Public buyers enabled to reserve contracts for social enterprises

5 January 2021

Public sector organisations are able to reserve procurements for suppliers in particular locations or for small firms or social enterprises, according to government guidance. 

The guidance, outlined in a Procurement Policy Note (PPN), discussed “additional freedoms in relation to contract spend on goods, services and works contracts” with a value under applicable thresholds, the Cabinet Office (CO) said. 

The thresholds, which are derived from the WTO Agreement on Government Procurement (GPA), apply to supplies and services (£122,976) and works (£4,733,252). 

The CO said the guidance would streamline and simplify procurement under these thresholds, and “tackle economic inequality, create new businesses, jobs and skills, as well as increasing supply chain resilience, encouraging entrepreneurship, and attracting new entrants to government markets”. 

The PPN applied to all central government departments, their executive agencies and non-departmental public bodies from 1 January 2021.

Under the guidance, agencies are able to run a competition and specify that only suppliers located in a geographical area can bid, whether it is UK-wide or by region to “tackle economic inequality and support local recruitment, training, skills and investment”.

“Supplier location should be described by reference to where the supplier is based or established and has substantive business operations and not by location of corporate ownership,” it said. 

Organisations are also able to reserve a procurement for SMEs or voluntary, community and social enterprises (VCSEs).

The note said: “Organisations should be clear in their procurement documentation about any intention to reserve the procurement, for example by including the standardised definitions of SME/VCSE and supplier location outlined in the associated guidance. 

“In applying the policy it is important that in-scope organisations achieve value for money and use good commercial judgement… In order to ensure value for money, in-scope organisations should not direct award when reserving procurements under this policy.”

The CO said: “Growing and diversifying supply chain opportunities is at the heart of the government’s industrial and civil society strategies and it is recognised that markets with a broad range of suppliers of different types, including SMEs and VCSEs, can offer better value for money, promote innovative solutions and give public services access to expertise and knowledge on complex issues.”

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