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Top Tips for Contracting with Charities for Public Services

Scotland
01/04/2011
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Top Tips for Contracting with Charities for Public Services (April 2011) In February, David Cameron announced changes to the way the government will carry out business going forward. This will include giving charities and social enterprises the opportunity to deliver services, part of building “The Big Society”. The treatment of charities under the procurement regulations varies greatly - here’s how to avoid the pitfalls:

1.
 Purchasing goods or services from a charity does not automatically exclude the need for public bodies to conduct a formal procurement process, and in most circumstances a full OJEU process will still be required.
2.
 As a general rule, grants or other contractual arrangements between public bodies and charities which do not involve the procurement of goods and/or services by the public body will not require a formal OJEU process. However, some form of competition may be required in order to ensure compliance with State aid rules.
3.
 Public bodies must verify that a grant is not, in reality, a contract for goods and services. The label of a “grant agreement” will not prevent the procurement rules biting if under the agreement the charity is required to provide the public body with goods or services.
4.
 Following the High Court’s decision in R(Chandler) v Secretary of State for Children, Schools and Families an OJEU process will not be required when a contract only provides for reimbursement of expenses with no element of profit. However, the public body may still want to run a competition to ensure high quality service provision and satisfy best value obligations (for example ensuring good supply chain management to minimise expenses).
5.
 Chandler also suggested that an OJEU process is not required when the contract is for services that are not otherwise offered “on the market”. In essence this appears to be when there are no alternative providers of the same service seeking to make a profit from the services in question.
6.
 The procurement rules permit public bodies to reserve contracts for “sheltered workshops”. This means that the competition will only be open to establishments, services or programmes where more than 50% of the workers are disabled persons who are unable work in the open labour market. A fair and open competition is still required, and must be commenced with an OJEU notice and run in accordance with the procurement regulations if over the thresholds, but only the reserved suppliers may bid.
7.
 Where an OJEU procedure is required, public bodies can use charities to help them shape the services and contract requirements. This does not preclude charities from bidding in the procurement process, provided they have not been privy to information with which other bidders are not to be provided and which may assist in the preparation of their tender responses.
8.
 Public bodies can shape PQQ procedures to make it easier for charities and voluntary organisations to be short-listed. For example, the new central government PQQ model should allow greater numbers of charities and SMEs to demonstrate financial stability and capability.
9.
 At tender stage, public bodies may be able to incorporate evaluation of social criteria, which charities and social enterprises will be responsive to. However, such choices must be made on a case-by-case basis to ensure that any social criteria used at award stage can be linked to the subject matter of a contract and are sufficiently objective and verifiable.
10.
 Finally, the public procurement rules impose duties of transparency and equal treatment which apply to all regulated procurement procedures. These duties require all bidders to be treated equally, whether private sector or third sector. The public procurement rules are intended to take politics out of procurement, and public bodies need to be mindful that the rules preclude them from making special allowances or variations for charities and social enterprises which discriminate against private sector bidders.


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