The Bevan Foundation
Public sector contracts in Wales are worth big bucks. It’s estimated that nearly £7 billion a year is spent by public bodies, on everything from construction and social care to cleaning and catering. How that money is spent and the ways in which contracts are managed is about to change, thanks to a new Welsh law.
Politicians have long wanted to get a bit extra out of their spending. Community benefits, in which contractors ‘give back’, for example by providing training or donating time or goods to local good causes, have become the norm, especially in construction. ‘Ethical employment’ has also been encouraged, with suppliers and contractors being asked to pay the real Living Wage and prevent Modern Slavery. But to date all of this has been voluntary rather than statutory, with public bodies and businesses which contract with them being able to set their own terms (within the law of course).
The new Social Partnership and Procurement Act, which received Royal Assent in May 2023, will change how public bodies approach procurement in future. Despite the title, the purpose of the Act is not to change public procurement for its own sake, but to increase ‘fair work’ in Wales. Fair work has been a concern of Welsh Government for some time, but its options to effect change are limited as employment law is not devolved. The Social Partnership and Procurement Act therefore uses the levers of social partnership – which brings employers and employee representatives together – and public procurement to take forward fairness in employment.
The Act includes a fair bit of ‘process’, such as putting a Social Partnership Council on a statutory footing, requiring public bodies to prepare procurement strategies and consult with employees, and prepare reports. But the real impact rests in how public bodies purchase goods and services.
Public bodies will be subject to a duty to procure in a socially responsible way. All procurement will be required to be in line with social, economic, environmental and cultural well-being objectives. There are additional provisions in respect of construction-related projects over £2m, outsourcing contracts of any size and larger goods and services tenders, and it is here that the biggest changes will occur. Two new duties apply to these kinds of contracts.
The first duty aims to protect the terms, conditions and pensions of any staff transferring from public bodies to a contractor, as well as ensuring that new joiners to a transferred-out workforce are employed on terms that are no less favourable. This goes further than the provisions of TUPE, and in effect mean that if contractors are to compete with in-house provision, they will have to do so by offering productivity gains, cutting employee numbers or making other cost savings.
The second duty requires the procuring body to ensure that socially responsible contract terms, including those in respect of unfair or unlawful employment, are applied throughout supply chains. This is especially significant in construction where long and complex sub-contracting arrangements can see the original contract terms watered down if not lost altogether.
When tendering for public sector contracts, all would-be suppliers and contractors will need to show how they meet the Act’s new requirements. This is not just about taking on a few local apprentices or refurbishing a children’s playground as ‘community benefits’. It’s about being a fair work employer, for example paying employees the real Living Wage, providing occupation sick pay, and having a mechanism in place for listening to employees’ voices.
The Act’s direct effects will mainly be felt in the main areas in which public bodies spend, such as construction, facilities management and utilities. There’s likely to be less of a direct impact in sectors such as retail and hospitality where spending is much lower. But even in these low-spend sectors, the provisions for dialogue between employers and employees, plus potential spill-over effects from other sectors, may well help to drive up terms and conditions at work.
No doubt there will be complaints from some parts of the business community. But for the estimated 144,000 employees in Wales earning less than the real Living Wage hourly rate of £10.90 an hour, fairness at work cannot come soon enough.