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SOCIAL VALUE IN PROCUREMENT – MEETING THE REQUIREMENTS. Mark Cook. 12th July 2013. Key Objectives. To understand the Public Services (Social Value) Act 2012 and its background; To understand how the Best Value regime fits in;

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Presentation Transcript
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Key Objectives

To understand the Public Services (Social Value) Act 2012 and its background;

To understand how the Best Value regime fits in;

To consider the EU procurement framework in relation to procuring social value.

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The Public Services (Social Value) Act 2012 and Best Value

VFM: “the optimum combination of whole-of-life costs and quality (or fitness for purpose) of the good or service to meet the user’s requirement”

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Best Value (1)

  • The general duty: section 3 Local Government Act 1999
  • A best value authority must 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.
  • For the purpose of deciding how to fulfil the duty arising under subsection (1) an authority must consult:
      • representatives of persons liable to pay any tax, precept or levy to or in respect of the authority;
      • representatives of persons liable to pay non-domestic rates in respect of any area within which the authority carries out functions;
      • representatives of persons who use or are likely to use services provided by the authority; and
      • representatives of persons appearing to the authority to have an interest in any area within which the authority carries out functions.
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Best Value (2)

  • For the purposes of subsection (2) “representatives” in relation to a group of persons means persons who appear to the authority to be representative of that group.
  • In deciding on:
      • the persons to be consulted;
      • the form, content and timing of consultations; and
      • an authority must have regard to any guidance issued by the Secretary of State.
best value statutory guidance 2011
Best Value Statutory Guidance 2011

56 pages replaced with 1 page

Confirms the Best Value duty

“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.”

Duty to consult – including local voluntary and community organisations and small businesses. “This should apply at all stages of the commissioning cycle, including when considering the decommissioning of services. In the interests of economy and efficiency, it is not necessary for authorities to undertake lifestyle or diversity questionnaires of suppliers or residents”

Don’t pass on too many cuts!

public services social value act 2012 section 1 contracts of relevant authorities
Public Services (Social Value) Act 2012Section 1 - Contracts of relevant authorities

The Act:

covers public service contracts (including service contracts with a works or goods element) and frameworks for such contracts

applies itself to the pre-procurement stage of the commissioning process

requires that contracting authorities should:

consider how to improve the economic, social and environmental well-being of the area served by them through procurement and how to undertake the process of procurement with a view to securing that improvement

consider whether to undertake any consultation as to these matters

provides that genuinely urgent situations do not require this exercise

public services social value act section 2 local authority contracts
Public Services (Social Value) ActSection 2 – Local authority contracts

“In section 17 of the Local Government Act 1988 (exclusion of non-commercial considerations in the case of local and other public authority contracts), after subsection (10) insert-

“(11) This section does not prevent a public authority to which it applies from exercising any function regulated by this section with reference to a non-commercial matter to the extent that the authority considers it necessary or expedient to do so to enable or facilitate compliance with duty imposed on it by section 1 of the Public Services (Social Value) Act 2011.”

Local authorities are not usually permitted to take non-commercial considerations into account in their contracts, but can do so if needed to comply with the Social Value duty

non commercial considerations
Non-commercial considerations

employment terms and conditions, training and opportunities for workforces

whether sub-contractor terms are for self-employed persons only

involvement in industrial disputes

country of origin of supplies/location of business

political, industrial or secretarian affiliations

financial support for an organisation the authority withholds support from

Building Regulations approvals

in force
In force…

31st January 2013

Cabinet Office Procurement Policy Note-

The Public Services (Social Value) Act 2012 – advice for commissioners and procurers

Information Note 10/12 20th December 2012

this is not new stuff
This is not new stuff…

Including social and economic requirements in procurement is nothing new, but had a renaissance at the beginning of the century when new clarity developed around the ambit of the EU procurement rules, and the relaxation of local government rules on non-commercial considerations.

cabinet office ppn
Cabinet Office PPN

“When considering how a procurement process might improve the social, economic or environmental well being of a relevant area the authority must only consider matters which are relevant to what is proposed to be procured. The authority must also only consider those matters to the extent to which it is proportionate, in all the circumstances, to take those matters into account ”

public bill committee
Public Bill Committee

Wednesday 19 October 2011

 "By focusing on services, the legislation rightly focuses on the types of contract with the greatest direct impact on individuals and communities, and consequently where wider value is likely to be most relevant. I stress that it is not the Government’s intention to suggest that there would not be benefits in considering wider value in other forms of contract, but we do not believe that they warrant legislation at this time. " (Nick Hurd MP)

sustainable procurement
Sustainable procurement

The Sustainable Procurement Task Force’s definition of sustainable procurement is:

‘a process whereby organisations meet their needs for goods, services, works and utilities in a way that achieves value for money on a whole life basis in terms of generating benefits to society and the economy, whilst minimising damage to the environment’

Considering the whole life costs of a contract, including its social, economic and environmental impact.

