03 March 2006
Most local authorities want to make the most of their community powers and include social and environmental benefits in the contracts they award. But procurement law can be problematic
Major public service providers have always been interested in the extent to which they can deliver secondary policies — such as social and environmental benefits — through those services. This was more or less taboo during the Compulsory Competitive Tendering regime of previous decades, being pejoratively referred to as 'contract compliance'.
The government of the time clamped down on attempts to influence involvement in industrial disputes, local labour, trade with South Africa (during the existence of apartheid) and so on. Legislation was introduced to outlaw such considerations, which were held to be 'non-commercial'.
However, this conflict between local and central government resulted in a legitimate aim being denied — the use of procurement and contracts to deliver wider community benefits. Now that the aims for all local authorities include community leadership, economic regeneration, collaboration with other public sector stakeholders and Best Value, this area has risen again to the top of the agenda.
The contract compliance tag has gone and local authorities are talking about 'community benefit clauses' to reflect their newly recognised legitimacy and contribution to the overall community strategy.
While some secondary benefits are required by national legislation (such as in the area of race relations), local authorities are more interested in the greyer areas, motivated by ethical considerations, such as fair trade goods. To what extent can these areas be covered? Here, the law is still not as clear as many would want.
The biggest hurdle is the European Union public procurement regime, both via the European Community treaty and the procurement regulations. The treaty creates the internal market, where national or local providers are treated no better or worse than those from other countries. It regulates all procurement activity, irrespective of value, and is designed to outlaw discrimination in favour of local or UK suppliers.
The new procurement regulations govern a narrower element of the whole, namely the procurement phase of certain types and values of works, services and goods.
Three stages of the procurement process are relevant here: the pre-procurement stage; the procurement stage; and the post-contract performance.
In the pre-procurement stage, community benefits can be promoted via the packaging of work (for example, by having smaller packages), notifying local contractors of forthcoming opportunities and in the drafting of specifications, to include for example 'fresh produce'.
The procurement stage itself is the most heavily regulated and therefore most difficult to use to achieve secondary purposes. The new procurement regulations (The Public Contracts Regulations 2006 – Statutory Instrument no 5) govern all aspects of the procurement stage, from advertisement, through selection, to tender evaluation. The commission has been particularly sensitive to this part of the process and has railed against practices that have even the slightest hint of discrimination or unfairness.
The actual performance of a contract awarded offers better prospects for community benefit clauses, particularly if contract conditions are transparent, have been clearly notified to all those participating in the procurement exercise and are non-discriminatory.
The commission has stated that: 'Once a contract has been awarded, public procurement can be used by contracting authorities as a means of encouraging the pursuit of social objectives.' This has led many lawyers to conclude that it is safer to deal with community benefit clauses purely as contract performance obligations, rather than at the procurement stage.
Here the key legal issue is to avoid any discrimination and therefore action must be taken on the ground to support any potential contractor to deliver its contracts locally. Examples here include setting up a community benefits working group to support a contractor in recruiting suitable staff and hiring a training co-ordinator to support a contractor in organising suitable training.
The EU regime is changing, but slowly. It has now recognised that the environment is a legitimate concern but social considerations are lagging some way behind, although there is recognition of their importance in the new procurement directive.
The Office of Government Commerce published guidance relating to 'Social issues in purchasing' on February 9, which explains how to deliver benefits while still meeting the EU rules. If care is exercised, a passage can be safely steered through those rules to achieve a good degree of community benefit.
Stephen Cirell is head of local government and Professor John Bennett is a consultant solicitor with Eversheds. They are authors of Best Value law and practice and Charging and trading in local government. John Bennett is also a co-author of EC public procurement law and practice
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