Greener NHS procurement: new NHS procurement guidance on net zero and social value from 1 April 2022
NHS England has published new guidance (the Guidance) which builds on and extends the scope of PPN 06/20 taking account of social value in the award of central government contracts (the PPN) to the commissioning and purchase of goods and services by NHS organisations, as well as organisations acting on behalf of such commissioners and purchasers.
The PPN on social value
The PPN (which was first implemented in September 2020) launched a new model to deliver social value through Government’s commercial activities (the Social Value Model). The model was designed to help in-scope organisations (all Central Government Departments, their Executive Agencies and Non Departmental Public Bodies) to take account of the additional social benefits that can be achieved in the delivery of their contracts. You can read our previous insight on the PPN here. The Guidance has now expanded the reach of the PPN to other organisations operating in the NHS, as set out above, which are now also to be considered as in-scope organisations.
In summary, the PPN requires in-scope organisations to 'explicitly evaluate' social value in their procurements. They must use criteria that are related and proportionate to the subject matter of the contract. Social value is now a mandatory award criterion. Generally speaking, the PPN provides that a minimum weighting of 10% of the overall score should be applied to social value in a procurement to ensure that it carries a heavy enough score to be a differentiating factor in bid evaluation (although there are more specific rules set out in the government's guide to using the Social Value Model which provide some flexibility to this approach). The PPN notes that a higher weighting can be applied, if justified. The Social Value Model and Annex A to the PPN sets out a list of five priority themes and eight outcomes which contracting authorities can use, including, for example, 'fighting climate change' and 'tackling economic inequality'. Contracting authorities have discretion as to which ones they use for any single project.
A focus on net zero
The Guidance has a particular focus on meeting NHS England's commitment to reach net zero by 2045 (interestingly, NHS England's net zero target falls five years before the UK Government's net zero target in 2050). It states that NHS procurement has an essential role to play in the delivery of this commitment because 60% of NHS carbon emissions occur in the supply chain. Whilst the PPN itself gives in-scope organisations the discretion to consider which of the five priority social value themes to use on a given project, there is an additional requirement for NHS organisations covered by the Guidance to ensure that the 'fighting climate change' priority theme is included in all NHS procurement, either in the technical specification or through the social value criteria, or both.
The Guidance builds on the government’s recent PPN to further incorporate net zero considerations into procurement: ‘Taking account of Carbon Reduction Plans in the procurement of major government contracts' (PPN 06/21) and complements the 2020 "Delivering a 'Net Zero' National Health Service" report. Further guidance will be published, including a new Sustainable Supplier Assessment which will be available later this year.
Other key themes
The Guidance is structured into five key areas and includes examples for procurement professionals to draw on:
- Selecting the social value themes: at the earliest opportunity, the relevant themes of the Social Value Model should be selected, with the ‘fighting climate change’ theme to be included in all tenders, as set out above.
- Determining net zero and social value weighting at or above the 10% minimum: in line with the PPN, an appropriate weighting for net zero and social value should, where appropriate, be added to the evaluation criteria.
- Adding net zero and social value questions to the tender: appropriate tender questions should be created.
- Evaluating tender response: responses deliver additional benefit to existing supplier activity.
- Effective contract management: contract KPIs are critical to ensure additional benefit to the NHS is delivered.
The Guidance refers to the upcoming changes in the Health and Care Act (which received Royal Assent on 28 April 2022) which will take the commissioning of healthcare services outside the scope of the Public Contract Regulations 2015. The new set of rules will be known as the NHS Provider Selection Regime and in some cases, services may be able to be contracted without competitive tender processes. You can read our summary of the new NHS Provider Selection Regime along with our response to the government's consultation on it. The Guidance will be updated in line with the new requirements of NHS Provider Selection Regime.
This is another sign of the importance of social value and sustainable procurement going forward as more public sector organisations are directed to make mandatory provision for it in their procurements.