Is social value fit for purpose in the public sector?

Most people would agree that business should be a force for good in the world, but when it comes to suppliers of public services this principle is actually enshrined in law. According to the Public Services (Social Value) Act of 2012, contracts for public services have 'to have regard to economic, social and environmental wellbeing.'

What does social value really mean?

Broadly, a commitment to creating social value means that all public sector organisations and their suppliers have to consider how their services improve outcomes for people and the environment. Yet since the Social Value Act came into force in January 2013, government organisations have had little guidance on what social value should look like, how it is measured, and what to ask for from suppliers.

Whilst the introduction of social value principles to the procurement process may be well intentioned, are they currently fit for purpose for the public sector ecosystem?

The Social Value Model

While the Social Value Act applies to both local and central government organisations, the integration of social value to procurement has happened more successfully in local government in recent years.

In an effort to improve social value within central government, the Social Value Model was released at the end of 2020, for application to all new procurements from the start of 2021. Described as 'a social value delivery model for central government buyers drawing on examples of best practice in local government,' the model requires those procuring services to explicitly evaluate how work will positively impact across five themes: Covid-19 recovery, economic inequality, climate change, equal opportunity and wellbeing.

When organisations procuring services evaluate a bid, they must assign a minimum weighting of 10% to social value — although this can be higher in certain circumstances. It's also worth noting that when we talk about social value in this context it has to be over and above the scope of the contract.

Who is responsible for social value within government?

If this sounds fairly simple, then it's probably because we haven't got into the detail yet... Because as soon as you start thinking practically about how to create — and demonstrate — social value within a commercial contract, things become more complicated.

This starts with where responsibility for social value sits within a government organisation. Although they must now consider social value in procurement, there are not currently enough people who have the time or understanding to do this.

“You could say that this responsibility falls to the buyer, but the buyer is a procurement person, they are not set up with the skill set to manage that sort of thing,” says David Pierce, former Commercial and Procurement Lead at TPXimpact. Their skill set is procuring the service, following the public contract regulations, managing the contract, exiting the contract, and reprocuring the contract. It's not around making sure a group of people from a supplier deliver social value.”

The consequence of this is that social value can often be a tick box exercise. When teams are under pressure to secure the solutions they need on time and within budget, concerns around social value can easily fall down the order of importance.

“If government organisations are going to do social value effectively, then there needs to be a dedicated person in government – or at least sitting alongside the procurement team and the contract management team – in charge of this, who makes sure suppliers deliver their social value commitments. Because it's a contractual obligation,” David adds.

Natalie Taylor, Chief Growth Officer at TPXimpact, agrees.

“You could argue that every organisation should have someone whose job it is to make sure they are getting social value out of their commercial arrangements. It could be a full time job, especially for a large organisation,” she says.

Quantifying social value via the TOMs Framework

In local government, a key tool in helping organisations to assess the social value of their contracts is the National TOMs Framework. This evaluation framework has also been turned into a digital portal, which tracks the social value suppliers have promised to deliver as part of a contract, making it easier for local government to assess and report on the benefits that are created. It should also enable them to penalise suppliers who fail to follow through on their social value commitments, although in practice this rarely happens.

“The TOMs Framework is a free tool that quantifies the social value of any input,” says Bryony Wilde, Purpose Director at TPXimpact. “So it thinks through things like, if you hire an apprentice in this location, this is how much it will give back to the community over the lifetime of the project.”

“The Social Value Portal has then created a dashboard that pulls this all into one place, so the customer can see the full amount of social value they are getting from all of their contracts - where, how, in what way, and how to quantify that social value in each area.”

It's not just a numbers game

The TOMs Framework might make managing the social value of contracts easier, but there still needs to be someone responsible for making sure the work is delivered, both on the side of the government organisation and the supplier. There's another nuance to get to grips with here too, as although the Framework quantifies social value, the Social Value Model itself stipulates that assessment must be qualitative.

This means that social value can't be measured like any other KPI.

