Legislation Overview

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Legislation relating to social value

The Public Services (Social Value) Act 2012

The Public Services (Social Value) Act 2012 places a responsibility on relevant public sector organisations to consider social value in service contracts, or where there is a service element in goods or works contracts. In theory, it only applies to contracts beyond a certain minimum value and for services only, but it is increasingly being used to catapult a broader agenda.

Its implementation date was 31st January 2013 and as a result of the Act, the focus within business processes, bids and tendering activity will no longer be solely upon financial metrics and measurements. Procurement teams will need to consider the wider social impact that has been traditionally discharged through corporate social responsibility or related activity that businesses may be doing.

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“The Public Services (Social Value) Act has the potential to transform both public and private sector procurement by putting social value at the centre of the commissioning process’’ Hazel Blears, former MP

“The Act requires public authorities to have increasing regard to economic, social and environmental well-being in connection with public services contracts; and for connected purposes.”

Procurement Policy Note 06/20 and the Social Value Model

The Procurement Policy Note 06/20 was issued in September 2020 and sets out how to take account of social value in the award of central government contracts by using the Social Value Model.

The Social Value Model outlines social value as distinct from core deliverables within procurement processes. Organisations must ensure that any benefit identified as social value in tenders or contracts under this policy is over and above the core deliverables of the tender or the contract.

The government guidance outlines that a competitive and diverse supply landscape can help to deliver innovation in public services, manage risk and provide greater value for taxpayers’ money. The more effectively the public sector normalises social value in commercial activity, the more wholeheartedly
the supply market will be able to adapt and respond. The result will be a fundamental cultural shift in behaviours and attitudes. To be effective, it is essential that the contracting authority’s consideration of social value starts at the pre-procurement stage, and that they carry it on through all stages of the procurement lifecycle.

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“The huge power of public money spent through public procurement every year in the UK must support government priorities, to boost growth and productivity, help our communities recover from the COVID-19 pandemic, and tackle climate change. There should be a clear ‘golden thread’ from these priorities to the development of strategies and business cases for programmes and projects, through to procurement specifications and the assessment of quality when awarding of contracts.”

Well-being of Future Generations (Wales) Act 2015

The Well-being of Future Generations Act requires public bodies in Wales to think about the long-term impact of their decisions, to work better with people, communities and each other, and to prevent persistent problems such as poverty, health inequalities and climate change.

The Act is unique to Wales attracting interest from countries across the world as it offers a huge opportunity to make a long-lasting, positive change to current and future generations.

To make sure everyone is working towards the same purpose, the Act puts in place seven well-being goals. The Act makes it clear the listed public bodies must work to achieve all of the goals, not just one or two.

The Commissioner’s office suggests organisations appoint social value champions who can raise awareness of, and embed social value within public bodies. They can also provide a point of contact for social value organisations, enabling public bodies to build relationships and understand more about key opportunities.

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“The Well-being of Future Generations Act gives us the ambition, permission and legal obligation to improve our social, cultural, environmental and economic well-being.” – Office of Future Generations Commissioner for Wales

The Localism Act 2011

The Localism Act 2011 (c. 20) is an Act of Parliament that changes the powers of local government in England. The measures affected by the Act include more powers for local communities, elected mayors, referendums and the “Local authority’s general power of competence” which means that “A local authority has power to do anything that individuals generally may do”.

Specifically for communities the Localism Act gives community groups, parish councils and local authority employees the right to express an interest in taking over the running of a local authority service. The local authority must consider and respond to this challenge; and where it accepts it, run a procurement exercise for the service in which the challenging organisation can bid. This makes it easier for local groups with good ideas to put them forward and drive improvement in local services.

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“To make provision about the functions and procedures of local and certain other authorities; to make provision about the functions of the Local Commission for Administration in England; to enable the recovery of financial sanctions imposed by the Court of Justice of the European Union on the United Kingdom from local and public authorities; to make provision about local government finance; to make provision about town and country planning, the Community Infrastructure Levy and the authorisation of nationally significant infrastructure projects; to make provision about social and other housing; to make provision about regeneration in London; and for connected purposes.”

EU Directive 92/50/EEC (Horizontal Policies for Procurement)

The creation of a common market for public-sector procurement and construction contracts was unlikely to come about entirely as a result of the obligations Member States had undertaken in the Treaties to remove restrictions on foreign goods, services and businesses. It was still likely to be frustrated by differences in national regulations.

Community legislation was necessary to make sure that government contracts were open to all nationalities on equal terms and to make tendering procedures more transparent so that compliance with the principles laid down in the Treaties could be monitored and enforced.

Therefore, to back up the prohibition of import restrictions resulting from discriminatory public purchasing and to make it easier for resident and non-resident foreign firms to compete for public-sector contracts, the Council issued directives to coordinate procurement procedures in all public-sector procurement subject to the Treaties.

The public procurement directives are based on three main principles:

Community-wide advertising of contracts so that firms in all Member States have an opportunity of bidding for them.

The banning of technical specifications liable to discriminate against potential foreign bidders.

Application of objective criteria in tendering and award procedures.

The latter principle is ensured by the following requirements:

Contracts are to be put out to open tender (open to all interested parties) or restricted tender (open only to selected candidates), at the choice of the authority placing the contract. Authorities may have recourse to negotiated tendering only in specified exceptional circumstances.

Interested parties may only be excluded from participating (in restricted or negotiated tenders) or from final selection (in open, restricted or negotiated tenders) on certain specified qualitative criteria.

Contracts may be awarded only on economic or technical criteria, namely either the lowest price or the economically most advantageous tender overall.

National TOMs supporting legislation

The National TOMS is a framework for measuring social value which is closely aligned to legislative requirements.
Read more about the National TOMs or try out the framework through our Portal.