The merits of social value in procurement

The growing importance of social value

The passing of the Public Services (Social Value) Act in 2012 meant that public bodies now have to consider the social, environmental and economic effect when buying public services above the Official Journal of the European Union’s (OJEU) threshold and, even if the value falls below the threshold, consideration of social value is still encouraged. In effect, it aims to measure how the wellbeing of the effected communities will be impacted. A key driver behind its implementation was to try and help prevent the “race to the bottom” which was occurring in the sector at the time were tenders were being won based solely on monetary measures and contractors were bidding at unsustainable prices. This resulted in a significant decline in the quality of services provided to the public and contributed to the collapse of a number of contractors. The hope was that the requirement to evidence social value could help prevent this from reoccurring.

By definition, therefore, social value should be a big step forward for the affected public bodies. Yet, since its inception two key questions have been posed – what exactly is social value and how do we evidence it?

What is social value?

The first difficulty is that value is ultimately subjective and can mean different things to different people. If one person is tasked with drafting a social value policy it will likely contain a subconscious bias towards what is most important to them and may differ significantly from that of another person given the same task. Furthermore, the social, environmental and economic issues in one area can differ greatly in another, hence requiring two different approaches/policies in order to bring about positive change.

Can social value work?

Whilst it’s not as black and white as monetary or quality based measures the principles behind it are solid and public bodies are placing more and more importance on the weight of its inclusion in tenders. The MP Chris White, who drove the creation and implementation of the Social Value Act explained it as:

“We mean value not in its narrow [financial] sense but in its true sense – recognising the importance of social, environmental and economic wellbeing across our communities and in our lives.”

Measurement and definition caveats aside there’s no denying that any work procured and carried out on these principles could have a wide reaching and positive impact. There is the potential for procurement to unlock millions of pounds of value for local communities as a result of the works which are commissioned. Furthermore, having a robust way to evidence and report on the positive impact of a project will allow public bodies to display better value for money of their services as well as better tax payer value.

Kirsty Bower, head of procurement at Affinity Sutton spoke candidly to Inside Housing in 2014, a year after the Act came into place, about the progress her organisation had already made in adopting the new legislation. They were creating and running training sessions aimed at helping social enterprises understand the procurement process and thus encouraging them to bid for works. Even just a year in, Ms Bower reported that they had already seen a noticeable increase in small and medium enterprises (SMEs) bidding for and winning contracts. Fast forward to the present day and we’re now seeing many more housing providers adopting such policies. It is likely that local or even regional SMEs are going to be in a much better position to meet the social value weighting of a tender. They are more likely to be using local labour thus creating local jobs, as well as utilising the local supply chain which cannot only create further jobs but create a monetary multiplier in the local community of the money invested by the public body. Social value can then be used to support value for money statements based on the long term positive economic impact the procurement of works will have on the community.

How do we evidence social value?

As it stands the Housing Association’s Charitable Trust (HACT) framework is the most adopted metric measure of social value. HACT say that since the procurement budgets of social housing providers can be used to leverage significant sums of money which could then be spent on their local communities they have the potential to make a significant positive impact. The tool they provide can be used to collate data and to measure and evidence the impacts they’ve generated through the supply chain. This is done using the Well Being Valuation theory which aims to measure the success of social intervention by how much it increases people’s well being. They’ve created a “Social Value Bank” which places a monetary value on social impacts of different community investment activities which they hope will allow users to better communicate the differences they’re making.

Some housing providers have been very proactive in adopting and supporting the principles of social value as well as the HACT framework as in theory it allows them better convey what they’re delivering to their residents at a time when their resources are stretched and expectations are growing. At present social value is perhaps not given the weighting in tenders it requires in order to unlock its potential but as more and more housing providers adopt its principles we expect we are going to see an increased emphasis on its inclusion in the procurement process.