent to which it is proportionate in all the circumstances to take those matters into account, when it considers how it might secure improvement in well-being through the procurement process.

The Act also provides that the authority must consider whether to undertake any consultation about improving the economic, social and environmental well-being of the area it serves or indeed how it secures that improvement through the procurement exercise.

So, it is not just councils that are subject to this requirement but housing associations, NHS bodies, Government departments and any other body that has to comply with the EU procurement rules. And this duty is noteworthy because it places a public law duty on all such bodies to consider the economic, social and environmental well-being of the area that they serve, before undertaking a procurement of services. “Place shaping” is now a legal duty on all such authorities!

That means, for councils, that – if they consult on best value arrangements in accordance with the statutory guidance - they could use the same exercise to discharge their duty under the Public Services (Social) Value) Act 2012.

Defining best value and social value: ask the people

The upshot, therefore, is that councils do have to find ways of talking with individuals and communities if they are to be able to achieve more with the limited resources that they now have. This is the law. But it is not just a question of providing services to or commissioning services for the areas that they serve. Facilitating social action and cohesion may actually mean having real conversations about what can and what can’t be done. If this legislation becomes not just a spur to council officers interacting in better ways with the public, but councillors are also enabled to engage with their voters on the detail of what local services really do have to look like, less may actually deliver much more than ever before. It has to.

Mark Cook is a partner at Anthony Collins Solicitors LLP. He can be contacted by email on 0121 214 3636 or by This email address is being protected from spambots. You need JavaScript enabled to view it..

[1] R on the application of Maria Stella Nash -v- Barnet London Borough Council – 29th April 2013

[2] Concordia Bus Finland Oy Ab (formerly Stagecoach Finland Oy Ab) v (1) HelsinginKaupunki (2) HKL– Bussiliikenne (2002) (C-513/99)

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