Public Procurement: Growing British industry, jobs and skills

Details of the Public Procurement: Growing British industry, jobs and skills - consultation on further reforms to public procurement can be found on Open consultation.

QUESTION 1a: To what extent do you agree or disagree that mandating large contracting authorities with spend over £100m p.a. to set three-year targets for their procurement spend with SMEs and VCSEs and publish annual progress against these targets, would help increase spend with SMEs and VCSEs?

We disagree

QUESTION 1b: If you wish to explain why you do or do not agree that the proposed measure reflects or delivers the policy intent described above, please do so here. 

This will create an additional reporting burden on already stretched councils that would not necessarily improve outcomes or secure better vfm. The reporting burden is already highly complex, and additional targets could discourage rather than enable considered, strategic needs for individual places. 

A recent report from British Chambers of Commerce highlights that councils report direct spend of some 35 per cent compared to central government spend of just 11 per annum. Recognising the important vfm and other benefits that SMEs bring, actual direct spend has risen in local government since 2021.   

External factors that might affect spend with SMEs and VCSEs, for example reducing budgets, market capacity, reliance on frameworks due to capacity issues are not considered. 

It is not possible to pre-determine a successful bidder in a tender process. It is unclear whether contracting authorities will be able to positively discriminate in favour of SME/VCSE bidders or whether it would be possible to direct award to meet self-set targets.

Micro enterprises are not mentioned but are (collectively) are an important employer and offer innovative solutions. A focus specifically on SMEs ignores this important resource.

Clarity is required over definitions and how status of an enterprise is determined. Examples include VCSEs with commercial subsidiaries, SMEs with larger parent companies or enterprises tipping through employee thresholds during contract delivery.

A focus only on procurement spend would mask the fact that significant spend reaches VCSEs and SMEs through other routes not captured by PA23 such as grant funding, PSR and (possibly) Light Touch contracts. Targets could push contracting authorities to shift this spend to procured contracts, raising barriers to participation.

Disapplication of the Local Government Act 1988 s17 restrictions and application of reserved spend under threshold would be necessary to fully support increasing spend with SME’s and VCSEs.

QUESTION 2a: To what extent do you agree or disagree that extending the requirements of section 70 of the Act to publish information on (i) all payments made under public contracts and (ii) payments under notifiable below-threshold contracts, would help increase spend with SMEs and VCSEs? 

We disagree

QUESTION 2b: If you wish to explain why you do or do not agree that the proposed measure reflects or delivers the policy intent described above, please do so here.

• Councils, as mentioned, already publish details of all invoices paid £500. We do not believe that increased transparency regarding payments will necessarily have any correlation to increasing the amount of spending with SMEs and VCSEs.
• In local government, much of the below £30,000 spend threshold is actually more suitable for SMEs and VCSEs and this will not be covered by the proposed automatic collection of data.
• Publication of Below Threshold Contract Award Notices should already be raising awareness around where authorities spend at lower values and where opportunities might be for SMEs and VCSEs – we do not believe that publication of payments information would give them much more and how that would lead to increased spend with SMEs and VCSEs.
• It is also unclear as to the level of automation in matching payments made under a contracting authority’s financial management system with contracts tendered and awarded under an e-tendering portal.  No matching currently exists so whilst it is relatively easy to say the number and value of invoices over £500 have been paid, matching them to a contract number is much more burdensome.
• Any amendments needed to financial management systems will result in a financial burden to councils.

QUESTION 3a: To what extent do you agree or disagree that requiring contracting authorities to exclude suppliers from bidding on major contracts (+£5m per annum) if they cannot demonstrate prompt payment of invoices to their supply chains (within an average of 60 days) would help improve late payment by suppliers to the public sector.

We agree.

QUESTION 3b: If you wish to explain why you do or do not agree that the proposed measure reflects or delivers the policy intent described above, please do so here.

