Reserved Contract for Social Enterprises

Reserved contracts for social enterprises are one of the most direct instruments that European procurement law provides to advance social inclusion through public purchasing. Rather than weighting social factors within an open competition, they remove mainstream commercial competitors from the field entirely, ensuring that contracts are awarded to organisations whose primary purpose is employment and integration of the most disadvantaged people in society.

What is a reserved contract for social enterprises?

Article 20 of Directive 2014/24/EU authorises contracting authorities to reserve the right to participate in procurement procedures, or the right to perform contracts, to sheltered employment programmes or organisations where the main aim is the social and professional integration of disabled or disadvantaged persons, provided that at least 30 percent of the employees of those workshops, operators, or programmes are disabled or disadvantaged workers.

The reservation applies to both the participation in the procedure (restricting who can bid) and the right to perform the contract (restricting who can deliver as prime contractor or subcontractor). Member states may extend or narrow the categories of disadvantage that qualify under their national transpositions.

Corresponding provisions exist in Directive 2014/25/EU for utilities procurement (Article 38) and Directive 2014/23/EU for concessions (Article 24). The defence procurement directive, 2009/81/EC, contains no equivalent.

In the UK, Article 20 was transposed into the Public Contracts Regulations 2015 and is carried forward in the Procurement Act 2023, which also introduced a broader reserved contract regime for public service contracts under the Light Touch Regime, available to voluntary, community and social enterprise (VCSE) organisations even where the 30 percent workforce threshold is not met.

The reserved contract is distinct from a social clause embedded in an open competition. It is a threshold decision about who may participate at all. A buyer who uses a reserved contract accepts a smaller competitive field in exchange for the certainty that the contract will be performed by an organisation with a defined social mission.

Why it matters for bidders

For social enterprises and sheltered workshops, reserved contracts represent a significant competitive advantage. Participating in a reserved procedure means competing only against organisations with a similar mission and structure, rather than against national commercial contractors with dedicated bid teams and lower overhead models. The competitive field is narrowed in a way that reflects the organisation's genuine strengths.

For mainstream commercial suppliers, understanding which contracts are reserved prevents investment in bids for which they are ineligible. Contract notices using Article 20 reservations must state clearly that participation is restricted.

Example

A Portuguese municipality uses Article 20 of Directive 2014/24/EU to run a reserved procurement for catering services across its primary schools. The contract is worth EUR 600,000 per year. Participation is restricted to organisations where at least 30 percent of the workforce are disabled or disadvantaged workers. Four social enterprises and two sheltered workshops submit bids. The winning bidder employs 40 people, of whom 18 have recognised disabilities, giving a qualifying workforce proportion of 45 percent. The award criteria weight food quality 50 percent, social integration plan 30 percent, and price 20 percent.

Frequently Asked Questions

Can a contracting authority place any type of contract under a reserved status?

No. The Article 20 reservation applies to contracts where the nature of the work is compatible with a workforce composed substantially of disabled or disadvantaged persons. In practice, reserved contracts most commonly cover cleaning, catering, printing, document management, packaging, laundry, and certain assembly or manufacturing services. Complex technical or professional services are less commonly reserved, though the directive does not preclude it where the workforce profile is appropriate.

Does a reserved contract require a different procurement procedure?

No. The reservation affects eligibility, not procedure. The contracting authority still conducts the procurement using one of the standard procedures (open, restricted, or negotiated), publishes a contract notice in OJEU above threshold, and applies the award criteria in the usual way. The difference is that only qualifying organisations may submit bids.

What happens if too few eligible organisations submit bids?

A contracting authority that receives fewer than three compliant bids in a restricted or reserved procedure may face questions about whether the contract should have been reserved. However, the directive does not specify a minimum number of bids: even a single compliant tender can be evaluated and awarded. If no compliant bids are received, the authority may abandon the procedure and re-run it as an open competition, though this should be documented and justified.