How the Procurement Act affects social value now that Royal Assent has been granted

Last October, the introduction of the Procurement Act marked a significant turning point in public sector procurement. This legislation was born out of the need to address the fallout from major industry failures, such as those of Carillion in 2018 and Interserve in 2019. It was also a proactive measure in preparation for Brexit. These incidents highlighted the fragility of the procurement process, exposing a pressing need for increased transparency, simplicity, accountability, and access to a wider pool of suppliers.

The Act is a response to an over-dependence on large suppliers and acknowledges the critical role of small businesses, which make up a staggering 99.9% of the UK business population. Its goal is to transform procurement into a more resilient and equitable system, fostering competition and ensuring value for money within the £300 to £400 billion spent annually in public sector procurement. Key reforms include stringent modern slavery exclusion criteria and the development of a unified digital procurement platform, marking significant progress towards enhanced transparency and accountability.

Understanding these changes and their implications is crucial. In this blog post, we will delve deeper into the Procurement Act, its key reforms, and how it can shape a more sustainable future for public sector procurement.

Who does the procurement bill ascension affect?

Understanding the scope of the bill is crucial. Certain exemptions apply, but the law affects public procurement in England, Northern Ireland, and Wales, with Scotland following its own rules. The bill influences a range of sectors, from central government departments to local government, healthcare, utilities, and defence. Notably, there’s an adjustment period leading up to its full enforcement in October 2024, giving you the time you need to align with the new rules.

What to expect

The reform aims to modernise and consolidate existing procurement frameworks, significantly streamlining the cluttered landscape of the current Act. As it stands, there are 350 regulations under four different regimes. With the new changes, there will be one regime with far fewer regulations. A simpler system means less overlapping and conflicting regulations underneath.

Removing the convolution makes it easier to have transparency and deter poor performers and fraudsters. This consolidation will increase flexibility for new market entrants, especially benefiting small businesses and social enterprises.

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Five shifts important to social value to watch out for

1. Value for money

If you’re going through this procurement, tendering, and contract award process, you should aim to get the best value for money out of this public sector spend. And that’s what the Act allows for. 

By “best value for money,” the Government doesn’t mean the cheapest price. Following the Green Book guidance, value for money means using public resources to benefit UK society as much as possible. It aims to achieve the best outcomes for the public and maximise social value.

2. Introducing “public benefit” to procurement

“Public benefit” is the terminology used in charity law. Using the idea of improving public benefit in public procurement is phrasing that’s never been used before in this context.

Public benefit is clearly defined for charities in law, the purpose of which must be beneficial, with any detriment or harm not outweighing the benefit. That benefit must be for the public or a large portion of the public and not for individual benefit. As they define public benefit in terms of public procurement, it’s important to keep an eye out for government definitions and explanations, as these will link to social value and impact provisions within future contracts.

3. Transparency 

The Act requires clear transparency throughout the procurement process, from start to finish, including commissioning, procurement, contract award, and delivery. This connects to good practices in line with Social Value Principles, especially Principle 6: Be Transparent. It helps practitioners be accurate, honest, and communicate openly with stakeholders. 

4. National Procurement Policy Statement 

There’s a specific provision within the Procurement Act about applying and adhering to the National Procurement Policy Statement (with a separate Wales Procurement Policy Statement to consider). While it’s not a new concept, it allows for new and different public procurement policy statements to be published that will outline the key priorities at a national level that all public procurement should consider. For example, the current statement has three priorities:

• Creating new businesses, jobs, and skills. 
• Tackling climate change and reducing waste. 
• Improving supplier diversity, innovation, and resilience.

It’s a particularly useful framework which gives businesses refined direction in how to better public wellbeing.

5. Accounting for non-financial benefits in tendering

Organisations used to award tenders based on the M-E-A-T “Most Economically Advantageous Tender.” The terminology is shifting to become more inclusive of non-financial accounting and benefits. Switching to M-A-T and dropping the focus on “economically” removes the pressure from contracting authorities to award the contract based on just price. Now they can factor in broader considerations that maximise public benefits and a broader understanding of value.

What’s next?

It’s a good time for businesses that interact with public sector procurement, either as buyers or suppliers, to start to understand what this means from their perspective.

For those keen to delve deeper into the Act’s nuances beyond its impact on social value, the ‘Transforming Public Procurement program‘ offers a plethora of resources to keep you informed and ahead of the curve. Over the coming months, we’ll keep our finger on the pulse to keep you updated with the important elements for social value in tenders, bids, and contract management.

Ready to navigate the new procurement landscape with confidence? Stay ahead with our insights and resources on achieving better impact management. To learn more about how our tenders module can help you manage your procurement processes, schedule a demo today or contact our team at 0161 532 4752.