Spring 2009

Community Benefit and Regeneration in Public Procurement

SCOTREGEN - Spring  2009

by Jamie McRorie

Securing local benefit from procurement processes is a longstanding and often frustrating challenge for those looking for added value from regeneration efforts.  In this article, Jamie McRorie of McGrigors LLP look sat how it is possible to resolve competing interests and avoid legal quagmires.

 

The public procurement rules, so often thought of as complex, dry and litigious can be used to procure contracts which are beneficial to local communities – providing the appropriate legal precautions are taken.

 

Bodies spending public money generally have to purchase their supplies, services and works in accordance with a complicated set of procurement rules based on European law. The rules are often thought of as tiresome or even dangerous by public bodies because they are associated with a succession of procedural hurdles and can lead to expensive court cases when things go wrong. But the public procurement rules can be exploited to deliver social goals relevant to regeneration practices. If the correct legal safeguards are observed then community benefit and valuable social goals can be explicitly acquired through the public procurement process and assist in the delivery of sustainable development.

 

The inclusion of 'community benefit' in the procurement process allows a range of social considerations to be built into the delivery of contracts. The aim of such an exercise is to help public bodies create a positive social, ethical and environmental impact through public purchasing. This means that public purchasing can be targeted to achieve a host of goals including:

  • community recruitment and training;
  • ensuring equal opportunities and combating social exclusion;
  • the training of existing workforces;
  • contributing to education;
  • the provision of resources for community initiatives; 
  • the reintegration of disadvantaged or unemployed persons into the community.

 

Real life examples include Glasgow Housing Association's commitment to ensuring employment and training opportunities from its £630 million 5 year housing stock investment, including a stated goal that 10% of the workforce will be new entrants.

 

There is a tension however between an enthusiasm to use the public purse to deliver social objectives and the purely economic rationale of the procurement rules. The rules have been drafted so as to ensure free-market competition and not to deliver community benefits per se. For this reason there are limits to the extent that procurement can be used to deliver regeneration and these limits are patrolled by the UK and European courts. For example a contractor who was rejected from the bidding process on the basis that it was unable to offer long term and sustainable employment contracts successfully challenged the award of the contract to a rival bidder in the European Court of Justice. It was able to succeed in its challenge because the grounds for its exclusion were not based on an assessment of the most economically advantageous tender and that to consider such criteria discriminated against it. This means that whilst it might be understandable that, for example, housing associations face difficulties in ensuring that benefits from contracts remain in the community this does not justify a "buy local" policy discriminating against or disadvantaging other suppliers.

 

Although there are limits to the way in which community benefits may be procured there are procedural methods by which public bodies can achieve regeneration goals through public purchasing such as:

 

  • Ensuring that the community benefits sought fit within the organisation's strategic objectives and that the decision to include community benefit clauses must is taken at the start of the procurement process. Inclusion must not be an afterthought and the particular community benefits must form part of the "core purpose" of the contract concerned; Grampian Housing Association in partnership with Social Firm Scotland recently produced guidance entitled "Buying for Good – A Practical Guide" which forms a good mission statement and guidance document.
  • For procurements which are above the procurement rules threshold figures the community benefit must be clearly set out in both the Official Journal of the European Union contract notice and the contract documents;
  • Technical specifications can be used to precisely define the subject matter of the purchase, provided they do not eliminate or favour a particular tenderer. Community benefit clauses may therefore only be specified in the advance technical specifications of the required purchase where they directly relate to the standard of the contract in question.
  • Referring to minimum standards of ""technical or professional ability" as a criterion to evaluate a bidder's technical capability and knowledge. This means that if the performance of the contract is clearly linked to providing specific community benefit considerations these can be taken into account when selecting the appropriate tenderers. General statements of community benefit are not valid where these do not relate to the specific requirements of the contract in question. 
  • Using specialised award criteria. Case law of the European Court of Justice demonstrates that non-economic criteria may be used to assess bids. The case of Concordia Bus Finland, concerning environmental considerations, established that criteria not of a purely economic nature may be used to assess the award of a contract providing:-

 

- the criteria are linked to the subject matter of the contract;

- the criteria do not give the contracting authorities unrestricted freedom of choice;

- the criteria are clearly outlined in the contract documents or the tender notice; and

- the criteria comply with the fundamental principles of Community law including non- discrimination

 

  • Use agreed contractual conditions to meet social considerations.

With appropriate observance of the strict legal controls on the public procurement process these steps may be exploited to deliver the social policy objectives so essential to the sustainable development necessary in local regeneration.