• There would be an additional burden built into the due diligence process to ensure that decisions to exclude are sufficiently robust to avoid legal challenge.
• It is unclear at this stage how a particularly complex procurement might need to be structured to implement this policy. For example, in a consortium bid, or a bid with a cascading supply chain, it is unclear whether all organisations be required to pay promptly even if their own part of the contract is worth less than £5 million per annum.
• It is also unclear what the process could be, whether councils, in multi-year contracts would need to keep checking that the successful bidder is continuing to pay promptly, and what the consequences of this would be if they are not doing so. We would hope that in this case that the decision to take action would rest with the contracting authority.
• It is unclear whether the requirement is for undisputed invoices or all invoices, there could be a legitimate reason for delay.
• The approach stated might work in some sectors better than in others. We think the same outcome can be achieved through project bank accounts in the construction supply chain for example:
• We would also support the proposal question whether an average of 60 days is sufficient. It sends a message that a 60-day payment window is acceptable. For small businesses prompt payment is vital. A 60-day payment window could encourage businesses to factor off their debt and include the charges for factoring that debt into the bid price. A more ambitious, lower average time to pay could in fact reduce prices by removing the need for factoring.
• This obligation must flow through the supply chain otherwise tier one contractors/suppliers could be accused of retaining funding unnecessarily.

QUESTION 4a: To what extent do you agree or disagree that there should be flexibility for contracts for people focused services to be awarded without competition.

We agree

QUESTION 4b: If you wish to explain why you do or do not agree that the proposed measure reflects or delivers the policy intent described above, please do so here.

Contracts for care services may involve choice for individuals under other legislation so competitive procedures will not be appropriate in those circumstances. It is unclear though, and guidance may be needed on whether a council or an advocate managing a budget can make a direct award contract on behalf of a user.

There is also a limited supply market for certain types of care/support. Requiring a full competitive procedure can be burdensome and delay contracts awards unnecessarily.

It is noted that there is an overlap with the Provider Selection Regime for health-related contracts that are out of scope of the Procurement Act 2023.

A preferred alternative for local authorities might be a workaround to the fact that it is not now possible to use Dynamic Purchasing Systems for under-threshold procurements even when the aggregated value of call offs is above the threshold.

The creation of preferred supplier lists (via conditions of participation) with multiple direct awards under PA23 Section 41: user choice. This is relevant to areas such as Care Homes and Home to School Transport.

To reduce burden in implementation, this policy should also remove the requirement to publish contract detail notices (UK6) for these contracts.

A small number of councils expressed concern that in making direct awards, the need to meet minimum standards eg compliance, CQC, experience, safeguarding etc, can be forgotten. Guidance would be useful in outlining more specifically what would constitute a people-related service and what type of vetting arrangements of such suppliers should be taken into account.

QUESTION 5: Are there other services delivered to vulnerable citizens (beyond adult and children’s social care) that warrant procurement processes not permitted in the Procurement Act 2023? Please include i) the CPV code where possible and description of the services; ii) the nature of the problem faced; iii) the optimal policy solution(s).

• Some Public Health services may be suitable.
• A number of people related services exist that might also be appropriate for consideration of direct award. These had been procured using Dynamic Procurement Systems under the Public Contracts Regulations 2015 (but these are no longer available under the Procurement Act 2023).
  1. Passenger transport services such as home to school transport, community transport, and special needs transport
  2. Adult and Children’s social care such as home-based adult social care, younger adult placements and looked-after children placements
  3. Community learning and training services
  4. SEND, educational tutors for excluded children (often recruited at short notice via SEND teams)
  5. Contracts with locally based charities and VCSEs to provide community services to residents either free of charge or low cost for: advice on legal matters, debt advices (e. Citizens Advice Bureau); mobility scooters; loneliness/befriending (eg Age UK); mental health advice (eg MIND)
  6. Reablement services
  7. 80000000 - Education and Training Services
  8. 60170000 - Hire of passenger transport vehicles with driver
  9. 60130000 - Special-purpose road passenger-transport services.

QUESTION 6: Do you have any examples where people-focused services have been procured well? Do you have any suggestions for changes to the processes available under the Procurement Act or guidance that could improve procurement of these services.

