Government Procurement

Motion made, and Question proposed, That this House do now adjourn.—(Taiwo Owatemi.)

On 1 October, it became mandatory for Government contracting authorities to include social issues like jobs and skills in their procurement processes. That in itself is a good thing, but the social value model they have prepared is flawed.

I welcome the consultation on further reforms to public procurement issued by the Cabinet Office in June. In his related press release, the Chancellor of the Duchy of Lancaster made an explicit connection between the consultation and the Government’s proposals for obtaining social value benefits that are specific to the needs of a community. That aligns well with section 12 of the Procurement Act 2023 and the national procurement policy statement, which connects procurement with the Government’s core missions—for example,

“encouraging suppliers to recruit from groups that struggle to access employment opportunities”

as part of the “Take back our streets” mission;

“removing barriers to entry for young people and under-represented groups”

as part of the “Break down barriers to opportunity” mission;

“encouraging suppliers to recruit from economically inactive cohorts”

as part of the health mission; and

“opportunities for small businesses and social enterprises across the country”

as part of the “Kickstart economic growth” mission.

The Act sets clear objectives that, in effect, call for targeted recruitment and training, and local initiatives for small and medium-sized enterprises. The current position builds on an approach that evolved during the last Labour Government, when a range of local and regional initiatives were developed to target jobs and training opportunities at disadvantaged local communities. The term “community” could refer to people living in a specific geographic area or people who share disadvantages in the labour market, such as the long-term unemployed, young people, ex-offenders or care leavers.

The Joseph Rowntree Foundation’s influential 2002 report, “Achieving community benefits through contracts: law, policy and practice” kick-started this whole approach. Later, the Labour Government published the first UK guidance, “Social issues in purchasing”, in 2006. That was followed by the Scottish Government’s “Community benefits in public procurement” document, which included policy, a methodology and model clauses, and remains widely used today.

Similar toolkits were adopted in other areas. Those included the targeted recruitment and training toolkit produced by the north-east improvement and efficiency partnership, the Can Do toolkit adopted by Welsh housing associations, and the west midlands procurement framework for jobs and skills.

As a proud Glaswegian, I am pleased to say that Scotland was an early adopter of targeted recruitment and training through procurement. A 2014 Glasgow University study that covered 24 contracts identified 1,000 people recruited from priority groups, of whom 38% were recruited as a result of the contract requirements; 200 apprentices recruited, of whom 73% were as a result of the contract conditions and all were still in employment; and 6,700 individuals who had received training, of whom 31% would not have done so without those contract conditions.

I commend the hon. Gentleman for securing this debate on an important subject. He always provides much detail and information to help us. When it comes to procurement, cheapest is not always best. We should consider the very thing that he refers to—the social value—to ensure that we support local businesses and the community. In listening to what he says, I can see things that we in Northern Ireland could and should take advantage of. Will the Minister consider sharing these ideas with the Assembly in Northern Ireland? That would be advantageous not just for the Minister, but for us all.

The hon. Gentleman is right, of course: cheapest is not always best. That is partly what the social value model is all about; it is designed to ensure that there is genuine social value, not simply the cheapest model.

The 2025 version of the social value model extends the scope to all contracts of central Government Departments, Executive agencies and non-departmental public bodies that fall within the scope of the Procurement Act 2023. It then encourages other contracting authorities to apply that approach. As a result, the social value model must now be used on most infrastructure and building contracts as well.

When I had the privilege of leading a council in north Staffordshire, we tried to invent a model that allowed us to use the Public Services (Social Value) Act 2012 in exactly the way that my hon. Friend describes, so that when we were working with a registered social landlord on house building, for example, we could stipulate that a proportion of the bricks should come from the local area and that, in turn, apprentices would be working in those factories. I found that it was a matter of political will, but also that procurement officers sometimes struggled to understand how to quantify social value. Does my hon. Friend have a solution—one that the Minister could then cascade through Government—for working out the social value that we are all seeking to achieve?

My hon. Friend gives an apposite example of some of the problems that can arise. I will not be so bold as to say I have the solution, but I will at least try to set out the problem with clarity, so that the Minister can ensure that his officers are able to provide a proper solution.

