Social value is the latest frontier for public procurement and value for money
Social value is the value attributed to economic, social and environmental outcomes that tangibly contribute to the well-being, resilience and sustainability of society and the wider environment. Through policy and directives, governments are increasingly encouraging public services to deliver social value. But how do they do that?
Social value may seem intrinsic to public services, but we miss opportunities even when delivering our greatest successes. How often have procured services concertedly provided employment opportunities for refugees or those with disabilities? How frequently do we encourage women and people from black, Asian and minority ethnic backgrounds into leadership through market engagement? How often do we leverage major infrastructure spend to push the envelope of sustainability?
Over the last 20 years, awareness of social and environmental challenges, as well as perceived supplier misbehaviour, has grown. Recent polls in the UK indicate the public increasingly dismisses free enterprise in favour of nationalisation and more intensive regulation. If governments want to maintain the benefits of outsourcing, and suppliers want to retain their freedom to innovate, then suppliers must reconnect with communities and put social value at the heart of procurement and project delivery.
What does social value mean for the public sector?
While most public services and projects deliver specified social benefits, incorporating social value captures broader opportunities. It draws from the holistic thinking of the Triple Bottom Line (“Profit, People, Planet” as coined by John Elkington in 1994) and the UN Sustainable Development Goals to compel commissioners and suppliers to widen their positive impacts through investment, transformation and regeneration. Most importantly, social value doesn’t compete with value for money, it’s part of it. Some examples of social value include:
- promoting UK innovation and growth
- providing employment and training for disadvantaged groups
- supporting Small to Medium Enterprises and Voluntary, Community and Social Enterprises.
- supporting community and workforce health and wellbeing
- diversity, inclusion, equality and accessibility
- promoting labour and consumer rights.
- reducing consumption, waste and pollution
- using sustainable energy, water and resources
- protecting and regenerating biodiversity.
Focussing on social value in procurement delivers greater value for money
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.