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Workforce issues and local government procurement
As an outcome of the Government’s Review of Best Value, Circular
03/2003 contains guidance on the handling of workforce matters in
procurement, including TUPE and pensions, and a code of practice
relating to new starters that must be incorporated into all council
contracts for services.
These changes make it lawful to take workforce matters into account
in procurement. The Government recognised that a well-motivated
and skilled workforce is essential to deliver quality services and
that councils therefore need to be able to identify and contract
with suppliers who have employment practices that will deliver high-quality
performance reliably.
The Local Government Act 2003 confers new powers on the Government
to require councils, when engaged in contracting-out exercises,
to deal with staff matters in accordance with directions. Councils
are also required to have regard to guidance on staff matters. The
background to this is the commitment made, as part of a package
of workforce measures, following the review of Best Value, to legislate
to make statutory within local government the provisions in the
Cabinet Office Statement of Practice on Staff Transfers in the Public
Sector and the Annex to it, A Fair Deal for Staff Pensions (this
is available on the Cabinet Office website at: www.cabinet-office.gov.uk).
It is intended to use the direction making powers to ensure that
contracting exercises are conducted either on the basis that TUPE
will apply or, in circumstances where TUPE does not apply, that
staff involved should be treated no less favourably than had the
Regulations applied, unless there are exceptional circumstances,
and that transferees will be offered either retention of the Local
Government Pension Scheme (LGPS) or a broadly comparable scheme.
The Act will allow for the Government to issue directions to require
councils, in contracting with other persons for the provision of
services or in circumstances where a contracted-out service is brought
back into the public sector on the termination of a contract, to
deal with staff transfer matters (employment or pensions) in accordance
with any directions made. The Act will require authorities to have
regard to guidance on staff matters issued by the Government.
The Act will provide that the Government will give directions so
as to ensure that councils, in contracting for the provision of
services, secure specified pension benefits. These are, first, that
the contractor is required to secure pension protection for employees
of an authority who are transferring from the authority under TUPE
or who, in a recontracting case, transferred from the authority
under TUPE when the services were first contracted out, have transferred
under TUPE on each subsequent change in contractor and are again
transferring under TUPE in connection with the contract with the
contractor. Secondly, that the contractual terms for the securing
of pension protection for a transferring employee are enforceable
by the employee. Pension protection is secured where the employee’s
rights to acquire pension benefits are the same as, or broadly comparable
to, those enjoyed by the employee before the transfer.
The Code of Practice on Workforce Matters in Local Government Service
Contracts addresses the problem of the ‘two tier workforce’
to end the practice by some suppliers of offering new recruits less
favourable terms and conditions than those of transferred staff.
The aim is to ensure that the provision of high-quality services
is not undermined by poor employment practices for new staff, and
to ensure that competition is based on genuine Best Value, rather
than lowest cost achieved purely by driving down pay and conditions
of employees.
Section 16 Order
The Consultation Paper Working With Others to Achieve Best Value,
Section 16 Local Government Act 1999 – A Consultation Paper
On Changes To The Legal Framework To Facilitate Partnership Working
(DETR, March 2001) contained proposals designed to remove legal
barriers to Best Value authorities entering into partnerships with
the private, voluntary and public sectors. The consultation paper
proposed new powers to encourage joint working and to permit Best
Value authorities to be able to create new structures through which
Best Value can be achieved.
The Government is proceeding with the making of a Section 16 Order
of the Local Government Act 1999, which will provide powers for
Best Value authorities to enter into agreements or arrangements,
with any person for the purpose of exercising any of the council’s
functions jointly with or by the other party to the agreement or
arrangement, and the power to form and participate in companies
for the purpose of exercising any of the council’s functions
jointly with, or by a company. In the exercise of these powers councils
will not be restricted to arrangements which meet the test of ‘well-being’
under the Local Government Act 2000 and the powers will extend to
all Best Value authorities.
