Procuring Prosperous Place-making

The P word (Procurement) has entered regeneration parlance over the last three decades and created a new industry, similar to the health and safety industry, with a risk averse culture, a huge ability to say NO and virtually no capacity to innovate.

But cracks may finally be starting to appear in this edifice.

Last week saw the final Lords stage for the Public Services (Social Value) Bill that moves local authorities from having the power to take economic, social and environmental well-being of their communities into account when letting public contracts to being required to take these factors into account in procuring public services.

This is also a fundamental step in implementing the predator/producer or responsible capitalism approach (terminology dependent on your political positioning) to public procurement markets.

Public procurement is very significant in private markets and the standards required in public procurement often become standard practice in private sector procurement and businesses that are successful in public procurement can create a competitive advantage in other markets – outsourcing being the most obvious recent example.

The new Act may also drive a change in culture from the one created by the Public Contracts Regulations 2006 – The UK’s version of the requirements of European Council Directive 89/665/EEC (currently in the process of change)- where contract bidding pre-qualification often started with the need to pass some numeric threshold (amount of professional indemnity insurance or number of staff say) rather than a quality threshold. The Government changed this to an extent earlier this year.

Ironically 2006 was also when the Sustainable Procurement Task Force (SPTF) reported. In the foreword to that report its chairman, Sir Neville Simms, said ‘imagine a government that is committed to sustainable development, that wants to create a strong, healthy and just society, here and overseas, that endeavours to live within environmental limits and wants to move towards a more sustainable economy. If that government could harness the purchasing power of [its] business, imagine what an impact it could have.’ Well yes, just imagine….

In design procurement, the Regulations led, financial box ticking approach has tended to mean that large architecture firms, who have long since lost any design flair possessed by their original partners (I could name names but just cast your eye down the AJ100 list (based on size not quality), secure much of the public sector work. As a result many public buildings have not achieved high design quality during this period.

Schools have been something of an exception to this as procurement has valued design quality and private sector PFI providers have employed multiple high quality architects in their bids (although there have been fall outs and tears and reversion to lowest cost, lowest quality, on occasion). Still the appearance of schools on Stirling Prize shortlists together with the odd winner (emphasis on the word odd) has shown that this approach can be successful. This trend was brought to a juddering halt following the last general election as the ‘cost of everything, value of nothing’ brigade gained control of the asylum.

In the place-making world we have long since moved on, in most places, from the local authority estates team who would put a city council ‘for sale’ board up and wait for offers. We have for some time in the world of developer procurement (or sale of publicly owned development land depending on your point of view) seen the use of evaluation matrices that take into account non financial issues and give them a score which is balanced with the financial bid.

In an infamous example a few years ago, two different Regional Development Agencies put two similar inner urban, brownfield, canal side sites on the market in two different core cities at the same time. One had an evaluation matrix that was 50% money and 50% social, design and sustainability and in the other it was 98% money and 2% design.

Needless to say, the second of these procurements got the horrendous scheme it deserved (which luckily didn’t go ahead as it was downed by the property crash).

The Public Services (Social Value) Act is not the last word in this move down the path to better procurement and it has taken a long time to get even this far since the SPTF said ‘Sustainable procurement – in short using procurement to support wider social, economic and environmental objectives, in ways that offer real long-term benefits, is how the public sector should be spending taxpayers money. Anything less means that today’s taxpayer and the future citizen are both being short-changed.’

The policy landscape is littered with abandoned good intentions in relation to these aspirations as the procurement industry has outlived political enthusiasm and reverted to type again and again. The simple message, that procurement is about maximising value, not minimising cost, keeps getting lost.

Even now, Government has deliberately removed procurements of works from the scope proposed by the Bill’s sponsor, Tory MP Chris White, although in the debate the minister emphasised that the Government supported the principles in relation to all procurement.

The minister specifically drew attention to the Best Value Guidance issued to local authorities by Eric Pickles at the end of last year. This guidance says ‘authorities should consider overall value, including economic, environmental and social value’ when considering contracts.

The political thrust of the current approach is pretty narrow and primarily about seeking to promote the interests of social enterprises and small business rather than to capture wider concepts of social return on investment. There are many gaps in the Government approach that mean that many Government agencies and Government policies (like Big Society and Localism more widely or community land trusts for example) are not specifically covered.

There are a variety of other changes that could be usefully be made on the journey towards responsible capitalism.

One of the potential changes would be to the culture of the public procurement industry. In the same way that Daniel Moylan, the Conservative councillor in Kensington and Chelsea, showed great courage in driving through a hugely important and innovative change in highway design (Kensington High Street) the same leadership will be required to resist the naysayers in the procurement industry.

In London at the moment the procurement of repairs and maintenance of public housing looks likely to be undertaken on a pan London basis. This could easily spell the end for the smaller, more locally based firms who give so much to their local communities including the recruitment and training of local workers from deprived communities and the support of local community organisations. A very sophisticated approach to procurement (unlike, for example, the approach to procuring the Work Programme) will be required to maximise the social, economic and environmental value of this procurement and many are questioning whether the political consensus exists to achieve this.

In many places current practice seems to be to only have faith in the financial element of bids, to minimise the proportion of scoring of non financial value and for the process of evaluation of the non financial aspects to be massaged to secure the ‘desired’ result or to be undertaken by unqualified staff.

There is lots of helpful (if obtuse) old school guidance around including from the former Office of Government Commerce on development agreements, the EU Land Sale Directive, HCA Delivery Partner Panel and the General Disposal Consent that shows numerous ways in which developers can be procured simply and how non financial considerations can be taken into account but the procurement industry tends to add multiple layers of obfuscation and poor practice that produces bad results.

There have been some small signs this week of hope that new people with energy and commitment are going to enter this field.

Bioregional is promoting its One Planet Open Source approach which is finding supporters amongst local authorities who are seeking to use it in a variety of ways including in the procurement of developers for public land.

Similarly the new head of Design Council CABE has announced that they will be looking to be able to give procurement advice which will no doubt cover both design and developer procurement.

And finally the Royal Institute of British Architects will shortly be publishing a report that deals with the abject state of British procurement and proposes routes forward towards a better approach.

Back in 2006 the SPTF did not cover the procurement of developers for public land because it didn’t show up as one of the big areas of public spend (in place-making the public sector receive cash and the private sector spends it). In 2012 the Public Services (Social Value) Act does not cover works procurement or land disposal.

This leaves a nice gap to be filled by an entrepreneurial organisation. A guide to best practice developer procurement to optimise financial, social, economic and environmental outcomes from place-making that supports local political leadership and is successful in transforming procurement industry culture would hit the spot nicely.

  • John Keyes

    An important issue. However, I fear things are moving in the other direction. The trend for the public sector to outsource procurement itself as a cost cutting exercise is leading to a “one size fits all” approach which can only reduce the attention paid to non-financial (i.e quality) considerations in the procurement of any work or related service.

  • James Howard

    Very important issue and one of the key reasosn why so many places fail. Is there a body of evidence that justifies the long term benefits of a qualitative approach over the short term approach?