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Withdrawal of two tier code

The Coalition Government has committed to opening up government procurement and reducing costs. It has also set itself the aspiration that 25% of government contracts should be awarded to small and medium-sized businesses.


In support of these commitments, the Minister for the Cabinet Office, the Rt Hon Francis Maude MP, has announced his decision to withdraw the Code of Practice in Workforce Matters in Public Sector Service Contracts (commonly referred to as the Two-Tier Code) effective from 13th December 2010.


Removal of the Code will help enable SMEs, mutuals, co-operatives, charities and social enterprises to enter the public sector market and have a much greater involvement in the running of public services and is designed to facilitate greater competitiveness and to drive value for money for the taxpayer. A mixed contractor economy will deliver greater competitiveness, drive efficiency and value for money for the taxpayer, and generate opportunities for greater innovation in how public services are provided.


Effect of the withdrawal of the Code

• The Code will be withdrawn from immediate effect. However, its withdrawal does not impact on existing TUPE regulations and provisions in the Employment Act 2008. Nor does it reduce or remove the statutory duties on public authorities to have due regard to the need to eliminate unlawful discrimination and promote equality of opportunity, which can apply to contracting authorities and to suppliers in some circumstances.

• Where contracts are renegotiated and any provisions giving effect to the Code are removed as part of the renegotiation, the changes will apply only to future new entrants.  Existing employees’ terms and conditions will be unchanged.

• Where contracts that have previously applied the Code are being re-competed (resulting in a new contract), the Code will not be invoked upon award of the contract.

• When existing contracts which have invoked the Code are being extended, the Code will continue to apply where adherence to the Code is included in the terms and conditions of the original contract, unless both parties agree otherwise.


Principles of Good Employment Practice

Government recognises the importance and value of good employment practices in delivering public services.  Therefore to encourage and safeguard good employment practice, the Cabinet Office has published a set of voluntary Principles of Good Employment Practice that have been developed in discussion with trade unions, suppliers and public service employer organisations. It is expected that the principles will be relevant in circumstances where Government’s employees transfer to the contractor’s workforce, as was the case with the Two-Tier Code. 


What this means for suppliers

These principles should not act as a barrier to those wishing to contract with central government as these principles are not mandatory, nor will their adoption be part of the formal procurement or decision making process. Therefore, there is no obligation on suppliers to implement to the principles and contracts will still be awarded on the basis of value for money and not on the basis of who signs up to the principles as these are a voluntary set of principles. 


The Principles of Good Employment Practice in procurement provide a flexible guide to suppliers and signal what Government expects of the best suppliers in their employment practices and believes that these practices help create a well managed, engaged and motivated workforce and through them, better delivery of public services.


Whilst these principles do not form part of the procurement process, Government hopes that suppliers will work with departments to apply the principles where appropriate.  Government will review the application of the principles through the Public Services Forum, which is a national forum for dialogue between government, public service employers and TUC affiliated trade unions on public service workforce issues.

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