New capital finance system
The new Prudential system for local government finance (like the
one it replaces) will set the legal framework within which councils
may undertake capital expenditure and central Government may regulate
that activity. The innovative feature of the new Prudential system
will be the freedom of councils to raise finance for capital expenditure
– without Government consent – where they can afford
to service the debt without Government support. There will be reserve
powers for Government to set limits on borrowing and credit, but
it is envisaged that these will be used only in exceptional circumstances.
Trading and charging
Under the Local Government Act 2003, those councils that achieve
a CPA assessment of good, fair or excellent will have unprecedented
powers to trade and charge. Trading will help create a dynamic and
entrepreneurial local government sector that will increase diversity
and choice in the delivery of public services. The Act will provide
wider powers to trade for all authorities where there is a strong
performance on delivery and where this helps achieve Best Value
in the delivery of public services.
The new powers for councils to trade will be introduced as part
of a new package of freedoms and flexibilities following CPA. The
Government intends that the new power will be available to councils
judged ‘fair’, ‘good’ and ‘excellent’
in the CPA.
The power to trade will only be exercisable through a company structure.
The Act allows councils to act in a commercial way and it follows
that they should be subject to regulation like commercial bodies
(eg on taxation). Best Value authorities will be able to enter into
trading agreements or arrangements with any person for the provision
of goods and materials, staff, accommodation and services. Councils
will be free to trade on a commercial basis (ie charges fixed at
more than cost recovery).
Existing public to public trading under the Local Authorities (Goods
and Services) Act 1970 will continue unchanged, as will the provision
of statutory services, whether or not supplied at a charge. Trading
under the new powers will need to be directed towards the achievement
of Best Value in the related function. Best Value authorities are
responsible for making their own day-to-day decisions as to how
the duty of Best Value should be met, subject to audit and inspection
subsequently. Surpluses on commercial operations under the new trading
power will be available to individual councils to use as they see
fit. However, the Government intends that trading under the new
powers should be conducted on a fully transparent basis and that
councils should not distort markets through the provision of inappropriate
subsidies to trading companies.
The Act will also contain powers that enable councils to charge
for discretionary services. The power to charge contemplates charging
for the cost of the services and not to make a profit.
EU public procurement regime
New provisions are currently being negotiated and are likely to
cover electronic procurement, framework agreements, group purchasing,
environmental considerations and a ‘competitive dialogue’
procedure for particularly complex contracts. The new rules, if
agreed, will be introduced in this country by regulations and are
likely to come into force in 2005. Interim guidance on topics such
as the treatment of framework agreements can be found on the OGC
website www.ogc.gov.uk
Sustainability
Sustainable food procurement is high on the Government’s agenda.
This initiative is designed to help the public sector promote procurement
of food that supports delivery of the Government’s Sustainable
Farming and Food Strategy for England. The objective is to encourage
the public sector to procure food in a manner that promotes sustainable
development and does not discriminate against local and UK suppliers.
Defra guidance and action sheet for buyers is available at www.defra.gov.uk/farm/sustain/procurement/index.htm
The IDeA has prepared complementary guidance on sustainability and
local government procurement aimed specifically at councils’
needs in this area. See www.idea.gov.uk/procurement.
Solace is publishing a summary guidance Sustainable Procurement
– Making it Happen that has been prepared jointly by Solace,
IDeA and WRAP (Waste and Resources Action Programme).
The Sustainable Procurement Group was set up by Defra to integrate
sustainable development into public procurement. It is chaired by
OGC and Defra provides the secretariat. In Towards a National Strategy
for Local Government Procurement, the ODPM and LGA undertook to
ensure links were made to the local government procurement agenda
and that local government’s experience of green procurement
was fed in. The Local Government Procurement Forum has addressed
this as an integral part of its work.
