Procurement is big money
Public procurement refers to the practice in which the state buys goods and services from private companies to realise its public goals and responsibilities. The use of public procurement has been, quite consistently, on the rise. Across the OECD, public procurement expenditure as a share of GDP increased from 1.8% of GDP in 2007 to 12.9% of GDP in 2021. Some countries, including the United Kingdom saw even more significant increases, from 13.1% in 2019 to 15.7% in 2021).Translating percentages into ‘real money’: gross spending on public sector procurement was £379 billion in 2021/22 across the UK, representing an increase of £24 billion or 7% from 2020/21 to 2021/22, in areas such as defence and public order, health, education, culture and religion, economic affairs, social protection, environmental protection, and general public services.
Recently, concerns have been raised regarding the recipients and the use of the money involved, with allusions to inefficiencies, waste, corruption, and even fraud. These concerns have escalated in the aftermath of the Covid pandemic, thus suggesting that the media and the public are aware that there is a significant degree of discretion in the decision to channel vast amounts of public money to private corporations.
Against this background, it has been argued that not only should the government spend taxpayer money appropriately and wisely; it should also ensure that it gets the best ‘social value’ from every pound being spent. In other words, the funds involved should be spent on employers and projects that fulfil wider social goals. Here we arrive at the concept of ‘sustainable’ or ‘social procurement’. According to the European Commission, this is the use of public tenders ‘to create job opportunities, decent work, social and professional inclusion and better conditions for disabled and disadvantaged people’. In its Buying Social Guide (2010), the European Commission explained that socially responsible public procurement ‘aims to address the impact on society of the goods, services and works purchased by the public sector’ [1.1].
In particular, we can identify three types of conditions associated with ‘social procurement’. First, there could be conditions that relate to compliance with what general labour law dictates (e.g. holiday pay, working time, etc) and, in essence, assurances and monitoring provisions to guarantee such compliance. Second, social procurement could include conditions that go beyond what the law requires (e.g. payment of the UK Living Wage, as opposed to the National Minimum Wage). Third, social procurement can include ‘special’ or ‘additional’ conditions that relate to the contracted workforce (e.g. creation of internships and bespoke training; hiring of local workforce; hiring of unemployed, young or over 50; recognition of a trade union). So we find that through public procurement, the contract can serve not only a ‘purchasing function’, but also a ‘regulatory function’, supporting traditional, individual enforcement mechanisms as well as ‘delivering on social standards beyond the minimum laid down by the law’. The question is: does the UK legal framework allow for procurement to play such a social regulatory function?
So the law provides the background to social procurement. In other words, against the background of the law, governments can decide if they use procurement to enforce existing rights and regulations; go beyond them; or none of the above. The question here, then, concerns the law’s active role: does it support or hinder realising the goals of social procurement?
The legal starting point for our analysis and proposal is that procurement in the UK was, for decades, governed by the need to maximise ‘value for money’. In 2012, the UK seemed to be moving towards a broader approach to public procurement with the adoption of the Public Services (Social Value) Act 2012, which finally allowed public sector organisations to include social, economic and environmental concerns and not to rely solely on ‘value for money’ calculations when awarding contracts.
However, the Cabinet Office reported that ‘the Government had no plans to promote the Social Value Act, explaining that it is a ‘permissive rather than a mandatory regime, so it is very much for public contracting authorities themselves to see how they want to use this, rather than for us to require it’ and that ‘you should not load procurement with values and requirements other than getting what you want at the best price’. And so, a very recent assessment of the UK public procurement regime concluded that ‘[d]espite longstanding criticism of being short-termist, ‘value for money’ remains the ultimate arbiter of who wins which contract’.
An opportunity to create a paradigm shift was presented with the debate around, and in October 2023, eventual proclamation, of the Procurement Act 2023 (‘the 2023 Act’), which will come into force in October 2024. In designating the awarding criteria, the Act replaces the ‘most economically advantageous tender’ (MEAT) criterion with the more flexible ‘most advantageous tender’ (MAT). And yet, in designating the criteria for ‘advantageous’, the 2023 Act simply identifies the requirements that the criteria relate to the subject matter of the contract; are ‘sufficiently clear, measurable and specific’; and ‘are ‘a proportionate means of assessing tenders, having regard to the nature, complexity and cost of the contract’. Moreover, it has been suggested that
There is currently no focus in the available information on the Procurement Act (2023) on its role in relation to social value or equality, diversity and inclusion. The focus appears to be on cost and efficiency, perhaps marking a reversion to a narrower conceptualisation of value.
Conclusion
As we show in subsequent posts, there are excellent examples of social procurement in other countries (e.g. Australia) and in regions and localities in the UK. In contrast, Westminster seems uninterested in ‘activating’ employers by creating a choice architecture which would incentivise prospective contractors to support those who experience barriers to work (e.g. people with disabilities, the young and elderly); enhancing terms and conditions of employment; and supporting worker representation, for example. The law, in this respect, is the platform for the policy. In its current state, whilst it seems to have moved from ‘antagonistic’ towards social procurement to ‘agnostic’, there is still some way to go before it becomes a positive force.
