Companies bidding for central government contracts will be scored twice as heavily on the local benefits they deliver, with the social value weighting rising from 10% to 20% for contracts worth £5 million or more, according to the Cabinet Office.
The changes, announced on 5 August, apply to a market the government values at £90 billion a year. Bidders will be judged on their commitment to creating British jobs, tackling local skills shortages and supporting young people into apprenticeships and work placements.
First Secretary of State Louise Haigh said: “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 added: “For too long, securing government contracts has been a tick box exercise that fails to deliver the positive change that people feel in their pocket and see in the places they live. We are doing things differently. 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.”
Alongside the increased weighting, the government is scrapping other areas businesses previously had to demonstrate action on, and raising the threshold at which the requirements apply to contracts worth more than £1 million. The Cabinet Office said this is intended to help smaller, scaling and innovative businesses and civil society organisations that are often locked out of contracts by layers of red tape and burdensome requirements that larger organisations know how to navigate.
Bidders will be able to earn extra credit for creating local jobs paying above the legal minimum, for treating workers properly, and for offering training such as 45 days of work experience. Suppliers will also be assessed on support targeted at young people not in education, employment or training, care leavers and individuals with long-term health conditions.
For major contracts, departments will allocate a key performance indicator and publish annual progress reports, with suppliers measured against the commitments they made when bidding.
Cabinet Office Minister Mark Ferguson said: “We believe that if you benefit from something you have a responsibility to give back.” He added: “These changes will mean that 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.”
The rules apply to central government procurements and take effect from 1 January 2027, with detailed technical guidance due in the autumn. The Cabinet Office said public sector procurement spending rose from £288.7 billion in 2019/20 to £394.8 billion in 2024/25, an increase of more than a third in five years.
The measures form part of a wider package of procurement reforms which the government says will protect national security, cut waste and boost local economies, and which it links to its Modern Industrial Strategy and to building more resilient supply chains.
Among industry responses, Craig Beaumont, Executive Director at the Federation of Small Businesses, said: “Lifting the threshold to £1 million ought to see many more small firms winning contracts, as small businesses deliver huge intrinsic social value but they can often struggle to demonstrate this in procurement processes.”
Anthony Kirby, Chief Executive of Serco Group, said the company employed over 30,000 people across the UK, of whom more than 4,000 are under 24. “We stand ready to support this ambition: delivering high-quality public services, creating skilled jobs across the UK, and helping more people access the opportunities they need to build sustainable careers,” he said.
Stuart Togwell, Chief Executive of Kier Group, said the model was “a welcome step to ensuring public procurement supports lasting benefits for people, communities and businesses across the UK.”
Social value has been a formal element of central government procurement scoring since 2021, when a minimum 10% weighting was introduced under the Social Value Model. The framework sits alongside the Procurement Act 2023, which came into force in February 2025 and governs how public contracts, including defence and security procurement, are competed and awarded.
The weighting is already visible in defence competitions. The tender notice for the Ministry of Defence’s Light Mobility Vehicle programme, published on 31 July, states that Social Value and the Land Industrial Strategy will together account for between 10% and 20% of the overall tender for a contract estimated at £2 billion.
Image Howard Lake from Colchester, UK, CC BY-SA 2.0, via Wikimedia Commons
This is why defence procurement is so broken.
Such a good idea, no doubt the treasury will be spitting teeth over doing this. It’s bound to cut down on well paid consultancy gigs for senior military officers as well.
I wonder if the SNP will adopt this on Ferries and Buses or just continue to blame everyone else for Ferguson and Alexander Dennis.
Sheer lunacy. Subsidised jobs at defence’s loss.
If roughly 40-50% of a fully UK spend comes back in UK taxes, allowing for only 20% compared with buying it off the shelf in the US may just be a step in the right direction. Maybe it should be more. But we need to see the Treasury acknowledge that by putting the money back into Defence on top of the agreed budget.