The government should extend social value legislation to ensure public service commissioners give more thought to the social value offered by bidding organisations, the Lords Select Committee on Charities has concluded.
The committee’s report, Stronger Charities For A Stronger Society, says that although the Public Services (Social Value) Act has been promoted by the government, more can be done to maximise its potential by requiring commissioners to "account for" rather than "consider" social value when awarding contracts.
The report says this should include measurable targets set out by the government for the use of social value in commissioning.
The government should also promote impact and social value-based commissioning rather than focusing on contracts that deliver services for the lowest possible cost, the report says.
A review of the social value act was announced by the government last month.
Rhidian Hughes, chief executive of the Voluntary Organisations Disability Group, said: "Public service commissioners need to widen their horizons beyond the cost of a service and do more to focus on the outcomes being delivered. There has never been a more important time to emphasise the role of social value in the commissioning of public services."
The report also raises concerns about the problems smaller charities have in bidding for public sector contracts, and it describes the commissioning landscape as "skewed against smaller charities".
It says contracting authorities should address this by embracing new procurement rules allowing for smaller contracts, and says that not involving charities in commissioning processes could see charities "losing out on potential work and funds" and commissioners "missing out on the values, knowledge of local needs and innovation that charities bring".
Government guidance on public sector commissioning should also help to protect smaller charities from being exploited by larger organisations, the report says.
Paul Streets, chief executive of the Lloyds Bank Foundation, said: "Every day, small charities are losing out on contracts. The committee’s recognition of the reality they face – caught up in complex and inappropriate contracting and commissioning processes – will provide much-needed reassurance to those charities struggling today."
Peter Holbrook, chief executive of Social Enterprise UK, said "there is growing evidence that small and medium-sized charities are beginning to feel the squeeze".
He said: "We hope that the committee does not stray away from recognising the need for continued government support for the sector through, to a large extent, established funding mechanisms."
Becca Bunce, policy and engagement manager at the Small Charities Coalition, said: "We must ensure that commissioning reform works for small charities. The Lords rightly note that currently ‘the commissioning landscape is skewed against smaller charities’."
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