The Government has released new statutory guidance, the National Procurement Policy Statement (NPPS) and several Procurement Policy Notes (PPNs) regarding social value under the Procurement Act 2023 (the Act). In this article, we review the NPPS and PPNs relevant to social value and their implications for contracting authorities.
National Procurement Policy Statement
Delivering value for money lies at the heart of any procurement exercise. Transparency is a core requirement in achieving this and is something that is referred to throughout the Act.
The NPPS sets out the Government’s strategic priorities for public procurement and contracting authorities must consider its policy objectives during procurement exercises. It stresses that this isn’t solely a matter for procurement teams, but also for strategic leadership and key decision-makers within contracting authorities.
The NPPS’s three priorities are:
- Driving economic growth
- Maximise spending with SMEs and VCSEs to boost local economic growth.
- Ensure suppliers provide high-quality jobs with fair pay and progression opportunities.
- Adopt a pro-innovation mindset through early market engagement.
- Delivering social and economic value
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- Maximise public benefit in communities, such as in deprived areas.
- Support national missions and local/regional economic growth plans.
- Ensure suppliers tackle bribery, corruption, fraud, modern slavery, human rights violations, environmental impacts, and comply with legal obligations, as well as preventing late payment of invoices.
- Building commercial capability to deliver value for money and stronger outcomes
- Manage contracts effectively and collaborate with other authorities.
- Follow best practices from the Commercial Playbook.
- Ensure procurement and contract management skills are adequate within the contracting authority.
The NPPS doesn’t apply to Wales (there is a separate Welsh procurement policy statement, which we expect to be updated under the Act in the next 12 months). Equally, it does not apply to call-offs under framework agreements or dynamic markets, nor to private utilities.
PPN 001
PPN 001 does not expressly refer to social value in its content, but its overriding principles have a social value ethos.
Both the Act and the NPPS, set out an objective to work with SMEs and VCSEs. In-scope organisations must set a three-year target for direct spend with SMEs from 1 April 2025, and a two-year target for direct spend with VCSEs from 1 April 2026. They should also report their results annually (no later than 30 September), and these must be signed off by the Department’s relevant Minister.
Whilst the PPN applies to central government bodies, their executive agencies and non-departmental public bodies (NDPBs), other contracting authorities (see exclusions in the PPN) may choose to apply the approach set out in the PPN.
PPN 002
Through PPN 002, the Cabinet Office has updated the Social Value Model to support adherence to the principles set out in the NPPS. Similar to PPN 001, PPN 002 applies to central government bodies, their executive agencies and NDPBs, but other contracting authorities (see exclusions in the PPN) may choose whether to apply the approach. For authorities that choose to use it, it offers a valuable tool for designing the scoring methodology when evaluating tenders.
From 1 October 2025, PPN 002 must be applied to procurements commenced under the Act. However, for procurement commenced under the Act before this date, contracting authorities can choose to apply this PPN or PPN 06/20, with the Social Value Model being considered at all stages of the commercial lifecycle.
There are similarities between PNN 06/20 and PPN 002. These include requiring in-scope contracting authorities to assign at least 10% of the total score weighting to social value, with social value commitments reflected in the contract as either terms, or key performance indicators. They both also require local job opportunities to be published through Government websites.
What does this mean for contracting authorities?
While there’s a lot to digest and several potential risk areas where contracting authorities can slip up, the guidance provides useful examples on how contracting authorities can provide social value.
However, one thing that’s not addressed in the guidance, is how to deal with conflicting priorities. We know that contracting with SMEs and VCSEs is a good way to create social value under the Act, with another objective requiring suppliers to provide opportunities for progression. Local SMEs may struggle to offer as much scope for progression as larger commercial enterprises, which raises the question: how should the contracting authority assess this? Similarly, if an SME is not based locally and is bidding against a big corporation with a local head office, how should the authority assess who is delivering better social value?
The Cabinet Office has sought to broaden the definition of social value to make it accessible for all—a change that is welcomed. However, the recent changes may make social value too broad, to the point that contracting authorities are at greater risk of challenges. Therefore, it’s essential that contracting authorities understand their priorities before tender, to ensure they’re precise, fully considered and clearly documented in tender documents. If a social value priority is too vague or not specific to the procurement, then it’s likely to cause issues for the contracting authorities and any awarded contract.
How should contracting authorities tackle this?
Document your decisions.
If a contracting authority can provide a clear audit trail on how it reached a decision, then it’s one step closer to successfully defending a challenge. Contracting authorities can only work in line with the guidance, if they can prove they acted pragmatically, reasonably and in a fair manner to all bidders, with evidence to support their decision-making. This will help to reduce the risk of a successful challenge.
Conclusion
Social value is crucial in procurement preparations and many authorities are keen to incorporate social value obligations into their procurements. Complying with the NPPS and the PPNs is essential if contracting authorities are to avoid risks and challenges. Suppliers should also familiarise themselves with these documents to better navigate the procurement process.
How can we help?
For further information about issues raised in this article, please contact a member of our Procurement team.
