I have received notice from the Minister of Finance that he wishes to make a statement. Before I call the Minister, I remind Members in the Chamber that, in light of social distancing being observed by parties, the Speaker's ruling that Members must be in the Chamber to hear a statement if they wish to ask a question has been relaxed. Members participating remotely must make sure that their name is on the speaking list if they wish to be called. Members present in the Chamber must also do that, but they may do so by rising in their place as well as by notifying the Business Office or Speaker's Table directly. I remind Members to be concise in asking their questions. This is not an opportunity for debate per se, and long introductions will not be allowed.
Last December, I updated Members on the restructured Procurement Board. As part of that restructuring, permanent secretaries were replaced by procurement practitioners and representatives from the private sector, the social enterprise sector and the trade union movement. The purpose of that change in membership was to ensure that procurement policies will be co-designed by people who develop contracts and the companies and workers who deliver those contracts. As part of that restructuring, it was agreed that the board's procurement guidance notes would go to the Executive for approval. Elevating the status of those notes from guidance to Executive policy was intended to ensure better and more consistent procurement practice across government. At the time, I highlighted social value as one of my priorities for the new Procurement Board. That is important because, each year, the Executive spend £3 billion, which is approximately 25% of their DEL budget, buying goods, services and construction from the private and third sectors. That spending power can and should be harnessed to advance our Programme for Government outcomes. To do that, we need to consider the cost and quality of what we buy and the broader impacts on society. However, tenders are typically scored on the basis of cost and quality only.
(Mr Principal Deputy Speaker [Mr Stalford] in the Chair)
Today, I can announce that a new policy on scoring for social value has been agreed by the Executive. Considerable work has gone into developing the policy. An initial paper was brought to the Procurement Board's first meeting in February. The feedback from that discussion was used to develop a more substantive policy paper, which was presented to the board in April. In May, an innovation lab was held with a range of stakeholders to finalise the policy and identify the support needed to implement it effectively. The main request arising from the lab was for a lead-in time of at least nine months before the new policy comes into effect. That is to allow for training to be rolled out to procurement practitioners and small organisations bidding for contracts. It will also allow time for business cases to build in any additional financial costs arising from the social benefits that are included in contracts.
The lab also highlighted the fact that this is a step into the unknown and that there may be contracts where it is not possible or appropriate to apply an aspect of the new policy. Therefore, if a Department wishes to opt out of an aspect of the policy, it must attain the approval of the relevant Minister. Opt-outs must be strongly justified by the characteristics of the specific contract and must be reported to the Central Procurement Directorate (CPD). That is a high bar, and Ministers are required under the ministerial code to abide by it. The final policy, which incorporated that feedback, was approved by the Procurement Board in June and by the Executive subsequently. I thank the board for working diligently and constructively to develop the policy and for reaching consensus on what will be a transformation in procurement practice. It is a testament to the excellent work of the Procurement Board that, when I brought the policy to the Executive, it was very much welcomed by all Ministers.
The new policy mandates that, from 1 June 2022, tenders must include a minimum of 10% of the total award criteria to social value. That minimum weighting will apply to the thresholds that are set out in public contracts regulations: service contracts valued above £123,000; and construction contracts valued above £4·7 million. Those contracts make up approximately 97% of total procurement spend. From 1 June 2023, the minimum weighting will, subject to review and Executive approval, be increased to 20%. That phased approach was requested by all stakeholders to help everyone to adjust to the new scoring arrangements in a smooth and managed way. It is worth emphasising that Departments can score for social value before 1 June 2022, they can score for social value on contracts below the thresholds, and they can assign a weighting of higher than 10%. The purpose of the policy is to set minimum standards.
The new policy underlines the importance of considering social value at the earliest possible stage. It encourages Departments to think about social value as part of the business case process, before the procurement phase gets under way. It recommends that Departments consult with communities affected by the procurement to identify the most feasible and beneficial way in which to promote social value. Departments are also required to consider the potential to reserve contracts for businesses whose primary aim is the social integration of disabled or disadvantaged persons.
