Hannover C3 markets

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Hannover policy forum background paper

Workshop C3: MAXIMISING MARKET OPPORTUNITIES FROM THE PUBLIC, PRIVATE AND SOCIAL ECONOMY SECTORS

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Contents

Workshop objectives

  • To discuss models, such as competitive tendering and partnership, through which public authorities can work with enterprises to create employment and inclusion.
  • To develop strategies, particularly for the next Structural Fund period 2007-2013, through which public authorities can improve the way policies and procedures for service provision and procurement contribute to employment and inclusion.

What is the challenge?

Public sector purchasing in the EU amounts to 16% of GDP, or some €1,500 billion a year. The main tier of government involved is the local level. Achieving better value for money is thus a major issue, especially in the area of steadily growing demand, such as social services. As well as delivering services directly by employing their own staff, public authorities commonly contract work to private companies, voluntary organisations and social enterprises. The EU Public Procurement Directive (2004/18/EC) has transformed the framework within which such contracts are concluded. It insists that contracts for public services must be specified and awarded in a transparent and competitive process. Despite misperceptions that an overemphasis on price would lead to a levelling down in quality, the legislation in fact gives authorities a great deal of freedom to avoid this and, on the contrary, to encourage high standards and community benefits:

  • Article 7 says that for the services listed in annex IIB (which includes many activities typically provided by social enterprises: job search, social work, welfare, day care, guidance, counselling, family planning and rehabilitation services) public procurement rules only apply to contacts over €249,000. Below this sum, contracts can be signed directly.
  • Article 21 says that contracts for the services listed in annex IIB are subject only to the procedure set out in article 23 (clear technical specifications musts be published), and article 35 section 4 (an award notice must be published). This means that the local authority can decide its own criteria for awarding contracts.
  • Article 19 allows authorities to operate sheltered workshops for handicapped people.
  • Article 26 allows authorities to lay down special conditions – that is social and environmental conditions – so long as they are compatible with Community law (geographical discrimination is prohibited) and specified in the tender.
  • Article 29 allows authorities to use the method of “competitive dialogue” in complex cases where the open or restricted procedures would not work. This means authorities can specify that a service should provide the output of social inclusion.
  • Article 53 says that authorities can decide between bids using the criteria of “economically most advantageous” or simply the “lowest price”. This clearly states that purchasing authorities can take many qualitative criteria into account.

A two-way street

The employment impact of the contract – for instance how many people of what description will be employed – will be affected by a large number of factors, and these must be taken into account in the design of the contracting process: the size of the lots, the procedure to be used, the specifications to be included and the selection and monitoring procedures. Inclusive and social enterprises that wish to bid must also plan ahead: what information and skills do they need? Should they join together in consortia or make partnerships with other companies? For instance public authorities can specify that a certain proportion of disadvantaged people be employed in delivering a given contract: whilst work integration social enterprises might choose to bid directly for many services contracts, where works contracts are concerned they might opt to go into partnership with a conventional construction company.

What kind of solutions are being tested?

A number of strands are being followed:

  • training of procurement officials in public authorities
  • training and capacity-building among social enterprises
  • development of fora in which public-private-social partnerships can be developed

Some examples are:

Training and capacity building in the East Midlands (UK)

The BEST Procurement (‘Benefiting the Economy and Society through Procurement’) development partnership, based in the East Midlands of England, is tackling both the supply and demand sides of the public procurement equation.

On the demand side, it is working with public authorities – both decentralised local authorities and more centralised health authorities – to change the way they look at value for money, and to open up the sources of information that will enable social enterprises to bid successfully for contracts. A key point is that contract specifications should mention the desired outcomes, rather than describing in detail how to achieve them. For instance an authority can say that it wants to buy services of neighbourhood renewal, and leave it to the bidders to propose how they would encourage participation, create new businesses, and raise the level of prosperity.

As for the supply, the project is encouraging social enterprises to work together and to scale up, by forming consortia capable of taking on big pieces of work. To bring the two sides together, it is using an internet database to provide earlier, higher quality information on contracting opportunities.

Local consultative tavoli in Milan

In the Milan province (population 4 million), the Agenzia di Cittadinanza (‘Citizenship Agency’) development partnership brought together 91 partners to transform the social service delivery system from a fragmented one based on competition to one operating via co-operation and networks.

The partnership had the scale to change the balance of power between the local authorities and the social co-operatives in the way social policy is made and implemented. National law 328/00 defines what qualifications social co-operatives need to operate in healthcare, social services and other community services, and sets up a voucher system. It provides for joint ‘negotiated planning’ in areas such as child and elderly care, handicap, mental illness, immigration and poverty. It works through local committees (tavoli) comprising representatives of the local municipalities, third sector organisations and trade unions. These committees decide social policy at the district level, and typically cover a population of several hundred thousand people. On some of the committees the EQUAL partnership has won direct representation. This enables the partnership to engage in a dialogue with the local authority, which currently covers health, housing, employment and training, and may be extended to town planning.

This participative policy-making system means that voices have been heard that previously were ignored. For instance in Sesto San Giovanni to the north of Milan, the project used the national process of contratti di quartiere (neighbourhood contracts) to insert a social dimension into an infrastructure restoration and environmental project.

Public-private-social partnership in Austria

In Austria, RepaNet (Reparaturnetzwerk Österreich) unites public, private and social sectors around a trio of objectives: to reduce waste, create jobs and dynamise local economies. Its triangular partnership includes not just the local authorities, labour market service and environmental activists, but also local SMEs. Small businesses join the local Repair Networks because they gain market contacts and benefit from sharing know-how. At the same time they provide jobs for long-term unemployed people. Partnership with the companies keeps RepaNet abreast of the skills that are in demand, and enables it to recruit trainees with matching aptitudes and desires. Across 10 countries of Europe, the RREUSE network’s 1,000 member enterprises employ 16,000 people.

Questions for discussion

  • What are the benefits of public and inclusive & social economy sectors working together? Quality / price / participation / innovation...
  • What are the best ways for them to structure this working together:
    • procurement procedures: social criteria / smaller lots / subcontracting within large lots? / reserved contracts?
    • partnership / tavoli?
  • What can be done (training, guidance, leadership…) to raise the awareness and change the behaviour of the professionals involved, such as lawyers and procurement officials?
  • What do inclusive and social enterprises need to improve if they are to win contracts? (consortia, information, training...)
  • What good models can we put forward for the more effective use of the Structural Funds in 2007-13?
  • What structures (e.g. REVES) can authorities use to improve their results?

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