The model details eight types of social value, each with several areas of activity. Those cover fair work, training to address skills gaps, support for small business and community business, action for sustainability, crime reduction, overcoming barriers to work, and support for health and wellbeing. Contracting authorities can choose which of those are relevant to a particular procurement, but one element is mandatory: where a type of social value is selected, the standard reporting metric set out in the model must then be used for monitoring and reporting. Herein lies the problem. These monitoring requirements will influence how social value requirements are described in tenders and contracts. A contracting authority using a targeted recruitment and training toolkit would struggle to comply with the standard reporting metrics, as they would not relate to the tried and tested specifications that are used.

Many of the options in the social value model are related to the jobs, skills and SME opportunities that are contemplated in the national procurement policy statement. However, the model appears to be expecting procurement officials to create tender requirements whereby potential contractors will identify labour shortages and community needs and then propose ways to fill these gaps in the delivery of the contract. That may be possible with a services contract, but it is really not workable in a large, complex building and infrastructure development.

What are my concerns? First, apart from the way outputs are recorded, no specific elements of the social value model are mandatory for contracting authorities, so the provision of opportunities for people who are currently disadvantaged in the labour market is not mandatory. Contracting authorities can choose to focus on other activities contained in the social value model.

My hon. Friend is making an excellent speech and a powerful argument. I have been dealing with an advanced manufacturer of metal and steel wires in my constituency that has been put off by the very thing he describes. That company stands ready to support the Government’s mission on clean and green energy—it wants to supply its steel wires to wind farms—but things like this deter it from getting involved in the first place. Does he agree that that needs to change?

I am heartened. When some hon. Members approached me about this Adjournment debate, I said, “Look, it’s extremely boring—you won’t want to be in it,” but to have had three interventions that have been so apposite is really gratifying.

An alternative approach would be for most social value requirements to be included in the tender and contract documents as conditions relating to the delivery of the contract, rather than an item that is scored at the tender stage. Here, a method statement would be required shortly after the award of the contract, but only the winning contractor would have to prepare it. I hope that that goes some way to answering the questions from my hon. Friends the Members for Stoke-on-Trent Central (Gareth Snell) and for Leeds South West and Morley (Mark Sewards).

My third concern is that the social value requirements may not be deliverable in large construction contracts. These have many layers of employer involved in delivering the contract and a significant turnover of employers and workforces at different stages of the contract. That is very different from the majority of service contracts. Key issues arising from this could include: ensuring that the subcontractors who employ most of the workforce deliver the social value requirements and provide the necessary monitoring information; getting highly mobile subcontractors to recruit and train locally based people; and ensuring continuity of employment and training for new entrants when subcontractors have limited engagement with the project and the training requires one or two years of on-site support. The current social value model demonstrates no awareness of those issues. If it feels impractical to achieve jobs and training on a particular project, procurement teams may opt for alternative social value outputs or opt out altogether. That could undermine the high priority given to providing opportunities for disadvantaged groups in the delivery of major projects.

Fourthly, the social value model uses terms such as “people under-represented in the labour market” and “disabled people”. Most applicants from these groups will not be identified on any register or easily categorised for recruitment and monitoring purposes. Indeed, they may not want to be labelled in this way, whatever the standard metrics require. In the toolkits to which I have referred, the focus of attention is on local people’s need for employment and for in-work training and support. Often months or years of employment is needed if new entrants are to become fully productive and embedded in their trade. Targeting comes by recruiting from training and support organisations that work with the target communities, especially local organisations.

I thank my hon. Friend for bringing this important subject to the House. Will he join me in welcoming the announcement that is hot off the press this evening from the Cabinet Office and the Ministry of Housing, Communities and Local Government about how councils, police and fire authorities in England will now be able to reserve bidding for lower-value contracts to local and UK suppliers? This is all about opening up Government work to small businesses and enabling—exactly as he was saying—small businesses and local people to get high-skilled jobs from such Government procurement.

