A person holds the silhouette of a family house in their hands

Buying Social: What’s new under the Public Contracts Regulations 2015?

Background

The Public Contracts Regulations 2015 are now in force and will apply (among other things) to the award of all contracts awarded by RSLs for supplies, services and works for which the procurement procedure has not yet commenced.

Among the many changes introduced by the new Regulations are a number of measures intended to support socially responsible procurement.

In this article we’ll take a look at some of the changes and consider just what can be done and can’t be done in respect of “buying social” and “buying local”.

The tensions between local aspirations and European policy

It is generally permissible to take social and environmental issues into account in the award of public contracts, and this is in principle actively encouraged by the European Commission. There is a fine (and sometimes less than clear) dividing line however, between what is permissible (or even laudable) and what is not.

When public funding is being used to support local initiatives for the regeneration of an area, including the enhancement of social housing provision it would seem logical and proper to ensure that local people benefit not only from the completed asset but also from the opportunities generated by its construction.

A key performance indicator of the Welsh Government’s regeneration framework “Vibrant and Viable Places” is the percentage of spend retained within Wales-based supply chains, and one of the objectives of the Housing-led regeneration element is to ensure that supply and quality are increased alongside increasing community benefits through procurement, including jobs and training

From the opposite perspective, under European law it is not permissible to use evaluation criteria or include contractual provisions in public contracts which breach the principles of the European Treaty, such as equality of treatment of bidders and potential bidders and non-discrimination on the grounds of nationality.

What has changed in the new Regulations?

Easier access by SMEs

Among the provisions intended to improve access to public contracts by SMEs (which by their nature are more likely to be local) are:

  • Greater opportunities to break contracts into lots in order to facilitate access by smaller firms.
  • Abolition of a pre-qualification stage for procurements below the EU thresholds, and a requirement to have regard to guidance on qualitative selection issued by Cabinet Office for above EU threshold procurements.
  • The requirement to advertise as many public sector opportunities in one place (Contracts Finder), and to publish award notices for contracts and call-offs from framework agreements.
  • The introduction of a turnover cap. Public bodies will not be able to set company turnover requirements at more than two times contract value except where there is a specific justification.

New “light touch” regime

Certain services, such as social care services, now have a much higher value threshold (currently £625,000) and a more relaxed procurement regime, including a broader choice of criteria for the selection of tenderers and the evaluation of tenders.

Reserved contracts

There is a completely new “carve out” for contracts for some of the services covered by the “light touch” regime, such as housing administrative services and care services, which, under certain circumstances can now be reserved for competition between public service mutual and social enterprises. This is an innovative provision, but would seem to be likely to be limited in its impact on the use of local enterprises as competition will be necessary for larger contracts and the Treaty principles will still apply to all contracts.

Social and environmental criteria

The promotion of a qualitative improvement in the use of public procurement by ensuring greater consideration for social and environmental criteria

Shared services between RPs

One increasingly utilised way of buying “local and social” without infringing procurement rules is for RSLs to buy services from other social landlords, or join together to create centres of expertise whose primary function is to provide services to the “parent” RSLs..

It is established European law that contracts between public bodies must be exposed to competition. Various cases however (notably the case of Teckal Srl v Commune di Viano) have established circumstances in which one authority (or social landlord) can provide services to another (or others) without the need for competition. These circumstances are clarified in the new Regulations. Alongside the recent relaxation of VAT rules for the provision of shared services this will create an environment in which the sharing of services between social housing providers will become an attractive option for many RSLs.

So, what can be done and what can’t?

The two key factors which must be taken into consideration when deciding what is and is not permissible in public contracts are that:

  • The principles of the European Treaty, such as equality of treatment of bidders and potential bidders and non-discrimination on the grounds of nationality apply to the award of all public contracts, including those which are below the value threshold set out in the Regulations.
  • The evaluation of tenders and contractual provisions must be based on matters which are relevant to the subject matter of the contract.

A detailed discussion on the subject would require a massive tome. Guidance published by the European Commission (“Buying Social – a guide to taking account of social considerations in public procurement” runs to 56 pages and barely scratches the surface, but does provide some useful examples.

Some examples drawn from the European Commission guidance

  • Accessibility standards for persons with disabilities can be part of the subject-matter of a works contract for building a school, but on the other hand the labour conditions of the workers building the school are not linked to the object of the contract and generally may not be set out as a requirement in the contract conditions and/or used as an evaluation criterion in the evaluation of tenders.
  • Technical specifications must be linked to the subject matter of the contract. Requirements that bear no relation to the product or service itself, such as a requirement relating to the way in which an undertaking is managed, are not technical specifications within the meaning of the procurement rules, meaning that requirements such as recruitment of staff from certain groups (disabled persons, women, etc.) are not permitted
  • The contracting authority cannot limit competition to bidders that already have an office within a certain geographical area, but the contract performance clauses may require the successful bidder to open a branch or office in a certain area, if this is justified for the purposes of successful performance of the contract (for instance, for coordinating a complex building contract on site).
  • The use of award criteria relating to the local purchase of equipment by the contractor in order to stimulate creation of new jobs on the local market is not permissible because it is not linked to the subject matter of the contract and is also discriminatory as it gives tenderers that buy their equipment on the local market ad advantage over other tenderers who buy from elsewhere.
  • Among the social considerations that are permissible in contract performance clauses are the provision of on-site vocational training, particularly for the unemployed or young people and the recruitment of long-term job seekers and handicapped people.

Summary

Socially responsible procurement continues to be a key issue in social housing and regeneration and the new Regulations do introduce some useful changes intended to facilitate this. In practice however, the subject remains something of a minefield.