The Social Value Act came into force at the start of this year, requiring public bodies to consider using procurement to produce wider benefits. Winnie Agbonlahor reports on a round table held to discuss the new law’s implications.
Some people use shopping to give themselves a lift – and now the government is asking departments to consider how their purchases could help make the whole nation feel better. This year a new law came into force, obliging public bodies to consider how their approach to procurement will affect Britain’s economy, environment and society.
The Public Services (Social Value) Act came into force on 31 January, its implications are explained in a procurement policy note published by the Cabinet Office, which says the act “will require commissioners and procurers at the pre-procurement stage to consider how what is to be procured may improve social, environmental and economic well-being of the relevant area, how they might secure any such improvement, and to consider the need to consult”.
All national organisations, including the vast majority of civil service bodies, must now assess the likely impact of their procurements throughout the country – even if the relevant service will only operate in part of it. On the surface, the Act appears to focus squarely on procurement. But it asks public bodies to think about what they’re procuring as well as how they do so – meaning that it has major implications for policymakers and service design specialists, as well as buying professionals.
The significance of this new law formed the focus of a recent CSW round table, sponsored by IT services company HP, at which civil servants and other key stakeholders came together to discuss the topic.
Helping lawyers become more adventurous
Several of the participants warmly welcomed the new law, arguing that it would help to persuade lawyers and over-cautious managers that they can use service delivery contracts to produce wider benefits for Britain without falling foul of EU procurement rules. Nicholas Hadziannis, procurement officer at the Department for Communities and Local Government (DCLG), described the new law as “a very good thing” and added: “The act gives us ammunition. We had the confidence [to pursue wider aims via procurement] before, but we would get knocked back because we couldn’t point to anything other than stating: ‘This is good practice’.”
His view was echoed by Neil Doran, franchising procurement policy adviser at the rail franchising team in the Department for Transport (DfT), who argued that the Act may help procurement teams to win support for their efforts to produce wider social and economic benefits. When he was working at a local authority a few years ago, he recalled, he'd tried to stipulate that a contractor employ local apprentices - but the council's lawyers had opposed the plan, fearing that it could be seen as anti-competitive or discriminatory against foreign firms. “In the end we decided not to do it, which was a real shame because it was something we were passionate about,” he said. “Now we’ve got this Act, which gives you more scope to do things like that.”
However, whilst a general enthusiasm for the Act and its perceived intentions was evident throughout the discussion, participants raised a set of concerns and called on the government to provide more clarity. One issue raised by Steve Beet, a PricewaterhouseCoopers partner seconded to the Cabinet Office as commercial director, was the danger that this Act could shift the focus away from the service being procured.
The pursuit of other objectives “can take over the purpose of procurement,” he said. “I think it’s a question not only of how well you apply the Act, but also of how much it dominates the procurement.” Beet added that the Department for Education has produced guidance on and introduced “a very clear policy at the top of the office on how much [the Act] should influence people’s behaviour, which is really useful to refer back to and say: ‘It’s only part of the deal, not the whole deal’.”
Another complexity lies in identifying the components of ‘social value’. While it is defined in the Act itself as “economic, social and environmental well-being in an area”, participants argued that leaves plenty of space for interpretation. “What this Act doesn’t do yet is help us understand the definition of social and economic benefit,” Doran said. “How do you define economic benefits? Does it mean, if I’m procuring a new train set, that I can create lots of jobs in Derby when I give the contract to Bombardier rather than Siemens? Are environmental benefits defined as low-carbon emissions?” To resolve this, Doran suggested a list of different kinds of eligible benefits: “It would be helpful to have a table of the type of things which may be considered in the evaluation process. That way, when you’re starting to strategise, you start thinking about what affects which type of procurement. I think when the Cabinet Office gets to that stage, it would be really helpful.” However, Sarah Wooller, team lead on the household waste collection programme at the Department for Environment, Food and Rural Affairs (Defra), questioned the practicality of creating such lists. Departmental staff are probably best placed to work out which aspects of the potential wider benefits they want to prioritise, she suggested, adding: “My environmental issue is not going to be the same as your environmental issue. The list of environmental issues is enormous.”
The next key challenge – according to James Johns, director of strategy for UK Public Sector at HP – will be attaching a value to these different potential benefits. “How do you normalise an evaluation of social, economic and environmental impact?” he asked. “You could have somebody bidding for a contract, who might say: ‘I’m going to run all my waste disposal lorries on electricity,’ but somebody else might come along and say: ‘I’m going to run mine on petrol, but my economic impact is I’m going to create 1,000 new jobs’. How would you evaluate whether the 1,000 new jobs are worth more than the reduction in carbon? Where would you choose to put the weighting on that?”
