Focussing on social value in procurement delivers greater value for money
In society, there are benefits in considering our mental well being and community cohesion, all evident as we witness the onset of COVID-19. In our earlier blog, we introduced the UK Government Green Paper on transforming Public Procurement, which is introducing the term ‘social value for money’. Millions of taxpayers money are spent via social and health services dealing with the outworking of mental health issues brought about by past and present ways of collecting and spending government money in providing all services within our communities. Pre-emptive measures would help everyone in society feel better about themselves and the society in which we all live. During this COVID-19 pandemic, there are many stories of everything slowing down and neighbours helping neighbours and strangers helping strangers because they have the time to think about other people. This has made people feel better about themselves and others. The outworking of this, is less reliance on the social and health services, which can thus focus on caring for the higher levels of sickness which require more direct medical intervention. Communities can heal communities. Money well spent.
Unethical actors rarely create the issues and missed opportunities associated with public sector suppliers. In our experience, the misalignment of incentives is a more common cause. The narrow focus of public procurement too often forces suppliers to deliver a narrow set of objectives at minimal price. This might exclude social value-oriented businesses, while rewarding those who strip out socially-valuable costs such as paying a living wage.
There are, however, many examples of best practice we can learn from, particularly in local government. For instance, when tendering for a major building renovation, Harrow Council included an explicit request for social value and systematic approach to recording it, as well as a 10% weighting in tender evaluation. They found that the lowest priced bid provided £439,000 (+41%) additional social value, while the highest priced bid provided only £71,000 (+3.5%). The fifth-ranked bid provided the greatest additional social value (£781,000, +57%). Although maximising social value can be expensive, it’s also possible to achieve more social value without additional cost.
There has never been a better time to embrace social value in public procurement
A tipping point in the social value story was the creation of the UN Millennium Development Goals and UN Global Compact at the turn of the millennium. These formed an international social value charter and encouraged businesses to adopt socially responsible practices, setting the agenda for EU and national laws to follow.
In the UK today, the Public Services (Social Value) Act 2012, Government Buying Standards (2012), Balance Scorecard for Growth (2016) and Public Contracts Regulations (2015) create an ideal environment to drive social value. They encourage strategies, business cases and procurements to incorporate social value, including in supplier selection and contract management. Here at PA, we’re increasingly receiving invitations to tender from public sector clients with explicit social value criteria included.
Although social value can deliver huge societal benefits at minimal cost, the uptake across public procurement is still patchy. This is due to a misperception of restrictive procurement law and the assumed complexity of measuring social value. Thanks to rapid evolution in public policy, however, the UK government has never been in a better position to leverage its £284bn annual buying power to transform markets in favour of social value outcomes – including the transition to a Circular Economy.
There is still some way to go before public services consistently and effectively integrate social value throughout procurement. That’s why we’re always working on better ways to support clients to achieve this. Together, we can incentivise and reward businesses that deliver social value, benefiting all citizens and driving true value for money for the UK taxpayer.