New era for public procurement
EACH year the Executive spends around £3 billion on goods, services, and construction works. This makes up 25 per cent of the Executive's budget, a tremendous level of spending power.
Procurement policy has traditionally placed a strong focus on minimising cost. Therefore companies that want to pay workers a decent wage or use environmentally sustainable products risk being undercut by the lowest bidder. The result is a race to the bottom.
I'm responsible for the Executive's procurement policy. We have recently agreed a new policy which seeks to harness this spending power for the benefit of society.
The new policy requires that all workers on government contracts are paid no less than the Living Wage. Calculated by the Living Wage Foundation, this is the minimum hourly wage that would provide a full-time worker with a reasonable standard of living. Paying the Living Wage, which currently stands at £9.50 per hour compared to the legal minimum of £8.91 per hour, will benefit low-paid contractors including domiciliary care workers who provide invaluable care for elderly people.
The policy also requires government to assess tenders for social value. This means that companies that deliver additional social benefits, for example by employing people in deprived communities or using environmentally friendly products, will have a better chance of winning government contracts. This is a game changer for companies that want to conduct their business in a socially responsible manner.
Another important part of the policy is that government must consider whether a contract can be reserved for businesses whose primary aim is the social integration of disabled or disadvantaged people. My department has used this provision to award a paper-shredding contract to USEL which employs people with disabilities.
On a recent visit I was hugely impressed by how USEL supports people with disabilities and health-related conditions into employment. However it is only one of two reserved contracts awarded across government. Greater use of this provision will create more job opportunities for disadvantaged people.
These changes come into effect in June 2022. This lead-in time gives everyone time to prepare for a transformation in procurement practice. Training will be rolled out to government officials that design contracts and companies that deliver contracts. A standard framework will be developed to score for social value to ensure a consistent approach. Councils will be encouraged to adopt a similar approach so that companies are working to a common framework across local and central government.
There will be some additional financial costs on government in the short term. However, paying people a Living Wage reduces poverty, and with that comes reduced public spending on areas such as social security. And of course the absolute necessity of the transition to a net zero economy means the finance involved should be seen as an essential investment in our future rather than a burden.
This policy is one of the most progressive in these islands and is at the cutting edge of international procurement practice. It marks a new era in how the Executive uses procurement as a tool in the creation of a more inclusive and greener economy.
:: Conor Murphy is Stormont finance minister