David Lidington, Minister for the Cabinet Office, announced in a speech at the think tank Reform yesterday that the Public Services (Social Value) Act 2013 would be reformed to strengthen the government’s commitment to awarding contracts based on social value, rather than just value for money.
He said the changes to the act, specifically the requirement to explicitly evaluate social value when awarding contracts, would “ensure that contracts were awarded on the basis of more than just value for money – but a company’s values too, so that their actions in society are rightly recognised and rewarded”.
The Minister outlined new proposals to keep bids for public sector work competitive while ensuring companies “play by the same rules”, rather than seeing the state absorb more of the work.
“Some still believe that the state is the answer to everything,” Mr Lidington said, claiming critics have used the collapse of Carillion for calls “bring every private sector contract – no matter how successful – back under state control”.
While some have claimed Carillion is an example of the problems with outsourcing providers, Mr Lidington said these companies on average deliver savings of 20pc compared to bringing services in-house.
The planned measures would encourage and make it easier for small businesses, mutuals, charities, co-operatives and social enterprises to take on government contracts.
Private sector companies will have to show taxpayers how money is being spent and publish data for cutting the gender pay gap and improving ethnic minority representation if they want to win contracts.
Mr Lidington said businesses must embrace the new proposals to help “put right failings” in the market for public contracts, which represents some £200bn of spending each year.
The Confederation of British Industry welcomed the announcement, saying that the collapse of Carillion “was a warning of the dangers of short-termism in public contracts”, and that it was vital to have a healthy, competitive and dynamic marketplace of suppliers of all sizes.
“The intention to reduce the complexity and cost involved in bidding should allow more SMEs to compete for work.”
Ian Smith, CEO of Winning Tenders, welcomed this announcement, “For 20 years we have been helping small businesses to win tenders and it will be great to see the implementation of these changes.
“Simply handing out contracts to big companies that know how to play with numbers is a short-sighted way to proceed.
“The change of emphasis from short-term bottom line to long-term value should get us on the right path to building businesses with a conscience that our children will be inspired to be a part of in the future.”