The public sector spends around £8billion each year on goods and services in Wales, and for years, they have been trying to elevate their procurement processes to achieve wider benefits that are above and beyond the simple delivery of what they are purchasing. This has manifested itself into a term called ‘community benefits’. Contracts have been designed to ensure that wider economic and social matters are considered when awarding tenders. In other words, price should only be one of the considerations in awarding public contracts. Other factors that benefit communities, such as local employment opportunities, should, in theory, also be considered.
How successful has the community benefits program been in Wales?
The degree of success of the community benefits programme is open to debate. Communities across Wales have no doubt benefited from the scheme in some shape or form, but it’s also fair to say that lowest price tenders still win a disproportionate number of contracts. The core issue has often been the disconnect between procurement policy and its implementation on ground for various and complex reasons.
What is the Welsh government doing to address the situation?
Welsh Government is trying to change this by putting legal clout behind the policies. This legislation will therefore put a legal responsibility on public bodies to deliver wider outcomes by placing an obligation on public organisations to evidence the wider benefits that they are delivering through their contracts. There’s also the shift from community benefits goals, which have predominantly focussed on social and economic benefits, to wellbeing goals, which, as well as the social and economic bits, will also look to deliver environmental and cultural benefits for communities in Wales.
How will this impact construction businesses?
In practical terms, public organisations will be required to produce objectives and annual reports to report on the delivery of these objectives by collecting evidence and data on the extent to which their wellbeing goals are met. Suppliers will see the impact of this legislation through the contracting process and through contracting management. No legal duties will be placed on businesses; the law will only apply to public bodies. However, the indirect impact on businesses will be significant. Public sector clients will require evidence and data from their supply chains on their delivery of their wellbeing goals as set out in their contracts. For example, level of carbon emissions, waste management, environmental protection and so forth.
A degree of proportionality in the implementation of this law is something the Welsh Government is eager to stress. The level of expectation places on larger companies who have access to more resource will be greater than the level placed on small firms. There’s also the acceptance that not all supply chain activity can be monitored. Each contract will need to prioritise the areas that are most important and be clear with suppliers on what these areas are.
FMB Cymru’s outlook
Assuming the burden placed upon businesses is proportional, FMB Cymru’s view is that in the round, we support the introduction of this legislation. FMB members are small firms who are often part of the communities that they serve. When competing for public sector contracts against larger competitors, who are often based outside the area, , FMB members are far better placed to deliver on wider wellbeing goals than they are on price alone. Steps that take us away from the culture of ‘lowest price wins’ and strives for something better can therefore only be a good thing.
What happens next?
The Bill is currently going through the Senedd and could become law as early as the spring. Once the Bill is established the statutory guidance that underpins it will be formally produced. The informal process of shaping this guidance has already started and the FMB is involved in this work. Welsh Government are very eager to engage with as many businesses as possible, especially ones who are on the coal face delivering public sector contracts day-to-day. If this is you, please get in touch.
Changes to public procurement and how these will impact Welsh builders
Check out this session from the 2022 FMB Building Conference, where Ifan Glyn discusses the public procurement landscape in Wales with Dr Sue Hurrell, Head of Fair Work Procurement for the Welsh Government: