UK looks to government procurement to bolster local jobs and skills

The plans, outlined by the Cabinet Office last Wednesday, are well-intentioned and could help the government achieve its aims of stimulating growth across the UK, according to Dr Totis Kotsonis of Pinsent Masons, but the public procurement and international trade expert said government departments will need to take care to formulate their procurements reflecting the new “social value model” in a way that accords with the UK’s international commitments.

The new rules, earmarked to take effect from 1 January 2027, are detailed in a new procurement policy note (PPN) (6-page / 141KB PDF) and will apply to certain procurements run by central government departments, their executive agencies and non-departmental public bodies – specifically, where the total contract value is £1 million or more and the procurement has been commenced under the Procurement Act 2023.

Under the changes, the procuring authorities would have to select one of just two “delivery outcomes” set out in the PPN – down from eight under the previous rules – and set corresponding award criteria, which should be reflected in tender documents. The two delivery outcomes encompass objectives aimed at job creation, fair pay and working conditions, training and development, and the harnessing of talent to meet future workforce and skills needs.

In the case of contracts valued at £1m and above, but less than £5m, the authorities would have to apply a minimum 10% weighting, or equivalent measurement, to assessing supplier bids against the relevant social value award criteria they set, when scoring their bids overall. A 20% weighting would have to be applied for contracts valued at £5m or above.

Successful bidders can expect their delivery against the “social value commitments” they make to be monitored by reference to key performance indicators (KPIs), which procuring authorities will be obliged to write into their contracts. In the case of contracts with an estimated contract value of £5 million or more, the authorities will be required to report at least once a year on suppliers’ performance against the KPIs set.

The Cabinet Office said: “Evidence of poor performance against social value KPIs can be taken into account in considering whether there are grounds to exclude suppliers from bidding for future tenders.”

While the PPN contains some summary information to help procuring authorities interpret the new rules, the government has pledged to develop further “supporting guidance” in the autumn to help them apply them in practice.

The implementation of a new social value model in public procurement was trailed as part of the government’s modern industrial strategy, which was developed under Sir Keir Starmer’s leadership. Those plans, published last summer, are now being taken forward under Andy Burnham’s premiership. The confirmation of the new rules comes just 18 months after the last raft of public procurement reforms, delivered in the Procurement Act 2023, came into force.

Kotsonis said: “The PPN is very clear that these social value rules may only be applied where a model award criterion can be selected which is relevant to the subject matter of the contract, is proportionate, does not create unnecessary burdens for suppliers or barriers to participation, and does not discriminate against treaty state suppliers. This latter point is particularly important – contracting authorities must be mindful that in setting social value award criteria they do not breach the UK’s international law commitments contained in the various free trade agreements that the UK has entered into with its trading partners.”

“Contracting authorities should consider carefully the potentially disproportionate burden these suppliers may experience in satisfying from abroad these model award criteria, relative to domestic suppliers, to ensure their procurements are compliant and non-discriminatory,” he said.

Kotsonis added: “Another point worth highlighting is that, seemingly under this new approach, contracting authorities would not have the option of applying a lower weighting other than 10% or 20% depending on the value of the contract. This seems somewhat unsatisfactory, particularly in relation to the 20% weighting, given that depending on the nature of the contract, such substantial weighting might not be always appropriate. Arguably, contracting authorities can rely on the courts’ case law to explain why it would be justifiable for them to depart from this fixed 10% or 20% weighting in appropriate cases. At the same time, it would be preferable for this to be made clearer in guidance that the government is intending to publish this autumn.”