There has been a lot of speculation about how the Social Value Act will affect local government procurement and whether costs might be passed on by suppliers. How do you measure and score social value and what might be the outcomes contracts could provide for our communities?
This was a question asked recently on the Guardian Local Government Network website. My response (published in full on the site) was as follows:
There is much to say about this, though firstly it is important to address the misconception that it will inevitably mean increased costs. There is plenty of evidence to suggest that if a procurement is well articulated and bidders know what they are being asked to provide, they can come up with responses that meet the commissioner’s requirements without increasing the costs for either party – indeed, significant savings can be generated in bigger picture terms, as the social improvements deliver wider benefits.
On the Act itself, it is possible to take the view that, in strict legal terms, it changes very little. This is not to say that contracting authorities do not need to take social value into account in conducting public procurement, but that they should be doing so already. The following are some of the reasons this is so:
- Public authorities exist fundamentally to serve the public. Although under the procurement regulations the commissioner must select the “most economically advantageous” bid or "lowest price", the latter would rarely be the appropriate sole criterion in relation to public services. It follows that social value should be an active component of decision making, right up there alongside price and quality.
- Contracting authorities are obliged to take principles of best value into account. This requires an assessment to identify the bid that will provide the best value return for the public money to be expended in purchasing the service. The three basic elements in best value are "economy, efficiency and effectiveness". Criteria for assessing best value include price, quality, technical merit and cost effectiveness and can properly include further material considerations, such as the added value to be provided by a particular service provider.
- The EU is often blamed as the reason procurement is so inflexible. In fact, the EU actively advocates taking social value into account. It has published guidance, 'Buying Social', on social considerations in public procurement. This articulates the benefits of socially responsible procurement. Further, as part of its current Social Business Initiative, equally unequivocally, it states its intention to use procurement as a means of promoting its social model.
The Act may well be useful as a means of focusing the attention of contracting authorities on the opportunity procurement presents to deliver social value – and of making it easier for third parties to hold them to this. However, as the question indicates, it will require work on the part of authorities to put in place the processes and instruments to enable them to do so with confidence. These include:
- Engaging in pre-procurement market engagement to educate the market in terms of what they are seeking in relation to particular procurements and to learn from the market what may be technically possible
- Constructing the specifications in a manner that makes clear the social value element of what they are seeking to purchase
- Being transparent about the role of social value in the evaluation of bids
- Developing contractual terms which both hold the successful bidder to the commitments they make and enable the commissioner to measure their performance
Through all of this, the critical factor in legal compliance terms, is relating the social value to the subject matter of the contract. If this is adhered to, much is possible. However, it requires thinking through all the above elements of the process from the outset to present a consistent approach throughout.
The question touches on the problem of measuring social value. This is, of course, a live issue. However, we are at a stage now where it is less the case that no one knows how to do it, but that there are lots of alternative methodologies and commissioners are unsure about which may be the most appropriate for them. They are out there though, and it is a matter of doing your homework to identify (or adapt) the most suitable for each procurement. Sharing of experiences between authorities can go a long way to ease this process.
At BWB, we are working with a variety of public authorities to develop the methodologies to make procuring for social value the default for them. We are happy to share our learning with those that are interested.