Community benefit clauses in public funding and procurement contracts ‘can be legal’
Public bodies can legally insist on terms that bring extra benefits to disadvantaged communities when drawing up procurement contracts and partnership, funding or planning agreements. Contrary to a widely held view among authorities, the inclusion in procurement of ‘community benefits’ – such as work and training opportunities – is not prohibited by Government policy or European Union rules.
A report for the Joseph Rowntree Foundation clarifies the relevant regulations. It also identifies good practice, including ways that government departments, local authorities, regeneration agencies and registered social landlords (RSLs) can use their mainstream procurement to increase social inclusion, especially through new jobs.
The authors, independent consultant Richard Macfarlane and Mark Cook of the Birmingham-based law firm Anthony Collins Solicitors, draw their conclusions from detailed legal and policy analysis, case studies in England, Scotland and Wales and discussions with officials in HM Treasury, the Office of Government Commerce, the Scottish Executive, the National Assembly for Wales and other Government departments. Their research finds that:
- In order to ensure value for money, community benefit requirements must be part of the core purpose of a procurement contract – or else such requirements must be disregarded when selecting tenders and awarding contracts.
- To comply with European Union rules, community benefit requirements must not put contractors from outside the locality at a disadvantage, and must be included in contract notices.
- Local authorities in England and Wales can include employment requirements in procurement contracts, provided they are demonstrably supported by their ‘best value’ policies and European Union rules are observed. Similar arrangements are being introduced in Scotland.
- Community benefit requirements can also be included in planning agreements, funding agreements and grant conditions provided they do not require either party to act in an illegal or discriminatory way.
To avoid contravening equal opportunities legislation or placing non-local contractors at a disadvantage, public bodies are encouraged to define the intended beneficiaries in general terms – for example, ‘unemployed people’, ‘trainees’ or ‘young people’. They can then ensure that the local community reaps the benefit through ‘supply side’ measures, such as pre-recruitment training and other support.
The researchers stress that although the use of community benefit requirements in contracts and agreements is lawful, contracting authorities should always seek expert advice to make sure they comply with legal and policy requirements. They should also, as a matter of good practice, ensure that effective monitoring and evaluation arrangements are in place.
Richard Macfarlane said: “Provided they comply with the relevant rules and procedures, bodies like Government departments, local authorities, registered social landlords and local regeneration companies and partnerships can include community benefit requirements in their contracts and other agreement where they think it appropriate.”
Mark Cook said: “As our report explains, the UK and EU policy frameworks typically determine how community benefit requirements should be used, rather than whether they should be used at all. However, the rules are complex and good advice needs to be obtained on a case by case basis.”
