Source · Select Committees · Public Accounts Committee
Recommendation 30
30
Accepted
Embedding social value in small contracts remains challenging for businesses.
Recommendation
However, for contracts that are too small to be able to fund a certain number of apprentices, it is difficult to sensibly embed social value. We wanted to hear how government is planning to review this or engage with small businesses to address this. The GCF commented that one of the purposes of the SME Crown representative is to try to tease that out. The GCF told us that if something is so small as not to be easily measurable, that will also apply to the large company that is bidding. The GCF explained that if the larger company says, “I will put a whole apprentice on that”, but the smaller company can only put half an apprentice on it, maybe we do have the right result. The GCF reflected that in that example, it would be the wrong metric to apply to that contract.53
Government Response Summary
The government agrees with the recommendation and states it is implemented through existing and upcoming policy frameworks like the Sourcing Playbook and NPPS. It highlights that ensuring a level playing field for SMEs and VCSEs is a key component of government commercial policy, referencing past consultations during social value policy formulation.
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.