Social value to gain stronger foothold in government procurement

Securing lucrative government contracts could become easier for social enterprises from next year, with new requirements for commissioning staff to factor in social value when awarding contracts – and new tools to help them do so.

The measures – announced alongside a new approach to first-time outsourcing and contingency plans for contractor firm collapse – will “revolutionise” government procurement, helping to deliver better public services and ensuring its contracting is a “force for good”, according to a Cabinet Office statement issued last week.

The new social value requirement will be in place by next summer. It builds on the 2013 Social Value Act, which requires those commissioning public services to think about the potential social benefit of a service from the start of the commissioning process. Last week’s announcements extend this to cover goods and works contracts, and will require procurement officials to explicitly evaluate social value where appropriate, rather than just ‘consider’ it. The new policy will apply to all central government departments, executive agencies and non-departmental public bodies.

A review published by Social Enterprise UK last year found that social value was already shaping £25bn worth of public sector spend, but said this was just “scratching the surface” of the £268bn spent each year. While most local authorities have implemented the Social Value Act, critics have said it has “hardly touched central government”.

In June the Cabinet Office announced it would extend the Social Value Act along with new measures to make contracts more accessible to small businesses, mutuals, charities, co-operatives and social enterprises – part of its response to the collapse of Carillion, a major supplier of public contracts. 

Details of how bids will be evaluated under the new requirement have not been revealed, but the Cabinet Office confirmed that government commissioners will consider certain “priorities”. Pioneers Post understands these will include facilitating access to SMEs, improving the gender pay balance, increasing representation of disabled people in the workforce, and increased representation of ethnic minorities in the workforce.

Pioneers Post has also learned that the Cabinet Office is developing a ‘scorecard’ to provide a standardised framework of values, policy areas and criteria. Procurement staff will be able to select relevant points from this framework, and require bidders to set out how they will deliver on these. The scorecard is being created with input from external stakeholders and is based on an approach currently used in local government.

Some 4,000 staff across central government will be trained in how to account for social value in their procurement, Pioneers Post understands. This training will be mandatory and will also be made available to the wider public sector.

The UK’s 100,000 social enterprises already contribute £60 billion to GDP. Andrew O’Brien, director of external affairs at Social Enterprise UK, said that better government procurement could help “grow the sector even further”. Reforming procurement through increasing social value matters, he added, “because the way that we spend public money should reflect the kind of society we want to see... We must not lose the momentum which is growing within government.”

Clarity, which employs people with disabilities, began supplying its soap products to the Cabinet Office over a year ago. The company recently confirmed a contract with the Department for International Development and is in discussions with other government departments, according to Camilla Marcus-Dew, co-founder and head of sustainable growth at Clarity - The Soap Co. Marcus-Dew said the Cabinet Office contract had made “a massive difference” to the business, enabling them to grow and boost revenue.

However, Chris Catterall, CEO at Capacity: The Public Services Lab, which brings public, private and third sector organisations together to rethink how public services are delivered, said many providers were more concerned with the “overspecification” of public sector contracts. “Providers want more ability to shape the specifications [of a contract]”, he said, and more opportunity to work with commissioners “to co-develop a service”. Overly detailed requirements mean the insight of a provider is not fully taken on board, he said, which could ultimately reduce impact.

Ailbhe McNabola, head of research and policy at Power to Change, a charitable trust that supports community businesses, welcomed the government’s commitment to work with a more diverse range of bidders. The size of contracts is a barrier to community businesses, she said, “so it’s encouraging to hear that contracts will be smaller and will take greater account of social value delivered, such as when small enterprises provide employment for disadvantaged people.”

Tony Armstrong, CEO at Locality, the national membership network supporting community organisations, also welcomed intentions to make contracts more accessible but raised concerns that a standardised framework for social value “may have the opposite effect”, by turning social value measures “into a tick-box exercise, that large providers distant from their communities are able to game”. He added: “We look forward to working with government on the detail of these proposals, to help ensure their stated aim of enabling smaller local providers to play a larger role in local services is actually achieved in practice.”

Armstrong continued: “We also know that local government is where lots of the most ambitious use of social value is taking place.” Locality has worked with a number of councils, he said, which use the legislation “to really harness the power in their communities. Central government could learn a lot from those working at this local level.”

Header photo: BECO soap, one of Clarity's brands, ready for delivery.