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Background
Defining social value
Social value is what is added to a contract above and beyond the standard requirements. It involves contributions to the community, environment and economy.
Examples of securing social value through procurement include creating apprenticeships and volunteering opportunities, utilising small-medium enterprises (SMEs) and voluntary, community and social enterprises (VCSEs) in supply chains, responsible employment practices, and diversity and inclusion initiatives.
The aim of social value in procurement is to promote mature and ethical market capitalism, alongside sustainable growth and better outcomes for customers.
Key laws and policies
- Public Services (Social Value) Act 2012: Public bodies considering social value when buying services
- Procurement Policy Note (PPN) 06/20: Social value in the award of Central Government contracts
- Procurement Policy Note (PPN) 06/21: National Procurement Policy Statement
- Procurement Policy Note (PPN002) 02/25: Taking account of social value in the award of contracts
- Procurement Act 2023: Contracting authorities must have regard to NPPS
Evaluating and measuring social value
Social value should have a minimum weighting of 10% of the total score in procurement evaluations.
However, it is not statutory as per PPN002 above. This weighting only applies to central government contracts procured under PA23, i.e. above the relevant financial thresholds. It does not apply to local government.
Clear commitments from suppliers are essential in ensuring that social value is effectively integrated into contract delivery.
It is also crucial to evaluate supplier responses based on the proposed impact of the social value that they offer to deliver rather than merely what or how much they offer.
There are many ways to measure social value. Buyers and suppliers should consider the following:
- Quantitative or qualitative data?
- Which methodology to use?
- Which metrics are the right ones?
- Short term delivery or long-term outcomes?
Recommendations
| Do |
|---|
| Start with a problem statement – the outcomes with which you need help. |
| Ask bidders to be specific about what they are committing to do for you and how they plan to measure and report delivery of social value. |
| Consider asking bidders to include an implementation plan. |
| Compare or evaluate bids based on the impact of the proposed social value activities. |
| Don’t |
|---|
| Tell suppliers what to do – allow them to innovate to solve your problem. |
| Forget to be proportionate in what you’re asking for. |
| Ask what they already do as an organisation (e.g. Corporate Social Responsibility policy). |
Discussion
What does social value look like in local authorities?
Social value in procurement for buyers varies considerably. While some local authorities have already incorporated social value into their contracts, others currently do not have a minimum social value weighting at all and/or are looking to incorporate this soon.
Social value resourcing also varies across local authorities. While some have social value officers typically in community teams, others rely on local politicians or councillors to drive it.
Ultimately, politicians decide on the right approach to social value for their area and senior management are responsible for making it happen.
To deliver social value in a more meaningful way, it was suggested that social value discussions should be included in pre-market engagement so that suppliers can consider their response at the earliest possible stage.
Examples of social value delivery
If local authorities were to apply the provisions of PPN002, then social value should have a minimum weighting of 10%. Whatever weighting is applied by a local authority for social value, there may be opportunities to sub-divide this weighting, for example into social, environmental etc. This makes sense because incorporating social value in tenders depends on the service provided. For example, regeneration will tend to focus on economic aspects, while environmental services may prioritise carbon neutrality.
In technology services, where there can be a portfolio of many suppliers, social value must be proportional to the supplier’s capabilities. For example, social value delivery could involve aligning with policies on sustainability and modern slavery.
There was also a discussion of meaningful social value delivery. For example, can you deliver social value in social care contracts, where social care is inherently present? In the same way, not all contracts can deliver social value. For example, contracts procured through national frameworks often involve non-local suppliers.
In terms of environmental priorities, translating national environmental initiatives to local levels can be challenging, often resulting in small-scale actions like planting trees. Large companies can struggle to align their national approach to a council’s plans at a local level and face difficulties in identifying appropriate meaningful action.
One local authority is piloting treatment of environmental priorities separately from social value given their significance.
Challenges for suppliers
Local authorities are aware that suppliers need clear, relevant and proportionate social value requirements and guidance on how to meet social value commitments. This is because suppliers face challenges in delivering social value in a meaningful way that meets local, clear and realistic social value targets. For example:
- There exists no consistent way for local authorities to define their social value requirements, which generates more effort for suppliers to meet their diverse demands.
