Procuring UK major projects: does the advent of “value-based procurement” herald a loosening of the public purse strings?

Last week the UK government published its Construction Playbook which sets out guidance for the future sourcing and contracting of public works, projects and programmes. The guidance sets out 14 key policies and how these should feature in each of the planning, publication, selection, evaluation, award and implementation stages of public contracts. Below we focus on what we consider to be one of its key themes: social value. 

The Construction Playbook is a product of its time. In part, it’s a response to the troubles the sector has faced in recent years: from the Grenfell Tower fire tragedy of 2017, to Carillion’s insolvency in 2018, and the more recent slow-down in activity since the onset of Covid. In apparent recognition of the central role it will play in the post-pandemic recovery, the UK government plans to spend big on projects in 2021. But the message is clear: ‘how you build is as important as what you build. We don’t just want buildings, roads and bridges—we want social value’.

What is social value?

“Social value”, according to the Playbook “is a way of maximising the benefits of public procurement by encouraging employment opportunities, developing skills and improving environmental sustainability”. In real terms it means:

• Being Greener. Contracting Authorities (“CAs”) will be required to (i) set out plans for achieving net zero emissions by or ahead of 2050, and (ii) adopt the use of whole life carbon assessments to understand and minimise the footprint of projects throughout their lifecycle. Greener offsite manufacturing solutions will be encouraged.

• Improving Building and workplace safety. Government will require CAs to plan for how they will prioritise H&S. Citing Dame Judith’s Hackitt’s Independent Review of Building Regulations and Fire Safety commissioned by the government in the wake of Grenfell, the Playbook confirms that the procurement phase should be where the “drive for quality and the required safety outcomes, rather than the lowest cost, must start”.

• Tackling Modern Slavery. Amid reports of a spike in Modern Slavery incidents in lockdown, the Playbook flags construction as a “high-risk” sector and the need to mitigate those risks in supply chains in line with the Modern Slavery Act 2015 and PPN05/19.

• Increasing employment opportunities and upskilling. Amid the end of Free Movement, the Playbook encourages CAs to invest in training, upskilling and apprenticeships “to contribute towards a level playing field for the UK’s small businesses, voluntary and community sector organisations and social enterprises”.

Social value is to be achieved in the context of sustainable relationships between the public sector and industry where pre-tender consultations are expanded, public sector project pipelines are more visible and (‘post Carillion’ type) financial monitoring of contractors is integral.

There will also be ‘hard controls’: from January 2021 a minimum weighting of 10% of the total score for social value should be applied in tender evaluations. Given the often-fine margins involved in competitive tenders, what a bidder offers by way of social value may be the key differentiator at the award stage.

But will government pay for social value? It seems so. Inherent in the Playbook is the recognition that none of this comes for free. In a nod to the PFI contracts of yester-year, the government recognises that it has often “applied unreasonable terms … and/or sought unsustainable cost reductions” which “can create a bias towards low quality and can increase the probability of contract failures”. Rather, “contracts should be profitable”, and while price will be important there will be occasions (we are told) where “quality will be weighted higher than cost, recognising the importance of delivering quality public works projects … or meeting legal obligations such as net zero GHG by 2025”.

Just how effectively the Playbook is implemented at the CA level, only time will tell. But one thing is clear as we head into the new year: government spending on public projects will be a vehicle for the government levelling up and social agendas.