Latest Public Sector News

01.12.12

Social value procurement

Source: Public Sector Executive Nov/Dec 2012

Cllr Paul Brant, deputy leader of Liverpool City Council and its fi nance spokesman, talks to PSE about the city’s innovative plans to include social value considerations in its procurement policies.

Liverpool spends £270m a year procuring goods and services externally – but from now on its decisions on who gets its valuable contracts will include considerations of ‘social value’, which could be everything from the extent to which the bidders will create and sustain local jobs, to the pay differentials between their top and bottom earners.

Cllr Paul Brant told PSE: “It will vary depending on the type of project we’re looking at, and which procurement function we’re involved in. If we are engaged in a construction contract, then providing apprenticeships and construction jobs is one of our key outputs. If we’re involved in the procurement of a social care service, we’d like to give a headstart to the not-for-profit sector. In long-term relationships, focusing on general contracts, it would be good to give a headstart to those organisations with a low income differential between the highest-paid and lowest-paid.

“We’re encouraging more equitable employers and better employers. The precise mix of social value we seek to get out of a contract will depend on the precise contract we’re letting.

“Our capacity to get social value out of the contract will also depend on what we can legally and lawfully get out of it, within the statutory framework that exists.”

Legalities

Clearly the legal aspect is vital: procurement competitions in which local authorities could just pick their favourite companies would be ripe for corruption, bad value for the taxpayer and unfair on other entrants. The existing laws at EU and UK level are there for a reason.

It’s important therefore that the ‘social value’ elements are an inherent part of the thing being procured, ensuring that bidders are competing on that basis. Cllr Brant, a lawyer himself, said: “We do have to treat applicants equally. My understanding is that in the case of a tiebreak, it’s relatively straightforward: you get essentially told beforehand that if there’s a tiebreak, we’d use social value criteria to decide.

“The other way we are intending to work social value into individual procurement processes is to make sure that the commissioning entity within the authority properly considers what social value is appropriate to ask for before it is procured. You make it part of the core value of the procurement, so, for example, we will say we want to procure a sustainable education and training facility where there is a long-term benefit to the community in terms of educational attainment and skills levels. It can become part of the core purpose of what’s been procured to ask for things like apprenticeships. You’re then not just procuring a building, you’re procuring something much broader, which requires therefore a careful conversation between the procurement department and the commissioning part of the council to identify how what is being procured can be shaped so that the social value element is a fundamental part of what is being procured.

“With some contracts, that will be easier than others. There will be some where we won’t be able to lever it in at all, I’m quite sure. Traditionally, procurement and commissioning departments in local authorities have tended to be a little bit conservative in the way they approach these things: so although the council as a corporate entity has got these wider policy objectives, sometimes they aren’t properly included or ‘mainstreamed’ within the procurement process.”

Long-term value

The aim, in many ways, is to extend the time period over which ‘value’ is being considered – to consider not just price today, but what value a bid could bring Liverpool in the much longer term, in terms of jobs, skills, taxes and so on.

Cllr Brant said: “That’s the fundamental policy reason why these outcomes are required; we know full well that if you create a more sustainable city with a healthier environment, communities can fl ourish. It isn’t just about getting products at the lowest price: it’s about getting them at the best overall value for the city, and that can and often should include those wider social benefits.”

He said he had not had feedback from the Cabinet Offi ce or any other part of Government on Liverpool’s new policy, which goes beyond that required by the incoming Social Value Act.

Pioneer

Giving advice to other authorities that might be considering something similar, he told us: “Firstly, you’ve got to get some pretty solid legal advice. Secondly, you have to change the council’s policies, and then thirdly you need to go out and do the procurement process in this broader manner. The more complex and the bigger the procurement, the longer they take: months and months, on occasions.”

The Social Value Act will help give “additional legal justifi cation for adopting this approach”, Cllr Brant said. He added that he is not aware of any other council that has gone as far as Liverpool has.

He said: “In some areas, councils are very familiar with doing this kind of thing: for most big construction projects procured by councils, a signifi cant number of apprenticeships are required, for example. So there are some areas where it’s a pretty well-trodden path.

“There are others where it’s more innovative, what we’re proposing.

“I think broadening out the element of social value we’re looking to achieve is a logical extension of where we’ve been looking for in the past, and should help most of the contracting bodies as well: a lot of them have got corporate social responsibility outputs they want to deliver.

“It got a good reception locally and we’ve had lots of interest from other local authorities, which is really exciting. They’re keen to watch us and learn from our experiences and emulate us.”

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