Another difficulty lies in the clash between the wholly aspirational aims of this Act and the hard budgetary pressures acting on public bodies. “How do you balance the social value and benefits against the fact that you’re a public body spending taxpayers’ money?”, asked round table chair Matt Ross. “If you sacrifice wider aims to get a slightly better price for the product, that money could be diverted into public services which also would have a social benefit.” His point was met with silence by participants. But Cabinet Office minister Francis Maude, who spoke about the Social Value Act at a select committee hearing last week, believes that nothing should get in the way of achieving the best deal: his predilection, he said in comments reported by Supplier Management, is to “keep things simple and straightforward”.
To consult or not to consult?
One way of understanding and assessing the potential benefits is by conducting a consultation; indeed, the Act requires public bodies to consider whether they should consult on how to proceed with procurement (though as the policy note explains,there’s a get-out clause if the procurement “has to be conducted urgently”). So how do authorities decide whether to consult? “It is good practice to consult wherever possible,” Hadziannis said, “but I think quite often the problem is time pressures. The question is: how quickly are you being asked to deliver something?”
He also commented that a willingness to consult is too often seen as revealing a lack of knowledge, and therefore a failure within departments. “We don’t ask ourselves: ‘What else do we need to know?’, because we often feel like that’s admitting weaknesses,” he said. “Conventional thinking, where Whitehall is king and to admit ignorance is to admit weakness, needs turning on its head. I actually think it’s positive to draw on the knowledge of the crowd.”
Wooller added that there’s a straightforward way to work out whether to consult: “You should only consult if you have questions you do not know the answer to, and you think there is a fair bet that the people you intend to consult know,” she said.
A welcome tool
Some participants argued that the model at the heart of the new Act is already prevalent among big corporates in the commercial sector. Susan Bowen, chief of staff at HP UK and Ireland, said: “There isn’t a single bid that would come through to us as a provider that doesn’t have very large sections for social responsibility. Big corporations like HP can’t afford not to take it seriously.” Some companies, Bowen said, “live and breathe that concept: that if there is a generic problem in the economy, big companies can make a difference”. The ways in which companies take initiative in improving the lives of the people in their area, she added, range from volunteer hours that staff can use for a broad range of activities, to operating community facilities or providing guidance to small businesses on topics such as procurement. Hadziannis added that the new Act could be used to give “brownie points” to companies who put a “mature approach” above the goal of merely driving profits.
The new law, participants agreed, is a welcome tool with which to drive more socially responsible behaviour. But to fully reap its benefits, Beet said, every effort must be made to avoid a scenario whereby the new law becomes “a bolt-on” requirement to procurement. Instead, he said, “this should become the way you do procurement”: it should redefine the processes by which public bodies plan and commission services.
He also warned that the aim of realising social, economic and environmental benefits looks different from the national and local perspectives. Because councils have such broad remits, almost any wider benefit automatically produces a result within their brief – but in Whitehall, “quite often, the social value you create will be in another department’s agenda. And so you have a cross-boundary issue: somebody could be spending a little bit more money on buying a service with social value, and yet the recipient is not within that department or structure. The only time that really works is when you get the business case from both sides coming together.”
Johns agreed, adding: “If you have a council making a major procurement decision and the service provided involves a net outflow of jobs from that council’s area, the political reality is that some of those councillors are going to feel the impact of that: it is their constituents who will be directly affected by their decision. Whereas at a national level, it kind of gets lost in the wash to an extent because you’re talking about a national scope.”
As the debate drew towards a close, participants expressed some confusion over the thinking behind the Act. Johns said: “It seems a slightly odd situation that an Act is needed to drive that kind of behaviour. The question is: where does good service design start and stop, and when does complying with this Act start and stop – or are they one and the same thing?” Beet added: “I don’t understand why we need the Act if it’s just good practice? Why not just send out a guidance note? I’m wondering what problem this Act is trying to fix.”
The truth may be that the Act doesn’t fit neatly within government policy: it was a Private Member’s Bill, championed by Tory MP Chris White, that the government chose not to squash – perhaps because the Act gives public bodies plenty of room for maneouvre, while supporting the government’s expressed aim of backing British businesses. Nonetheless, it does give procurement professionals a little more license to pursue wider benefits if they wish, and as such was welcomed by participants as a step in the right direction. “It effectively becomes a tool for sustaining quality in an increasingly commoditised procurement,” Johns said. It is the kind of “ongoing encouragement” needed to achieve “a big change in attitude”, said the National Offender Management Service’s equality and diversity manager Omar Ralph – who believes it will encourage people to feel that organisations are “doing something for the benefit of the area, not just for their own immediate aims”. And Hadziannis was optimistic: “We’re half-way through a journey,” he said, “and this is just an additional milestone. I have quite a lot of hope.”
