The collapse of Carillion is going to have wide-reaching implications for public sector contracts – which could be good news for smaller and medium sized businesses.
The Social Value Act was introduced in 2012 and required public authorities – including local government and health bodies – to have regard to economic, social and environmental well-being when they gave contracts for public sector works. It was designed to help public sector commissioners get better value for money. This is now the case for any public sector contracts with a total value above about £170,000.
The crash of Carillion earlier this year left many contracts on hold, cost many thousands of jobs, and shook confidence in large scale public contracts. As a direct result, the Government are announcing changes to the Social Value Act which require businesses bidding for public sector contracts to positively demonstrate the ‘social value’ of their business.
Minister for the Cabinet Office, David Lidington, said “We want to see public services delivered with values at their heart, where the wider social benefits matter and are recognised. That means government doing more to create and nurture vibrant, healthy, innovative, competitive and diverse marketplaces of suppliers that include and encourage small businesses, mutuals, charities, co-operatives and social enterprises – and therefore harness the finest talent from across the public, private and voluntary sectors.”
In practice, this should mean businesses with a progressive approach to issues such as the gender pay gap, equality and discrimination should be in a stronger position to compete for valuable large contracts.
David Lidington said that the Government aims to “ensure that contracts are awarded on the basis of more than just value for money – but a company’s values too, so that their actions in society are rightly recognised and rewarded.”