The procurement dilemma

In October 2024, independent think-tank Localis published a research report, ‘New Values: local public contracts for networked social prosperity‘ in partnership with Norse Group on smart procurement.

“New Values” continues the dialogue from its predecessor, ‘True Value: towards ethical public service commissioning‘ by examining how procurement can drive societal benefits. It explores the roles of arms-length management organisations (ALMOs) and Local Authority Trading Companies (LATCos) in supporting local government by aligning strategic goals to genuinely deliver social prosperity.

The Procurement Act 2023 aims to remove barriers that have historically hindered contracting authorities—whether local authorities, central government, or LATCos—from awarding contracts as they see fit. A notable development discussed in ‘New Values’ and championed by Norse Group is the introduction of the Competitive Flexible Procedure. This shift also reframes the priorities in contract evaluation, focusing on the Most Advantageous Tender (MAT) rather than the traditional Most Economically Advantageous Tender (MEAT). Who would have thought that removing the one word – ‘Economically’ would open up so many doors to innovation, social value opportunity and sustainability? The simple fact is that these elements can now become driving factors in supplier selection.

The introduction of the Procurement Act is a step forward in ensuring responsible stewardship of public funds, promoting a move from bureaucratic processes to a proactive procurement approach, and ensuring that suppliers selected for public contracts are the best fit for the needs at hand. Yet, a key question remains: how can public sector buyers balance supporting local SMEs while remaining compliant with legal standards? ‘New Values’ addresses this tension, suggesting ways to support SMEs by reducing tender requirements, like lowering insurance thresholds, dropping the need for audited accounts, and allowing extended tender preparation times.

However, in the current economic climate, budget-stretched councils face a dilemma. Do they award contracts to higher-cost suppliers because of their social or environmental contributions? Do procurement teams have the resources to fully embrace these new opportunities for change? While concepts like economic regeneration and environmental stewardship are compelling, implementing these ideals is complex, particularly given that local government capacity has worsened since 2019. The Local Government Association has advocated for a collaborative effort to refine the Act in a manner that is both efficient and sensitive to the operational realities of councils.

The need for investment in procurement departments and funding mechanisms to help SMEs compete is clear. SME’s need government funding to ensure they can be competitive when selling their wares in those most critical early days. However, support such as SME loans may need to increase if smaller businesses are to thrive in the early stages of contract delivery. After all, economic prosperity remains foundational to social prosperity.

These developments call for a shift in how procurement is viewed, not just as a cost-saving function but as a strategic and developmental force. While most heads of procurement understandably still have cost reduction targets, we should look at procurement as an innovator as well as a negotiator. As ‘New Values’ states, achieving true value-for-money requires local authorities to reconceptualise procurement’s role.

The Teckal exemption and the role of LATCos remain in place, presenting a valuable option for local service delivery and strategic public procurement—a powerful tool when combined with the principles of the Act. Although the Procurement Act’s implementation has been delayed, possibly to align it with the National Procurement Policy, ‘New Values’ suggests this delay provides an opportunity for the new government to embed its commitments.

Whatever the outcome, the LATCo model offers councils additional procurement resources that can help align contracts with local prosperity goals while delivering value-for-money and quality service. The public sector’s capacity issues, compounded by a box-ticking culture, present challenges. For the Act’s vision to be realised, councils may need to think outside the box—or entrust it to a capable partner.

Read the report:
New Values: local public contracts for networked social prosperity