A joint Defra/OGC Note provides guidance on environmental issues
in public procurement to government departments and bodies within
their field of responsibility. The Note, due to be updated shortly,
offers advice on how to encourage suppliers through specifications
to develop environmentally preferable goods and services at competitive
prices. See www.ogc.gov.uk/index.asp?id=400
Small firms
Ninety-nine per cent of businesses have fewer than 50 employees
and these small firms account for around fifty per cent of UK business
turnover.
Small and medium-size enterprises (SMEs) may in the right circumstances
offer better value for money than larger suppliers by:
• Bringing greater competition to the marketplace
• Having smaller administrative overheads and management costs
• Bringing innovation
• Responding quickly to changing requirements
• Being flexible and willing to tailor a product or service
to meet specific customer needs
• Offering high-quality, personal levels of service
• Supplying specialist products and services
The Small Business Service, an executive agency of the DTI, in conjunction
with OGC, has published guidance on the role of small firms in public
procurement. Smaller Supplier...Better Value? describes the added
value and innovation that small firms can bring and it offers advice
on how procurement processes can be shaped in a way that is consistent
with obtaining value for money and compliance with EU procurement
law. It is complemented by a guide to tendering for government contracts.
The Small Business Service and the OGC have launched a ‘Supplying
Government’ web portal, which provides help and advice to
suppliers on tendering for government
contracts and links to other Departments’ web pages (www.supplyinggovernment.gov.uk)
In May 2003, the Better Regulation Task Force (BRTF) published a
report together with the Small Business Council entitled Government:
Supporter or Customer? The report falls into three parts and begins
by examining specific barriers associated with key stages in the
procurement process from finding out about contracts through to
payment. It also focuses on the need to raise the profile within
the public sector of the benefits that can be obtained through procurement
from SMEs. A number of recommendations are addressed to the Government
and Local Government Association.
The BRTF’s proposal to develop an SME-friendly ‘concordat’
is to be taken forward by the Local Government Procurement Forum.
The aim of the concordat would be to focus on ways of streamlining
processes and reducing bureaucracy for small firms. The concept
may be extended to social enterprises, ethnic minority businesses
and the voluntary and community sector (see below).
Voluntary and community sector
There are around 500,000 voluntary and community organisations in
the UK. These range from small, local community groups to large,
established, national and international organisations. Of these
188,000 are registered charities. Some have no income at all and
rely on the efforts of volunteers; others are, in effect, medium-sized
businesses run by paid professional staff.
The sector is important economically. In 2000 it contributed £5.4
billion to GDP and employed 563,000, accounting for two per cent
of the total UK workforce. In addition, it is estimated that in
monetary terms the total value of unpaid work to general charities
in 2000 was £15.4 billion.
The sector also plays a significant role in the delivery of services.
The Role of the Voluntary and Community Sector in Service Delivery:
A Cross Cutting Review published by HM Treasury in September 2002
suggested that many voluntary and community sector organisations
have certain characteristics which make them potentially better
able to deliver services than either public or private sector counterparts.
These characteristics include:
• the ability to draw on specialist knowledge and experience
• unique access to the wider community
• freedom and flexibility from institutional pressures
The Cross Cutting Review concluded that ‘there are areas where
the voluntary and community sector may be best placed to deliver
services’.
The Cross Cutting Review was one of seven announced as part of the
2002 Spending Review. It confirmed that a modern and dynamic voluntary
and community sector has a key role to play in public service delivery
and laid the foundations for a new framework for service delivery
between the Government and the voluntary and community sector.
The Review set out 42 recommendations for improving the way the
funding relationship and mechanisms work; building capacity and
infrastructure support for the sector; and embedding the Compact
in Government across the sector. A number of these are focused on
the delivery of services at a local level. The Active Community
Directorate in the Home Office is leading cross-government work
to implement these recommendations, as part of delivering the Home
Office’s Public Service Agreement “to increase voluntary
and community activity, including increasing community participation
by five per cent by 2006”.
