Public Procurement and Business for Value: Looking for Alignment in Law and Practice

The state traditionally procures from either market actors or charitable providers. If it buys from the market, the tendering process is subject to national and European public procurement law, but if it buys exclusively from charities, some exemptions apply—either as a result of special sectoral regimes, or in order to preserve the constitutional role given to these entities in some jurisdictions. But distinctions have become more complex as new forms of non-charitable enterprise emerge that combine a social mission with an entrepreneurial vision. These organisations are entrepreneurial in the same way as traditional businesses, but also committed to accounting for their impacts (positive and negative) on their stakeholders, internal and external, which sets them up to generate societal value rather than exclusively shareholder value. These commitments are embedded in the business, in binding procedural/structural mechanisms that are stronger than mere undertakings by management to ensure corporate social responsibility (CSR). This chapter considers the benefits for the state in procuring from these value-led enterprises, compared to procuring from traditional shareholder corporations. Contracting from them enables the state to establish longer-term relationships for the provision of public goods and services by entrepreneurial actors that will fill gaps in underspecified procurement contracts in line with their commitments to societal value rather than exploit them exclusively to generate shareholder value. Consequently, public contracts can be left more open and their performance demands be less carefully managed and policed because the state can rely on the value-led enterprise’s procedural/structural commitments. In terms of the economy more widely, these relationships with value-led enterprises enable the state to nurture a particular form of capitalism and of enterprise that is more sustainable as it requires less external control than the shareholder corporation because of the internally embedded procedural commitments of the value-led enterprise. Given this is not the dominant form of capitalism now, many value-led enterprises struggle to get a foothold in markets (including public service markets) that are dominated by the shareholder corporation. The chapter consider how the state can resort to public procurement as a way of nurturing these alternative enterprise forms, and in doing so, transform the current, dominant form of capitalism.