There needs to be a clear, well-considered definition of people-focused services, to avoid confusion. This isn’t a term that’s been used so far in the legislation. There is a need to revisit the interrelationship with the Provider Selection Regime and ensure clarity and to prevent overlap.

Councils strongly advocate for the reinstatement of DPS for under threshold procurement with many saying the Open Framework as set out in PA23 would not be appropriate and there is no comfort provided in the guidance around light touch, as to whether this sort of approach is permissible. The pseudo DPS was working well in a light touch / social care context – seems that the removal of this tool is the root cause, and that an alternative mechanism is required for these services.

QUESTION 7a: To what extent do you agree or disagree that contracting authorities should be required to undertake a public interest test and publish it when making sourcing decisions

We agree

QUESTION 7b: If you wish to explain why you do or do not agree that the proposed measure reflects or delivers the policy intent described above, please do so here.

We agree in principle but note that the completion of a PIT is not currently set out in Procurement Act.

We note that this policy intent is set out in a consultation on procurement legislation, when often the make/buy decision is made within council service areas not by the procurement team. This policy needs wider awareness raising particularly in the local government sector.

This policy change could focus on specific spend categories. We support further consideration of areas that are more suited to insourcing.

Vertical arrangements and some other partnerships (eg Local Care Organisations) are already seen as in-house (with parallel governance, employment rights, etc).  It is unclear whether these arrangements would also need to be included in the PIT

Consideration should be given to the +£5m threshold. Given the potential cost and time required to insource a contract, it seems likely that this would only be viable for very large contracts.

Contracting authorities that have outsourced services for many years may have reduced both capacity and capability to bring services back in-house and this would need to be considered in the PIT

We note that when some services (eg housing maintenance) have been brought back in-house there is a need for additional capacity within procurement teams to undertake low value tendering for ‘supplies’ (although many of these could be procured through framework contracts). Storage facilities may also be needed.

Depending on the complexity of the service there is a potential that the need for a PIT may increase consultancy spend and this will slow down processes, particularly if the council is also required to consult on other matters as well.

If councils are also required to publish the PIT, then there could be a large amount of confidential information in the public domain, or an additional redacting burden.

QUESTION 8a: To what extent do you agree or disagree that requiring authorities to set an award criteria which relates to the quality of the supplier’s contribution to jobs, opportunities or skills for all public contracts over £5m and with a minimum evaluation weighting of 10 per cent will help to deliver social value that supports economic growth

We neither agree nor disagree

QUESTION 8b: If you wish to explain why you do or do not agree that the proposed measure reflects or delivers the policy intent described above, please do so here.

Research commissioned by LGA identifies £276 billion of untapped potential for economic growth within local government. The analysis strips out national, sectoral and regional trends to pinpoint genuinely local economic potential, identifying areas where local leaders, properly resourced, could make a significant difference in tackling local economic challenges, addressing barriers to work, unlocking local jobs and boosting business opportunities.

Some multi-year contracts for a single person with complex needs, or technology contracts could be over £5million but may not drive additional jobs and skills. Some categories of spend are more suitable for consideration.

Introducing requirements that increase the burden on suppliers may reduce the attractiveness of contracts and may discourage SMEs who will assume larger suppliers are better placed to respond. Mandating specific commitments around job/skills may result in higher bid values and weaken the overall assurance around vfm.

It is unclear how commitments to jobs are managed through the life of the contract, and what action could be taken if commitments made in bids were not or only partly delivered.  For example, debarment for future tenders. Consideration could be made in how we measure the actual impact of including social value clauses around jobs and skills.

Some councils advocate for a stronger approach on this but a mandatory 10 per cent for social value could be the tipping point for awarding a contract to a larger supplier who has more opportunity to add social value rather than say an SME who could be more limited. We believe a more flexible approach could be taken.

There is a risk of the double counting where larger suppliers could use the same social value delivery evidence across multiple contracts with different buyers.

We strongly recommend that councils should be able to set their own social value criteria based on their place’s needs in addition to this national measure

QUESTION 9a: To what extent do you agree or disagree that, where authorities have set social value award criteria relating to jobs or skills, mandating that they also set at least one KPI on social value delivery, and subsequently report performance against a social value KPI (published in the contract performance notice), will support transparency of progress against social value commitments?

