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The impact of the Social Value Act

Wednesday February 27th, 2013

The Public Services (Social Value) Act 2013 was implemented on 31 January 2013.

Public bodies now have a legal requirement to consider the social good offered by bidders during the procurement process as well as price and quality. 

Social value will ask the question: ‘If £1 is spent on the delivery of services, can the same £1 be used to also produce a wider benefit to the community?’

Ian Taylor, Director of NEPO, the North East Procurement Organisation and public sector procurement consortium Pro5, provides us with a procurement perspective, and Julian Blake, Partner at law firm Bates Wells & Braithwaite shares his legal expertise on the impact of the Social Value Act.

The Act applies to the pre-procurement stage of contracts for services because it is at this stage that social value consideration can have the greatest impact.  This will require authorities to hold consultations and commissioners to take on board a wide variety of factors as part of their procurement preparation.

Are authorities at risk of being overwhelmed and bogged down by consultation procedures?

Julian: “These ideas do suggest more active, creative and innovative thinking by commissioners and their more active and productive engagement with suppliers and users. Procurement process has to a significant degree become detached from Commissioner purpose. Overall, there is the opportunity to recognise that overcoming the inefficiency in procurement process failing in delivering best value may be translated into efficiency of a focus on actual needs and commissioning process more precisely directed towards those needs. It is true that the current tendency towards required objectivity in a procurement process actually becoming insensitive mechanics can only be corrected by time input, but the rewards at the end of the transition process which reintroduces the centrality of purpose, incorporating social value, may be an enhanced public benefit and a truly efficient process directed toward that end.”

Ian: “There is the question of  ‘how do we cope with a national consultation?’ There’s a real risk of process over procedure. It will be a challenge and it will be interesting to see this work in practice and see how national frameworks can deliver locally. Consortia work with local governments on construction framework solutions and social value includes things like the number of local apprenticeships and how landfill will be managed. We can learn from others and the examples they set.  Commissioning is a key part of the budget and we must avoid the risk of over-complicating something which is a no-brainer.”

Funding for core public services has been and will continue to be reduced but the demand for services will increase significantly in the coming months and as a result operating  supply chain efficiently will be vital. 

How can organisations use the Act to improve their relationship with suppliers?

Julian: “Commissioners have always had the power to consider and focus on the way broader and integrated social value can be built into the procurement of particular services. The act is a stimulus to that power being utilised. The starting point is the pre-procurement consultation with suppliers and users in relation to the needs of the community in relation to a particular service. This may generate an optimum version of a service, with variations, which include social value factors and which can form the basis of the procurement specification.”

Ian: “The Act gives permissions to do what a lot of local authorities are already doing which is to take social and environmental issues into account during procurement exercises. Local authorities who want to take more than just price into account – this paper says, now you can. It’s about helping to sustain local economies, provide jobs and giving procurement permission to use these kinds of solutions.”

While social value may have been considered by various procurement bodies it has been difficult to quantify and instead cost and quality of service delivery – which can be more easily identified and analysed – has been the driving factor in bid assessment.

Are local authorities ready to start working with more small organisations who may be less experienced compared to bigger groups who may have more expert bid-writing capabilities?

Ian: “It requires thinking and collaboration. Consortia are already established to do this kind of thing and help to train and support small local organisations. I can see it working really well in local authorities when the onus is on regional or national consortia. Many local authorities are already working to train and help develop the third sector.  It’s a real opportunity for suppliers to get in there.”

Under the new legislation local authority procurers must now consider how they can improve the social impact of their public service contracts before they start the procurement process.

Do you think any legal issues are likely to arrive from Council’s procuring for a service with a very limited geographical reach but still having to consider the entire Council area in their consultation process?

Julian: “There is certainly an issue in principle about preferring a local business, when general principles of procurement law would suggest this to be anti-competitive. The answer is that any such preference must be based on objective criteria in the public interest and properly reflected in the specification. A Council has the discretion to make judgements about impact within localities and the balance with general impact throughout the whole Council area. Such judgements are made all the time. The only unfamiliar element here is the idea of such judgements being based on the concept of identifiable and even measurable ‘social value’. Commissioners could commit to overcoming the lack of familiarity by keeping in touch with such developments.”

The law is expected to open up more opportunities for social enterprises to deliver public services.

Will smaller charities with limited resources have difficulty demonstrating outcomes and social value to local authorities?

