Are you contracting with government? Three changes you need to know about

In recent months the government has announced a number of initiatives which affect companies wishing to do business with public sector organisations.

As well as assisting the government in its aim to increase SME involvement in government procurements and diversify the suppliers in the supply chain, these initiatives demonstrate the government’s desire to promote “responsible capitalism” and rebuild public confidence in outsourcing, especially in the wake of recent high-profile insolvencies in the marketplace.

1. On 10 April the Crown Commercial Service (“CCS”) published a Procurement Policy Note (“PPN”) on supply chain visibility designed to increase its oversight of spend with Small and Medium Enterprises (“SMEs”) in its supply chain. The initiative is intended to assist suppliers, including SMEs, in bidding for work in government supply chains through the Contracts Finder platform.

   This PPN means that going forward, for all but the smallest contracts, prime contractors will be required to advertise their subcontracting opportunities. This is a significant shift which raises the possibility that in the future there may be a move towards greater regulation of tendering of subcontracts. Whilst the government already surveys its largest suppliers on their spend with SMEs, the move from a centralised collection to a wider collection at department level reinforces the importance of the government’s policy of encouraging SME participation.

   The PPN provides that the terms and conditions of procurements that are (i) subject to the Public Contracts Regulations 2015, (ii) valued above £5 million per annum, and (iii) commencing from 1 May 2018 must be updated to include clauses requiring the successful prime supplier(s) to:

   • Advertise on Contracts Finder subcontract opportunities arising from the contract above a minimum subcontract threshold of £25,000; and

   • Report on how much they spend on subcontracting, and how much they spend directly with SMEs or Voluntary, Community and Social Enterprise organisations (“VCSEs”) in the delivery of the contract.

2. On 25 June the government announced changes to the Public Services (Social Value) Act 2012 to require government bodies to not just consider social value when procuring public services contracts but to specifically evaluate it. Major government suppliers will also be expected to publish data and KPIs on key social issues such as gender pay gap, ethnic minority representation and modern slavery in order to increase transparency. The changes are intended to help shift the focus towards long-term value instead of short-term costs in procurement following the collapse of Carillion. The changes have not been drafted and no implementation date has yet been suggested. It has been indicated that the changes will relate only to contracts with central government in the first instance.

3. On 5 July the CCS launched a new Public Sector Contract for use in framework arrangements where the government calls off common goods and services. As it currently stands there is no threshold for use of the contract indicating that it should be used for all framework arrangements regardless of their value or complexity. CCS has indicated that the core terms may not be negotiated between the parties. This simplified and standardised contract is intended to make it easier for businesses, including SMEs, to apply for government contracts.

The Government’s appetite for further changes to public contracting is unlikely to wane especially in light of Brexit. Companies that frequently do business with public sector organisations would therefore be well advised to keep an eye on any future developments.