Companies bidding for public contracts will have to show how they will create jobs and support skills in local areas under an overhaul of the government’s £90bn procurement system.
Andy Burnham is to tell firms seeking public work that they must demonstrate how they will help get more people into employment, with particular emphasis on young people and regional skills shortages.
The changes will apply to contracts worth £5m or more and will increase the weighting given to wider benefits delivered by bidders from 10% to 20%, according to the Cabinet Office.
Until now, that element has covered a broad range of social value measures, including equality and diversity, net zero commitments and post-Covid recovery. Under the new model, the 20% weighting will instead focus on job creation and related employment measures.
Bidders will receive additional credit for creating local jobs that pay above the minimum wage, offering training to address skills gaps in the area and providing 45-day work experience placements for young people.
The government said the aim is to ensure public spending on contracts delivers direct benefits for communities and helps tackle the number of young people who are not in education, employment or training.
Figures from the Office for National Statistics show more than one million people aged 16 to 24 are currently not in education, employment or training, a group commonly referred to as Neet.
Burnham has said he wants to create “growth in every postcode” as ministers seek to use public procurement as a tool to support employment and skills development across the country.
The Cabinet Office said the model will apply to both British and international firms bidding for government contracts, meaning overseas companies seeking UK public work will also be expected to demonstrate local employment benefits.
First Secretary of State Louise Haigh said the current procurement process had become a “tick-box exercise” and argued that taxpayer-funded contracts should be used to strengthen communities.
“Every pound of taxpayer money should be spent in a way that benefits local communities — creating good jobs and giving young people the skills they need for the future,” she said.
Haigh added: “These new rules will ensure the £90 billion that is spent each year through government contracts supports British jobs, skills and people in every postcode.”
Cabinet Office Minister Mark Ferguson said companies that win government work should be expected to contribute to the places where contracts are delivered.
“Businesses that benefit from the billions of taxpayer pounds spent by government, will have to create more local jobs and opportunities for young people in their area,” he said.
The policy marks a shift in how ministers intend to define the wider benefits of public contracts. Government procurement decisions are already based on a range of factors, including value for money and the contribution a bidder can make beyond the immediate delivery of goods or services.
Under the revised approach, firms will need to show more clearly how contract awards would support local labour markets. The emphasis on jobs and training is intended to push suppliers to set out practical commitments before receiving public money.
The plans have drawn criticism from environmental campaigners, who warned that supporting young people into work should not mean downgrading green requirements in public procurement.
Ami McCarthy, head of politics at Greenpeace UK, said protecting the environment and helping young people into employment are “mutually beneficial and one shouldn’t come at a cost to the other”.
“Companies should be held to account with environmental targets to help achieve a better future without leaving young workers behind,” they added.
The government has not said that value for money will be removed from procurement assessments. However, the planned doubling of the wider benefits weighting means employment-related commitments will play a larger role in decisions on higher-value contracts.
Ministers argue the approach will make public spending more directly useful to local economies, while critics say climate and environmental standards should remain central to how public money is awarded.
