The Impact of Social Value Legislation in The Public Sector

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.

Integrating Social Value Within the Third Sector

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 Public Services (Social Value) Act 2013 - Key Changes and Amendments

Since its inception, the social value legislation has undergone numerous modifications and updates. These adjustments reflect the UK Government's ongoing dedication to refining the legislation in response to insights gained from its implementation, stakeholder input, and societal priority shifts. The evolution of this legislation aims to enhance the clarity and effectiveness of policies and guidance regarding how contracting authorities should incorporate social value considerations into the procurement process and award decisions.

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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