Tag Archives: Public procurement

Public Procurement and Local Benefits, part 3

The previous two posts here have outlined the permitted ways by which public bodies can include local equality outcomes within contracts.

In a nutshell, the practicalities revolve around the importance of the “core purpose” of each procurement exercise. The general principle is the difference between (a) ‘just’ procuring a new school and (b) procuring better education, skills and economic wellbeing in community X in which a new school will be built.

The recent report by the Joseph Rowntree Foundation is here – http://www.jrf.org.uk/media-centre/community-benefit-clauses-public-funding-and-procurement-contracts-%E2%80%98can-be-legal%E2%80%99

Also useful here, the Equality and Human Rights Commission produced a guide in 2013 to public procurement and equality benefits, called Buying Better Outcomes. A key extract is:

“Equality clauses may be introduced under these arrangements relating to the performance of the contract, but they must:

  • be compatible with EU rules (as determined by the Public Contract Regulations 2006 and any other related legislative requirements)
  • be relevant and related to the performance of the contract
  • not be a technical specification in disguise or used in the evaluation process
  • not discriminate (directly or indirectly) against any potential tenderer
  • be able to demonstrate that value for money is maintained, and that whole life costs are taken into account
  • be proportionate and quantifiable
  • be referred to in the contract notice or tender documentation, and
  • be clear and unambiguous, and understood by tenderers and contractors.”

Link: http://www.equalityhumanrights.com/uploaded_files/EqualityAct/PSED/buying_better_outcomes_final.pdf

As pointed out in the first article, it would be helpful now for Treasury Solicitors to produce guidance for public officials on the operational steps to achieve local and equality benefits using public procurement.

Tackling Poverty Through Public Procurement – details for practitioners

My previous post commented on the launch by the Joseph Rowntree Foundation (JRF) of their report on Tackling Poverty Through Public Procurement. That post looked at the policy implications of the report, and this post follows on with a discussion about the practicalities. The audience here is assumed to know the usual workings of public procurement in the UK. For those who don’t and are interested to know more, a useful free starting point is https://www.gov.uk/tendering-for-public-sector-contracts/the-procurement-process .

The key lesson from this JRF report is that it is possible to operate a public procurement call for bids where the successful contractor will have to work with a named list of local agencies in order to provide additional local impacts, including employment and training for people in the most disadvantaged areas and groups. To be lawful, this requirement must be advertised right at the start, such as in the Official Journal of the European Union (OJEU). This must be quantified, for example following the JRF target of 52 person-weeks of employment for the most disadvantaged residents for each £1 million of contract value.

This approach is compliant with the MEAT (most economically advantageous tender) criteria for scoring bids which by law can include environmental and social criteria as well as economic ones. All criteria used must be relevant to the nature of the contract and to the wider work of the purchasing client. One of the most powerful reasons for local employment and training is that any improvements in disadvantaged areas and groups will improve the value for money obtained by the wider public sector in lower costs to a range of departments and services, for example in lower requirements for out-of-work benefits.

It was noted at the launch event that these additional criteria are actually most frequently applied in the procurement of major construction projects, which is all well and good, but they now need to be taken further into contracts for services and supplies. These non-construction procurements actually are a much bigger slice of the cake.

Some of the typical concerns raised by some procurement practitioners are as follows:

1. Will it cost more?
No, the firms which are good at recruiting disadvantaged people are also good at their work generally, including cost control. The local benefit criteria is typically around 5% of the total score, so winning companies will also be very good at the other 95%.

2. Will it be a make-work scheme?
No, because successful firms want all of their staff to be as productive as possible so they will develop any previously-disadvantaged staff along with the rest of the workforce.

3. Will EU rules allow it?
Yes, and the details are in the JRF report. This applies both to the law about free mobility of labour and the law about firms in all EU countries being able to bid equally. It is equal because the local agencies will work with whoever wins the bid, wherever their head office is. And the local agencies will not discriminate against disadvantaged residents based on their nationality, directly or indirectly.

