PLC Public Sector reports:
Chris White MP’s Public Services (Social Enterprise and Social Value) Bill 2010-11 may have been the subject of a government hatchet job, but one of its key goals does remain intact (although largely rewritten and somewhat diluted). It looks increasingly likely that contracting authorities will be obliged to consider “social value” as part of their procurement processes and to consult on the issue if necessary.
On 30 June 2010, the Public Services (Social Enterprise and Social Value) Bill 2010-11, a private members’ bill sponsored by Chris White MP, had its first reading in the House of Commons. The Bill proposed to:
- Place a duty on the Secretary of State to publish a “national social enterprise strategy” to encourage engagement in social enterprise.
- Amend Section 4 of the Local Government Act 2000to require local authorities to include proposals for promoting engagement with social enterprise in their area in their sustainable community strategy, and also includea statement of the measures suggested to enable social enterprise to participate in implementing these proposals.
- Require contracting authorities entering into public procurement contracts to give greater consideration to economic, social or environmental well-being during the pre-procurement stage.
On 15 February 2011, Nick Hurd, Minister for Civil Society, said
“I am pleased to confirm the Government’s support for the Bill, subject to certain amendments at the Committee stage.“
Chris White now knows what government “support” for his Bill actually means:
- The complete removal of two of the three key aims of the Bill.
- The complete rewriting and substantial dilution of the other.
However, getting a Private Members’ Bill onto the statute book is difficult to say the least, and Chris White’s Bill now looks as though it will implement the first statutory “policy through procurement” duty on public authorities in England. (Although there has been a plethora of guidance published over the last few years, for details of which, see our practice note on sustainable procurement.)
What will the duty be?
As currently drafted the Bill will apply to:
- Contracts for services to which the Public Contracts Regulations 2006 apply.
- Framework agreements but not call-off contracts under those frameworks.
For procurements covered by the Bill, contracting authorities will need to consider the following when they “propose to procure” services:
- How what is being proposed might improve the economic, social and environmental well-being of their area.
- How they might conduct the procurement process to achieve that improvement.
- Whether they need to consult about these issues.
The key changes that have been made to this element of the Bill by the government are to restrict its application to services contracts (and not goods or works contracts) and to only apply the duty to the pre-procurement phase and remove an ongoing obligation to consider the conclusions drawn at the planning stage throughout the process. The Bill does not, and never did, apply to below threshold procurements.
What has been cut from the Bill?
The requirement for both the Secretary of State and local authorities to prepare strategies or proposals to encourage engagement with social enterprises have been cut from the Bill completely. Interestingly, the government’s justification was that it is because it wants to see this type of engagement that it won’t legislate in respect of it. Nick Hurd commented:
“Precisely because I want local authority leaders and commissioners to embrace social enterprises and take forward this agenda with conviction, I do not want this to involve a sense of duty to comply with a bureaucratic exercise … Publication of strategies should be driven by need of the moment and conviction, rather than a bureaucratic duty.”
While some committee members disagreed with this approach and argued for their reinstatement, the more vociferous arguments were made in respect of the consequential deletion of a statutory definition of “social enterprise” which had been included within the Bill. The Bill had stated that a person or body would be engaged in social enterprise if they were carrying on a business and:
- The business’s activities are being carried on primarily for a purpose that promotes or improves the social or environmental well-being of the United Kingdom, whether the purpose is pursued in relation to all or any part of the United Kingdom or all or any of the persons resident or present in it; and
- The greater part of any profits for distribution is applied for such a purpose.
While it seems that the loss of the strategies would be accepted relatively quietly, the government’s Big Society agenda and its promotion of, as yet undefined, social enterprises appear to make it likely that further attempts will be made in the future to reinstate a definition into the Bill of what the government considers a social enterprise to be.
The likely impact of the Bill
Policy through procurement has the ability to confuse rather than actually achieve any significant impact; procurement officers are best focused on the mechanics of the process rather than looking at the wider picture. Therefore, the government’s decision to limit the duty to pre-procurement stage of the process appears sensible. It is at this stage where the interest of policy makers should be at its greatest, although this is not always the case! Decisions on well-being issues can and should be taken at this stage, and procurement officers then left to procure the result.
Less convincing are the government’s arguments as to why goods and works contracts should be removed from the duty. The government claims that services contracts are “the types of contract with the greatest direct impact on individuals and communities, and consequently where wider value is likely to be most relevant.” This may, to an extent, be true, but the relevance of the duty for all types of contract will differ on a case-by-case basis and an arbitrary distinction such as this appears to provide significant scope for confusion, and in turn costly legal proceedings.
The most likely consequence of the new duty will be arguments about exactly what criteria should be used to judge the economic, social and environmental well-being of an area and how this can improved, and also how the duty relates to issues such as Best Value. We have already seen the use of the well-being power make it to the Court of Appeal in Brent v Risk Management Partners, the odds must be relatively short on this duty following a similar path.