My Department recently used that provision to award a contract to Ulster Supported Employment Limited (USEL). When I visited USEL a few months ago, I witnessed at first hand how it delivers an excellent service to government while adding social value by employing people with disabilities. I encourage all Departments to make greater use of that facility, and, to that end, Social Enterprise NI is developing a directory of social enterprises that could benefit from reserved contracts.
A strong message from our consultation with stakeholders was the desire for a standard framework for scoring social value. The purpose is to ensure that social value is assessed in a predictable and consistent manner. At the same time, Departments must have flexibility to select measures of social value that are appropriate to the specific contract. To balance those two objectives, the policy provides a framework of indicators that Departments can draw on as is relevant to the contract at hand. Those indicators are linked to Programme for Government outcomes, ensuring that procurement spend contributes to the Executive's objectives. They include contracts that create jobs for people in deprived areas; maximise security of supply by, for example, minimising the proximity of supply chains to the point of delivery; deliver environmental benefits, including those that facilitate the transition to net zero; safeguard the mental health of workers; and allocate a percentage of the budget to artwork or cultural activities.
While Departments will select the indicators that are relevant to the contract at hand, some social value considerations will be mandatory. If we are to eradicate poverty and create a fair and cohesive society, we have to tackle low pay. The Living Wage Foundation (LWF) provides an annual estimate of the minimum hourly wage that would provide a full-time worker with a reasonable standard of living. It currently stands at £9·50 an hour, compared with the legal minimum of £8·91 an hour. From June 2022, payment of the living wage as calculated by the Living Wage Foundation will be mandatory for all contracts. Given the Executive's significant spending power, that will be a major step forward in ending poverty pay. Any additional costs arising from that condition should be incorporated into business cases so that they are borne by government and not by businesses. Companies will also be required to adopt fair work practices for workers, which are defined by the Carnegie Trust as including terms of employment, work-life balance and workers' representation.
Departments and organisations that tender for government contracts will now begin to prepare for a new era in which social value is a key component of public procurement. Training and guidance will be developed to assist with that preparation. It is important that those who design and deliver contracts have a common understanding of the new requirements and how they will be applied in practice. Reporting arrangements will be established so that the impact of the policy can be assessed and any changes needed can be identified. I expect that the policy will evolve and develop over time. We are now also in a position to look at the legislation required to underpin the policy.
The policy ushers in a new era for the Executive to use their spending power for the common good. Scoring for social value will be of particular interest to social enterprises and community groups, which exist to deliver social benefit. It will also be good news, however, for many private enterprises that want to pay their workers a living wage and protect the environment but are worried that, if they do the right thing, they will be undercut by a lower bidder. Under the policy, good companies will be rewarded rather than penalised when they bid for government contracts. Rather than encouraging a race to the bottom, it sets high standards for how private and social enterprises conduct their business. I commend the policy and welcome Members' questions.
I thank the Minister for his remarks and for meeting me earlier today to discuss the statement. The Committee for Finance has previously taken evidence on social value in procurement and had hoped that related legislation would be brought forward in this mandate. Further clarity on the scoring of social value and the evaluation of public contracts would therefore be welcome.
If I may, Mr Principal Deputy Speaker, I have a question with two parts to it. In his statement, the Minister mentions the roll-out of training to procurement practitioners and small organisations. What will that training be, in general terms, and has it commenced? The Minister also mentioned the Living Wage Foundation and an increase in the hourly wage from £8·91 an hour to £9·50 an hour. Does he have an estimate of what that will equate to across the public sector annually?
I thank the Member for his comments and thank the Finance Committee for its cooperation in the development of the policy. The Strategic Investment Board (SIB) has been tasked with developing a level of training and with developing what will ultimately become reporting and monitoring.
That will be made available to those who are designing contracts, obviously, but also to those who may be on the receiving end, who bid for the contracts.
On the living wage, as I said in my statement, we want to see the Living Wage Foundation's definition of the living wage, which is more than the minimum wage, built into the business case for the contract so that the burden would not necessarily be imposed on the contractor. The total cost added as a result would depend on the contract, so it is not possible to give a standard cost; it would very much depend on the size and nature of the contract.
