Social value legislation is significantly transforming public
procurement practices at various levels. This policy is broad in scope and aims
to bring about meaningful changes in both economies and communities. The actual
effects of such legislation become most evident in its practical application
and interpretation, and social value follows this trend. Social value
principles are integrated into public service agreements, sector standards, and
other guidelines. However, there are valid concerns regarding the future of
social value legislation considering ongoing social, economic, and political
challenges.
Defining the Meaning of Social Value
Social value encompasses various social, environmental, and
economic outcomes, extending beyond the transactional relationship between
suppliers and customers. This concept is particularly significant in public
service delivery, as these services are funded by taxpayer money and directly
affect local communities. The evolution of procurement law since 2008 has
established a new framework that emphasises these broader outcomes,
highlighting the importance of considering the impact of procurement decisions
on society.
The motivations driving these initiatives are notably
consistent. They focus on enhancing community involvement, fostering
collaboration among public, private, and third-sector entities, and improving
social care results. Additionally, these efforts aim to recover social costs
and financial advantages while ensuring that procurement practices align with
the values and objectives of public service. Social value serves as a conduit
for translating public policy intentions into actionable outcomes, although it
often remains outside the traditional procurement discourse, which primarily
prioritises financial efficiency.
The shift in procurement practices reflects a growing
recognition of the need to inform the market rather than solely cater to it.
This change in perspective necessitates rethinking how procurement activities
are structured, promoting flexibility, responsiveness, and a more equitable
distribution of risk. As organisations and networks adapt their strategies to
incorporate social value, there is an opportunity for further dialogue aimed at
practical solutions that can effectively drive meaningful change in local
communities.
The Public Services (Social Value) Act 2012
The Public Services (Social Value) Act 2012 is a significant
piece of UK legislation integrating social value into public procurement. It
aims to align procurement practices with social value objectives, enhancing
social, economic, and environmental well-being through public spending. The Act
requires public authorities to evaluate the positive impact of their
procurement activities on community well-being and encourages bidders to
consider their contributions to these outcomes.
The Act applies to the 'Public Contract Regulations,' which
incorporates the EU framework in England. It encompasses a range of
stakeholders, including public sector entities and service providers that fall
under its jurisdiction and those who offer guidance and support to these
groups. By emphasising the importance of social value in procurement processes,
the Act aims to create a more holistic approach to public spending that
prioritises community benefits alongside traditional economic considerations.
The legislation mandates that public authorities consider the
implications of their purchasing decisions, particularly how these choices can
be leveraged to promote economic, social, or environmental enhancements.
Numerous instances illustrate this principle, such as the preference for local
colleges over national training providers of “Not in Education, Employment, or
Training” (NEET) apprenticeships, as local institutions possess a deeper
understanding of community-specific challenges and can generate more
significant societal benefits. Additionally, approximately 44% of public sector
health expenditure now falls under the purview of this Act, emphasising its
broad applicability.
Suppliers must also consider the Act when submitting bids,
detailing the social value they can contribute beyond the primary service
offered. It is important to note that the assessment of social value proposals
does not necessarily have to be included in the overall evaluation of tenders,
depending on the discretion of the contracting authority. Furthermore,
transactions involving the sale of public service contracts during mergers or
acquisitions may be exempt from the stipulations of the Act, highlighting the
complexities involved in implementing social value legislation.
The Key Provisions of Social Value
The Public Services (Social Value) Act 2012 mandates that
public authorities evaluate how their contracting activities can enhance their
respective communities' economic, social, and environmental well-being. This
section highlights the principal elements of the legislation, which encompass
the necessity to assess pertinent areas, balance social, economic, and
ecological advantages, engage with stakeholders, and publish policies and
results related to social value procurement. It also emphasises measuring and
enforcing outcomes while ensuring adherence to social value legislation.
Several existing procurement policies and frameworks within
the public sector advocate for a broader interpretation of 'value' to guide
procurement decisions. This approach encourages authorities to look beyond mere
financial considerations and to incorporate a more holistic view of the
benefits that can be derived from their procurement activities, ultimately
fostering a more sustainable and socially responsible procurement landscape.
One of the Act’s main provisions is to require public authorities (including non-governmental
and not-for-profit entities) to engage with local people and businesses when:
- Setting
social, economic, and environmental outcomes for an area as part of the
output and outcome specification.
- Consider
local labour and supply solutions during the market engagement.
- Evaluating
the social, economic, and environmental value of the outcomes produced by
the services sought or commissioned.
Achieving specific goals through public sector procurement,
such as creating job opportunities for young people, is a contractual
obligation for suppliers. This requirement differs from operational aspects,
like ensuring fair wages for employees. It's essential to distinguish between
these approaches to enhancing social impact, especially as legal frameworks
increasingly scrutinise social-focused specifications. The contracting
authority’s level of detail and the alignment of outcomes with services delivered
are critical factors in this context.
