Home: Issue 1 2013 › Cover Story › More bureaucracy?
More bureaucracy?
06/03/2013 | Channel: Business
The new localism: procurement and the Social Value Act. By David Vayro
The dire economic circumstances currently facing the European Union have given a renewed focus to the use of procurement as a tool to implement social policies.
In the UK, the Government is seeking to influence the procurement behaviour of contracting authorities, in order to, amongst other things, secure local economic benefits by means of the Public Services (Social Value) Act 2012 – which came into force in January 2013. There are very real questions about the scope, impact and utility of this new legislation.
In the UK, the Government is seeking to influence the procurement behaviour of contracting authorities, in order to, amongst other things, secure local economic benefits by means of the Public Services (Social Value) Act 2012 – which is due to come into force in January 2013. There are very real questions about the scope, impact and utility of this new legislation.
What is the scope of the Social Value Act and is it wide enough to have an impact?
The Social Value Act will apply to all entities that are classed as ‘contracting authorities’, under the Public Contracts Regulations 2006. It will bite on public services contracts only – excluding works and supplies only contracts. Sub-threshold procurements are also excluded, as are ‘call off’ contracts under Framework Agreements. What this means in practice is that the impact of the Act will be restricted to service outsourcing and will be even further reduced where authorities procure services through framework agreements involving no minicompetition.
On a macro level, it should also be noted that the Government is, whilst championing the Social Value Act, simultaneously promoting the creation of larger and fewer framework agreements. Those larger and fewer framework agreements are likely to have the effect of excluding the applicability of the Social Value Act altogether.
Will the Social Value Act relax present constraints on procurement?
Once in force, the Social Value Act will require authorities undertaking the procurement planning phase to consider a number of different factors. Firstly, how the services being procured might improve the economic, social and environmental wellbeing of the local area; and, secondly, how such improvements can be implemented via the procurement process.
Legally, the ‘procurement planning phase’ has no defined starting point, but the Act provides that it will be complete when a ‘contract notice’ is advertised in the Official Journal of the European Union; when some other advertisement is published; where contact is made with an economic operator to seek an offer or expression of interest (whether initiated or in response to an unsolicited approach); or by entering into a contract or a framework agreement – whichever occurs first.
As clear cut as these obligations may appear, they will most likely prove unsuccessful in broadening an authority’s scope of creativity when it comes to its procurement strategies. One of the Act’s major limitations is that in considering economic, social and environmental improvements authorities may only take into account matters that are directly relevant to that which is being procured and, even then, only to the extent it is proportionate to do so in the circumstances of that particular procurement.
If anything, these limitations reinforce existing constraints in the procurement process, such as those concerning the achievement of value for money, equality of treatment and non-discrimination, which currently run through the Public Contracts Regulations.
Does the Social Value Act have any teeth?
The only reference the Act makes to sanctions for noncompliance is to note that failure to comply with its requirements ‘will not affect the validly of anything done in order to comply with the Public Contracts Regulations’.
In practical terms, authorities will be left with the problem of deciding to what extent complying with the Social Value Act will put them in breach of the Public Contracts Regulations and thereby elevate the risk of a challenge to a procurement process or decision. It seems clear that, given funding constraints and the instinctive risk aversion of contracting authorities, any calculation is overwhelmingly likely to be resolved in favour of meeting the Public Contracts Regulations obligations at the expense of Social Value Act duties.
An example of this would be circumstances where an authority identifies a direct connection between an economic improvement and the subject matter of a public services procurement. It could attempt to influence the terms and conditions on which the contractor’s employees were engaged in order to seek to implement that improvement. Any changes would only affect those employees who would be directly involved in delivering the service.
The terms and conditions used by different bidding contractors would almost certainly require different treatment – a difficult issue in procurement terms. It would be inherently undesirable, in any event, to be creating distinctions (albeit limited) between various classes of employees. It is not inconceivable that an authority would elect to abandon that identified improvement (thus breaching the Social Value Act) in order to avoid a potential breach of the Public Contracts Regulations, which could have much more severe consequences.
Conclusions
The limited scope of the Social Value Act and the constraints it imposes mean that, in practice, it is unlikely to result in securing the economic improvement at which it is aimed. It is difficult to see how this new legislation will have any other effect than to expand the bureaucracy of an already complex procurement process.
David Vayro
David Vayro is a partner at Gateley, specialising in construction and engineering work, both front end and dispute resolution. He leads the firm’s public procurement team. David is active in PPP, in particular advising the private sector, funders and at subcontract level through the NHS’s LIFT Primary Healthcare procurement initiative. David is an associate member of the Procurement Lawyers Academic Network, and a member of the Procurement Lawyers Associate
Gateley
Gateley is a top 50, national UK law firm. Its specialist procurement team provides strategic procurement guidance relating to the selection of processes and procedures, as well as compliance in line with the current legislative framework. Advice relates to Contract Notices, PQQ, Information Memoranda and ITT documentation, covering selection and award criteria, scoring and evaluation methodologies, as well as pursuing and defending court proceedings and challenging procurement processes and decisions.