- Technology suppliers face more challenges in responding to procurement requirements, as social value may be seen as less relevant when procuring ICT contracts.
- SMEs can face difficulties when up against big businesses in terms of resources required to meet social value objectives. This can impact their ability to win contracts.
SMEs
The discussion particularly shone light on the administrative burdens for smaller contracts and the struggle to evaluate social value fairly, especially between SMEs and large organisations.
Local authorities believe SMEs are underselling themselves in the tendering process. Additionally, SMEs should recognise that they often offer greater flexibility and are able to deliver bespoke local results that bigger organisations cannot. SMEs, with their local knowledge, can deliver more localised social value.
Suppliers urged local authorities to make sure they consider the capabilities of SMEs. At the same time, are there opportunities for local SMEs to join up when tendering, giving access to more resources thus enabling better tenders as a result?
Measurement
There is a need for defining, measuring and tracking social value during contract management. This has resulted in a growing number of reporting platforms, which complicates obtaining consistent social value data.
Buyers should focus on their social value goals, without letting methodologies dictate social value delivery. However, over time, the focus on measurement systems has created an industry within an industry. This has led to reducing social value to countable metrics (tick box exercises), which contradicts the qualitative essence of social value.
Participants suggested tracking performance against what was proposed in contracts initially in regard to social value, which is more meaningful and ensures qualitative aspects are not missed.
Further to this, social value at the local level is easier to measure with local suppliers already having some visible impact in an area, such as job creation.
KPIs
In order to ensure effective social value delivery throughout contract duration, local authorities highlighted the need for clear KPIs, monitoring mechanisms and regular check-ins to be specified in contracts with suppliers to ensure that commitments are met.
KPIs need to be meaningful and simplified to ensure they can be measured and tracked without complications by those working at full capacity.
However, a universal approach to KPIs is challenging, no one organisation currently has the answer for social value delivery without overburdening suppliers.
Local authorities recommended having a KPI related to sustainability or social value requirements for higher value contracts. As part of their transparency requirements under PA23, one local authority intends to pilot publication of a KPI related to social value or sustainability for higher value contracts to highlight the importance of social value in procurement processes.
Solutions and suggestions
To address the challenges of social value in procurement, both suppliers and local authorities agree that pre-market and ongoing engagement between both sides is essential for understanding the proportionality of social value requirements, as well as assessing suppliers’ capabilities and feasibility for social value delivery.
Local authorities urge suppliers to better understand local community needs. At the same time, suppliers want the definition of social value to be standardised to avoid delivery pressures on suppliers serving different local authorities.
Suppliers must also be aware of contextual factors and remain flexible to adapt to changing priorities of local authorities, especially in long-term contracts. As part of this, suppliers should be transparent about what they propose in terms of core contract and social value add-on.
There is a need for evidence on what ‘good’ looks like when both customer and supplier are aligned in social value delivery. Suppliers should share their social value commitments and experiences to provide good and bad examples of delivering social value in contracts.
Further to this, a standardisation framework for local government, similar to that for central government, would be beneficial.
Finally, agreement on the best methodology to measure and track social value is needed to achieve alignment.
Impact of the Procurement Act 2023
The new Procurement Act will create administrative burdens for both suppliers and buyers, requiring additional resources for increased reporting and compliance. At the same time, the new Act presents opportunities for increased transparency and early engagement with suppliers. The benefit of this is likely to be improved supplier relationships and enhanced social value delivery due to increased visibility into procurement processes.
The Competitive Flexible Procedure (CFP), one of the changes brought on by the Act, will grant contracting authorities more autonomy, allowing extensive supplier negotiations, pre-market engagement and presentations. While this is likely to be beneficial and create greater flexibility, it also has the potential to be time and labour intensive. This is particularly the case for SMEs that may have less resources available to participate in potentially lengthy tender processes.
Conclusion
In summary, the successful implementation of social value in public sector procurement requires clear objectives, early and ongoing engagement, realistic and proportional targets, and effective monitoring.
With the launch of the Procurement Act 2023, alongside local government reorganisation and devolution, there are likely to be more challenges and opportunities for social value delivery. However, local authorities must keep suppliers informed during such transitions. In order to do this successfully, both suppliers and local authorities should continue to work collaboratively to maximize the social value derived from procurement contracts.