SOCIAL VALUE, SOCIAL FIRMS AND PROCUREMENT: OPPORTUNITY OR THREAT?

1. SOCIAL VALUE, SOCIAL FIRMS AND PROCUREMENT: OPPORTUNITY OR THREAT? Mark Cook

2. Commissioning and procurement – a legal overview Commissioning in austere times: fewer grants and more rigid procurement processes; Best value guidance: don’t punish VCS and take into account well-being in exercise of all functions; Localism opportunities: Community Right to Challenge? Reserved contracts: what’s occurring? So, social value: the real thing?

3. Public Services (Social Value) ActClause 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 not only how to improve the economic, social and environmental well-being of the area served by them, but also how to undertake the process of procurement with a view to securing that improvement provides that genuinely urgent situations do not require this exercise

4. Public Services (Social Value) ActClause 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.”

5. In force… January 2013

6. This is not new stuff…

7. Definitions

8. The 3 Aspects of Sustainable Commissioning and Procurement

9. 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’

10. Or… Maximising the difference made to people’s lives

11. Not… “added value” “additional benefits” “secondary considerations” And yet: does the Government get it?

12. Legislation Consolidated Directive UK implementing Regulations EU interpretative communications Updated Directive - 2014 Local government legislation Best Value statutory guidance – September 2011 for councils in England Public Services (Social Value) Act 2012 Localism Act 2011 Health and Social Care Act 2012

13. 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!

14. The central conundrum: what are you buying?

15. Procurement: good practice Core specification Check the authority’s powers 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 Include in PQQ and specification Use in the award process Deliver through a ‘partnering approach’

16. 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)

17. The significance of policy 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.

18. The word “local” in procurement Don’t use it! Use targeted requirements that reflect European–wide priorities – unemployed etc; SMEs – see the Recitals Achieve local benefit by facilitating a high quality local resource for contractors to work with

19. If it’s policy, it’s core

20. 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))

21. 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.”

22. 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.

23. 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) 

24. 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).

25. 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 Social Enterprise UK guide: http://www.socialenterprise.org.uk/uploads/files/2012/03/public_services_act_2012_a_brief_guide_web_version_final.pdf

26. Community Right to Challenge “The community right to challenge paves the way for more communities to help shape and run excellent local services. This might include making services more responsive to local needs, offering additional social value outcomes, or delivering better value for money. It may act as a springboard for radical re-shaping of services, or simply trigger small changes that will make a big difference to the quality of service communities receive.” Ministerial foreword Statutory Guidance

27. Community Right to Challenge Under the community right to challenge a relevant authority must consider an expression of interest to provide a service on its behalf “Relevant authority” i.e. councils or other bodies with functions of a public nature specified by the Secretary of State (section 81(2)) An Eol must be made by a relevant body: a voluntary or community body a charity a parish council two or more employees of the local authority as specified by the Secretary of State (section 81(6))

28. Community Right to Challenge The £11.5 million Community Right to Challenge programme - advice and support to develop their skills to be able to bid for and run excellent local services. Around 90 per cent of the funding will go directly to communities in the form of grants allowing them to buy the support they need. Website www.mycommunityrights.org.uk Telephone helpline run by Locality, with the grants programme provided by the Social Investment Business.

29. But… what’s really needed?

30. If you have any queries or comments about social firms, social value and procurement please contact Mark Cook of Anthony Collins Solicitors LLP on 0121 212 7472 or mark.cook@anthonycollins.com