The UK Government has announced that it is targeting 1/3 of central government contracts to be awarded to small and medium sized enterprises by 2022.
Developing the principles set out in the Public Services (Social Value) Act 2013, the Government is currently consulting on a range of measures to require central government departments to develop their approach to social value. The consultation can be found here https://bit.ly/2F4Cb4T.
There would be an obligation to build in at least 10% of evaluation marks for social value in certain procurement activity.
There are five thematic baskets of social value which can be incorporated into procurements. The consultation confirms that the new policy would apply to all central government departments and their agencies, awarding regulated contracts under Part 2 of the Public Contracts Regulations 2015.
The proposal is that a minimum 10% weighting for social value in the evaluation criteria, although this can be increased where "appropriate".
The Public Services (Social Value) Act 2012 already puts an obligation on all contracting authorities to "consider" how to build social value into above threshold services contracts. The Government is considering whether to extend the scope of the Social Value Act to, for example, make social value evaluation compulsory in every procurement.
The Public Contracts Regulations 2015 - the UK's procurement rules which will stay in place broadly un- amended after any Brexit - and the procurement case law requires award criteria to be linked to the subject matter of the contract, and there is no "unfettered freedom of choice" for public bodies when setting evaluation criteria.
These proposals are linked to the growing profile of modern slavery protection in supply chains, which is an increasing area of concern for public and private sector clients alike.
The criminal sanctions which attach to the Modern Slavery Act 2015 include life imprisonment for section 1 offences. The corporate risk to directors and officers at all levels of the supply chain is growing and procurement processes are beginning to recognise this.
The encouragement of smaller suppliers and the third sector to bid for and win public contracts aims to reduce Government dependence on "too big to fail" suppliers, and to boost diversity in all levels of the public sector supply chain.
There is always a risk, in practice, of gold plating of quality requirements, and demanding more social value than the market can offer often results in the extra cost being directly passed on the public sector client by the supplier. Care is needed to ensure that the criteria are proportionate and do not lead to unaffordable bids, and/or no bidders.
For more information or advice on this or any other procurement law issue you may be facing please contact David Hansom, Partner on 0044 (0) 207 876 4127 / firstname.lastname@example.org or your usual contact at Clyde & Co.
The shake-up will create a significant cultural shift for both the public sector and industry, while not adding extra cost or complexity to the procurement process