Goodness me! It is very rare that I stand in this Chamber and get such immediate results from the Government. If this is a precedent, it is one that I wholeheartedly welcome. I am delighted to hear what my hon. Friend has just reported is the new Government policy. As I was saying about the Department for Work and Pensions, defining some job vacancies as “new entrant trainee opportunities” and naming local organisations as potential recruitment partners can increase opportunities for local people without damaging competition, and he has just mentioned a very good example. This is especially important in the context of the youth guarantee announced by the Government in September. Likewise, local business support organisations can help increase opportunities for local SMEs. Many combined authorities have a role to play in promoting good practice, on a shared basis, in their regions.

Finally, I am concerned that the current model provides a complex shopping list of what social value might be sought. It leaves procurement teams to unpack what each will involve and then turn that into a tender requirement. This is in a context in which many of the procurement staff involved, especially in works contracts, will be new to social value. I am struck by the critique of the social value approach that was made in the 2024 report published by the Centre for Local Economic Strategies, one of the leading organisations in the field. It says that

“an entire industry has grown up around the demand for methods, measures and consultancy time to help understand and measure social value. As a result, there are concerns that the original purpose of social value and the nuanced social dynamics involved in measuring its impact may be lost to bureaucracy and rigid frameworks.”

I think that sums it up perfectly.

In my view, the current social value model will bring a bonanza for consultants. Both contracting authorities and contractors will feel that they need to seek help to engage with these relatively new requirements. It would be far more efficient to simplify the requirements and equip procurement teams with the tools, systems and training to put these into contracts and monitor delivery.

I thank my hon. Friend the Member for Brent West (Barry Gardiner) for securing the debate. He raised a number of important and specific points, which I will answer shortly. If he will permit me, I will briefly set out the Government’s approach to procurement, not least because it is the first opportunity that I have had to do so as the Minister responsible for procurement.

I want to emphasise that this Government and I see public procurement as an incredibly important vehicle for social and economic change, and not in the slightest bit boring. Public procurement accounts for one in every three pounds of public spending, totalling some £400 billion a year, so it is a huge opportunity and responsibility to make sure that that budget is spent wisely, and that it does everything possible to boost British jobs and growth, and delivers opportunity and fairness across the country.

To follow up on the point made by my hon. Friend the Member for Rugby (John Slinger) about the great announcement that police forces will be able to buy things locally, when will the Minister extend that to ensure that British police services are buying British cars, that the Government car service is buying British cars, that the Motability scheme is using British cars and that the Foreign, Commonwealth and Development Office fleet is using British cars? All those currently use foreign-made vehicles, which is not using British taxpayers’ money for British jobs.

As my hon. Friend knows, the Budget announced progress on that with the Motability scheme, and the Chancellor has spoken many times about the need to buy British. Hopefully, we can start to roll that out and make much greater progress on it. I am glad he welcomes today’s announcement, which I will come to, but whether we are talking about British steel, British shipbuilding, wind farms or, as we saw in the Budget last week, driving innovation and spurring investment across the UK, we need to do far more to ensure that we buy British.

That is also why, just this week, as my hon. Friend the Member for Rugby (John Slinger) said, we have announced measures to allow local authorities to reserve contracts for suppliers in their area. That will help to keep more than £1 billion of potential spend in local communities, and it will benefit small and local firms considerably. This flows from our decision earlier this year to publish a national procurement policy statement that required contracting authorities to consider wider objectives, such as creating local skills, jobs and opportunities, and to maximise procurement spend with small and medium-sized enterprises.

Over the summer, the Government consulted on a range of proposals to go further, including broadening the definition of national security to economic security, allowing greater support for critical UK industries, such as shipbuilding or steel, and plans to introduce a public interest test to support and help deliver a wave of insourcing. The proposals also included further expanding support and opportunities for SMEs, including tackling the scourge of late payments, and, to go to the thrust of the remarks made by my hon. Friend the Member for Brent West, reforming and tightening the definition of social value to see it delivered much more effectively.

We are working through the consultation responses. I have met with a number of businesses, unions and contracting authorities to discuss this further, and we are drawing up plans to bring forward legislation in the next session for a new procurement Bill to deliver these changes.