Public Sector Focus

23.10.17

Bridging the Gap

Guy Battle, CEO of Social Value Portal, dispels the six big myths surrounding social value ahead of the national conference taking place in Birmingham on 14 November.

There is no doubt that the Social Value Act 2012 is transforming the relationship between the public sector and business. It is hard to argue against doing more with the public pound, especially as austerity continues to bite. Council members get this, officers also get this, but as importantly companies are beginning to understand that this is now a necessary part of doing business with the public sector.

But despite the overriding benefits and the efforts by many to embed social value into public sector commissioning and procurement, there remains a stubborn inertia to change built on six myths.

The National Social Value Conference is aimed at breaking down these myths and giving public sector and business alike the tools and knowledge to make things happen faster, deeper, better. Time to dispel those myths…

Myth 1: The Act lacks details and guidance

It is true that the Act is low on detail and defines social value only very loosely as economic, social and environmental wellbeing. However, this lack of definition is also one of the Act’s greatest strengths, as it leaves the interpretation of social value to the commissioning organisation. This is important as it allows councils, health services, regional bodies and even central government to define social value in a way that is specific to their communities and meets their local priorities.

Myth 2: There is no way of measuring (and comparing) social value

Having a robust, transparent and consistent solution for measurement was one of the key recommendations that came out of Lord Young’s review of the Act. It is also an essential requirement for engaging businesses who need to know that they are working on a level playing field. In response to this, the National Social Value Taskforce is launching the National TOMs Framework that may be applied across all sectors and reflects the expectations and requirement of the 30 members of the taskforce. It is important to emphasise that the taskforce recognises that this is not the only way that social value can be measured, but as a solution it reflects the way that most local authorities are presently describing social value. It is also easy to manage, may be adapted to specific member priorities and is business-friendly.

Myth 3: Implementing social value leads to higher project costs

There is simply no evidence to indicate that embedding social value into procurement is leading to price inflation, and in fact there is evidence to suggest that the reverse is true. Why is this? Firstly, most businesses have already found a way to be good and profitable at the same time at a cost that is already absorbed into ‘normal business.’

Rewarding business for ‘doing good’ is therefore not an add-on and in fact will give the really good ones a natural advantage when competing against organisations that are ‘less good.’ And for local businesses who are already embedded into the community this is even easier. Secondly, and obviously, an organisation that builds a local supply chain will have a lower cost base as people work locally and have to travel less distance – hence lower cost.

Myth 4: SMEs and VCSEs find it too complicated

The prevailing thinking by many in public sector is that SME/VCSEs are less able to engage in social value than big organisations because they ‘do not have the resources.’ Not only does this underestimate the ability of our SME/VCSE community, but it also fails to recognise that it is local companies, with local supply chains and local community engagement, that have the advantage over larger organisations for the very reason that they are local.

Certainly, councils that adopt the National TOMs Framework will find that because the measures are designed by local authorities to reflect local needs, they are practical and easy to deliver and their prescriptive nature actually creates a level playing field. If you offer to do a school visit then it does not matter whether you are big or small, the value is the same (and if your kids go to the local school, is even easier!).

Myth 5: This new burden will cost too much and is not worth the effort

There is no getting away from the fact that it will require more time to include social value into the procurement process and that contract managers will need more time to assess contracts. This additional effort can be minimised by creating standard clauses and TOMs that go into all tenders over a certain size, and of course by using applications such as the Social Value Portal to specifically help make this process as simple and quick as possible.

Experience shows that this may be as little as a half-day per contract. The upside is that there is clear evidence that the additional effort is well worth it, and we are regularly seeing proposals from suppliers that are offering over +25% additional social value (SVA), and in some cases as high as +80% SVA. On an annual spend of £100m this would lead to additional social value of £20-80m to the community.

There is also emerging evidence that over time, and as business takes up the strain and gets more involved, this will lead to eventual cost savings – although this outcome is hard to prove at present.

Myth 6 (and the biggest of all): Businesses are out to rip us off – they are driven by profits alone

Businesses, especially SMEs, are run by people who live and work in a community somewhere near you. That makes them normal people, working hard to make ends meet and to get their kids through school, just like us all. Yes, there are some bad apples, but these are exceptions rather than the rule, and unless you believe that people suddenly turn into demons when they leave the house it follows that businesses are generally good.

On top of this, by 2020 central government grants will drop away as councils get to keep all of their business rates. From this moment on, councils will be 100% reliant of the success and ability of local businesses to pay their rates and this will, for the first time, create a direct link between business, the delivery of local services and communities. As a result, councils really have no choice but to make these relationships work well.

And finally…

In summary, the Social Value Act is delivering enormous benefits to those who are applying it well. There is now clear evidence that embedding social value into commissioning and procurement unlocks more value, does not cost more, will ultimately lead to costs savings and ensures that the best businesses are rewarded with the opportunity of working with the public sector.

And as local government funding shifts from central grants to business rates, it is now more important than ever for us all to reach out, bridge the gap in our collective knowledge and to develop new working partnerships that put community at the centre of everything we all do.

To attend the National Social Value Conference on 14 November, visit: socialvalueportal.com/events/national-social-value-conference

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