Councils operate under a different framework for procurement, but we have had some discussions with councils, and quite a few of them have expressed an interest in incorporating social value into their procurement practices. My team on the procurement side in the Department will work with councils to give them advice, even within the framework that they currently have, to make sure that they can take maximum advantage of that ability to achieve social value. If there is a legislative change required to the councils' framework for procurement, it would be a matter for the Department for Communities. Much progress can be made on that in the time ahead, and some councils are interested in that work.
Minister, have you engaged with businesses in the small business and microbusiness sector, many of which create huge social value but, too often, are frozen out of government procurement? What is the Minister doing to unlock the social value of those small businesses?
As the Member knows, we changed the nature of the Procurement Board and brought people onto it. They are not there just in an individual capacity; they are there as representatives of sectors. Some of the sectors, including the social enterprise and the small and medium-sized enterprise sectors, have a voice on the board. We want them to act as conduits to their sectors, and if, for example, people who are involved in microbusinesses are raising issues about inaccessibility to government contracts, we would like to hear about them. Of course, they can talk to our procurement team in the Department as well, but they have a voice at the Procurement Board through the representatives of the various sectors. We want to ensure that there is fairness in the awarding of contracts so that people have a reasonable chance of accessing them and that, in this policy, we add social value to all that we do to make sure that it reflects the Executive's priorities as well.
I thank the Minister for his statement and declare an interest as a member of the all-party group on social enterprise. This is something that we have been calling for for some time, and it is a good-news story in that respect. I agree with other Members: I would like to see the policy extended to arm's-length bodies and councils and to see training for the small businesses that can avail themselves of this. Will it be extended within the next two years? Will people be able to avail themselves of 100%, or will it be capped at 20% by 2034?
It is very much an evolving policy. We are setting a score target for a contract. Initially, starting next June, the target will be 10%, which is a figure that was reached after consultation with the people on the Procurement Board who represent various sectors. That is a minimum target, so there is nothing to stop Departments going for more than that or, if they have the capacity, starting it now. In June 2023, we move to 20% as a minimum target. Again, that can be exceeded if Departments have the capability to do so or the contract allows for it. What we are setting are very much minimum standards.
It is also an evolving policy, which is why we have a reporting mechanism with it. My Department will produce an annual report, and, as I said in response to an earlier question, SIB is working up how that will be delivered, implemented and reported on so that we get an ongoing sense of the policy's impact. I see it very much as an evolving policy. If there is scope for setting a higher minimum standard, I am sure that that can be looked at in the future.
Thank you, Minister. I declare an interest as chair of the all-party group on social enterprise. I welcome the positive move towards embedding social value in all central government and third-party contracts. It is an important step forward. However, Minister, in the all-party group, we have an objective and goal to see this embedded in legislation. When will there be a timeline for a social value Bill, and ultimately Act, in Northern Ireland?
I know that the Member has a keen interest in this, and I have welcomed his input. Obviously, first, we wanted to get the policy in place and get it to the Executive. He knows that I and all Ministers have conversations around the Executive table most weeks about the tight time frame for the significant amount of legislation that is coming through. It is my ambition to legislate for this within this mandate. Now that the policy is in place, we need to check that that can be done. If it can be done, we will do it. If it is not possible within this mandate, given other competing Executive Bills and the short time frame, I will want to get it to a place where legislation can follow quickly in the new mandate. However, if it can be done in this mandate, we will do it.
I welcome the content of the statement. Others have talked about aspects of it such as the living wage and creating jobs in deprived areas. As my party's environment spokesperson, I welcome that the policy delivers environmental benefits and transition towards net zero. On page 5 of the statement, it says:
"A strong message from our consultation with stakeholders was the desire for a standard framework for scoring social value."
Will the Minister outline how scoring for the social value policy will be enforced?
The Member has identified a key part of the policy: we should have a standard process so that people across all Departments and people who bid for contracts become familiar with how the process works. That will give the policy a much better chance of having an outcome.