Julian: “Some smaller charities with limited resources can demonstrate aspect of social value directly: a mission driven personal engagement with the service, for example. Procurement currently works the other way in making it difficult for small charities with limited resources to be considered. This happens because the primacy is placed on risk avoidance, with financial security criteria, such as large reserves or the ability to provide performance bonds acting as conditions before the merits of supplier are considered. In the way smaller charities with limited resources are eliminated from consideration at the preliminary assessment stage.”

Ian: “Organisations are getting help to sharpen their message but just because they are working on delivering their message about the value they can deliver to the community they must not slack off when it comes to technical tender questions. Social value isn’t enough by itself – you also have to get past tender stage.

“We (public sector commissioners) are looking for local providers for local services, suppliers who know the area and know what they are doing – providers who know their community and are able to demonstrate real social value.”

The implementation of the new Social Value Act enables procurers and commissioners to take account of the potential long term benefits of working with social enterprises.

Sharing best practice is a vital part of most business organisations: will we see more collaborative procurement as a result of the Act?

Ian: “Not as a direct result but because of the pressures placed on local authority budgets. Difficult though collaboration may be, and it is difficult, it is extremely worthwhile for buying groups and can help build social value.  For example, PRO5 is working on a national procurement for milk and must work closely with local authorities on local needs, taking their requirements under consideration into the solution; we’re in consultation with schools and residents making sure we think about local suppliers and things like the organic aspect of the supply.”

How well do you think Central Government will be able to integrate a more socially conscious approach to procurement compared with Local Government which already has a clear focus regarding areas such as emergency services, health care and housing?

Julian: “This again depends on how seriously the Act is taken. Inevitably, active engagement with the concept will be variable across sections of central and local government. Previous initiatives to improve public sector contracts and commissioning process have not been a great success. To take one example, the Compact between Government and the Community and Voluntary Sector has not been absorbed as good practice despite figuring in public policy for about fifteen years.”

Ian: “There is a desire from the central government to control things at a local level. A national school framework will have difficulty delivering things at a local level. When issues are devolved a consortia will deliver social value as a matter of course. They have the local knowledge and know the local suppliers; it’s incredibly difficult for national solutions to manage that. There’s a chance when a larger service provider is used that the money will leave the area while if a local supplier is used then money will stay in the region and help boost the local economy.”

What do you hope to see as a result of the Act?

Ian: “Better recognition of what procurement can do. Procurement has traditionally been hedged in savings which are important but actually when you talk to public sector commissioners and procurement practitioners what a procurement needs to do is deliver social value. Hopefully this act will help enhance the image of procurement by allowing procurement teams to do the right thing within their community.”

Julian: “There are already examples where commissioners have taken an approach incorporating social value with hugely successful results. The question is whether this approach becomes mainstream. The effect will inevitably be variable in the initial phases, but the hope is that more examples will demonstrate that the public benefit is best promoted by taking the new Act seriously. There are good and efficient social enterprises, charities and socially-focused local businesses that should benefit from an approach which seeks to recognise the extra value you they deliver through their value driven approach to their services. One would hope that the value of the corrective it represents – refocusing on commissioning purpose over procurement process – is totally accepted.”

Public sector organisations aim to achieve as much public benefit as possible with the money they spend and traditionally public service contracts have had a focus on paying for outputs (quantified delivery) and rather than the wider outcomes, or additional value of how a service is provided.

By placing an emphasis on social value and allowing procurers to seek out projects which offer the best technical services at the best price while also strengthening areas such as sustainability, apprenticeships and training and local supply chains, the Social Value Act opens up the already powerful channel of procurement to make a real difference both locally and nationally.


Julian Blake

 

Julian Blake is a Partner at law firm Bates Wells & Braithwaite.  He is particularly involved with the application of corporate/commercial law to charities, social enterprises, educational institutions and socially focused business and the engagement between such organisations and the public sector.  As well as being joint head of the Charity and Social Enterprise team, Julian leads Bates Wells & Braithwaite’s cross-departmental Commercial Services and Education Groups.

www.bwbllp.com


 

Ian Taylor

 

Ian Taylor is the Director of NEPO and public sector procurement consortium, Pro5 Group. With a joint buying power of £2 billion, Pro5 combines the expertise of the five biggest professional buying organisations in the UK.  Ian was previously Commercial Director at the Department for Education where he was an active proponent of collaborative procurement for schools and across central government. Prior to that, Ian was Head of Procurement at HBOS.

www.pro5.org

 


To read the new Social Value Act click here

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