The big thing in 2021 for public sector procurement, certainly in the UK, will be social value*. We’ve written about it several times over the last year, and interviewed leaders who are passionate about the topic, such as Julie Welsh and David Shields.
The UK Cabinet Office announced last year that social value would have to be “explicitly evaluated in all central government procurement, where the requirements are related and proportionate to the subject-matter of the contract”, and indeed buyers would have to give 10% of the marks in the supplier selection process to social value related factors.
The concept that government procurement spend should look to bring value beyond simply a “good product at a good price” is absolutely right. Of course we should consider issues such as climate change and emissions, use of plastics, human rights and modern slavery and other topics related to the United Nations SDGs when we buy. (Indeed, that’s the whole point of this website!)
So it’s right that public organisations follow those principles just as Unilever, Mars, Microsoft and most leading private sector firms are doing. However, it is worth sounding a few warning notes before we all get too excited about the potential for public procurement to drive social value. There are three areas where we could see issues which could detract from the benefits it can undoubtedly bring. I’ll discuss the first today, with two more to follow.
Don’t Forget the Business Needs
Choosing suppliers because they are offering impressive social value must not become a substitute for their ability to actually deliver the goods or services the organisation needs, efficiently and effectively and at a fair price.
If we are serious about the benefits of the social value approach, then clearly buyers have to show that it is important. That means incorporating relevant factors into the procurement process, and generally that can take three forms.
The first approach – which is not used much, certainly in the UK - is to reserve some contracts for firms who meet a certain “social value” requirement. The existing example of this within the EU regulations allows work to be reserved for “sheltered workshops”, as they are called. Such organisations usually employ workers with a particular health or disability issue, and only those bidders who fit this definition are allowed to bid.
It may be possible as the UK leaves the EU for this to be extended in some way. So we might find that public bodies could reserve certain contracts for social enterprises, or businesses that support good causes. More likely is reserving contracts for “local” suppliers, although I suspect that will prove a lot more difficult than it sounds, as well as leading to greater potential for corruption (see my part 2 to follow).
A second and more common approach is to use social value as a qualifying factor when selecting suppliers. Social value requirements can be mandated, so that firms bidding for work must show that they have reached a certain level or standard, and that determines which firms have their proposals fully considered by the buyer. That threshold could be anything from an actual qualification or certification, to simply “ticking a box”, or describing a policy. If the firm cannot answer the question satisfactorily, or puts “no” in a box where they should have put “yes”, then they are out of the running for the contract.
This already happens frequently in qualification for public contracts, with questions around health and safety, equality and diversity policies, whether the firm or its directors have engaged in tax evasion and so on. You could easily see how this could be extended into other “procurement with purpose” issues.
The third approach is to assess social value in the proposal or bid and score it alongside other factors such as cost, quality service levels and so on. The new guidance mentioned earlier in effect promotes this approach when it talks about the minimum weighting of 10%.
Now all of these approaches have merit. The second option does have questionable value, I’d argue, because if all I have to do is say that yes, I have an equality and diversity policy, or yes, I will employ 5 apprentices if I win this contract, then that does not in itself guarantee a positive outcome.
The third option can lead to some genuinely positive and valuable actions from suppliers, as long as buyers do follow up and make sure promises are kept. However, it does also have some potential downsides. In particular, we could see cases where “social value” starts to outweigh the supplier’s genuinely ability to execute the work and deliver the goods or services required.
The example of a tender evaluation shown in the table below highlights both the power and the risks around using social value (or “procurement with purpose”) factors to select suppliers and bids.
Supplier A Supplier B
Criteria Weighting Raw Score Weighted score Raw Score Weighted score
Cost 50% £2.75M 45 £2.5M 50
Service 20% 7/10 14 7/10 14
Quality 15% 6/10 9 7/10 10.5
Social Value 15% 9/10 13.5 4/10 6
TOTAL 81.5 80.5
We might well feel positive about choosing supplier A, whose offering in the social value area was clearly far superior to that of supplier B, scoring nine out of ten rather than just four. But looking at the result, we see that supplier B is £250,000 cheaper in their bid and has a slightly superior product or service in terms of quality. Yet supplier A has won, based on the total score, because they did so well on social value. (I’ve followed a commonly used approach to scoring price, by the way).
The question is; are we really happy about paying that substantial premium and accepting a lower quality product or service, in return for some additional “social value”? We may not be able to describe that value in terms of quantifiable benefits, or absolutely guarantee it will be delivered once the contract is underway. And can we be sure that the marking was fair, and not tainted perhaps by an improper but well-meaning desire to see supplier A triumph, perhaps because of their excellent environmental and social credentials?
Those questions apply whether or not the additional cost from supplier A is caused by the social value that is being offered. The firm might have built in another £250K specifically to cover the costs of the social value initiatives proposed, and that has driven the additional bill. Or it may be that supplier A would have been more expensive even if social value had not been included in the process. It is hard to establish those underlying assumptions simply from analysing the bids.
It is also essential that the social value proposals from the supplier are relevant to the buying organisation, I’d suggest. Giving bidders direction as to what sort of social value they should put forward seems far more sensible than just allowing them to propose anything - from reducing plastics use to employing disabled staff to “saving the whale”. David Shields discussed that in our interview mentioned earlier, and it’s a major topic in itself.
Anyway, we need to be aware of this as more organisations start to incorporate social value into evaluation processes. And it’s not just the public sector doing so, we should say. Vodafone announced a similar approach recently, for example. But my point is we should not get to the point where social value starts to outweigh the basic capability to do the work and offer core value. If we start seeing suppliers appointed principally because of apparently impressive social value characteristics or proposals, and they then fail to deliver, that could quickly tarnish the whole social value philosophy.
* Note that “social value” under the UK government definition includes ALL the topics that would usually be under the “environmental, social and economic” headings of corporate social responsibility.