Alongside Hogan Lovells, we recently gathered experts from the government, legal and public sector to share insights on how to best capitalise on the opportunity that has arisen from the new Social Value Model. Changes to policy mean the public sector must place more importance on social value when buying goods and services. Our speakers advised on how all types of organisations could and, because of the broader impact of the changes, should embrace it.
Don't underestimate the edge given to social businesses
Claire Dove CBE, Crown Representative for the VCSE sector, led the talks by highlighting the impact of changing ‘consider’ to ‘accounting for’ in the Social Value Act’s wording. Dove, who was instrumental in the development of these changes, was explaining how the sector must now evaluate the social value of a contract. This change has opened up roughly £290 billion of contracts to organisations that can return social value. This is backed up by a minimum 10% weighting on social value when assessing tenders. When a buyer is considering a tender they are essentially scoring it in different areas. Examples of these areas might include the price, technical capability of the supplier or social value that they return. Each area is given a ‘weight’ which determines how much importance is placed on it. Adrian Walker, Head of ESG at law firm Hogan Lovells, points out that a 10% weighting on social value shouldn’t be underestimated. Walker explains that the financial and technical aspects of a tender carry a larger weight but competing tenders are usually similar in these areas. The weight for social value might be smaller but with more variation between tenders. Because of this, the difference between a successful and unsuccessful tender may lie in the assessment of the social value. Walker believes the variation could be due to the embedding of social value in tenders being a newer concept. “Margins on tenders are very fine indeed… The social value side is less mature and more green territory (no pun intended). The 10% weighting on social value is significant and may well be the difference between winning and losing.”
“The 10% weighting on social value is significant and may well be the difference between winning and losing.”
10% is the minimum but not the maximum
Organisations that centre social value are given an edge by these minimum requirements but our speakers noted that this advantage won’t be limited. Dove explains that there are many opportunities that place even more importance on social value; “Some of our departments will be looking at a higher intervention rate on social value, for example on rehabilitation contracts we have been discussing up to 20%. Authorities like Andy Burnham’s in Manchester have enforced a 20% minimum.” Dove also pointed out that some contracts will only be available to VCSEs and SMEs. “130k for goods and services and 2million on construction.” Dove explains that whilst a small amount, it could be a significant turning point; “We’ve managed to put a ring around certain contracts for VCSEs and SMEs… Whilst relatively low, it is a start.” VCSEs and SMEs stand to gain further advantage from the lowering of barriers in the process of tendering itself. A framework, created by Dove, that simplifies the procurement process allowing smaller organisations to bid for contracts is in the process of being released and already being adopted by organisations with a significant spend; “The NHS has adopted our framework… We are working with local and combined authorities so that they can adopt it too. With this, we really can make great changes.”
“[The Social Value Act] has been in place since 2012 but there has been wilful blindness to its existence. At the Met Office we only recently got to grips with it.”
The big changes are happening now
Ciara Kennedy-Loest, a partner on Competition, Public & EU Law at Hogan Lovells, explained that these changes to the Social Value Act are made more significant by the trend in regulation changes. As Kennedy-Loest ran through the policy notes and regulations created in recent years, a clear direction emerged. There is increasing importance placed on Social Value in regulations, with a clear change of pace in the last year, culminating in the most recent Procurement Policy Note. That note “requires consideration of national priority outcomes and any additional local priorities: creating new businesses, new jobs and new skills; tackling climate change and reducing waste; improving supplier diversity, innovation and resilience.” Both Dove and Kennedy-Loest highlighted another requirement set out in this policy note. This is that from 2022 (2023 for smaller bodies) the public sector must publish procurement pipelines well in advance of tender, which will again lower the barrier for VCSEs and SMEs. This sudden upward curve is reflected on the buyer side by Alison Wilson, Director of Commercial at the Met Office, “[The Social Value Act] has been in place since 2012 but there has been wilful blindness to its existence. At the Met Office we only recently got to grips with it.”
Take a collaborative and investigative approach
For all types of organisations it is apparent that collaboration is key. Dove urged the VCSE sector to “rise to the challenge” by working together as laid out in her consortium model. “I know how difficult it is for social enterprises to get their foot on the ladder. But coming together may be the way forward.” For buyers, Wilson placed importance on working with suppliers early in the procurement process to ensure the most impactful outcomes. “You have to embrace and work with [social value] at the earliest stage. You have to share your plans with the market. This does make the beginning part of the process quite heavy but I think it’s important.” For private businesses, Walker underlines an opportunity to work with social enterprises to increase the social value of their work. Wilson also explained that greater collaboration within an organisation is key but there is work still to do in bringing everyone up to speed with social value. “It’s a business-wide accountability. We have to make sure all stakeholders understand social value... how to include social value in a proportionate manner is not understood. The question still remains ‘I’ve got this requirement. How do I apply it?’” Walker echoed the need for better understanding, advising buying teams to take a detailed approach to a bid. “This is not just about reaffirming your CSR policy.” He explained that when bidding, organisations should investigate the criteria and weighting of a tender, any regulation relating to the jurisdiction, what the targets of the authority offering the contract and their approach to social value. On top of that, they can’t lose sight of their own objectives, policies, capacity to deliver and for any risk factors.
“We should expect that what the UK is doing in terms of social value requirements will replicate across jurisdictions. They will for sure cross into the private sector market."
What’s clear is that making the most of the new Social Value model may require some diligent work up front but that the investment is worth making. Not only because of the scale of the current opportunity but because it is only going to grow. As Walker states “We should expect that what the UK is doing in terms of social value requirements will replicate across jurisdictions. They will for sure cross into the private sector market. It’s worth really putting some effort into it.”
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