Following the UK’s withdrawal from the EU, the new Procurement Act, which will come into force in February 2025, replaces and improves on existing legislation while remaining compliant with international obligations.
The focus of the Act is to streamline and improve public procurement of supplies, services and works, while making it easier for suppliers to do business with the public sector. This involves making public procurement simpler and more transparent, as well as removing barriers to new entrants such as small businesses, voluntary, community, faith and social enterprises.
There is also greater emphasis on procurement as an enabler to deliver wider benefits for the public good – which is where Social Value comes in.
Social Value is the value an organisation contributes to society beyond a reported profit. It is often delivered without an organisation realising that is what it is, particularly in the small business community. Examples of Social Value initiatives include donating staff time for volunteering, committing to sustainable procurement practices, offering apprenticeships and training programmes, buying and employing locally, and reducing carbon emissions.
Building commercial partnerships based on a wider understanding of value has the potential to deliver a step change that will benefit people, communities and the economy.
Prioritising value for money vs value for the community
Value for money will of course remain a high priority, but national strategic priorities such as job creation, improving supplier resilience, reducing emissions and driving innovation are also significant determining factors.
The big difference for Social Value when the Act comes in will lie with the legal requirement for public sector buyers to shift from awarding contracts based on M.E.A.T (Most Economically Advantageous Tender) to M.A.T. (Most Advantageous Tender).
This means considering the wider benefits for the community in which the contract will be delivered, such as creating local employment opportunities, carbon emissions reduction or using a local supply chain – all of which naturally fall under the umbrella of Social Value.
What many of our members have learnt is that by delivering Social Value in the communities in which they operate, they also stand to benefit from a more resilient and motivated workforce, forming a virtuous circle where all parties flourish.
Embedding Social Value at the very start of the procurement cycle
Social Value needs to be close to the top of the list of priorities at the very inception of a new project, starting with planning, preparation and market engagement.
The very first step is to identify the needs of the community in which the contract will be delivered. For instance, does the area have a high number of unemployed people, a high crime rate or a poor standard of shared outdoor spaces?
This information will inform how a supplier can make a positive difference. We’ve known a number of procurement professionals who have benefitted hugely from holding a ‘meet the buyer’ event, which provides potential bidders with a chance to hear and discuss what the focus areas and expectations will be, gain a clearer understanding, and in turn, provide better bid submissions.
This type of event also provides insights for potential supply chain partners to make a stronger Social Value case to tier one suppliers, thus unlocking Social Value across the wider supply chain.
Setting contractual expectations for a responsible and accountable supply chain
Broadly speaking, the bigger the company, the more scrutiny it comes under. Yet RepRisk, a due diligence database on ESG and business conduct risks, recently found that nearly one in three public companies linked to greenwashing are also associated with social washing.
Buyers have an integral role to play in ensuring that their organisation’s supply chain is beyond reproach when it comes to sustainability and Social Value performance, so setting out clear expectations at the contract stage is critical to managing the ongoing relationship.
For Social Value, the main points to cover in the contract should include:
- Being clear about the importance placed on Social Value through the evaluation weightings applied
- Supporting bidders by providing sufficient information to ensure they understand Social Value and have the capabilities to deliver
- Stating expectations regarding regular reporting of Social Value deliverables during the contract delivery phase
- Setting out key performance indicators to benchmark results against
- Identifying who is responsible for the delivery of agreed Social Value initiatives and what the arrangements are should things go wrong
- Including remedies for non-delivery of Social Value objectives
These points will help to ensure that the contract delivery and, more importantly, the contractual relationship with the appointed supplier, is effective and positive. This isn’t just about the results – which are of course the end goal. It is also about creating a mutually beneficial, open and clear working relationship that will deliver Social Value and potentially generate more positive outcomes through repeat business in future.
Evaluating Social Value Delivery
A fair and transparent evaluation process from initial tender right through to contract delivery has multiple benefits and is worth spending the extra time on.
For the buyer, assessing Social Value delivery from the outset means:
- Budgets will go further, getting the best possible results for the public
- Concrete evidence of benefits created for the community can be delivered, enabling opportunities to promote successes with credibility
- Compliance requirements are legitimately covered
- Improved supplier collaboration and engagement
For the communities where the contract will be delivered, it means:
- Wider access to employment and upskilling opportunities
- Stimulus for local businesses
- Cleaner, greener spaces, maintained by sustainable practices
- Healthier, safer and more empowered communities
Using Social Value to tackle climate change
It’s important to remember that Social Value and reducing environmental impact go hand in hand. Climate change is felt differently by different groups, with lower income and disadvantaged groups more likely to be affected, despite contributing to the causes of climate change the least.
As Social Value is all about spearheading improvements that will lead to a flourishing local economy, it gives buyers a unique opportunity to support the just transition by helping disadvantaged groups on the road to net zero. In practice, this can mean anything from providing learning opportunities in local schools and colleges to running a cycle to work scheme.
Increased transparency and reporting obligations will filter through to all parties
Greater transparency and accountability in public procurement spend decisions has been built into the new Procurement Act, with obligations to publish information via transparency notices at various stages made available to the public. This includes the estimated value of the contract and the date when the contract will be entered into.
This will provide insights for citizens into how their tax-payer money is spent, what for, and who with.
In turn, this will place a greater emphasis on the need to continually track, measure and report progress, outcomes, and alignment with initial contract requirements. which will filter through the entire supply chain.
Measuring, tracking and reporting on Social Value delivery
The most effective way to capture and report Social Value performance is by using the Social Value TOM System™. Endorsed by the Local Government Association, it ensures procurement spend goes as far as possible, enabling buyers to track and measure Social Value from commitment to delivery. It is fully compatible with the UNSDGs and the central government's Social Value Model, and is the most established and widely adopted method for recording and reporting Social Value in the supply chain.
Where profit is measured in standard accounting terms, Social Value is measured by actions, with a Social Value £ attributed to it. For instance, employing someone who has been long-term unemployed saves money for the government in benefit payments and provides income to the newly employed individual who will be able to spend in the local economy. Also, as a result of having that job, they are likely to be healthier for longer and so not become a burden for the NHS. All of these benefits can be valued.
The TOM System is fully transparent and the data is validated by a third party, which adds another layer of protection against accusations of greenwashing and social washing.
Demand for third party data validation and reporting is naturally expected to increase under the new Act, with both suppliers and buyers relying more heavily on measurement frameworks such as the Social Value TOM System. After all, reporting inflated results has the potential to do significant harm to an organisation’s reputation.
Social Value is here to stay
Social Value has been steadily gathering momentum in the UK, from the Public Services Act in 2012 to the new Procurement Act. It’s encouraging to see organisations across the public and private sector gaining a wider understanding of the many and far reaching benefits to be had from generating Social Value throughout the supply chain.
We are also starting to see other countries, such as the Republic of Ireland, Canada, and Australia, moving towards embedding Social Value into procurement legislation.
The rest of the world will be watching the UK as the new Procurement Act comes into force and we must all remember that behind every £1 of public money spent, there is a person, a life and a community that will stand to benefit.
To learn more, explore our Buyer Toolkit, an essential resource for anyone looking to embed Social Value into their procurement.
This article originally appeared in The Purchaser on the 8th January 2024.
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