Additionally, public authorities are mandated to engage with
stakeholders, including organisations from the voluntary, community, and social
enterprise sectors, before initiating consultations on their procurement
strategies. This engagement is essential for identifying relevant social value
outcomes that should be integrated into the procurement process. By fostering
collaboration and understanding the community's needs, authorities can better
align their procurement practices with broader social objectives, ultimately
enhancing the overall impact of their initiatives.
The most pertinent outcomes align with a region's local
'well-being' strategy. Public authorities must assess the results generated by
the goods, services or works procured and their alignment with the desired
outcomes outlined in the contract award criteria. Courts cannot enforce
compliance with the Act retroactively, which means that a supplier who has
adhered to the 'spirit' of the Act is likely to be recognised as the most
economically advantageous option based on the award criteria.
The Practicalities of Implementing Social Value Requirements
In some areas of the United Kingdom, compliance with social value legislation can be enforced through the High Court, allowing for the possibility of claiming damages from public authorities in specific circumstances. Nonetheless, there are no penalties or compensation parameters available for non-compliance. If a contracting authority remains non-compliant in terms of its social value obligations, this can be contested in writing and escalated to the appropriate legislative government department for further review.
Engaging with public authority procurement functions
highlights several challenges and strategies related to the compliance and
implementation of the Public Services (Social Value) Act 2012. Survey responses
reveal four distinct approaches to integration. These approaches vary from
local authorities fully embedding social value into their overarching
strategies and all major procurement decisions to those implementing just one
or a few procurement initiatives that include social value. Additionally, central
government is conducting further research into social value inclusion to
ascertain a more in-depth review of the success of social value initiatives.
Navigating compliance with the Act presents significant
challenges for procurement functions, particularly regarding the necessary
training and resources. Many local authorities find it challenging to
understand the Act's mandatory and discretionary aspects fully. Furthermore, a
notable lack of training and written guidance is available, which hinders their
ability to integrate social value effectively into their procurement processes.
The third sector encompasses the sector of the economy that operates independently of the public and private sectors, characterised by its non-governmental and not-for-profit nature. Commonly referred to as the voluntary or charity sector, this area plays a crucial role in community engagement.
A review of local authorities' education and early years sectors indicates a commitment to building collaborations with the third sector. This highlights the importance of social value beyond the basic training standards imposed by the legal and financial limitations of the education sector inflicted by government and society at large. While the implementation of social value legislation differs among large, medium, and small organisations, the underlying challenges remain similar.
These challenges include the necessity for adequate time to evaluate social value, the accessibility of resources, and the drive to modify procurement practices. Research suggests that smaller businesses are often more motivated by social value than their larger counterparts. In contrast, larger companies, particularly those with revenues exceeding £10 million, frequently focus on commercial performance, corporate branding, and leadership dynamics, with a tendency for owners to be strategically sales and profit focused.
Compliance with social value legislation requirements is a recurring concern, even among those familiar with integrating social value into their operational decisions. The financial performance of procurement outcomes has been highlighted as a barrier to increased integration of social values in organisational commercial activities. The evidence indicates minimal resistance to implementing the Act at the grassroots level; where resistance exists, it typically stems from a lack of understanding amongst those procuring products, services or works.
Successful implementation of social value hinges on a strong commitment from leadership, training for procurement personnel, and a strategic approach to prioritising resources at various governmental levels. Each authority must address gaps in understanding, resources, capacity, and confidence among contract holders. Furthermore, monitoring and evaluation frameworks have been established to facilitate the measurement of changes and the benefits delivered to communities.
The recent amendments are intended to bolster the
legislation's role in facilitating contractual outcomes by various entities,
including voluntary, community, and social enterprise organisations and
educational institutions. By providing additional context and more explicit
directives, these changes are expected to encourage more significant investment
in the UK, ultimately fostering a more robust framework for social value
integration in public procurement practices.
The Public Services (Social Value) Act 2013 is an essential
piece of legislation in the United Kingdom to enhance communities' social,
economic, and environmental well-being. This Act requires public authorities to
consider how the services they procure can benefit society, particularly when
awarding contracts. Implementing this Act has encouraged a more integrated
approach to public service delivery beyond merely focusing on financial
savings.
One of the key features of the Act is its emphasis on
promoting social value in the procurement process. This means that when public
bodies decide which companies to hire for services, they must consider the cost
and quality of the services and the broader impact of those services on the
community. For example, a local council might decide to award a contract to a
cleaning service that employs local workers and utilises environmentally
friendly products over a cheaper option from a distant company. This decision
would support job creation and promote sustainability in the area.
The Act has influenced numerous sectors, including health,
education, and housing. In the health sector, for instance, providers are
encouraged to offer more than just medical services to patients; they are also
prompted to engage in community outreach, support local health initiatives, and
address the social determinants of health. This is particularly pertinent as
public health systems strive to become more integrated, focusing on the
well-being of communities rather than individual care.
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