One in every three pounds of public money, approximately £300 bn a year, is spent on public procurement. This money is important for maintaining and improving our housing, health, education, safety and of course, transport. Recent events (the Covid-19 pandemic and Brexit to name a few!) have shaped the way the UK thinks about procurement and what ‘value’ really means. There has been a shift in mentality to no longer think in monetary terms but to also consider how and where money is spent so that it can bring the greatest benefits to a community. But it seems that this shift has not been enough and social value is at risk of becoming just a buzzword that is spoken about but not actioned. The transport industry is currently facing ambitious targets to reach Net Zero by 2050, whilst also facing supply chain issues, soaring energy costs and political uncertainty. If there was ever a time to be innovative and consider what ‘value for money’ really means, it is now.
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In January 2013 the Public Services (Social Value) Act came into force, requiring those who commission public services to think about how they can also secure wider social, economic and environmental benefits. This meant that new projects should consider how many new jobs it provided, creating safer communities, reducing emissions, increasing biodiversity, utilising technology and growing businesses.
In terms of procurement, this meant that what defined ‘value for money’ was no longer purely based on profits and savings but what could bring the greatest benefits to an area.
Several years later, the Covid-19 pandemic hit, which provided a stark reality shock, highlighting the large social and economic disparities in the UK. Many people were hit with unemployment, lack of community services, business uncertainty and insufficient support for their physical and mental health. It was a devastating time, but the pandemic made the UK Government realise that infrastructure and services need changing to provide better value for communities.
In response, the Government set out to ‘Build Back Better’, and took the Social Value Act one step further with their Social Value Procurement Policy Note in September 2020 - which stated that social value should no longer be just ‘considered’ but explicitly evaluated in all central government procurement. This highlighted a big shift in the way the Government viewed social value, no longer seeing it as a ‘nice to have’ but as a necessary process for the future development of the UK.
In the words of Julia Lopez, cabinet minister at the time:
“Too often ‘value’ has been narrowly defined by price without taking into account other important factors such as the number of local jobs or apprenticeships a contractor will provide, the care they show the environment in their business practices or the number of SMEs [small and medium enterprises] involved in their wider supply chain.”
The Procurement Policy Note set out themes and outcomes for procurement teams to apply in new procurements, which were:
Later, in December 2020 the Cabinet Office published their long awaited Green Paper: Transforming Public Procurement. However, despite the Government clearly seeing social value as an important part of public procurement, this paper lacked a robust policy and strategy for how social value targets will be achieved and measured against. In CIHT’s response to the Green Paper we called for standard metrics and consistency to be introduced so that social value can be properly tracked and measured. This is important because different procurement projects will vary when it comes to social value targets and there will be differences on regional versus national scale projects, and so, consideration will need to be given on how equal reporting of targets will work.
Over a year after the Green Paper was published it was confirmed in the Queen’s Speech (May 2022) that a new Procurement Bill would be formed to replace EU legislation and create a new framework to improve the way public procurement is regulated. The Bill is currently working its way through Parliament and once made into law (according to the Government) it should create a transparent, simple and flexible commercial system that encourages procurement.
Yet, there is no mention of social value to be found in the current version of the Bill.
The charity think tank New Philanthropy Capital (NPC) recently published their ‘Recognising Social Value’ report which stated the unique position charities can bring to public procurement (£17 bn of public procurement goes to charities), but unsustainable procurement frameworks undermine their potential. Two thirds of charities in the UK aren’t paid enough to cover the costs of delivering the 7,330 contracts they work on.
In their report, NPC recommend that “the Procurement Bill’s definition of ‘value for money’ should recognise social value (e.g. well-being) and cost savings from reducing demand on other services (e.g. healthcare or police time). Commissioners must be mandated to score contracts against this definition”.
As energy bills, inflation and manufacturing delays all skyrocket, the time to really ask ourselves what ‘value for money’ truly means is now. Yes, saving money will be more important than it has been in recent years, but that doesn’t mean we forget about innovation and social value when it comes to procurement.
The Government’s new proposed framework should allow businesses to be more ambitious and innovative by encouraging new advantageous tenders, rather than pursuing those that are simply ‘economically advantageous’. As clients are being encouraged to look for quality over quantity, there needs to be a compatible approach to how social value will be measured which includes the processes that underpin the activities.
In the next instalment of the CIHT Monthly Masterclass we hear from Sam Markey, Ecosystem Director for Place Leadership, Connected Places Catapult who will talk about ‘sparking transport innovation through smarter spending’ and Mr Mahmood Sidiqi FCIHT GMICE, Senior Transport Consultant and past President of LGTAG who will provide a Local Authority perspective on innovative procurement.
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