For further information visit: www.gateleyuk.com
In the UK, the Government is seeking to influence the procurement behaviour of contracting authorities, in order to, amongst other things, secure local economic benefits by means of the Public Services (Social Value) Act 2012 – which came into force in January 2013. There are very real questions about the scope, impact and utility of this new legislation.
In the UK, the Government is seeking to influence the procurement behaviour of contracting authorities, in order to, amongst other things, secure local economic benefits by means of the Public Services (Social Value) Act 2012 – which is due to come into force in January 2013. There are very real questions about the scope, impact and utility of this new legislation.
What is the scope of the Social Value Act and is it wide enough to have an impact?
The Social Value Act will apply to all entities that are classed as ‘contracting authorities’, under the Public Contracts Regulations 2006. It will bite on public services contracts only – excluding works and supplies only contracts. Sub-threshold procurements are also excluded, as are ‘call off’ contracts under Framework Agreements. What this means in practice is that the impact of the Act will be restricted to service outsourcing and will be even further reduced where authorities procure services through framework agreements involving no minicompetition.
On a macro level, it should also be noted that the Government is, whilst championing the Social Value Act, simultaneously promoting the creation of larger and fewer framework agreements. Those larger and fewer framework agreements are likely to have the effect of excluding the applicability of the Social Value Act altogether.
Will the Social Value Act relax present constraints on procurement?
Once in force, the Social Value Act will require authorities undertaking the procurement planning phase to consider a number of different factors. Firstly, how the services being procured might improve the economic, social and environmental wellbeing of the local area; and, secondly, how such improvements can be implemented via the procurement process.
Legally, the ‘procurement planning phase’ has no defined starting point, but the Act provides that it will be complete when a ‘contract notice’ is advertised in the Official Journal of the European Union; when some other advertisement is published; where contact is made with an economic operator to seek an offer or expression of interest (whether initiated or in response to an unsolicited approach); or by entering into a contract or a framework agreement – whichever occurs first.
As clear cut as these obligations may appear, they will most likely prove unsuccessful in broadening an authority’s scope of creativity when it comes to its procurement strategies. One of the Act’s major limitations is that in considering economic, social and environmental improvements authorities may only take into account matters that are directly relevant to that which is being procured and, even then, only to the extent it is proportionate to do so in the circumstances of that particular procurement.
If anything, these limitations reinforce existing constraints in the procurement process, such as those concerning the achievement of value for money, equality of treatment and non-discrimination, which currently run through the Public Contracts Regulations.
Does the Social Value Act have any teeth?
The only reference the Act makes to sanctions for noncompliance is to note that failure to comply with its requirements ‘will not affect the validly of anything done in order to comply with the Public Contracts Regulations’.
In practical terms, authorities will be left with the problem of deciding to what extent complying with the Social Value Act will put them in breach of the Public Contracts Regulations and thereby elevate the risk of a challenge to a procurement process or decision. It seems clear that, given funding constraints and the instinctive risk aversion of contracting authorities, any calculation is overwhelmingly likely to be resolved in favour of meeting the Public Contracts Regulations obligations at the expense of Social Value Act duties.
An example of this would be circumstances where an authority identifies a direct connection between an economic improvement and the subject matter of a public services procurement. It could attempt to influence the terms and conditions on which the contractor’s employees were engaged in order to seek to implement that improvement. Any changes would only affect those employees who would be directly involved in delivering the service.
The terms and conditions used by different bidding contractors would almost certainly require different treatment – a difficult issue in procurement terms. It would be inherently undesirable, in any event, to be creating distinctions (albeit limited) between various classes of employees. It is not inconceivable that an authority would elect to abandon that identified improvement (thus breaching the Social Value Act) in order to avoid a potential breach of the Public Contracts Regulations, which could have much more severe consequences.
Conclusions
The limited scope of the Social Value Act and the constraints it imposes mean that, in practice, it is unlikely to result in securing the economic improvement at which it is aimed. It is difficult to see how this new legislation will have any other effect than to expand the bureaucracy of an already complex procurement process.
David Vayro
David Vayro is a partner at Gateley, specialising in construction and engineering work, both front end and dispute resolution. He leads the firm’s public procurement team. David is active in PPP, in particular advising the private sector, funders and at subcontract level through the NHS’s LIFT Primary Healthcare procurement initiative. David is an associate member of the Procurement Lawyers Academic Network, and a member of the Procurement Lawyers Associate
Gateley
Gateley is a top 50, national UK law firm. Its specialist procurement team provides strategic procurement guidance relating to the selection of processes and procedures, as well as compliance in line with the current legislative framework. Advice relates to Contract Notices, PQQ, Information Memoranda and ITT documentation, covering selection and award criteria, scoring and evaluation methodologies, as well as pursuing and defending court proceedings and challenging procurement processes and decisions.
For further information visit: www.gateleyuk.com