Making social value a priority

United Kingdom

The Cabinet Office has published Procurement Policy Note 05/21 (“PPN 05/21”) giving information and guidance on the National Procurement Policy Statement. It demonstrates continued emphasis on how spending can be used to increase social value in society: supporting economic growth, helping communities recover from the pandemic, and aiding the net zero transition.

This comes at a time when the Government is developing widespread legislative reforms (as detailed in the Green Paper on Transforming Public Procurement and our associated Law-Now) with a view to leveraging public procurement to better meet the needs of those in the UK. In its Green Paper the Cabinet Office signalled its intention to legislate to require authorities to have regard to the National Procurement Policy Statement when conducting procurement activity.

  • Our Law-Now of 25 February 2021 (link here and related PPN 06/20 here) noted a growing focus on this topic - from January 2021, the UK Government requires minimum 10% of procurement scores to be allocated to social value.

  • In a similar vein, our Law-Now of 24 March 2021 (link here)commented on the more recent inclusion of fair work practices within Scottish procurement.

Therefore, while social value is not a new concept, PPN 05/21 is further evidence of a clear direction of travel.

Social Value

Going forward, central government departments, executive agencies, non-departmental public bodies, local authorities, NHS bodies and the wider public sector across England are required to support public benefit at national and local levels.

The National Procurement Policy Statement sets out the national priorities which must be considered – where it is both proportionate and relevant to the contract subject matter:

Creating new businesses, new jobs and new skills:

  • increasing opportunities for entrepreneurship and greater business creation;

  • increasing employment opportunities for those facing barriers or those who live in disadvantaged areas; and

  • extending training opportunities to those in industries with skill shortages or high growth sectors.

Tackling climate change and reducing waste:

  • assisting the UK Government with their net zero target;

  • reducing waste, improving efficiency, and moving towards a circular economy; and

  • identifying and prioritising opportunities in sustainable procurement.

Improving supplier diversity, innovation and resilience:

  • create diverse supply chains to include start-ups, SMSEs and VCSEs;

  • encourage the wider adoption of innovation; and

  • modernise deliver and increase productivity.

What does this mean for procurement?

All contracting authorities to which the PPN applies should consider whether they currently have effective policies in place to deliver the requirements of the National Procurement Policy Statement. They should also consider whether they have the organisational capability and capacity to deliver value for money with regard to their procurement skills and other local priorities.

The National Procurement Policy Statement outcomes are in all cases to be relevant to the contract and proportionate to the subject matter. Emphasis has been placed on the necessity to balance these outcomes with the core purpose of the contract. Commercial experts should be involved in the development of the business case of the project from the beginning to ensure that the procurement specification is a result of the strategic and economic elements of the business case.

The Cabinet Office has also emphasised that this guidance does not mean that procurement teams must select the lowest price bid. In contrast, they should draft the contract terms and consider and evaluate tenders taking a broad view of value for money which includes enhancing social welfare and wellbeing (in line with HM Treasury’s Green Book). An example of how this can be done is by incorporating award criteria into tender requirements which will encourage social, economic and environmental benefits to be at the front of bidders’ minds.

The UK Government intends to introduce legislation to ensure that the National Procurement Policy Statement is adhered to and to require contracting authorities to both publish procurement pipelines and to benchmark their procurement capability (in each case subject to a financial threshold test).

Comment

PPN 05/21 builds on the emerging social value policy and is a positive indicator that there are long term objectives here and that more is to come. There is increasing pressure on businesses to show their commitment to ethical, environmental, social and governance issues, and PPN 05/21 provides the next step in encouraging relevant contracting authorities to do so. The Government’s intention to legislate on this topic further emphasises its commitment to progressing policy in this area.

Article co-authored by Rebecca Murray.