From the TUC

Procuring ‘social value’ – can we make it work?

22 Mar 2012, by in Public services

With high stakes battles being fought over the Welfare Reform and Health and Social Care Bills in Westminster, it is not surprising that a private members bill on public procurement entered the statute books largely unnoticed earlier this month.

But the Public Services (Social Value) Act 2012 has some potentially far reaching implications for the commissioning of public services.  Trade unions and community activists should take note.

With cross party support and government backing, Tory MP Chris White’s (heavily amended) private member’s bill gained royal assent on 8 March.  The aim of the Act is quite simple, to require public authorities to ensure that they procure services in a way that provides ‘social value’.  The complexity arises around what is considered ‘social value’ and how best it is identified, evaluated and monitored.

The Act applies across the public sector in England and Wales, including central government, non-departmental bodies and agencies, the NHS, local authorities, police, fire and rescue services, housing associations and the criminal justice system.  The key part of it requires that, while remaining within EU procurement rules

The authority must consider –

(a)   how what is proposed to be procured might improve the economic, social and environmental well-being of the relevant area, and

(b)   how, in conducting the process of procurement, it might act with a view to securing that improvement.

Of course, this sits very comfortably with a government bent on outsourcing as much public service provision as possible and, in theory if not practice, likes the idea of social enterprises, voluntary organisations and charities picking up some of the work.  Social Enterprise UK have been keen supporters of the bill from its inception and were elated at the arrival of the Act.

While the TUC will continue to press the case for publicly owned and accountable public services, we have long campaigned for the strengthening of social value in procurement and, as such, we welcome this legislation.

That said there are a number of potential problems that we should be alive to.

The most obvious point to make is that social value does not come cheap.  And with public spending cuts intensifying, the ability of public authorities to go down this route is severely limited, particularly in those areas facing the biggest cuts and upheaval such as local government and health where outsourcing is most rife.

There is also the danger that as part of the procurement process, social value becomes overly defined and commoditised.  While the public sector client needs to be clear about the value it is seeking to acquire and how it will be measured, there is a threat that this could be become a bureaucratised process or a box ticking exercise that stifles genuine social innovation.  Overly prescribed outcomes may also create mission drift within voluntary and community providers who end up chasing narrowly defined outcomes rather than serving their social purpose.

Moreover, requirements for bidders to demonstrate social value may well favour only those providers who have the capacity and means to undertake the kind of Social Return on Investment type analysis that will offer the quantifiable outputs that the procurement process might require, namely large charities and private enterprises. 

The Economist estimates that there are currently £80bn worth of public contracts currently being contested in national and local government and this is likely to increase to over £140bn by 2015.  They quote an investment banker, Caroline de la Soujeole, who calls this “a golden age of outsourcing” and the number of corporate events aimed at public sector outsourcing is growing each week.  Corporate providers are lining up and increasingly adept at displaying their social value credentials, or ‘partnering’ with others who do a better job of it.  As we’ve pointed out before, evidence under this government shows that this is where the business is likely to flow.

Sp we need to ensure that social value is defined in its broadest sense and is based on a genuine dialogue between public service providers, users, communities, unions and other stakeholders.  The definition of social value will differ in different contexts and between services, providers, communities.  We need to ensure that we’re capturing the right kind of value and this can only come through an informed commissioning process that meets genuine need defined through that process of dialogue.  And we need to ensure that social value is applied to all potential providers, so this isn’t just an exercise in giving public contracts to charities or social enterprises on the assumption that they ‘do a bit of a good’.  Social value must apply to any provider, whether the service stays in-house or goes out to a contractor from the private or community sector.

The scope for trade unions and community activists to use the new legislation to support living wages, investment in local employment, training and apprenticeship schemes and labour standards is evident.  This new Act makes this a more tangible proposition.  But concerted local organising and campaigning will be necessary to ensure that we are setting the agenda on social value and making procurement work to deliver the right outcomes.