Turning procurement into a force for good

On Jan­u­ary 1, while all eyes were on Brex­it, anoth­er major change came into effect in pro­cure­ment that received scant atten­tion despite hav­ing far-reach­ing con­se­quences. The UK intro­duced a new social-val­ue mod­el cov­er­ing cen­tral gov­ern­ment pro­cure­ment for goods and ser­vices worth around £49 bil­lion a year. 

Pro­cure­ment pol­i­cy note PPN 06/20 requires all ten­ders to include a min­i­mum 10 per cent weight­ing for social val­ue. This means that while the main cri­te­ria for award­ing gov­ern­ment con­tracts is the still best com­mer­cial out­come, the government’s new social-val­ue mod­el must be tak­en into account. 

Social val­ue is the catch-all term used to describe the dif­fer­ence an organ­i­sa­tion or project can make to a com­mu­ni­ty. The ques­tion asked by social val­ue is this: if £1 is spent on the deliv­ery of ser­vices, can that same £1 be used to also pro­duce a wider ben­e­fit to the com­mu­ni­ty? 

Social pur­pose is noth­ing new to busi­ness. Com­pa­nies are now under pres­sure from all stake­hold­ers – investors, cus­tomers, employ­ees, reg­u­la­tors – to do more for the com­mu­ni­ties where they oper­ate. Envi­ron­men­tal, social and cor­po­rate gov­er­nance issues can make or break busi­ness­es. And although it is easy to be cyn­i­cal about pur­pose, many senior exec­u­tives real­ly do want to leave a lega­cy that tran­scends mak­ing good returns for share­hold­ers. 

Despite the con­sen­sus, the busi­ness case for doing the right thing for com­mu­ni­ties has remained elu­sive. Mea­sur­ing social val­ue is at best com­pli­cat­ed, which is one rea­son why its adop­tion in pub­lic pro­cure­ment has been slow. 

In the UK, social val­ue was defined through the Pub­lic Ser­vices (Social Val­ue) Act which came into force in Jan­u­ary 2013. This 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 well­be­ing of an area. 

How­ev­er, the absence of a manda­to­ry require­ment to include social val­ue as an out­put in the pro­cure­ment process and clear ways to mea­sure its impact meant adop­tion by local author­i­ties and cen­tral gov­ern­ment was poor. 

Eight years on, the gov­ern­ment has tak­en a sig­nif­i­cant step towards turn­ing words into action. In its lat­est iter­a­tion, the lan­guage of social-val­ue pol­i­cy includes a stricter oblig­a­tion, with explic­it ref­er­ences to inequal­i­ty, men­tal health and per­son­al well­be­ing. The social-val­ue mod­el itself con­nects social val­ue to oth­er rel­e­vant leg­is­la­tion, poli­cies and ini­tia­tives, includ­ing the Unit­ed Nations’ Sus­tain­able Devel­op­ment Goals. The model’s first “theme” is coro­n­avirus recov­ery, with the aim of help­ing local com­mu­ni­ties to rebuild and recov­er from the pan­dem­ic. 

Under the mod­el, a min­i­mum weight­ing for social val­ue of 10 per cent of the over­all score is man­dat­ed when­ev­er any of the social-val­ue pol­i­cy out­comes are includ­ed in the pro­cure­ment. For exam­ple, the con­tract­ing author­i­ty might split the weight­ings as 30 per cent for price, 60 per cent for qual­i­ty and 10 per cent for social val­ue. This sends a mes­sage to the sup­ply mar­ket that social val­ue is impor­tant to the con­tract­ing author­i­ty.

Char­lotte Öster­man, pri­vate sec­tor lead at Social Val­ue UK, the pro­fes­sion­al body for social val­ue and impact, says: “This is a time­ly inter­ven­tion by cen­tral gov­ern­ment to imple­ment a mech­a­nism to try to tack­le the UK’s biggest chal­lenges through pro­cure­ment: ris­ing social inequal­i­ty, achiev­ing net zero and improv­ing well­be­ing. We hope this will catal­yse a dif­fer­ent way of mak­ing deci­sions.”

Clear­ly, PPN 06/20 brings oppor­tu­ni­ties for com­pa­nies whose own busi­ness mod­el has embraced social val­ue. How­ev­er, it also brings chal­lenges. Com­pa­nies are at risk of miss­ing out on pub­lic sec­tor con­tracts if their response to the ques­tions on how your busi­ness would deliv­er on social val­ue does not score the max­i­mum 10 per cent.

This is why busi­ness­es need to be aware of these changes and be pre­pared. A good start is to gath­er togeth­er all infor­ma­tion on cur­rent social-val­ue ini­tia­tives. Firms need to con­sid­er how these could be pre­sent­ed in a ten­der response, includ­ing report­ing oblig­a­tions and mea­sur­able out­puts. For busi­ness­es with­out a social-val­ue propo­si­tion, now is the time to do some­thing about it. 

Sarah Stone, founder and direc­tor at Sam­taler, the social-val­ue cre­ation agency, says: “The new mod­el has huge impli­ca­tions for any com­pa­ny which sup­plies the pub­lic sec­tor, whether direct­ly or indi­rect­ly. Around a third of all pub­lic expen­di­ture, approx­i­mate­ly £284 bil­lion annu­al­ly, is spent buy­ing goods and ser­vices from exter­nal sup­pli­ers. In fact, the mod­el may well prove to be the cat­a­lyst that final­ly moves social val­ue to the top of the cor­po­rate agen­da and trans­forms how social val­ue is deliv­ered across the board.”

Peter Mason­brook, asso­ciate direc­tor and social-val­ue lead at Faithful+Gould, the project and pro­gramme man­age­ment con­sul­tan­cy, says: “PPN 06/20 forces us all to think about the real impact of what we do and how we can work to increase that social impact for the good of every­one. It also opens the doors wider for oppor­tu­ni­ties for small and medi­um-sized enter­pris­es and vol­un­tary com­mu­ni­ty and social enter­pris­es as a more qual­i­ta­tive eval­u­a­tion process for pro­cure­ment means the most pos­i­tive, impact­ful solu­tion will be tak­en for­ward, regard­less of where it comes from.”

John Alk­er, direc­tor of pol­i­cy and places at the UK Green Build­ing Coun­cil, says: “We wel­come the intro­duc­tion of a min­i­mum 10 per cent weight­ing of the total score for social val­ue and are pleased to see an eval­u­a­tion frame­work that has more focus on envi­ron­men­tal and health fac­tors. But we hope the per­cent­age weight­ing and the scope of out­comes will be more ambi­tious over time.”