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Or…

Maximising the difference made to people’s lives

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Not…

“added value”

“additional benefits”

“secondary considerations”

Cabinet Office guidance does not define the “social value”

but simply sticks to economic, environment and social

benefit terminology

procurement good practice core specification
Procurement: good practice Core specification

Check the authority’s powers – especially for large or broad contracts

Identify a policy basis for action (short term)

Adopt an explicit policy (longer term)

Include in Business Case

Include in the core requirements – ensure non-discriminatory

Include reference in Contract Notices to ensure you are upfront. If it’s not in the Contract Notice, it’s not in the procurement!

Include in PQQ and specification

Use in the award process

Deliver through a ‘partnering approach’. Don’t just leave your contractors to it.

the significance of policy
The significance of policy

Concordia Bus Finland Oy Ab (formerly Stagecoach Finland Oy Ab) v (1) Helsingin Kaupunki (2) HKL– Bussiliikenne (2002) (C-513/99) (the “Finnish Buses” case)

Contracting authorities are entitled to include environmental (and, by implication, social) considerations in their award criteria. These need not be purely economic in nature. They need to:

be linked to the subject matter of the contract;

not confer an unrestricted freedom of choice on the authority;

be expressly mentioned in the contract documents or tender notice; and

comply with all the fundamental principles of community law, in particular the principle of non-discrimination.

the word local in procurement
The word “local” in procurement

Don’t use it! It will be discriminatory

Use targeted requirements that reflect European–wide priorities – unemployed etc; SMEs – see the Recitals to the Consolidated Directive

Achieve local benefit by facilitating a high quality local resource for contractors to work with – supply side support available to all bidders shouldn’t discriminate.

if it s policy it s core
If it’s policy, it’s core

But : exercise common sense!

verifiability
Verifiability

The accuracy of the information sought from tenderers in relation to environmental (and, by implication, social) requirements must be capable of being verified. Award criteria that are not linked to the subject matter of the contract are not permissible.

(Case C-448/01, (1) EVN AG (2) Wienstrom GMBH v Republic of Austria (2003))

evaluation criteria
Evaluation criteria

Public Contracts Regulations 2006 Regulation 30(2): 

“A contracting authority shall use criteria linked to the subject matter of the contract to determine that an offer is the most economically advantageous including quality, price, technical merit, aesthetic and functional characteristics, environmental characteristics, running costs, cost effectiveness, after sales service, technical assistance, delivery date and delivery period and period of completion.”

evaluation criteria1
Evaluation criteria

Recital 46:

In order to guarantee equal treatment, the criteria for the award of the contract should enable tenders to be compared and assessed objectively. If these conditions are fulfilled, economic and qualitative criteria for the award of the contract, such as meeting environmental requirements, may enable the contracting authority to meet the needs of the public concerned, as expressed in the specifications of the contract. Under the same conditions a contracting authority may use criteria aiming to meet social requirements, in response in particular to the needs – defined in the specifications of the contract – of particularly disadvantaged groups of people to which those receiving/using the works, supplies or services which are the object of the contract belong.

evaluation criteria2
Evaluation criteria

Increasing amounts of case law on the complete disclosure of evaluation criteria

Three recent cases:

Traffic Signs and Equipment Limited -v- Department for Regional Growth and Department for Finance and Personnel [2011 NIQB 25 (4 February 2011)

Mears Ltd -v- Leeds City Council (No 2) [2011] EWHC 1031 (TCC) (19 April 2011)

Commission -v- Netherlands (Case C‑368/10) (10 May 2012) 

commission v netherlands 10 th may 2012
Commission -v- Netherlands (10th May 2012)

Environmental characteristics can be used in specifications but must be set out in full

Fair trade cannot be included in technical specifications but can be in a contract condition

Evaluation criteria can reflect fair trade or eco-requirements, provided they are linked to the subject matter of the contract and observe the principles of equality, non-discrimination and transparency such that well-informed bidders can know their exact scope

General requirements on bidders to demonstrate sustainable purchasing/socially responsible business cannot be used as pre-qualification factors

Equal treatment, non-discrimination and transparency requires clarity and precision

evaluation criteria new directive
Evaluation Criteria: New Directive

Proposed Recital 41:

… in view of a better integration of social and environmental considerations in the procurement procedures, contracting authorities should be allowed to use award criteria or contract performance conditions relating to the works, supplies or services to be provided under the public contract in all respects and at any stage of their life cycles from extraction of raw materials for the product to the stage of disposal of the product, including factors involved in the specific process of production, provision or commercialisation of those works, supplies or services or a specific process during a later stage of their life cycle, even where such factors do not form part of their material substance … this includes also award criteria or contract performance conditions relating to the supply or utilisation of fair trade products in the course of the performance of the contract to be awarded. Contract performance conditions pertaining to environmental considerations may include, for example, the delivery, package and disposal of products, and in respect of works and services contracts, waste minimisation or resource efficiency.

