Monday, 31 December 2012

Is the Public Services (Social Value) Act a no go for small contracts?

Allison Ogden-Newton fears that social enterprises with local knowledge will lose out to larger deliverers that can achieve scale
Will the Social Value Act favour larger organisations? Photograph: Corbis Super RF/Alamy
The government's target of enabling over one million former public sector staff to achieve mutual status by 2015 echoes the aspirations of many in the public sector who want to carry on doing the job they love and are interested in more independence – but only if the deal is right. For them, the choice between
moving, via the TUPE process, to work for a large listed company with a reputation for stacking it high and selling it cheap, or clubbing together with trusted colleagues to 'go it alone', is an easy one.
At the Transition Institute we believe these public servants could be heroic innovators and should be able to secure the necessary contracts to finance their services. However, following a recent statement from the Cabinet Office, we fear smaller, less protected entities face an obstacle that could halt them in their tracks.
In a recent statement, the Cabinet Office told us that European Union rules will preclude some public sector contracts from compliance with the Public Services (Social Value) Act, passed by the government earlier this year. They identified two thresholds: £113,057 for service contracts awarded by central government and the NHS, and £173,934 for all other contract bids, below which, they said, tests for social value could not be applied in commissioning: "The act (public services 2012), when it comes into force, will apply to public services contracts whose value exceeds the relevant financial thresholds in the EU Directives and Public Contracts Regulations."
If this is the case, we ask: how will mutualisation for smaller spin-outs work? Will we see commissioning frameworks reward large deliverers which can achieve economies of scale, while smaller entities with local knowledge and strong track records lose out?
We are seeking further clarification from the Cabinet Office as it is not obvious, even to the commissioning experts at the Institute, how the act can be applied to the heavily-regulated procurement processes over the threshold, and not to the more lightly regulated procurement space below. Nor can we identify what has changed within the EU to move the goal posts since the act was drafted and passed.
One thing we do know is that the need to build a much clearer picture about what is happening in the vanguard of this public service transformation is vital.
The Transition Institute is the UK's first and only advocate body for public sector providers that make social value their business, and we intend to build an accurate set of social value commissioning guidelines, based on information from the sector that accurately describes the size, aspirations and climate in which spin-outs are operating. We've just launched the UK's first survey to ask all independent service providers and spin-outs what affects them when it comes to commissioning. This survey will map who the new providers are, their size and scope, and the commissioning processes that operate in their working environment. This information will be vital in educating the government about how this issue in particular affects social value organisations.
Allison Ogden-Newton is chair of the Transition Institute. To contribute to the survey, click here. For more details of a social enterprise network live debate on the social value act on Friday 11 January 2013, click here
This content is brought to you by Guardian Professional. To join the social enterprise network, click here
  • Jeff Mowatt
    24 December 2012, 10.17

    From experience, yes.  There will be obstructions.

    Among our own experiences is being excluded from bidding for work with an existing Research Councils  customer, because EU procurement rules demanded a minimum turnover of £500,000.

    We've found that when bidding for work in the NHS supply chain, despite being an existing NHS supplier,  they wouldn't respond when asked for a reason for exclusion in the PQQ process.

    We've seen a CIC set up locally by doctors and Tory politicians, extract £200k from public funds without trading, to benefit only a consultant. Another CIC came from nowhere to attempt taking over the primary care services for Gloucestershire.  Neither of these have wanted to engage with existing social enterprise.

    Finally there is conclusive proof that social enterprise participating with goverment is weighed in favour of corporates.  I have a copy of letter from the British Council to my MP stating clearly that their criteria for  partnership includes a substantial financial contribution.  More it seems than the considerable sum invested in our groundwork for Eastern Europe since 1999.

    We conclude that although there's a clear case for social enterprise developent, some of the more radical social objectives, like extracting children from neglectful institutions, are not palatable to big business or some of our more avaricious politicians..

    By buying into such a project, a corporation may enhance its CSR image while avoiding such human rights issues, essentially a modern day interpretation of purchasing indulgences.

    Such was the experience of social enterprise in Ukraine, begging the question - where were the goverment supported advocacies in any of this?.  


  • Rich Tomlins
    28 December 2012, 21.20

    Evening Allison, have you had direct communication from the Cabinet Office about the threshold point, it sounds that way from the article.

    It hasn't been my interpretation but it was a point being made by Local Government Lawyer back in May, although I hadn't seen anything to that effect since.

  • Mark Upton
    31 December 2012, 9.35

    This is not a new issue at all the MP who sponsored the Bill tied it quite explicitly to the EU Procurement rules, including their thresholds, in defining which procurement would be caught. Indeed  the legislation does not change the procurement process at all, save requiring public bodies to consider the role of social value in the commissioning phases. Though that is welcomed.

    I am not so sure that this will impact on the spin out of mutuals. I cannot see a spin out being viable off the back of a contract below these threshold levels. And if the Act did apply to 'below threshold' contracts it would risk imposing disproportionate burdens on small and medium enterprises including VCS bodies.
    In any case this Act is about commissioners seeking additional value from their contracts, so it is right their focus on potential big wins there.
    This article just reveals two things (1) unrealistic expectations of this legislation (2) lack of understanding of what it means in practice.
  • David Floyd
    31 December 2012, 13.21

    Hi Allison,

    I don't consider myself a procurement expert but my instinct, I think similar to Mark Upton's, is that the changes the Act will hopefully bring about are more relevant above the EU threshold than below it.

    I think these points:
    "If this is the case, we ask: how will mutualisation for smaller spin-outs work? Will we see commissioning frameworks reward large deliverers which can achieve economies of scale, while smaller entities with local knowledge and strong track records lose out?"

    are taking you off on a bit of a wild goose chase.

    The answer to the first question is that smaller spin outs - looking for contracts under £113,057 will get contracts if the commissioners in their area want to give them a contract, based on the business case they've made (and hopefully based on a recognition of the wider social value they can deliver).

    If commissioners don't decide to give them a contract on this basis, the Social Value Act won't make any difference.

    My hunch is that imposing a requirement to demonstrate consideration of wider social value - and therefore fairness to all organisations who might potentially provide that value - explicity through the tendering process at a lower level would actually make it less likely that small spin outs and other small social enterprises would win contracts rather than more.

    It would potentially make it harder for commissioners to take a punt on an innovative new organisation.

    The point is that below the EU threshold, commissioners who want to commission for wider social value can already do so. The Act provides them with justification for doing so when awarding contracts above £113,057,

1 comment:

  1. Thanks for the comments, apologies for my late response but I have been in Cornwall where signal is as rare as sushi. I think what I wanted to say with this piece is that whilst I wholeheartedly welcome the act and know it to be a good thing, I am concerned about the experience of smaller local providers as this market opens up. The article certainly emphasises the threshold, probably wrongly as it was always a done deal, but there is a palpable complacency about the necessity for smaller contracts to sustain local grassroots organisations. I think we need to know more about their experience, and have a better strategy to ensure that the strength and diversity of home grown solutions are not lost.