Social value: should we care?

Apparently, as it is moving up the agenda for both central and local government. This could be good news for small to medium size contractors – and now is the time to get  prepared.

The Government wants to change its procurement rules so that those awarding contracts can take account of the value that companies and their services add to society. Cabinet Office Minister David Lidington launched a consultation on what the rules should be in March this year which ran until mid-June.

The new procurement rules will apply to projects procured by central Government departments and some public bodies, while social value is creeping up the agenda for local authorities too. The Public Services (Social Value) Act 2012 introduced the concept for service contracts, encouraging those awarding contracts to consider how the company, product, or service might improve the economic, social and environmental well-being of an area.

In addition to the Act, there are two interlinked factors driving this change. First, local authorities will be awarding more contracts as the Government changed the rules on council borrowing late last year to encourage them to help countering housing shortages by building more social housing, New figures from the National Housing Federation suggest that we need to build 340,000 homes a year until 2031, rather than the current output of 140,000. Second, funding to local authorities from central Government continues to fall and councils must extract every ounce of value possible from every source.

Contractors may have noticed some changes when tendering for work, such as more questions relating to training and apprentices. However, as there are more elements to social value than just training and skills, we are likely to see a broader scope of social value issues needing to be addressed in coming years.

What is social value?

There’s a lot of jargon attached to social value, yet put simply, it is the positive impact that a company, its employees and activities have on residents, businesses and others. This could be related to jobs and economic growth, health, wellbeing and the environment or in strengthening the community.

Many councils now have social value polices, although some are more well defined than others. When it comes to awarding construction contracts, some look at a company’s social value creation only as a differentiator, while others award a proportion of their tender points on social value issues. The most recent research on this, by Social Enterprise UK, in 2016 found that a third of local authorities were considering social value in their procurement processes to some extent.

A weighting is applied to social value during tender assessments of generally 5% to 10% according to the UK Green Building Council, who in March this year published important new guidance on this subject: Driving social value in new development: Options for local authorities. However, some go further: Manchester City Council, for instance, awards 20% of its marks when assessing bids on social value issues.

Generally, councils that are switched onto social value will be looking for positive impacts that are linked to the project that they are awarding. The good news for local firms is that all the social value they are likely to be creating will be centred on the area in which they operate.

New procurement rules

The Government’s proposed new procurement rules introduce five themes which they think should be covered when considering social value in awarding contracts. These are: diverse supply chains; skills and employment; inclusion, mental health and wellbeing; environmental sustainability; and safe supply chains.

Most of these themes are similar to those already considered by forward-thinking local authorities, although there are one or two newer ideas. Under the ‘inclusion’ banner, the Government will look to increase opportunities for businesses that can demonstrate gender pay balance, or that employ people with disabilities or that are led by people from ethnic minorities. ‘Safe supply chains’ covers modern slavery and cyber security which may not yet be on the agenda for most local authorities.

Another positive drive among the new rules is that they aim to encourage the inclusion of small and medium-sized enterprises (SMEs) in supply chains for central Government projects. Even if central Government projects are not on a company’s radar, our advice would be to look at these proposed changes since they are an indicator of changes others will make. Sooner or later, questions on social value will appear in a tender document – if they haven’t already.

Know your value

It’s likely that small and medium-sized employers are already delivering significant additional value to the communities in which they operate, so it’s important not to be put off by the terminology used when looking to record and report on them when requested by local authorities and councils.

For instance, a company may have bought shirts for a local football club. This could be an example of helping to improve health and wellbeing while supporting the local community. Alternatively,  staff may have volunteered to work with the community – for example, by helping to repair the roof of a local village hall.

A contractor is also very likely to be increasing people’s skill levels and employability in its day-to-day business. This doesn’t just refer to apprenticeships. It could be sending people on specialist courses or giving a colleague time to train online to develop their excel skills or how to use a new payroll or accounts system.

It doesn’t stop there, social value is not just displayed in how a contractor supports charity or training, it’s also through recruitment – they may be employing people who were previously out of work, or ex-military personnel or someone with learning difficulties.

When bidding for new work, it’s also important to think about how future activities could be relevant for that project. Charity work and fund raising could be linked to the project or job that they are bidding for, or recruitment could be targeted within the area very local to the project.

Recording these things can be an additional administrative burden, for firms both large and small. Large companies may have the benefit of teams of people who can contribute to their social value; yet it can be easier for a small firm to demonstrate that its activities are relevant to a particular project because it already employs local people, buys materials locally and gets involved with local charities.

Good news

Given that many companies are already adding social value to their communities, this is good news for both small and large contractors. By considering social value when awarding contracts, councils can take account of the fact that companies are bringing benefits beyond installations and builds. It seems right that they should be rewarded with more work, leading to greater financial stability and hence more value locally.

This is a developing area, and we will see changes to how social value is defined and measured over coming years, and what clients ask for in tenders. By considering and recording their contributions to the local community and economy now - contractors will put themselves in a stronger position to make it onto tender shortlists and win more work in the future. Now is a good time for businesses, whether big or small, to prepare.