The second quarter of this year brought with it significant changes to the patterns observed within the local government procurement market. Contract award value by local government authorities reached a total of £4.3bn, a decline of £2.7bn from the first quarter of the year.
Lancashire County Council became the largest contracting authority of the quarter, awarding a total of 29 contracts totalling just over £400m, reflecting this quarter’s shift away from London based authorities as the largest buyers within the local government market.
The top supplier of this quarter was Skanska Construction UK Limited after winning a £220m contract with Kent County Council, a 10-year contract for hard Facilities Management (FM) services. This contract was the supplier’s largest services contract to date.
Cross-Regional Analysis suggests that regions do spend locally as seen by the diagonal pattern in the graph below. Contracting by the South East within the East of England shows the largest total contract value, followed by the North West and Scotland locally. Notably, local government bodies in the devolved regions exhibit a much stronger preference for sourcing procurement with suppliers in their own nations, reflected by their high levels of local procurement, regularly over 50%.
Comparing contract award value between 2022 Q2 and the preceding quarter, we can see contract awards spreading out across the country, with a lower concentration awarded to London based suppliers and awarded by London based contracting authorities. This is highlighted when looking at the largest contracts of Q1, the top three of which were from London buyers, compared to Q2 where the top three come from between buyers in the North West, the East of England and the East Midlands.
A sectoral analysis of local government contract awards shows that 56% of total contract value this quarter went to either construction or health and social services related contracts, with £1.3bn going to the former, making it the largest sector by total contract value. The largest construction contract for this quarter was awarded by London Borough Tower Hamlets for a £161m responsive maintenance contract.
Whilst construction remained the top performing sector following from the previous quarter, total contract award value for construction saw a sharp decrease (55%) between quarters. This shows a greater decline than the 38.6% decrease in total contract award value for the local government procurement market as a whole. In contrast, health and social services contract value remained consistent at around £1.1bn.
Key Sector Analysis: Health and Social Services:
As a result of this sustained market value, health and social services related procurement has been worth over £2.2bn in the first two quarters of 2022 alone, with over 2,300 contracts being awarded to suppliers in the sector. Lancashire County Council’s £310m contract on the Flexible Agreement for the provision of Fostering Agency Placements, the largest contract overall this quarter, was within the health and social services sector, specifically falling into the category of social care. Lancashire County Council has also awarded two other large social care contracts this year, aimed at supporting carers.
Regional analysis shows that health and social service contracting was concentrated within the North of England, with 34% of total contract value awarded in the North West. This is driven by the high value contracts in Lancashire and Kingston upon Hull. Health care and social services contracts saw an increase in focus on social care, with large contracts focused on community wellbeing, domiciliary care and special needs information, with a high value awarded to contracts aimed to help place individuals within foster care and education.
Notably, Kingston Upon Hull is also one of the few local government authorities who have issued a social care contract directly related to the placement of Ukrainian refugees. It will be interesting to see the impacts of this increase in social care procurement following the impacts of the war in Ukraine and the high cost of living coming into the winter.
Health and Social Services: Social Value
Increasing procurement with SMEs and local suppliers can be seen to reflect an increase in social value within the procurement market, an important consideration for local government authorities. The health and social services exhibited strength in this regard, awarding 46% of contracts to SMEs in Q2 2022. This differed greatly from the 6% and 7% awarded to SMEs within the environmental and business services sectors respectively, the next two largest sectors from the quarter.
On average, local contracting authorities procuring within the health and social services sector awarded 69% to SMEs and 67% to local suppliers. Lancashire County Council, the largest contracting authority of the quarter, awarded 77% of their contracts to SMEs but only 42% to local suppliers. Cyngor Gwynedd performed highly regarding social value with 90% of contracts going to SMEs and 94% to local suppliers. This high score was driven by a contract for domiciliary care for which eight suppliers were contracted, seven of which were from Wales and seven of which were SMEs. This is in contrast with Wakefield Metropolitan District Council that awarded just 12% of contracts to SMEs.
This article was written by Tussell for LocalGov
