Public bodies have a duty to consider the impact on local communities when procuring goods and services. Broadly speaking, their aim is to allocate finite funds and resources in a way that maximises the benefit to people, the environment and the economy at local level.
This means considering what they allocate resources to – is it better to fund the construction of a new school, or to fund social care for the community’s most vulnerable citizens?
Beyond that, it also means considering which provider can deliver the contracted services in a way that best contributes to local objectives.
This is known as social value, and since the introduction of the Public Services (Social Value) Act 2012, public bodies have been focusing more and more on the wider benefits to third parties and communities as part of the tender process. A new government consultation, Social Value in Government Procurement, outlines proposed requirements that will lead to an even greater focus on social value when tendering.
What is the current situation?
At present, the legislation around social value is open to interpretation. The duty placed on public bodies is to consider (‘have regard to’) economic, social and environmental wellbeing connected to public services contracts. It is generally seen as best practice for public-sector buyers to include questions within the tender process, inviting bidders to outline the social value that will be derived through their delivery of the contract.
However, there is no formal duty for the buyer to do so. Technically, it is sufficient for commissioners to ‘think about’ how they can secure social, economic and environmental benefits. As long as they can show that the potential for these benefits had been considered at some stage of the procurement process, the commissioner is fulfilling their obligations under the Public Services (Social Value) Act 2012. This is why bidders will see social value explored in different ways in different tenders and, on occasion, not explored at all.
The Act can therefore prove quite confusing for bidders and commissioners alike.
What is changing in procurement?
The proposed requirements in the Social Value in Government Procurement consultation exercise will change that. Public-sector buyers today will make their own judgement as to whether or not to include questions on social value in their invitations to tender and, if so, they have relative free rein over the evaluation criteria and weighting – i.e. the bearing that tenderers’ social value responses will have on their overall tender score.
The new requirements will define policy outcomes such as improved employability and skills, improved gender pay balance in the supply chain, and reduced cybersecurity risks. While commissioners will still be able to select those outcomes that are relevant to the contract, the defined policy outcomes will have standard award criteria. We would expect this to mean more rigidly defined criteria, more uniformly applied by public bodies across England and Wales.
Tender bid responses will continue to be scored qualitatively, meaning that written method statement-style responses will remain the norm. However, new proposed metrics will be used by all departments, giving greater clarity on how well the selected contractor actually fulfils their obligations and enabling the public body to more effectively performance manage the delivery of social value.
One of the most noteworthy changes proposed under the consultation exercise is a mandatory minimum weighting allocated to social value in their evaluation. The new requirement will see social value carry a weighting of at least 10%. While it already common to see higher weightings of 15%, 20% and even 40%, the big difference will be that the minimum weighting will now be mandatory and public bodies will no longer be able to issue tenders with weightings lower than 10%.
What will it mean for firms tendering, and what should you do?
The Social Value in Government Procurement consultation will be ongoing until 10 June 2019, with a response paper expected for publication on 2 September 2019. The proposed requirements may therefore be subject to change based on responses from public bodies, suppliers and other stakeholders.
However, based on the requirements that are currently proposed, bidders should certainly expect to see significant changes on the horizon.
First and foremost, bidders who do not have a coherent and competitive social value offer will need to develop one. It is suggested that over 4,000 public-sector staff will receive training in the application of social value in government procurement. Tender evaluators will therefore be better-informed and able to analyse and evaluate the competitiveness of social value offers. Bidders, in their turn, will need to ensure they are similarly well informed and in an excellent position to offer benefits relevant to the policy outcomes relevant to the commissioner.
Further, bidders who are experienced in responding to social value questions in tenders will need to undertake a detailed review of their offer. The new requirements suggest much more clearly and rigidly defined criteria, metrics and measures. Bidders who are already confident in the value that they can bring to the communities in which they work will nonetheless have to be confident that what they offer aligns with the award criteria that will be mandated by central government.
Finally, all bidders should take serious note of the minimum weighting of 10%. Although many bidders will have seen higher weightings given to social value in the past, the fact that a ‘floor’ of 10% will be mandated will likely bring with it a significant sea change. Social value will now be closer to the forefront of commissioners’ minds during every procurement. What was arguably an afterthought for some will become a much more fundamental factor in every public-sector procurement.
At a time when local authorities’ budgets are stretched, it is hardly surprising to see proposed legislation designed to make every pound go further for the local community. The impetus is now on bidders who don’t want to be left behind to start to think seriously about social value.