Social Value Briefing
What is the Social Value Act?
Social Value refers to the wider financial and non-financial value created by an organisation through its day to day activities in terms of the wellbeing of individuals and communities, social capital created and the environment.
Social Value is defined through the Public Services (Social Value) Act 2012 (Act) which came into force in January 2013 and requires all public sector organisations (and their suppliers) to look beyond the financial cost of a contract and consider how the services they commission and procure might improve the economic, social and environmental well-being of an area.
As local authorities are becoming increasingly financially self-reliant, they are looking at how to make their limited resources go ever further while still maintaining the quality and breadth of services. Social value represents an area where additional community benefits can be derived. As such, it can be seen as a complementary activity to other strategies such as commercialisation organisations may employ.
What are the benefits?
The Act provides a significant opportunity for the public sector to engage with its supply chain by rewarding organisations that go beyond the provision of just the core contract requirements to deliver more value for the community. This can deliver solutions that are the most economically advantageous and will also, over the long term, help to reduce cost and build a more resilient, healthy and economically strong community.
Key benefits include
- Better Value for money delivering more for the pubic pound by requiring your suppliers to do more than ‘just’ deliver the core services
- Increases local spend by rewarding organisations that are local or have a local supply chain, especially SMEs and VCSEs
- Increases opportunities for disadvantaged people and promotes social mobility
- Promotes a responsible supply chain by requiring businesses to compete
- Leads to a cleaner, greener city
- Builds stronger more resilient communities
- Leads to greater innovation and long term thinking
Leading authorities that are successfully embedding the Act are delivering an additional +20% in value to their communities at no additional cost. For a council that spends £100m/year this is equivalent to £20m worth of additional benefits.
How can social value be measured?
The National Social Value Task Force sponsored by the LGA and supported by Social Value Portal developed and published the National Social Value Measurement (National TOMs) Framework in 2017. The National TOMs were the culmination of over 18 months consultation with over 40 separate public and private sector organisations designed help organisations to identify and measure that social value being delivered through a contract. The TOMs are built around a range of 5 Themes, 17 Outcomes and 35 Measures, hence the name TOMs, that a supplier could provide in addition to the delivery of the core service that they are being engaged for. Typically, this might mean jobs for those furthest from the job market, spend with local SMEs, opportunities for voluntary organisations, environmental improvements and volunteering in the community. Each opportunity is given a value that reflects the fiscal and economic benefits for the community and allow organisations to report their total contribution to society through the contract they are delivering.
The National TOMs are a free resource and can be downloaded here.
How is the Act being applied?
There is no one way to emded the Act and councils should consider what is best for their communities and suppliers to allow them to collaborate in the way that unlocks the most value.
Despite the fact that the Act is specifically aimed at the commissioning and procurement of services contracts (e.g. consulting services, repairs and building maintenance as a ‘service’) falling under the EU Procurement Regulations, many local authorities are choosing to extend the Act to cover all of their tendered contracts (services, goods and works) usually above £100,000. In addition, they are looking at how the Act could be included within the planning process. Across the UK, planning represents an annual opportunity of delivering an additional £15bn per year
There is an emerging consensus on what good practice looks like and councils looking to maximise its steps should consider the following:
- Social Value Policy. Ensure that Council policies, especially those relating to procurement, mention social value and describe how suppliers must consider it within their proposals (see here)
- Weightings. Ensure that an appropriate and stand-alone weighting is used within the procurement evaluation. Total weightings should be 10-20% requiring bidders to submit a financial proposal (using the TOMs) and a method statement to ensure their supplier has the capabilities of delivering against their pledges. Example weightings
- West Midlands Combined Authority – 15%
- Manchester City Council – 20% (minimum)
- Birmingham City Council – 10%
- Thresholds. Agree a threshold above which all procurements contain a requirement for social value (e.g, £100,000). This will ensure consistency across the Council and sends a clear message to your suppliers.
- Build Capacity. Work with your suppliers, especially SMEs and voluntary organisations to help them understand opportunities and provide support to build market capacity.
- Make it easy!. Make it as easy as possible for suppliers to understand and deliver social value. You should make all of your policies easily accessible, publish supporting information such as needs analysis and provide links to local delivery partners.
It’s all about collaboration
There are many public sector organisations that are working within our communities, both public and private. Within the public sector, there are usually at least 2 anchor organisations being the council and health authority. There might also be a university or large school. Community wellbeing is the commonality between all of these organisations and if they can collaborate by using a common set of TOMs for their buying, then the impact will be even greater and will go much further.
Of course, suppliers working with the public sector will be a part of this solution, but there are a number of other opportunities where the council has an opportunity to influence the private sector directly with perhaps the most important one of these being the Planning process. The UK Government has identified this as a major opportunity and there are a number of councils that already require social value as a part of the planning submissions. It is also true that some developers already recognise the benefits to elected Members of being able to explain the broader contribution that a development is making to society.
Does embedding social value lead to price increases? If applied well, with the correct weightings and proper education of suppliers, there is no evidence that the Act is leading to price increases
What about SMEs? Using the TOMs provide a level playing field as all bidders are provided with the same list of opportunities, regardless of their size. The TOMs award the engagement of local people to deliver the project and contributions to the local community.
What weightings should we use? Weightings should be high enough to send a clear signal to the market that social value is important, but not so high that bidders add costs to boost their social value score. 10-20% is presently recognised as good practice.
What happens if a contractor does not deliver? The key to preventing failure to delivery is to make sure that suppliers do not over promise in order to win the work. It is therefore essential that the tender documents make it very clear that successful bidders will be contractually held to their commitments and that there are a range of remedies available to councils if a contractor fails to deliver including holding back payments for non-delivery.
The National TOMs – https://socialvalueportal.com/national-toms/
SME Toolkit for Public and Private Sector Commissioners – https://socialvalueportal.com/sme-toolkit-social-value/
Social Value for District Councils (to follow)