However, the condition of a link with the subject-matter of the contract excludes criteria and considerations relating to general corporate policy, which cannot be considered as a factor characterising the specific process of production or provision of the purchased works, supplies or services. Contracting authorities should hence not be allowed to require tenderers to have a certain corporate social or environmental responsibility policy in place.

evaluation criteria new directive1
Evaluation Criteria: New Directive

Proposed Article 66 (2):

The most economically advantageous tender … shall be identified by an assessment on the basis of award criteria affecting the value of the tender from the point of view of the contracting authority. Those criteria shall include, in addition to the price or cost, other criteria linked to the subject-matter of the public contract in question, for instance quality, including technical merit, aesthetic and functional characteristics, accessibility, design for all users, environmental and social characteristics, innovative aspects, conditions of commercialisation, after-sales service and technical assistance, delivery conditions such as delivery date, delivery process and delivery period or period of completion…

new directive moving in the right direction
New Directive: Moving in the right direction

Proposed Article 54(5) (Social and environmental law):

Contracting authorities may decide not to award a contract to the tenderer submitting the best tenderwhere they have established that the tender does not comply with obligations established by Union law in the field of social and labour law or environmental law or of the international social and environmental law provisions listed in Annex XI. For the purpose of this paragraph, 'best tender' means any tender which is better than that submitted by the tenderer to whom the contract is awarded.

Annex XI includes the ILO Conventions on forced labour, minimum age, discrimination, equal pay, child labour and others.

new directive moving in the right direction1
New Directive: Moving in the right direction

Proposed Recital 38(b):

Contract performance conditions are laying down specific requirements relating to the performance of the contract. Unlike contract award criteria which are the basis for a comparative assessment of the quality of tenders, contract performance conditions constitute fixed objective specifications that have no impact on the assessment of tenders. Contract performance conditions are compatible with this Directive provided that they are not directly or indirectly discriminatory and are linked to the subject matter of the contract, which comprises all factors involved in the specific process of production, provision or commercialisation. This includes considerations concerning the process of performance of the contract, but excludes requirements concerning general corporate policy. The contract performance conditions should be indicated in the contract notice, the prior information notice used as a means of calling for competition or the procurement documents…

Proposed Article 70 (Contract Performance Conditions):

Contracting authorities may lay down special conditions relating to the performance of a contract, provided that they are linked to the subject-matter of the contract within the meaning of Article 66(3) and indicated in the call for competition or in the procurement documents. Those conditions may, in particular, concern social and environmental considerations.

new directive moving in the right direction2
New Directive: Moving in the right direction

Proposed Recital 28 (Use of Labels):

Contracting authorities that wish to purchase works, supplies or services with specific environmental, social or other characteristics should be able to refer to particular labels, such as the European Eco-label, (multi-)national eco-labels or any other label provided that the requirements for the label are linked to the subject-matter of the contract, such as the description of the product and its presentation, including packaging requirements. It is furthermore essential that these requirements are drawn up and adopted on the basis of objectively verifiable criteria, using a procedure in which stakeholders, such as government bodies, consumers, manufacturers, distributors and environmental organisations, can participate, and that the label is accessible and available to all interested parties. It should be avoided that reference to labels would have the effect of restricting innovation.

new directive moving in the right direction3
Proposed Article 41 (Use of Labels):

[considerations for use of labels – (a) to (e)]

Contracting authorities requiring a specific label shall accept all equivalent labels that fulfil the requirements of the specific label indicated by the contracting authorities. Contracting authorities shall accept other appropriate means of proving such requirements, which may include a technical dossier of the manufacturer, where the economic operator concerned has no access to the label, or no possibility of obtaining it within the relevant time limits, provided that the lack of access is not attributable to the economic operator concerned.

2. Where a label fulfils the conditions provided in points (b), (c), (d) and (e) of paragraph 1 but also sets out requirements not linked to the subject-matter of the contract, contracting authorities shall not require the label as such but may define the technical specification by reference to those of the detailed specifications of that label, or, where necessary, parts thereof, that are linked to the subject-matter of the contract and are appropriate to define characteristics of this subject-matter.

New Directive: Moving in the right direction
key points
Key points

Policy is critical to social value being embedded in procurement

Early scoping so the subject matter of the contract is clear greatly reduces bases for challenge

The use of sustainability criteria that go beyond quality accreditation must be explained in the tender documentation

Provided that all evaluation criteria are properly disclosed to bidders, the use of economic, social and environmental requirements is entirely acceptable

Don’t use specified labels - technical specifications used should instead describe the underlying requirements

“There is therefore nothing, in principle, to preclude such a criterion from referring to the fact that the product concerned was of fair trade origin” (Netherlands).

Therefore contract conditions and award criteria are best way forwards for social requirements

Social requirements in contract specifications must be verifiable and tangible and clearly within the within the scope of what is being paid for.

social value in procurement is good practice
Social value in procurement is good practice

Provided…

Good practice in procurement is followed!

Scope fully at the outset and you can’t go far wrong

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If you have any queries or comments about the Act or sustainable procurement please contact Mark Cook or Gayle Monk of Anthony Collins Solicitors LLP on 0121 212 7472 or mark.cook@anthonycollins.com