Whose Social Value Is It Anyway?

Chris White’s private members’ legislation Public Services (Social Value) Act 2012 which is expected to come into effect next January places a duty on local authorities and other public bodies to consider how their public procurement might improve the economic, social and environmental well-being of their areas.

Its arrival on the statute book has been greeted by euphoria within the civil society and social enterprise sectors accompanied by some unrealistic expectations and misinterpretation of the new legislation and what it means in practice.

In reality it provides a large amount of discretion because it only imposes a duty on commissioners to consider economic, social and environmental improvements, where they consider it to be relevant and proportionate.

It does not compel them to act upon that consideration nor does it change in any way the current legal framework, notably the EU Procurement rules, in how public procurement is discharged – which means commissioners are still prevented from favouring local suppliers or classes of providers such as the voluntary sector.

However, it does provide a legal stimulus to get commissioning and procurement officers to think about social value, a welcome step in the right direction – a recent LGiU report Future Service Partnerships finding that while “there has been considerable progress in local authorities leveraging more value through procurement and service delivery contracts in the past ten years, there is potential for this to be taken even further”.

But both the new Act and the new statutory guidance on Best Value, if followed to the letter, provides for a sub-optimal approach to commissionin for social value. Notably the Government restricted the application of the Act to service contracts, omitting those for works and supplies, claiming that service contracts is “where wider value is likely to be most relevant”. Like the new Act the best value guidance ties this to service provision. It also falls short of providing a definitive policy statement on the subject which matches the breadth of the best value duty it seeks to describe. This is a false premise which simply ignores the history of social considerations in public procurement in the construction sector, current practice and future potential. On this basis, for example, local authorities and housing associations should not be seeking social value through their investment in new housing and housing refurbishment projects; though they have been for a number of years.

Nonetheless, it doesn’t automatically mean more contracts for social enterprise and voluntary organisations as could be implied by much of the commentary during the passage of the Bill. It does not guarantee that contracts will not go to big contractors or the cheapest tender. It will be the cheapest that also delivers the social value specified, with large private sector companies and charities likely to be more able to resource and demonstrate in their procurement bids social value and play the corporate social responsibility card. As a consequence, as Demos has concluded, we may see a situation where contracts are not awarded to organisations which have the greatest social value but the ones who are best at quantifying and articulating this to commissioners.

What is required is a form of measurement that is relevant and proportionate to the size of what is being procured and focused upon making the case for incorporating relevant and proportionate economic, social and environmental well-being considerations. Equally, commissioners need to know what constitutes a good investment; which means building up knowledge about what may or may not be achievable informed by expert evidence and at the same time they need to be mindful that social considerations can sometimes involve increased burdens which smaller suppliers might find difficult to bear.

These concerns (and over emphasis) over the measurement of social value (rather than its achievement) is probably a result of the different perspectives on how social value is defined with those who have longed championed the agenda doing so by reference to the measurement of non-monetary factors. Whereas the EU Procurement rules refers social considerations which are specific, defined, measurable and related to what is being procured making it less subjective. Too much ‘financialising’ of results may not be helpful in this context.

Given this, social enterprise and voluntary organisations (and indeed, private SMEs) would benefit if they concentrate on identifying and promoting their ‘concrete’ deliverables (e.g. the number of apprenticeships offered) and focusing on impact (e.g. number of people taken out of ‘out of work’ benefits). In this way they will be in a better position to respond to social considerations which are specified by commissioners as well as making it easier to predict, measure and account for.

But this new legislation, like any other, will not solve anything without a culture change that comes from both commissioners and providers. There is no substitute for a strong relationship between the two where a real effort is made to understand each other and develop mutual respect.

Commissioners need a clearer understanding and appreciation of the commercial, financial and value drivers of potential bidders. Service providers need to be in tune with commissioning organisations’ corporate and community objectives to make the right connections between these and the services to be procured.

It is of course for individual local authorities to determine whether to follow the new legislation, and the best value statutory guidance, to the letter or instead work towards a more optimum approach to levering in social value by going beyond the minimum requirements.

This would mean taking a more strategic and proactive approach which potentially embraces all supply chains (including current contractual relationships) across goods, works as well as services and working beyond public procurement to search out for the best value options to lever in social
value.  In doing so they will find that seeking to achieve their corporate and community objectives such as tackling disadvantage, climate change and economic growth, in this way can realise greater value for money.

But there is a sense that yet again, local civil society and social enterprises will be disappointed by the impact of the new Act. In part this is because the Government has not resolved the irrevocable tension between their communitarian aspirations, which had been characterised by the Big Society,
with the Conservative neo-liberal drive to reduce the cost and extent of Government.

This is evidenced by a clear gap between the Government’s rhetoric and the reality of their own procurement policies where you can see the missed opportunities over the last two years: the Work Programme, the NHS reforms, and the Open Public Services White Paper in which social value is only referred to once (merely stating that it should not be ignored). But even with the legislation in place the same outcomes would have probably occurred.

Going forward excluding contracts for works from the legislation is at least sending out mixed messages when the Government is meant to be encouraging the development of apprenticeships and using infrastructure spend to boost the economy. At worst it is providing a pipeline of significant missed opportunities set out in the Government’s £250 billion Infrastructure Plan,
which cannot be afforded.

This should worry the promoters of this new legislation as while it might provide additional encouragement to locally based commissioning organisations, the big gains will come from central government departments that are not always closely connected to social issues.

This post is written by Mark Upton, Consultant at Public Policy Strategies (www.publicpolicystrategies.co.uk) and LGIU Associate, and is based on his Local Government Information Unit member briefing on the new social value legislation. For more information about LGIU membership and briefings see www.lgiu.org.uk or contact chris.naylor@lgiu.org.uk.

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