In the years since I became interested in procurement with purpose – and the parallel “social value” approach in the UK public sector – I’ve felt uncertain about one important issue. I touched on it in the book, but as social value becomes more prevalent in public procurement, and the weightings attached to it in supplier selection decisions increase, it becomes more and more critical.
It is the question of how we “score” social value in bids and proposals from potential suppliers. Should buyers convert those social value offers into a monetary value within those evaluation processes?
There are obvious attractions for doing so. It simplifies the process, allows easy comparison between bids, makes potential trade-offs between cost and social value offers more obvious, and adds an air of objectivity to the often difficult business of assessing varying bids.
It also justifies and adds legitimacy to the whole social value concept. It gives politicians and officials something positive to discuss, a financial number to tell citizens and taxpayers about, and suppliers can claim their major “financial contribution” to the greater good.
The problem is that the negatives and issues around this approach are pretty serious too.
1. It is a very uncertain and imprecise science. The financial numbers used, whether derived by individual contracting authorities or taken from standard sources (such as the social value portal) cannot be more than estimates. Sometimes they are estimates built on second or third order estimates. That applies whether it is the value of a tree planting programme in Wales (or the Amazon) or the value in a bidder offering a young person coming out of the care system a job.
2. In almost all cases, this is not real money. “Wooden dollars” as someone described it to me recently. It does not show up on the buuer’s P&L or balance sheet. You can’t spend these “financial” benefits on more road maintenance, a new operating theatre, or re-opening a drop-in centre for vulnerable people. No cash appears in the CFO’s hands.
3. Even if there is a real value in the supplier’s social value proposal, which I absolutely accept there is in many cases, it often does not accrue to the contracting authority (the buyer). By assessing social value as a monetary figure, the buyer implicitly agrees they are prepared to make a trade-off and accept a higher price for more social value. But if that “value” is around deforestation, or even employing ex-offenders, where does it go? My local council doesn’t benefit much if few people are kept out of prison – it is the Ministry of Justice that is the main beneficiary, perhaps the NHS and maybe a little to the council if there is a lower chance of the person needing emergency housing or social care. My local council is not gaining in any real sense (other than a 50,000 / 8 billion fraction, or 0.0006%, of the global benefit based on population) if a supplier promises to cut emissions in its factories in China.
4. Even if there is value, and ignoring the issue of where it goes, it is desperately difficult to track whether promises are kept and offers in bids are delivered. Is your council counting the trees planted by that supplier? Or identifying the additional female / gay / disabled / ethnic minority employees or apprentices they promised to recruit?
5. Is the proposal truly incremental? How do we know what the bidder would have done if we hadn’t run the competition? Would they have recruited the apprentices anyway? Planted those trees? Making sure proposals are really related to the specific contract is not easy.
6. We don’t tend to evaluate any other “non-price” factors in this way. In my experience, all the other no-cost questions (around quality, service, administration, partnership working, innovation… etc.) tend to be marked on a scale, perhaps 0 to 5 or similar. A score of 4 might mean “meets all the major requirements we have in this area but falls short on a few minor issues”, for instance. That doesn’t mean this is the right approach – but there is no real reason why we should treat social value as an evaluation criterion in a different manner from everything else we assess.
7. A focus on social value may have an unintended consequence - ironically it may favour large, already successful suppliers to the public sector that have geared up to be able to answer social value questions well. They have net zero plans, they can promise to recruit busloads of apprenticeships or to plant millions of trees. The small (often local) supplier finds it difficult to compete with this, having less resource to write impressive-sounding plans and less scope to take on dozens of apprenticeships. Indeed, social enterprises whose whole raison d’etre is “social value” are finding it hard to compete in some cases because of this.
Now some of these points (such as the issue of playing into large firms’ hands) applies whether or not social value proposals are converted to cash or not. But when bids are evaluated that way, it tends to exacerbate the issue, as the “financial” numbers can just look so different. Evaluating in a more subjective but considered manner can help iron out the inherent advantage larger firms hold.
I do worry that at some point there will be a backlash against social value (Cabinet Office Minister Jacob Rees-Mogg may disappear from our consciousness soon, but he raised some points recently without having the courage to actually do anything). Taxpayers may ask those councillors who are claiming millions in financially expressed social value benefits the killer questions – “where is the money? If you have realised millions of pounds benefit from social value, why are services being cut and why is council tax going up?”
So on balance, I think we need to stop evaluating in this way. No doubt we’ll come back to this topic, but that is probably enough controversy for today!