E3M Seminar: New Opportunities for

Partnership between Social Enterprises

and Commissioning Authorities

Commissioning under the New

Procurement Directive (2)

Julian BlakeCo-head Charity & Social EnterpriseBates Wells Braithwaite

8th July 2014

1. Public Procurement Reform1. Misunderstood: “Part B” outside prescribed procedure; treaty principles

apply (equal treatment/transparency); myths/caution distort objectivity principle into obstacles; same procedures used for safety/applied by analogy.

2. Interpretation required; guidance general; case law not direct; fear without safe harbours; lack of robustness re scope.

3. Little distinction social/commercial (e.g. IT/construction) services; purpose central to social services; different relationship to profit as efficiency driver; same (commercial) rules ok, same interpretation not.

4. Little attention to EC Publication 2010: “Buying Social: A Guide to Taking Account of Social Considerations in PP”. An effort to clarify.

5. EC appeal for information on issues (E3M Conf. 3/13): input into Directive: clarification; emphasis; new provisions.

Assumptions/themes for seminar

2. New PP Directive 20141. Clarification/development of social focus: beyond free market objective;

to instrument of social policy; promotion of social economy.

2. Part of EC “Social Business Initiative” 2011: “an invitation to national & regional governments & stakeholders to develop eco-systems for SE”. SEs represent: “smart growth” – social objectives, impact, innovation, natural worker motivation.

3. Emphasis of EC representatives at UK Procurement Law Association & Strasbourg SBI event 1/14: on efforts to clarify; need for interpretation; & flexibilities.

4. Transposition into UK law 2014-15 – directly without Govt interposing; passing flexibilities on; open to regional interpretation.

3. Most Economically Advantageous Tender - Article 67 (Preamble 89)1. Optimum balance: price/quality/social value.

2. Currently selection by: MEAT or price - price only appropriate for undifferentiated goods, not services. In reality “by price” widespread.

3. New requirement “base award” on MEAT - emphasis on cost effectiveness; life-cycle costing; price/quality ratio, including: qualitative, environmental and social aspects; innovative characteristics; quality of staff.

4. Provision for competition on quality criteria with the price element fixed.

5. Govts can restrict possibility for price only awards.

4. Life-cycle costing - Arts. 67,68 (Pre.74,96)1. Derivation 2010 EC Communication - “Europe 2020 a strategy for smart,

sustainable and inclusive growth”.

2. Promotion of placing value on holistic/long-term economic & environmental benefits beyond headline price; allows value to be attached to public service cost saving. Fair trade mentioned.

3. Requirement for method of costing – link to Social Value/Impact Measurement.EC Expert Group (Social Entrepreneurship) - GECES

4. Report 2/2014: objective: “Commission will develop a methodology to measure the socio-economic benefits created by SEs. The development of rigorous and systematic measurements of SEs’ impact on the community… is essential to demonstrate that the money invested in SEs yields high savings and income”.

5. Particular regime for Social Services (replacing Part B) - Arts. 4, 76 (Pre.114)1. For social/health/cultural “services to the person”: limited cross-border

dimension; different cultural traditions; sensitivity required; promotion of societal goals.

2. Higher threshold €750k (vs €200k) for no prescription/only equal treatment & transparency principles (although Part B no threshold).

3. National not EU rules above threshold to ensure transparency/equal treatment, with EU publication requirements;

4. Rules shall ensure authorities may: take into account: user needs & empowerment; innovation; and may select on basis of: “best price-quality ratio, taking into account quality and sustainability criteria”.

6. Reservations – social/health/cultural, services - Arts 77,20 (Pre. 118, 36, 40, 75)1. Reserved competition for one three year contract per supplier

2. Mixed provenance - UK promoting productive “mutuals”; social purpose & non-profit distribution conditions added.

3. Cited rationale of service continuity - close to idea of spin-out re-organisation preparatory to market supply.

4. Wording extends to SE with “active employee, user, stakeholder participation”.

5. Separate reservation to “social businesses” with disadvantaged as at least 30% of workforce.

6. Wider emphasis on promotion of environmental, social, labour law and standards.

7. PP promotion of SMEs - Art. 46, 58 (Pre. 59,78, 124) 1. Recognised potential for growth, innovation, job creation; also UK Govt.

Policy.

2. PP “should be adapted to the needs of SMEs” ref to 2008 Code of Best Practice.

3. Market aggregation/economies of scale tendencies should not close markets to SMEs.

4. Duty to consider division into lots (for quality & quantity); Govts could require justification not to divide; can separate design & execution; allow lot grouping.

5. Financial capacity requirements must be “related & proportionate to…subject matter”. Turnover test - not exceeding 2x contract value.

6. Promote minimum requirements & maximum variation potential

7. Emphasis – consortia do not need to be SPVs.

8. Objective benefits of small/local supply; Localism Act “Right to Challenge”.

8. Competitive procedure with negotiation – Art. 29 (Pre. 44)1. “Great need…for additional flexibility to choose…procedure which

provides for negotiations”. In particular for innovation. To achieve regular/acceptable tenders. Minimum requirements safeguard.

2. Negotiations can cover social, environmental, innovative and commercial clauses.

3. Call for competition/responses/invitation(s)/negotiation.

4. Additional to “Competitive Dialogue” & “Negotiated (with one supplier)” procedures.

9. Innovation Partnership Procedure - Art. 31 (Pre. 49) 1. New procedure incentivising innovation to meet public service

challenges, increasing efficiency & effectiveness.

2. Suppliers respond to invitation to participate in an “Innovation Partnership”.

3. Allows development phases with: minimum requirements; one or more suppliers, intermediate targets; & payments; ongoing negotiation; IP protection; reducing participants.

4. Requires creative specifications of proposed partnerships - & pre-consultation re- possibilities, ideas and opportunities.

10. Comments on practice1. If get PP right - restored to (mere) process for overall purpose of

commissioning & delivering best value services.

2. SBI strong policy to this end; for Govt. & Authorities to respond.

3. Need for realism re challenge risk; flexibility/interpretation parameters make manifest failure true issue; 2-way concern; traditional v practical.

Julian BlakeCo-head Charity & Social EnterpriseBates Wells Braithwaite

8th July 2014