18 Dec 2018

On 29 November 2018 the Cabinet Office published Procurement Policy Note (04/18) (PPN) regarding taking into account a supplier's approach to payment in the procurement of major projects. The PPN is interesting because it reflects a wider trend in the Government's use of procurement. Not simply to buy things, but to 'do good'…

Paying on time

Since the collapse of Carillion the political spotlight has been shining on public-private contracts. One of the key problems identified is paying on time. In particular it's been recognised that failure to pay invoices quickly can be a barrier to entry for smaller providers and can lead to problems for suppliers. It can therefore create wider societal issues. 

David Lidington has duly set out the Government's "ambition of paying 90% of valid invoices to SME suppliers within five days", and the Government is looking to major government suppliers to also ensure their sub-contractors are paid on time. The PPN sets out questions for public purchasers to incorporate into their selection questionnaires and focuses on whether contractors have paid sub-contractors within 60 days of receipt of an invoice.

The Rise of Social Value

Social value has slowly been creeping up the political agenda. Both social value and payment practices have been mentioned in the same breath by David Lidington in his set-piece speeches in June and November of this year, and can been seen as part of the same trend for the public pound to be seen to 'do good'. 

There's nothing new about including social value in procurement. In broad terms it means considering the wider indirect benefits a procurement has (or could have) on a community rather than just the direct benefits. For instance, considering whether there are opportunities to reduce the carbon footprint of an existing service when it is re-procured rather than just considering the quality and cost of the service itself.

Social value has been a part of the procurement landscape since long before the Social Value Act 2012 brought it onto the scene on a statutory footing. The Act requires contracting authorities (with limited exceptions) which are procuring services (but not works or supplies) to consider consultation with stakeholders and how the procurement process might be conducted in manner to improve the social, economic and environmental well-being of the relevant area. 

It's important to note that contracting authorities are only required to consider consultation and the incorporation of social value into a procurement. This has led to the Act being criticised in some quarters for lacking teeth. As a response to this criticism the Government indicated in its Civil Society Strategy that it will 'account for' social value within the evaluation criteria for its procurements for goods, works and services. The Government is therefore going far beyond what the Act requires. 

The Shape of Things to Come?

It could be argued that these changes aren't revolutionary, and to a certain extent the Government is taking its lead from many contracting authorities who already have social value procurement policies in place and seek to ensure that SMEs are paid promptly. 

The Government is showing however that it intends to use procurement as a means of trying to address wider societal issues. In that respect these latest changes announced by the Cabinet Office are unlikely to be the end of the story.

If this is the shape of things to come, it will be interesting to see how the Government further seeks to develop the notion of the public pound 'doing good'.