The changing nature of procurement

Stuart Thomson, public affairs consultant, and Dougal Ainsley, solicitor at Bircham Dyson Bell discuss the changing face of the procurement process

It has been reported that Jon Cruddas, the Labour Party Policy Coordinator, wants to bring in revolutionary measures that will “strip companies of government contracts”. But what he really appeared to be considering was a potentially significant but evolutionary change to the way that procurement is undertaken.

The coverage was based on Cruddas’ essay in ‘Blue Labour: Forging a New Politics’. Cruddas’ contribution is largely blue skies thinking rather than detailed policy prescription. It suggests, for instance, that:
“Labour’s politics of the common good requires … no more outsourcing of relational services to those parts of the private sector that are driven purely by corporate profit rather than a social purpose. It is quite staggering that some £10 billion of public contracts – of taxpayers’ money – are allocated to some 20 private companies. Rather, we need to forge cooperative ties with ethical enterprise – such as cooperatives, mutuals, and social businesses.”

The coverage prompted a response from the CBI warning against “damaging rhetoric” and emphasising the contribution of the public services industry to the economy. There is no doubt that many existing relationships prove beneficial to both sides but Cruddas’ comments suggest that a different type of procurement competition could be on the way.

It is a stretch to see his words as leading to the removal of existing contracts from companies. Indeed, Cruddas appears comfortable with outsourcing. To the extent that he is proposing any sort of a change, he seems to want to widen the range of organisations which are involved in the outsourced delivery of public services, and proposing that those organisations (including companies) should pursue social objectives.

Cruddas’ comments leave plenty of room for speculation but it seems existing contracts would remain in place; from the date of implementation of the policy, contracts only would be awarded to organisations that contribute to social objectives.

To a certain extent, this is what already happens. Businesses are required to meet social purposes in a number of ways. For example, it is a social objective to make new buildings more energy efficient. This is required by law through building regulations. Builders therefore contribute to these objectives, whether or not they are involved in a public contract.

In addition, many firms already have a developed corporate social responsibility programme. That is part of their current offer under the current arrangement.

The proposals are in line with other recent developments in the relationship between public bodies and the companies that they contract to deliver services.

For example, the contracts offered for Crossrail were considered a real shift in the way procurements worked. They were heralded as “responsible procurement” by the then Secretary of State for Transport, Justine Greening. The emphasis was ensuring that bidders set out how they would engage with their supply chain, provide opportunities for training and apprenticeships and for small and medium-sized businesses in their own procurement strategies.

Since then we have also seen the passing of the Public Services (Social Value) Act 2012. The Act “requires people who commission, or buy, public services to consider securing added economic, social or environmental benefits for their local area.” The public body designs the contract so the business is bound to deliver the benefits.

More recently, the Public Contracts Regulations 2015 came into force on 26 February. The have been designed to secure increased quality and value for money for contracting authorities, and seek to do this by making public procurement more accessible to SMEs and voluntary organisations – exactly the kind of organisation more likely to be motivated by social ends that Cruddas has in mind.

So this points to a clear direction of travel where politicians, in essence, want businesses through the procurement process to help deliver social and policy outcomes. Simplistically, it is a quid pro quo for being paid large amounts of taxpayers’ money.

Seen in this light, the proposals can be seen as the latest suggestion in an ongoing process. They are designed to encourage ‘normal’ businesses to up their game on social contribution and for ‘alternative’ businesses to up their game (or be assisted) in bidding for public service contracts against their more commercially adept rivals. If implemented, they could be expected to have a gradual cultural effect, rather than instant and dramatic consequences. They are similar in objective to many recent policy initiatives and legislative changes.

So rather than Cruddas the revolutionary, we are really looking at Cruddas the evolutionary.

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