The government has announced plans to force departments to evaluate social value when tendering.
The move, announced today by David Lidington, minister for the Cabinet Office (CO), is a direct response to the Carillion crisis and an attempt to start “restoring trust between government, industry and the public”.
The change will expand the powers of the Social Value Act, which previously only required departments to “consider” the social impact of contracts.
In a speech hosted by the think tank Reform in London today, Lidington said: “We will extend the requirements of the Social Value Act in central government to ensure all major procurements explicitly evaluate social value where appropriate, rather than just consider it.
“We will also require all departments to regularly report on the social impact of new procurements, and we will train all 4,000 of the government’s commercial buyers on how to take account of social value and use that knowledge to procure successfully from social enterprises.”
A social enterprise is a business that has the provision of a social good as part of its business model.
Asked by SM about how government would support buyers with the additional workload the social value provisions would put on procurement staff, Lidington said the commercial team at the CO were “fully onboard” with the proposals and that he had “every confidence” CO would deliver on the training.
As well as expanding the social value act, Lidington’s reforms included:
- Better contingency planning – including the creation of a “living will” for key suppliers – which would allow a failing supplier to collapse without affecting the provision of public services
- Requirements for government departments to follow a “playbook” of procurement rules to encourage new businesses to enter the market
- Mandatory publication by suppliers of KPI statistics, in a bid to make performance more transparent, starting with key suppliers
- Training for all 30,000 contract managers in the civil service to better manage contracts
The changes were welcomed by Matthew Fell, chief policy director at the Confederation of British Industry, who said the changes showed a change in focus to long-term values.
He said: “The collapse of Carillion was a warning of the dangers of short-termism in public contracts.
“So businesses will welcome a change of focus to long-term value rather than short-term costs in procurement, and its intention to reduce complexity and cost involved in bidding to allow more SMEs to compete for work.”
In a speech in which he championed the benefits of outsourcing, Lidington said the reforms would help “build confidence in a responsible capitalism”.
He said Carillion’s liquidation had “crystallised issues” that had led to a breakdown of trust between government and businesses. “For too long governments have been suspicious of the right of companies to make a fair return on their investments. For too long businesses have not trusted the government to look beyond pure cost or to apportion blame fairly when thing go wrong,” he said.
He added: “If we’re to ensure that taxpayers are to receive good value for money then yes, we need to make sure the conditions are there for supplier to make a decent rate of return.”
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