“The problem with social value, is if you try and measure it with a consistent KPI then you miss local need and nuance, and - actually - human impact sometimes is really difficult to quantify consistently,” says Bryony. “Sometimes it's possible, like with diversity of teams, or hours of training delivered. But actually, if you want to get the richness out of social value, and really get the most out of these projects, then you need to leave some room for qualitative impact.”

Although the TOMs Framework uses a formula to process social value inputs and outputs, it does also require suppliers to provide a narrative around their projects for this reason.

“There is a real danger that by just using the formula, and that quantitative analysis, you can game the system in a way that you know isn't the most value to beneficiaries, and then you're completely coming away from the impact,” Bryony adds. “You've got to be led by the impact you can make into communities, not how you can report on KPIs. We're in a really dangerous place right now where if we focus too much on one then we actually lose the value out of social value.”

Are smaller businesses on an equal footing?

A focus on quality, not quantity, when it comes to social value is designed to level the playing field for suppliers since a large organisation would have the means to effect much more aggregate value than an SME or micro business simply due to the scale of its operations.

That said, smaller businesses do struggle more with the Social Value Model for other reasons.

“Larger companies — however difficult they find these things — have the capacity to understand the procurement process to start with,” says Anna Inman, Head of Bid Management at TPXimpact. “Micro businesses made up of a few people are mostly not going to be proficient in understanding what to write in order to score well on these things.”

This is a problem because as David notes, considering social value in procurement should often benefit smaller, local suppliers, who can make a big difference in their community.

“The local grounds maintenance company that cuts the lawns for a housing estate probably won't mind cutting a couple of lawns down the road for the school because it's easy for them — they're there already. But actually, they are really impacting their local community by doing that,” he says.

Local vs national social value

This point of local versus national social value is another thorny issue currently dominating the social value space. The central government Social Value Model dictates that social value must be relevant to the procurement, but how should organisations – whether from government or suppliers - interpret this when their work takes place on a national scale?

As Bryony notes, this often results in suppliers having to amend their social value proposition from contract to contract.

“At TPXimpact, our social value strategy is national, not regional,” she says. “It has never been reactive, it is strategic, thinking about how we can add the most value to our beneficiaries. But the way social value is evaluated in bids forces us to behave on a regional basis and reactively. I have to ring fence some of our social impact budget and capacity - just in case we win bids in local areas - to do work that isn't strategic and isn't the best use of our time and resources necessarily, but responds to a bid that has come in.”

We've got to be more strategic about social value

The way that social value is implemented in government lacks strategic vision in general since it results in social value being calculated and analysed at multiple points across the supply chain, duplicating effort and running the risk of counting the same social value several times over, inflating reporting figures.

Bryony likens this to the way carbon emissions are calculated, and the need to highly define emissions that you are directly responsible for, compared to those that you are indirectly associated with through your supply chain.

“Local authorities are now reporting huge numbers for social value,” she says. “This is social value that would have happened anyway, but they are now taking credit for it because they are taking the social value of the whole supply chain.”

“When everyone is reporting on social value it becomes massively inflated at every stage in the supply chain. This is why with carbon reporting you really highly define your scope 1, scope 2 and scope 3 carbon emissions, but with social value we're still in a really grey area.”

An alternative would be to evaluate a supplier's commitment to social value as part of their acceptance to procurement frameworks. Government organisations then wouldn't have to evaluate this as part of every single contract, suppliers would have more autonomy to deliver social value in the most effective way for them, and the same social value would not be counted more than once.

Looking for answers

Whatever the solution, it's clear that social value in its current form isn't working in the public sector. It's too complex, it doesn't have clear roles and responsibilities attached to it, and it lacks meaning within the procurement process, with government organisations unable to differentiate suppliers, and suppliers often failing to deliver on their promises.

As government justifiably looks to get more value out of the public purse, broadening the scope of value beyond purely financial considerations is commendable. But a social value model that fails to meet any of its users' needs definitely does more harm than good.