Procurement model reforms could deliver mixed impact for construction

Changes to the public procurement model may strengthen construction’s talent pipeline but further action on cost pressures and demand is needed to maximise their impact.

Under new government reforms⁽¹⁾, firms bidding for public contracts will be judged on creating high-quality jobs, local skills development and supporting young people into apprenticeships and work placements.

The simplified model updates past criteria with a stronger emphasis on businesses delivering social value through training and employment.

BCIS chief economist Dr David Crosthwaite said the changes are well-intentioned but are likely to require wider economic interventions to elevate their effect on skills and jobs.

‘Revising the government’s procurement model is not a small change and could reshape contractor pricing and bidding behaviour for public work, although its full impact remains uncertain,’ he said. ‘Equally, delivering a lasting local skills legacy is not something the construction industry has much control over, given the nature of labour mobility, market conditions and project constraints.

‘That said, the reforms are a positive move that will hopefully contribute to construction’s talent pipeline without undermining SMEs’ ability to compete for public contracts.

‘Ideally, the new model should be accompanied by measures that ease employment and wider business cost pressures and support demand for new construction.

‘The latest S&P Global UK Construction PMI suggests new orders remain subdued and, although the pace of contraction has eased, activity is still declining. These reforms are welcome, but they will be far more effective if contractors are in a stronger financial position to invest in high-quality training and recruitment.’

The new rules will apply to businesses bidding for public contracts worth more than £1 million. For contracts valued at £5 million or more, 20% of the overall bid evaluation will be based on the social value commitments bidders pledge to deliver.

Bidders will receive additional credit for creating local jobs that pay above the legal minimum wage, promoting fair employment practices and helping to address local skills shortages through training and skills development initiatives, including providing at least 45 days of work experience.

To ensure these commitments are delivered, government departments will set performance targets for suppliers. Successful bidders will be monitored against these targets, enabling departments to assess whether promised social value outcomes have been achieved.

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^{(1) GOV.UK – Government orders that public spending must back British jobs and skills in every postcode – here}