A partner at London-based firm of public law specialists, Sharpe Pritchard, says that the recommendations from the Institute for Public Policy Research (IPPR) could bring certain benefits but not without risk.
The IPPR has suggested that the Social Value Act 2012 should be extended to cover procurement of construction and engineering contracts and that public bodies to “account for” rather than simply “consider” social value created in a procurement process. Meanwhile, Shadow Chancellor, John McDonnell has argued that the top earners at firms supplying the public sector should be paid no more than 20 times the lowest paid employees.
Justin Mendelle, Head of Construction at Sharpe Pritchard, said: “I don’t think anybody could disagree with the sentiment that public money should be used to drive better outcomes. The IPPR is also right to point out issues with ‘crude lowest cost measures’ and the challenge of awarding contracts to local businesses.
“The question is how this can best be achieved in the context of current procurement rules and the wider political climate.
“The suggestion of extending the scope of legislation to include construction and engineering contracts would certainly significantly widen its reach.”
However, he added: “The proposals would add another layer of complexity for public bodies and introduce more stringent requirements when it comes to public procurement.
“A number of companies, some of them household names, may well struggle with the changes that are being suggested regarding the pay ratios. This in turn could affect the ability of public bodies to actually award contracts to those entities that currently deliver a wide variety of services and undertake significant construction projects across the country.
“There is a real risk that dramatic changes of this nature could prevent a large number of current suppliers and contractors who serve both Central Government and local authorities from bidding for future contracts, with not enough other providers out there who can meet the public’s needs. The changes would therefore need to be carefully considered when being rolled out, to reduce the risk of unintended consequences.”
This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published.