‘Futurebuilders’ was also announced in the 2002 Spending
Review to enable the sector to develop its public service delivery
role. To fulfil this, the fund has three objectives: to overcome
obstacles to efficient voluntary and community sector service delivery;
to modernise service delivery organisations for the long term; and
to increase the scale and scope of voluntary and community sector
service delivery.
The £125 million fund is spread over three years 2003-04 to
2005-06 and is split between eighty per cent capital and twenty
per cent revenue funding.
Since the Spending Review, the Government has built on the conclusions
of the Cross Cutting Review. In the 2003 Budget, the Government
announced a study of departmental involvement with the voluntary
and community sector in local service delivery, and the potential
for going further, in order to inform the next Spending Review.
Social enterprise
Social enterprises are businesses with primarily social objectives
whose surpluses are principally reinvested for that purpose in the
business or in the community, rather than being driven by the need
to maximise profit for shareholders and owners. Their social (and
often environmental) objectives, combined with their entrepreneurial
flair, can provide an excellent basis for the delivery of public
services to their local community.
Most social enterprises are SMEs that can offer the same advantages.
In addition, social enterprises may offer other benefits because
of their closeness to local stakeholders and their focus on achieving
their social objectives, which may contribute to a council’s
sustainable development and community plan objectives.
Options for service delivery include:
• Contracting with existing social enterprises
• Establishing a new, not for profit social enterprise, which
could take on employment of council staff and deliver a service
previously managed by the authority
• Supporting and developing the capacity in local social enterprises
to take on a proportion of a service tailored to local needs
Enabling social enterprises to compete effectively for public sector
contracts is one of the priorities in Social Enterprise: a strategy
for success, the Government’s first strategy for social enterprise,
published in July 2002. The strategy sets out a vision of dynamic
and sustainable social enterprise, strengthening an inclusive and
growing economy. One of the key commitments in the strategy is the
production of a toolkit to provide a source of information and advice
on accessing public procurement opportunities tailored to the needs
of the social enterprise sector. The toolkit, as outlined above,
was published in October 2003.
Community interest companies
The Social Enterprise Unit is working on measures to increase social
enterprise involvement in public procurement, and it is intended
that Community Interest Companies (CICs) will fit in with this work.
To increase expertise on procurement within social enterprise, a
toolkit was published in October 2003 with practical advice on how
to compete for and win public sector business.
Complementary work is going forward to increase understanding of
social enterprise and its potential within the public sector, in
the context of local government procurement. Work is also under
way on facilitating asset transfers from the public sector, taking
account of the development of the CIC. The Government will update
its guidance for councils on discretionary rate relief to reflect
the introduction of CICs.
Race equality
Race equality means ensuring that there is equality of opportunity
for all contractors whatever the ethnicity of ownership. Authorities
should collect data on their contractors, identifying barriers faced
and take action to address such barriers.
The Race Relations Act 1976 and Race Relations (Amendment) Act 2000
place a duty on councils to ensure that their functions are carried
out with “due regard to the need to eliminate unlawful racial
discrimination and to promote equality of opportunity, and good
relations, between persons of different racial groups”.
The CRE has recently produced Race Equality and Procurement in Local
Government which updates and advises public bodies, contractors
and councils on the opportunities and challenges of the Race Relations
(Amendment) Act 2000 in relation to procurement. The guide is supported
by LGA and COSLA and is helpful practical advice for officers, members
and suppliers. See www.cre.gov.uk
©Crown Copyright 2003
All information in this Guidance is checked and believed to be
correct, but cannot be so guaranteed, and the publishers shall not
be liable for any loss suffered directly or indirectly as a result
of its use.
BiP Solutions Ltd, Park House, 300 Glasgow Road, Shawfield, Glasgow
G73 1SQ
Tel: 0141 332 8247 Fax: 0141 331 2652/2792 Email: bip@bipsolutions.com
Web: www.bipsolutions.com
© BiP Solutions Ltd 2004
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