The growing importance of social value in public sector procurement contracts
Public sector organizations are increasingly selecting suppliers based on their business ethics and social responsibility and how much social value their services contribute to the community. During these challenging times, anything that makes public money go further is vital.
For IT vendors like us, the need to demonstrate social value used to be a nice-to-have. That’s all changed. Vendors are now scored on what they will do for the community.
Also, this element is now usually weighted anywhere between 5 and 20 percent (and sometimes significantly higher), and tenders are increasing based on formal metrics such as those developed by the National TOMs Framework (in the UK), and equivalents in other countries.
So, for contract tenders, both public sector organizations and their suppliers must understand the initiatives, the relevant legislation, and the available support.
Why is social value important?
Two factors are powering why social value is so essential today.
The first is how beneficial services become when they focus on social value, with services becoming more holistic rather than one-directional. Suddenly vital services go beyond simply provision and offer deeper support, solutions, and opportunities. So instead of simply being a function, they become embedded in the communities they serve, looking after the people and environments they work in.
The other key driver behind the rise in social value in the public sector is a necessity. Working to a social value agenda is now a requirement for the public sector in some places. For example, Public Services (Social Value) Act 2012 in the UK has made it a requirement that local authorities across the country have to consider the social value in all procurement.
And its success, according to Business Growth Hub, has led some authorities to raise the weighting of social value elements in procurement from 5% to 40%, which has given “[l]ocal companies that can demonstrate a strong commitment to social value … a growing competitive advantage”. [1]
Why a National Measurement Framework?
The aim of one such initiative — the National TOMs Framework in the UK, for example — is to provide a minimum and consistent reporting standard for measuring social value. It’s based around five principal themes (jobs, growth, social, environment, and innovation), with associated outcomes and measures.
This presents a level of digital disruption for many public sector organizations, which may appear daunting, but it offers a massive opportunity if tackled properly. For organizations not currently doing this, it enables them to embed social value into their procurement and management processes. For those already measuring social value, TOMs helps them integrate these standards and measures into their approach.
TOMs follows the Public Services (Social Value) Act 2012, which many public sector organizations must comply with. Under the Act, public sector organizations are encouraged to demonstrate how their services provide value for money, build social value into their procurement and commissioning processes, and use all this to better understand talent management across the public sector.
The TOMs toolkit enables commissioners to see the economic breakdown of each measure by supplier. This lets them see which businesses provide the most value to their local authority and community, so they can make sustainable and economically intelligent decisions to help their public pound go further.
Significant benefits
Carl Hedberg, from the Social Value Portal, says:
Those local authorities that are using TOMs and fully exploiting the potential of the Social Value Act are reporting very significant benefits, anywhere between 20 and 50 percent of added value. Replicating this across the whole of the [UK] public sector would bring additional value of over £48bn. Extended further across planning and development and we would gain another £15-25bn. In challenging times, these are compelling numbers.
Social value during COVID
Dealing with the social and economic effects of COVID-19 calls for both immediate and longer-term responses, so social value at this time is more critical than ever. Before the COVID-19 outbreak, social value appeared to be gaining momentum across public sector organizations – increasing in size and scope and occupying a greater proportion of the tender evaluation process. And the pandemic has definitely brought it into sharper focus.
A 5-20 percent weighting
While the Social Value Act only urged more public sector bodies to consider social value during bid reviews – alongside quality and cost – 2018 and 2019 saw a reinforcement of this commitment.
With the introduction of the common values procurement framework, the social value should make up a minimum of 10 percent weighting when reviewing tenders. It also now has to be accounted for, not just ‘considered.’ In our experience, as suppliers to public sector organizations, this weighting can be between 5 and 20 percent.
Social value in public procurement in Canada
In Canada, unlike in the UK, there is no legislation to support Social Value (or Social Purchasing as it is known there). Despite this, a mixture of Canadian not-for-profits, voluntary organizations, and social enterprises, are involved in Social Purchasing. And a lot of work is being done in the background to form a base for possible legislation.
More information
Social Value International’s members share a common goal: to change the way society accounts for value. Its National Networks, which span the globe from Australia to the UK, Sweden, the US, and Canada, promote the Principles of Social Value, refine and share practice, and build a powerful movement of like-minded people to influence policy.
Please visit our public sector industry page if you’d like to know more about Unit4 solutions for the public sector.
FAQs
What is the purpose of the Social Value Act?
Since January 31, 2013, the Public Services (Social Value) Act has placed a requirement on all public sector bodies to consider their services’ more comprehensive social, economic, and environmental benefits. But why?
The main aim is to take a more holistic view of their services. So instead of simply looking at the value and speed, they consider the longer-term outcomes and what it takes to make these happen. This helps build better processes, procurement practices, supply chains, and communities. And it does this by taking the public sector beyond the bottom line and back into the value of what they do. Though the bottom line still matters.
For Gov.uk, the Act helps public sector commissioners “get more value for money out of procurement. It also encourages commissioners to talk to their local provider market or community to design better services, often finding new and innovative solutions to difficult problems.” [2]
How does an organization demonstrate social value?
Understanding how you benefit from social value starts early. It’s not simply an outcome of the service you provide, but instead comes from building social value considerations into the foundations of your procurement processes.
This means setting objectives and values that you are actively pursuing at every stage of the procurement process, from internal discussions to tender and beyond. You can find a handy guide on how to do this and understand and score the process to ensure your social value ROI here.
How can public services innovate?
Like anything, the public sector must innovate. The people you serve don’t stay the same, nor do their needs. This is the same for the world you live in and the conditions you work under. So innovation isn’t an option, it’s a necessity for survival.
But how? There are three areas of focus for public sector innovation—social, technological, and process.
Social innovation is itself behind the need for the Social Value Act. The need for social innovation comes from the changing needs of the people you serve and the world you and they live in. And it requires public sector organizations to keep evolving how and, equally importantly, why they do what they do.
Technological innovation supports social innovation by powering the how. Helping public sector organizations provide services smarter and faster. They also help free your people to focus on important social value questions. And by integrating data sources and systems, they help you answer these questions faster. According to Deloitte, technological innovation in the public sector helps you keep pace with a changing society, build trust and meet expectations as they evolve. [3]
Process innovation helps bring your social how's and why’s together. Letting you build processes that focus on what matters. For many public sector organizations, new social value processes are how they identify, manage and evaluate the benefits of their services. And by continually evaluating their services they can also adapt as society and the needs of the communities they serve change.
