Supporting social responsibility in the economy through public procurement

By using their purchasing power to choose socially responsible goods, services and works, public authorities can set a positive example and encourage enterprises to make wider use of social standards in the management, production and provision of services.

The new EU public procurement system, entering into force on 18 April 2016, will help by opening up new avenues for public authorities to promote socially responsible public procurement. Specifically, the new rules aim to promote social inclusion and ensure the compliance of tender awards with social and labour legislation. By utilising them, public authorities can provide incentives to companies to develop socially responsible products and services.  New opportunities to promote social inclusion through the public procurement system include:

1. The awarding of a contract will no longer be dependent on price alone if a company commits to helping integrate disadvantaged persons

Contracting authorities will be able to better take social aspects into account when awarding procurement contracts on the basis of the 'best price-quality ratio (BPQR)'. In the future, public purchasers can chose the tenders that provide more social advantages, such as a company employing the greatest number of long-term unemployed or disadvantaged persons to perform the contract. The awarding of a contract can also take into consideration if the employee working conditions of a contract go beyond legal requirements, are intended to favour the promotion of equality between women and men at work, increase participation of women in the labour market, and/or help better reconcile employees work and private lives.

2. Ending social dumping by respecting social and labour laws

Under a new ‘social clause’, public authorities will need to ensure the respect of obligations in all public procurement procedures. These include national or EU social and labour rules, applicable collective agreements and/or international law. Tenders must be rejected if they do not comply with social or labour law obligations, irrespective of whether or not they are abnormally low. Furthermore, any company failing to comply with their obligations will be excluded from public procurement procedures if:

• It has been convicted of failure to pay taxes or social security contributions.
• no judgment has been passed but it can be proved that the company has failed to pay taxes or social contributions, or has failed to comply with the 'social clause'.

3. Reserved tendering procedures for companies that promote the integration of disadvantaged persons

Under normal conditions of competition, 'sheltered workshops' or social enterprises whose main aim is to integrate disadvantaged people in the workplace might not be able to obtain contracts. Under the new rules however, contracting authorities will be able to restrict some tendering procedures for all types of work, services and supplies to 'sheltered workshops' and social enterprises. To participate in reserved procurement procedures, 30% of the company’s employees must be disadvantaged. Contracting authorities will also be able to reserve the right to participate in award procedures for social services for a period of up to three years. These include certain health and social services; certain education and training services; library, archive, museum and other cultural services; sporting services; and services for private households and non-profit companies with a public service remit based on employee participation.

4. For social services, European public procurement rules apply only to contracts above €750 000

The procurement of social, cultural and health services, as well as some others such as legal, hospitality, catering and canteen services will be simplified. The new European public procurement rules will only apply to contracts above €750 000 (compared with €209 000 for other services). Apart from the obligation to treat all companies equally and provide adequate publicity for the call for tenders and award of contracts (in a simplified form), national rules will apply to the relevant procedures.

5. Clear responsibilities when several subcontractors are involved in the same project

National contracting authorities must also ensure compliance with environmental, social or labour law obligations under EU or national rules or under applicable collective agreements or international agreements for subcontracting. This makes it necessary to ensure transparency in the subcontracting chain as well.  At the call for tenders stage, companies will be required to specify what part of the contract they intend to assign to a third party. By the time the performance of the contract commences, the main contractor will be required to indicate the name, contact details and legal representatives of its subcontractors to the contracting authority. These obligations may also apply to subcontractors of subcontractors for which a chain of responsibility may be drawn up. The subcontractor's services may, if necessary, be paid for directly by the public purchaser.

Background

The new public procurement rules provide contacting authorities with a vehicle to achieve social goals. Even though there is no obligation to use the new possibilities to promote socially responsible goods, services and works, EU countries and contracting authorities should take advantage of this opportunity to support social inclusion and ensure the respect of social and labour rules. The new Directive does not affect the way in which EU countries organise their social security systems, nor does it oblige them to externalise the provision of services that they wish to organise themselves.