Stuart Thomson, public affairs consultant, and Dougal Ainsley, solicitor at Bircham Dyson Bell, talk about how the procurement process is changing.
According to reports, Labour Party Policy Coordinator Jon Cruddas wants to implement revolutionary measures that will “strip companies of government contracts.” But what he seemed to be thinking about was a potentially significant but evolutionary change in the way procurement is handled.
Cruddas’ essay in ‘Blue Labour: Forging a New Politics’ was the basis for the coverage. Cruddas’ contribution is primarily conceptual, rather than detailed policy prescription. It suggests, for example, that “Labour’s common good politics require… no more outsourcing of relational services to those parts of the private sector that are driven solely by corporate profit rather than a social purpose.” It’s mind-boggling that some £10 billion in public contracts – money paid for by taxpayers – are given to just 20 private companies. Rather, we must form collaborative relationships with ethical enterprises such as cooperatives, mutuals, and social businesses.”
The CBI responded by cautioning against “damaging rhetoric” and emphasising the importance of the public services industry to the economy. There is no doubt that many existing relationships benefit both parties, but Cruddas’ remarks suggest that a new type of procurement competition may be on the way.
It is a stretch to believe that his words will result in the termination of existing contracts from businesses. Cruddas appears to be at ease with outsourcing. To the extent that he proposes any change, he appears to want to broaden the range of organisations involved in the outsourced delivery of public services, and he proposes that those organisations (including corporations) pursue social objectives.
Cruddas’ comments leave plenty of room for speculation, but it appears that existing contracts would be maintained; contracts would only be awarded to organisations that contribute to social objectives from the date of policy implementation.
To some extent, this is already the case. Businesses must meet social objectives in a variety of ways. Making new buildings more energy efficient, for example, is a social goal. This is mandated by law through building codes. Builders, whether or not they are involved in a public contract, thus contribute to these goals.
Furthermore, many businesses already have a corporate social responsibility programme in place. Under the current arrangement, that is part of their current offer.
The proposals are consistent with other recent developments in the relationship between government agencies and the companies with whom they contract to provide services.
For example, the contracts offered for Crossrail were regarded as a significant shift in the way procurements were conducted. Justine Greening, the then-Secretary of State for Transport, praised them as “responsible procurement.” The emphasis was on bidders describing how they would engage with their supply chain, provide opportunities for training and apprenticeships, and include small and medium-sized businesses in their procurement strategies.
Since then, the Public Services (Social Value) Act of 2012 has also been passed. “People who commission or purchase public services must consider securing additional economic, social, or environmental benefits for their local area,” according to the Act. The contract is designed by the government so that the business is obligated to deliver the benefits.
On February 26, 2015, the Public Contracts Regulations 2015 went into effect. They are intended to ensure increased quality and value for money for contracting authorities by making public procurement more accessible to SMEs and voluntary organisations – precisely the type of organisation that Cruddas envisions as being more likely to be motivated by social ends.
As a result, this points to a clear direction of travel in which politicians, in essence, want businesses to help deliver social and policy outcomes through the procurement process. Simply put, it is a payment in exchange for receiving large sums of taxpayer money.
In this light, the proposals can be viewed as the most recent suggestion in a continuing process. They are intended to encourage ‘normal’ businesses to contribute more to society and to assist ‘alternative’ businesses in competing for public service contracts against more commercially savvy competitors. They could be expected to have a gradual cultural impact rather than immediate and dramatic consequences if implemented. They share the same goal as many recent policy initiatives and legislative changes.
So, instead of Cruddas the revolutionary, we’re looking at Cruddas the evolutionary.