An interesting example of this work in practice was described at the launch event. Birmingham City Council has co-located a local employment officer within Network Rail in connection with the redevelopment of New Street rail station. As one result, 10 unemployed apprentices were recruited by a local demolition sub-contractor.

The presentation by Birmingham City Council outlined the following factors to ensure success:

– Make it policy.
– Get buy-in from partners, including the private sector.
– Embed the details within contracts
– Support businesses and train public sector procurement staff
– Agree the key performance indicators, otherwise it will drift into easy-to-do areas and groups
– Monitor the data, and use RAG ratings (red, amber, green) to trigger payments
– Celebrate successes
– Make it business as usual.

As one speaker said, you have to “bake in” the targets into the contracts, but don’t jump all over contractors or sub-contractors if they get a red RAG rating, but instead support them to find solutions. And, they added, it is better to give the opportunity to 10 people to change their lives than to list 100 people moving from one work programme to another.

A phrase that was used repeatedly at the launch event was that public procurement staff needed to know that they had permission to impact in the most disadvantaged areas and groups. Finally, within the presentations it was noted that in Birmingham the director of public health is now looking to copy the council’s approach into their own contracts, such as mental health support services.

Tackling Poverty Through Public Procurement

Today (28 April) saw the government’s launch requiring long-term unemployed people to sign on every day. Two bridges along the river from Parliament, today also saw the launch by the Joseph Rowntree Foundation (JRF) of their report on Tackling Poverty Through Public Procurement. In my view the JRF report may ultimately have a bigger impact on reducing poverty and changing lives. I would say that JRF is upstream of parliament certainly geographically but also in terms of policy.

In a nutshell, Richard Macfarlane explained how the report shows that is perfectly lawful for public bodies to specify a list of local agencies that must be worked with, whichever company wins the contract and wherever they come from in the EU or beyond. Equally the local agencies must re-affirm that will work with anyone who meets the criteria for being disadvantaged within their catchment area, regardless of their EU (or even non-EU) nationality.

A case study from Birmingham then looked at how the council has managed to include local employment clauses into major procurements with a programme of £7.9 billion and a pipeline of £0.9 billion of further work. The deal is that 60 person-weeks of employment or training is procured for every million pounds within any major contract. The council has tracked the impact of their work on the most disadvantaged localities and have seen significant reductions. Impressively, 17 homeless people in Birmingham are now in full-time employment because of better procurement. Lives have been changed.

The JRF launch was chaired by Chris White MP, the author of the Social Value Act 2012 and the vice-chair of the all-party group on poverty. The speakers were the authors of the report (Richard Macfarlane and Mark Cook), from Birmingham City Council (Shilpi Akbar, Assistant Director for Employment) and Carillion (Simon Dingle, Operations Director) with a case study in using procurement for stronger local impact. The JRF lead is with John Low, and the lead started out twelve years ago with Peter Marcus, now at Zenith Chambers. The first report in 2002 was called, Achieving Community Benefits Through Contracting.

So you might well ask, if it is plainly lawful and such an obviously good idea, what is the problem? Well, guess what — the governments of Wales and Scotland, and many English local authorities are on board, but bits of Whitehall remain stuck in the mud. Various suggestions were made at the launch event as to what to do with Whitehall. Perhaps some departments and agencies genuinely struggle to understand the ‘place impact’ of their procurement? They need help. Perhaps ministers are fearful of any new guidance or permission to civil servants looking like a new regulation, given the ‘one in, two out’ mandate to reduce regulation? They need reassurance.

This could well be a topic where local authorities involved in City Deal discussions with Whitehall take a lead, ideally in true partnership, but with muscular and co-ordinated persuasion if necessary. There may also be a role for the Core Cities and the Eurocities networks here.

JRF announced their plan to convene a network of interested organisations to take this agenda forward, to meet with politicians and with civil servants where possible, and to hold regional events. For my money, getting the Treasury Solicitors on board with explanatory guidance to colleagues would be a great impetus.