Source · Select Committees · Public Accounts Committee
Recommendation 27
27
Accepted
Government procurement mandates specific supplier requirements to advance broader social and environmental objectives.
Recommendation
The NAO report highlighted the value of departments considering how a contract will contribute to meeting key social priorities such a fighting climate change, creating jobs and promoting innovation.48 We questioned how much consideration has been given to using government’s immense purchasing power to encourage business to behave in a way that meets government’s other objectives. The GCF described three things that it had felt appropriate to mandate: first, that government will not deal with businesses that do not pay their suppliers promptly; second, that the GCF had introduced a requirement for suppliers for contracts over £5 million to have a net zero policy in place and a target for that; and third, that there is a modern slavery exclusion.49
Government Response Summary
The government agrees with the recommendation, stating it is implemented through existing commercial policy outlined in the Sourcing Playbook and Procurement Policy Notes. These policies already mandate considerations for social priorities like fighting climate change and social value, and will be further integrated with the Procurement Act 2023 and the forthcoming NPPS.
Government Response
Accepted
HM Government
Accepted
The government agrees with the Committee’s recommendation Recommendation implemented The Sourcing Playbook outlines how government commercial policy considerations should be balanced by contracting authorities and will be revised in line with the Procurement Act 2023 during 2024. Government commercial policy is set out in Procurement Policy Notes (PPNs). Ensuring a level playing field for small and medium-sized enterprises (SMEs) seeking to contract with the government is a key component to the design, delivery and implementation of commercial policy. For example, during the formulation of the government’s social value policy, as well as a public consultation, there was consultation with the Federation of Small Businesses, the Cabinet Office Small Business Advisory Panel and the Crown Representatives for Small Business and Voluntary, Community and Social Enterprises (VCSEs), on the content of the model, a proposed minimum 10% weighting for evaluating social value in bids, and whether the approach posed any particular accessibility issues for SMEs. Central government’s social value policy states that bids should be scored on a qualitative contract by contract basis, as comparing volumes or use of financial proxies could disadvantage SMEs. This process of ensuring SMEs are not overburdened has been replicated on other policies, for example reducing carbon in government supply chains which has a threshold at which the measure applies to minimise impact on SME and VCSE suppliers, as does the prompt payment policy. The commitment to reducing barriers to SMEs in public procurement is demonstrated by near doubling of spend with SMEs from 2016-17 to 2021-22 (latest figures) from £11.1 billion to £21 billion1. As part of the Procurement Act 2023, the government has powers to publish a National Procurement Policy Statement (NPPS), to which all contracting authorities must have regard. This will provide the government of the day an opportunity to set out its strategic priorities to which it expects procurement to contribute and may include subjects such as driving innovation, creating jobs and tackling climate change. It is anticipated that the first statutory NPPS will be in place later in 2024. A successful commercial agreement strategy takes into consideration a number of factors to balance the risk appetite of customers (the public sector) against the best value offering from a supplier; with suppliers fairly evaluated against each other, ensuring transparency and ultimately competitive tension; it is tailored to market opportunities and customer needs, which varies by commercial agreement; and it also balances commercial pricing with quality of product or service and considers policy implication, for example, SMEs, social value and net zero. Where the balance points are is determined by each contracting authority or Minister. The Crown Commercial Service implements government commercial policy by ensuring that commercial agreements, for which it is the Framework Authority, comply with PPNs and government commercial policy, as well as being compliant with the Procurement Regulations.