Rob Bell looks at the implications of the Public Services (Social Value) Act 2012 for public procurement.

Public sector procurement decisions are driven by value for money. However, the perception of value for money is shifting from, simply, lowest cost to taking into account wider social, environmental and economic (SEE) gains.

The Public Services (Social Value) Act 2012 (the Social Value Act) makes taking these factors into account law, requiring public bodies to consider how the services they commission and procure can benefit local communities, by helping achieve SEE goals. Minister for Civil Society Nick Hurd describes the Act as “an important step in encouraging public sector commissioners to think harder about maximising value to communities”.

Public bodies whose actions are governed by the Social Value Act include local authorities, government departments, NHS Trusts and housing associations, among others. The Social Value Act applies to public service contracts over the EU procurement threshold, which currently stands at £113,057 for central government and £173,934 for other public bodies. While it is not compulsory for commissioners to consider social value in contracts below the threshold, the Government promotes its inclusion in all contracts as best practice.

Social Enterprise UK (SEUK) Chief Executive Peter Holbrook says: “The Social Value Act has the potential to create a more level playing field for social enterprises and charities that are often squeezed out of public services by larger private providers.

“Social value in the DNA of contracts will help banish a culture of commissioning that always defaults to lowest cost and is responsible for the mass degradation of services. This law, if strengthened, has the power to improve standards across the board, as private companies will also come under pressure to deliver social value to win contracts.

“The Social Value Act throws national and local commissioners a lifeline, giving them the freedom to choose providers that deliver whole community prosperity.”

SEUK, alongside Conservative MP Chris White, who tabled the Social Value Act as a Private Members Bill, and Anthony Collins Solicitors, which Partner Mark Cook says has been advising clients on how to build social value into public procurement for 15 years, are now working to raise awareness of the Act to help public sector bodies embed SEE benefits into their commissioning and procurement processes.

Mr Holbrook says: “In these austere times, it is important that commissioners choose service providers that deliver maximum value for communities. Every £1 spent from the public purse should be working as hard as possible.

“We’re helping local commissioners embrace this armoury — it is imperative they get to grips with what they need to do to comply with it so our public sector spending can be used as a force for good.”

“A little gem”

Sir Stuart Etherington, Chief Executive of the National Council for Voluntary Organisations, describes the Social Value Act as “a little gem [with] the power to radically transform our public services”. He continues: “It gives commissioners the green light to take into account the extra value charities bring. We know charities add something special that cannot always be seen from the figures in a tender document. They do it by putting their values and their service users first, often involving volunteers who have a personal interest and experience of the issues they are dealing with. They are frequently the most expert organisations in their fields, and have the skills and the drive to create genuinely better services.”

SEUK’s Ólöf Jónsdóttir specialises in public services policy and leads SEUK’s political work, which has meant heading SEUK’s campaign for the Social Value Act. She tells Croner: “The Act is quite a short piece of legislation, which is ultimately about trying to allow commissioners to commission in a way that makes the most sense for wider communities. It allows them to achieve the best outcome by considering how social value can be factored into decision-making.”

Ms Jónsdóttir gives the example of local authority waste management contracts, where in the past, lowest cost would often have been a deciding factor. However, taking social value into account could mean choosing a contractor that commits to training the long-term unemployed to work in the waste industry, delivering new jobs, and bringing local residents off benefits, cutting unemployment expenditure.

“Traditionally, a number of public bodies around the country have done this as a core part of their work, but the risk-averse nature of procurement, and the challenges of working in-line with EU regulations, both hinder the drive away from simply lowest cost decisions.”

Passing the Social Value Act required cross-party agreement, Ms Jónsdóttir says, which demonstrates “recognition across the board” in policy-making circles of the potential for taking social value into account in decision-making, to help achieve long-term savings in areas such as welfare spending.

She continues: “Contracts such as the waste management example would save considerable amounts from the UK’s welfare bill.” In the past, commissioning has suffered from a silo approach, with spending on disparate areas, such as waste and health only every considered separately. “The Act allows commissioners to look at wider strategic objectives,” Ms Jónsdóttir says.

Raising awareness

The next move for organisations such as SEUK and the National Council for Voluntary Organisations is to raise awareness of the Social Value Act’s requirements, and help commissioners working for public sector bodies to achieve greater social value in the contracts they agree.

Jónsdóttir says: “Part of what we need to do now is to achieve clarity as to how the aims of the Act fit with Central Government priorities, and how they can be achieved within the EU regulatory framework.

“The concept of ‘best value commissioning’ incorporates social value, but has not been articulated strongly enough. We need to raise the profile of what is meant by social value. For a lot of commissioners we have spoken to, it is a way of working they are trying to undertake already, but it is proving a struggle within their organisation to make it work; or it is something they have wanted to do, but have not had a platform to make it happen.”

SEUK is working with MP Chris White and other stakeholders with an interest in making the Act a success to improve skills and change attitudes in public sector procurement departments.

“We are expecting the Government to publish guidance in the area, and we are working with the Commissioning Academy on training,” Ms Jónsdóttir says.

The Commissioning Academy opened in June 2013, and the Government said its focus is on “practical, peer-led learning, covering key commissioning issues such as outcome-based commissioning, working with the voluntary and community sector, market engagement and development, joint commissioning across organisational boundaries, behavioural insight, and new models of delivery such as mutual and joint venture companies.”

Minister for the Cabinet Office, Francis Maude, says: “The world is changing and so must we ― the demand for public services is going up, while resources are going down. Our public sector must change to meet the long-term challenges and ensure we live within our means.”

In addition, Nick Hurd says: “The UK needs effective commissioners to deliver better outcomes for citizens on ever tighter resources as we rebalance our economy. We need commissioners for whom no option is off the table when designing and delivering efficient public services ― and who are knowledgeable and confident in all potential approaches.”

However, Mark Cook says achieving this goal may prove challenging. “For organisations such as housing associations and parts of the NHS, incorporating social justice in commissioning decisions is not an unusual part of what they do, but for most of central government, thinking about the benefits to the people they serve in decision-making will be revolutionary.

“Implementation so far has been patchy ― some councils such as Liverpool City Council are taking it very seriously, but others regard it as just another level of red tape. We are not seeing active involvement within the procurement departments of central government.”

Mr Cook says changing the way central government departments make decisions will require the appointment of “social value champions” ― “it is about a change in cultural mindset”, he says.

Enthusiasm at local level

Despite the hard work raising the Social Value Act’s profile by organisations such as SEUK and the National Council for Voluntary Organisations, Mr Cook says success will require “a really positive signal of enthusiasm from the Treasury”.

“We’ve never seen the Treasury embed social value in procurement, regardless of the Government. We need a positive commitment from either the current Chancellor or the next one.”

The most exciting progress, however, is being made at the local government level, Cook says: “There is a ripple of enthusiasm at local authority level, in places such as Birmingham, Liverpool and Durham.”

Liverpool City Council has set up a Social Value Taskforce with the aim of ensuring the Social Value Act is used by commissioners. Mayor Joe Anderson says: “Spending from the public purse should be working hard for people and communities, not for private profiteers. The Social Value Act gives commissioners, for the very first time, the green light to choose providers that are committed to delivering community prosperity and wealth, like social enterprises and charities. It has the power to bring about a cultural shift in commissioning practices by local authorities and other public bodies.”

Local Government is taking a lead on the Social Value Act, a lead Cook and Jónsdóttir hope Central Government will follow. From acorns mighty oaks grow ― this short piece of legislation that began life as a Private Members Bill has the potential to transform public sector procurement. However, a great deal of work remains to be done to make this happen.

Last reviewed 19 November 2013