New Values
Local public contracts for networked social prosperity
Author: Callin McLinden |
In the context of an evolving public procurement landscape, local authorities in England are grappling with multiple challenges and opportunities. An increasing strategic turn in procurement is being reflected by legislative reforms, notably the pending Procurement Bill, which aims to simplify and modernise the system. However, the responsibilities of the new reforms for local authorities are complicated by the fact that the capacity of local government is in a worse state than it was in 2019, despite financial uplift and a widespread recognition of the value of strategic procurement at the local level – as evinced by the 2023 Procurement Act.
At the beginning of a new Parliament, the urgency to re-evaluate public procurement and its relation to national priorities is heightened. New Values builds on previous Localis reports on strategic procurement, providing a comprehensive understanding of the current state of public procurement, providing actionable insights to guide both policy and practice in anticipation of public procurement reforms, in the wake of the new political cycle kick-started in July 2024.
Download the executive summary and recommendations
Key Points
A new regime for strategic procurement
The February 2025 implementation of the Procurement Act, building on the UK’s departure from EU procurement rules presents an opportunity for a more strategic, socially-minded approach to public procurement. The new regime provides greater flexibility in procurement practices, allowing local authorities to move away from simply selecting the lowest bidder and instead prioritise broader value-for-money considerations, including social value and local strategic priorities.
The rise of insourcing and hybrid delivery models
There is a growing trend of insourcing and hybrid models of public service delivery. Insourcing has gathered political momentum in recent years and while outsourcing remains an important part of the delivery mix for most councils, a shift towards hybrid models that combine elements of both is increasingly evident across the sector. This shift is driven by a desire for greater control over service quality, cost management, and a recognition of the limitations of traditional outsourcing models. There is potential for cross-boundary collaboration, using Local Authority Trading Companies and expanding upon the housing-based arms-length management organisation model to facilitate this transition.
The expansion of ‘value’ in value-for-money
Across local government, the concept of value-for-money is continuing to expand beyond purely economic measures to include social and environmental considerations. The report emphasises the growing importance of social value in public procurement, driven by the Public Services (Social Value) Act 2012 and evolving social attitudes. Local authorities are increasingly considering the broader impact of their procurement decisions on communities and the environment, incorporating factors like community well-being, environmental sustainability, and ethical labour practices into their evaluations.
The strategic capacity gap
Local authorities face challenges in effectively managing public contracts, including a strategic capacity gap. Despite the potential for strategic procurement and general enthusiasm within the sector, councils – particularly smaller ones – often lack the resources, expertise, and experience to effectively manage complex public contracts. This capacity gap can hinder their ability to implement innovative procurement strategies, manage risks, and achieve strategic goals. Increased investment in capacity building and support for local authorities is needed to overcome these challenges.
Recommendations
Central government
- Central government should launch a local government capacity building programme to enhance the staffing and training of procurement departments and ensure that the intended aims of recent reforms can be met at the local level.
- To ensure strategic procurement can be carried out successfully at the local level, there is a need for greater clarity in legal definitions and scenarios around the new regime, particularly in the context of a drive to hybridised and insourced models.
- Central government should conduct economic and social impact studies on local authorities and their public contracts to assess strategic capacity and resource allocation in relation to upcoming reforms at the local level, with a view towards tailored and sustained central government support where it is needed most.
Local government
- To drive social prosperity, councils should integrate procurement strategies with wider socio-economic objectives, as defined by local understandings of wellbeing and prosperity.
- As part of this process, it is important to take advantage of the new reforms to tailor contract design to local economic needs such as the privileging of local SMEs or development of training pathways.
- When approaching new public contracts, councils should consider a hybrid model – particularly regarding the use of LATCos and arms-length delivery vehicles to deliver strategic goals across public contracts.
- Councils should emphasise dynamic contracting, where local contracts are designed with mechanisms that allow for periodic review and adjustment of terms – making use of the new procurement regime to ensure local objectives are being met.
- In the context of an insourcing drive, given capacity constraints in local government, councils should consider joining together to set-up or make use of delivery vehicles for strategic assessment of administrative and managerial control over public service contracts:
- County, unitary and other regional authorities: consider the possibility of setting up an arms-length body to take on the administrative and managerial functions contracts among groups of local authorities
- District and constituent authorities: Consider the possibility of reshoring relevant administrative and managerial functions to be contracted out to an arms-length body at the regional or sub-regional level
General
- As we end one political cycle and begin another, it is important that momentum is not lost and that central government continue ongoing dialogue and collaboration with local government, combined authorities and other stakeholders to ensure that public contracting for social prosperity continues to be realised across the country.
- As part of this, both local and central government must adopt non-ideological, evidence-based approaches to procurement strategy, to ensure best local outcomes, maintaining a pragmatic and socially-inclined mindset.
Research kindly sponsored by:
