Social Value

Therefore, in the face of increasingly tight budgets and ongoing austerity why isn’t the act, which was designed to mitigate these issues, delivering on its promises and should we all be taking another look at it?

The Act was designed to be a tool to help commissioners find new and innovative solutions to difficult problems, and ultimately deliver more value for money for tax payers via the procurement of services. For example, if an area was struggling with unemployment then a supplier might offer up apprenticeships or training as part of their tender. Or a company might offer up its staff for a number of days to help improve a local community centre. A win, win situation it would seem. The procurer gets more value for money, the provider is able to compete on more than just price and the local people benefit as well.

So why hasn’t it been fully taken advantage of? Lord Young’s review found that it was down to three main things. The first was a simple lack of awareness about the Act and what it meant. Secondly, he found that there was significant confusion around how to apply the act.  And finally, those that were applying it then went on to have difficulties in measuring outcomes. This meant it was hard to prove whether it was adding any value at all or just adding perceived bureaucracy to the procurement process.

However, as the Communities Count 2014 report found, for those that do implement the Act there are real benefits. Yes, creating social value is difficult and can be a challenge, but it also offers significant opportunities to drive cost savings, deliver more innovation and reinvigorate organisations and so surely we should all be giving it more focus?

The research undertaken in 2014 and found that of those surveyed, 71% said it led to better service delivery, 70% said it led to opportunities for innovation and 52% said it led to cost savings. Cost savings were made in various ways. From straightforward savings, whereby a contractor simply delivers some services that commissioners would have had to paid for themselves, to better designed services that waste less money, through to changes in service delivery that reduce waste in other parts of the service ‘life cycle’ and save money later down the line.

A great example of driving value for money is Circle Housing’s procurement of repairs and maintenance.[4] The case study says they are on track to “realise around £80 million worth of cost saving over 10 years, subject to market conditions and fluctuations” and have calculated a social return on investment (SROI) of £5.40. This has been done through rationalising their contracts and mandating social objectives within their procurement model, for example, securing one apprenticeship for every £0.5 million worth of contract.

So, what is the key to unlocking all this value? The Communities Count 2014 report is a great place to start for anyone wanting to take advantage of the Act. It clearly sets out the four steps to success:

The first being about defining the vision, ensuring clear objectives are set and a having clear view of what services are required.
Secondly it is critical that social value is integrated across the entire enterprise. It particularly highlights the importance of contract management being fully engaged. It is no good for procurement to set up social value agreements if contract management fail to manage the supplier relationship and ensure initiatives are implemented.
Another key element is about partnership. Social value is best realised when working in partnership with suppliers who share the vision and already have strong CSR policies in place, not those that are just paying lip service to adding social value in order to fill in a tender form.
Finally, and critically given Lord Young’s findings, establishing ways to actually measure SROI is the last step to success.
Whilst the act was initially welcomed mainly by smaller social enterprises or local providers, forward thinking larges companies are also realising that social value makes sense for businesses as well. They are after all part of a local community and will benefit from the overall gains made. Many companies are now putting significant resources behind training and development outside their own organisations or finding innovative and new ways to recycle old goods. For example, one company has diverted 16 tonnes of paint from Landfill to a Community RePaint programme benefitting 69 community groups and 400 individuals[5]. It just goes to show what can be achieved when people put their minds to it.