We agree

QUESTION 9b: If you wish to explain why you do or do not agree that the proposed measure reflects or delivers the policy intent described above, please do so here.

Where contracting authorities include social value award criteria related to jobs or skills, it is essential that there is a mechanism in place to monitor and report on performance against these commitments. Without this, the exercise risks becoming ineffective, and there is a significant risk that promised social value outcomes may not be delivered. This, in turn, can undermine the integrity of the evaluation process— particularly if a supplier scores highly on social value but fails to fulfil those commitments, potentially disadvantaging another bidder who performed equally or better on quality and price.

A KPI would ensure reporting against what has been outlined at tender stage, however broader concerns have been expressed about the burden of the increased reporting on contracting authorities and the risk that this may also pose to suppliers such as putting them off tendering due to KPIs reported publicly, which does not happen in private sector contracts.

QUESTION 10a: To what extent do you agree or disagree that requiring contracting authorities to use standard social value criteria and metrics selected from a streamlined list (to be co-designed with the public sector and suppliers) in their procurement of public contracts will help to deliver social value in a proportionate manner

We neither agree nor disagree.

QUESTION 10b: If you wish to explain why you do or do not agree that the proposed measure reflects or delivers the policy intent described above, please do so here.

Whilst standardisation can often make processes simpler it may lead to standardised generic responses that do not meet local needs or needs that change over time. A council might wish to tackle a particular issue relevant to their own communities and this may not be included in the list of ‘standard’ and ‘national’ social value criteria.

There is the risk of larger suppliers ‘double counting’ as outlined above.

We can however see the benefit in developing a set of standard measures, we believe that these would benefit particularly those smaller councils with limited resource in terms of procurement and contract management. There needs to be flexibility to adapt what is actually delivered beyond the tender process to react to current and changing needs in specific places. Recipients of social value should also be involved in developing the standard measures.

The consultation paper notes “Social value should not be about tactical ‘tick-boxing’ It must be aligned to actual need”, we suggest that it must be primarily aligned to the needs of the place or community where the contract originates.  It is unclear whether any ‘additional’ social value criteria must be in addition to a choice from the standard set or instead of the standard set.

Social value criteria and metrics often rely on notional valuations assigned to proposed deliverables. However, these figures can lack real-world relevance. In practice, reporting based on notional values is of limited usefulness, as elected members and the general public are generally more concerned with tangible outcomes and demonstrable benefits such as ‘lives changed’ rather than theoretical or estimated values.

Businesses and VCSE organisations have much more to offer in terms of innovation and this could be harnessed through a less ‘tick box’ approach to using a standard set of measures which could stifle innovation and real time responses to identified community needs.

QUESTION 11a: To what extent do you agree or disagree that contracting authorities should be permitted to define the geographical location of where social value will be delivered as described above? Do you have any suggestions for innovative ways of delivering social value including by creating more flexibility in the current requirements in the Act on relevance and proportionality.

We agree

QUESTION 11b: If you wish to explain why you do or do not agree that the proposed measure reflects or delivers the policy intent described above, please do so here.

• Whilst most contracting authorities will be primarily interested in their own local area, we can see that there would be occasions that delivery of social value outside the relevant area could be helpful.
• The consultation document is not specific enough for us to comment on this fully but a number of questions have emerged that might be considered as part of the policy response on this.
  1. In relation to the relevant area: it is unclear whether social value must be restricted to UK or England. For example, a council in the South of England may wish to define social value to be delivered in Calais.
  2. If a contracting authority is procuring highway repairs and decides the social value ask is to have trees planted in a geographically different region, then the supplier does not perform on that part of the contract, what would be the consequences of this for the supplier. It is unclear whether the supplier can be excluded from future contracts for poor performance given the social value was not related to the subject matter of the original contract.
  3. This policy may be seen as anti-competitive during the tendering process. Strong guidance and clarification will be needed if this policy were to be adopted.

Tina Holland
Programme Manager, Local Government Association

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Email: [email protected]