It will be enforced because it will be built into contracts. It will be part of a contract award. If people default on the contract, depending on the nature of it, there will be penalties. We want to make sure that that standard approach is maintained across all the Departments. That is why, every year, the Department of Finance will report on how it is working. Where Departments have sought deviation from it in specific circumstances, the Department of Finance will report on how that worked and why it came about. We intend that there will be an ongoing monitoring and reporting mechanism. It will be enforced in the way that all contracts are enforced: if people get a contract, they will subscribe to the terms of that contract and be expected to adhere to and honour it.
The Procurement Board is working on a range of issues, including going through and updating existing procurement guidance and discarding any that is not relevant to the current era. There are initiatives to improve the delivery of major capital contracts, on which there was a report recently. Addressing supply chain resilience has been one of the main features during the pandemic, and there is a timely piece of work on that. There are also measures to approve the commissioning of community-based services. That is some of the ongoing work. A programme of work has been outlined in the Department, and I am sure that it is available to members of the Committee.
My party welcomes the statement. Minister, you have outlined the change in that this now an Executive policy and the change in guidance. What monitoring mechanisms will there be for this? What surety will you have that accounting officers are following this, and, if they are not, what sanction exists?
As I said in response to the previous question, if someone wins a contract and this is built into it, they are duty-bound to honour that contract. There will be the normal contracting procedures. As to how this is applied across the board in a more general sense, the SIB is developing the implementation process, which will include a monitoring and reporting process.
The intention is that my Department will report annually to make sure that it is being standardised and followed through across all Departments and contracting bodies. We expect that, if somebody wins a contract on the basis of what they are going to do with regard to this policy requirement, they honour that. There will be penalties in the contract for not honouring that.
The Minister outlined that he would like to bring legislation forward in this mandate. Hopefully, that will happen. Is there enough support for the new policy among the Executive to ensure that, regardless of who has the Ministry in the next mandate, there will be commitment to it? I know that he cannot speak on behalf of a future Minister, but does he at least have indications from other parties and Ministers?
We reconstituted the Procurement Board, and, rather than procurement policy being the property of the Finance Department and our Department having to attempt to get other Departments to adhere to it and follow it through, we have brought in a change that means that procurement policy is brought to the Executive for approval. The policy has Executive approval and is an Executive matter. All Ministers are duty-bound to abide by it. Unless someone brings a different policy to the Executive to undo that, an incoming Finance Minister is bound by the policy. We fully expect that. Of course, I look forward to the time when it is strengthened by legislation, but that may not be possible in this mandate. The policy is an Executive policy, and part of the reason for bringing in that change to procurement was to make sure that it had endorsement from the whole Executive. My Executive colleagues gave a warm response to the policy.
The Minister outlined the fact that local government has a separate procurement policy. Is the Department giving consideration to making representations to the Northern Ireland Local Government Association (NILGA) and the Society of Local Authority Chief Executives (SOLACE) on what it is doing centrally in government and encouraging them to replicate that?
Legislation that comes under the responsibility of the Department for Communities applies to procurement for councils. Some argue that it places a value on value for money rather than on social value. Even within that, there are opportunities for councils to develop. Some of them have already been in dialogue with us, and some are encouraged by it and want to take it up. The Department remains willing to talk to councillors and council organisations, such as NILGA and SOLACE, to see how they can make sure that they build in as much social value as they can, because they are significant procurers of contracts across the community, and, if they were on board, it would have a significant impact. There is a willingness there. If it requires legislative change, that would fall to the Department for Communities, but, even in the current framework, there is room for improvement in what the councils are doing, and there is an interest among some of the councils, which, perhaps, might increase when they see the roll-out. We will work with them in the time ahead if they wish to explore how to do this.
Go raibh maith agat, a Phríomh-LeasCheann Comhairle. It is great news that, from June 2022, payment of the living wage will be compulsory for all contracts. No one should have to work for less than the living wage, and I warmly welcome the Minister's commitment to delivering that. Is the Minister aware of any other Government on these islands that requires contractors to pay their staff the living wage? Which sectors are likely to benefit?
I also welcome the Member to her seat. I am delighted to see her join us. She is correct that one of the key aspects of this is the living wage. It will allow many firms that wish to give their workers a decent standard the opportunity to do so and to bid for contracts and not be undercut by those who do not. That is an important part of this. As far as I am aware, the Governments in Scotland and Wales encourage or promote this but have not made it a requirement. This is probably the first institution on these islands to make this a requirement as part of contracts. In that case, we are ahead of the game. I think of significant workers. I caught the tail end of the previous discussion on the recognition of health workers. Significant numbers of people are employed in private contracts in the health service — in care homes and the caring sector — who do not necessarily get the living wage. The development of this will have a significant impact on those people, and I am glad that that will be the case.
I thank the Minister for his statement. I welcome the thrust of the statement. My question has been asked. However, he states:
"from 1 June 2022, tenders must include a minimum of 10% of the total award criteria to social value."
In 2023, there will be a step up again. In layman's terms or in language that the dogs in the street will understand, what does that mean?
First, it is a minimum standard. Departments can, if they wish and if they have the capability, do that now. From next year, they can have a standard of higher than 10%. In 2023, the minimum standard will, subject to Executive approval, be 20%. I have just referred to one of the key issues, which is that people will be employed using the Living Wage Foundation's living standard wage. Rather than trying to encourage people to do right by society through making environmental improvements, there is a requirement for the fair treatment of workers. A range of measures will be aligned to the Executive's Programme for Government priorities. When contracts are being designed, the selection will not be random; it will be aligned to the Executive's Programme for Government commitments.
I referenced USEL, a company that has won a government contract and is delivering that contract very well. USEL employs people with disabilities, which is social value that you can see in practice. We want to encourage more of that, and there is already a facility to encourage Departments and contracting bodies to deliver social value today. The benefit of scoring social value can be seen in a firm that delivers a very good service to government and real social value to people who would not otherwise be in the employment arena. That should not be random. I think that, across the North, only two companies deliver social value at the moment. Social value is now to be part of a minimum standard for all government contracts.
The taxpaying public should now realise that the Executive have decided to downgrade value for money in public-sector contracts. Then, we have the added cost to the public purse of the declaration in the policy that the additional costs of the living wage will be borne by government. Yet, in an answer already given, we find that that has not been costed. Will that be an added burden on the block grant, leaving less money for health and education? Will it come out of the capital or resource budget of any Department?
It is said that a cynic is a person:
"who knows the cost of everything and the value of nothing."
Mr Allister clearly falls into that category. He cannot see the bigger picture. Social value delivers much more than value for money. Of course, value for money is still an element in the awarding of contracts, but social value delivers much more for society. In the longer term, it will save money for the Executive. When disabled people or those with mental health issues can get back into work, that is a saving for the health service. When contractors are improving aspects of the environment through their everyday work, that is a longer-term saving for the Executive. Therefore, I invite Mr Allister to look above where he is at the moment and see the bigger picture. Value for money is much enhanced by social value, rather than simply counting the cost in pennies and shillings.
I thank the Minister for his statement. He mentioned:
"spending power for the common good."
I absolutely agree with that. When the policy was developed, what consideration was given to no longer awarding government contracts to organisations such as Capita? Capita has been found guilty of systemic maladministration, and many people regard it as having no social value. This policy seems to be a contradiction at a time when many millions are being funnelled into organisations such as Capita. What consideration has been given to that?
The Member knows that the Capita contract was awarded long before this discussion took place. We want to create a better future in relation to such matters. I cannot speak to the specifics of that contract. It comes under a different Department, and I am not across all the details. Suffice it to say that this is about creating social value in the awarding of contracts. It is about changing the picture. It is about higher requirements and higher standards for the people who get public money to deliver services. It is about changing the mindset. I am not across the detail of whether that specifically applies to some of the issues that the Member raises. We want to ensure that the policy begins to deliver so that people who bid for public money to provide services and contracts to government have to meet a significantly higher standard in their dealings with broad society and in their approach to societal interests and outcomes than has perhaps been the case in the past.
Thank you, Minister. No other Members have indicated that they wish to ask a question. That therefore concludes questions on the statement from the Minister of Finance. I ask Members to take their ease for a few moments to allow for changes in the Chamber. The next item of business is the question for urgent oral answer, which stands in the name of Ms Linda Dillon.
I beg your pardon, Members. That is not the next item of business. The next item —.