A reality check on social value

Many hoped the Public Services (Social Value) Act would help charities win more public sector contracts. But, 16 months on, Andy Hillier finds that awareness is still poor and its use limited

Sector umbrella bodies say awareness of the Public Services (Social Value) Act remains low
Sector umbrella bodies say awareness of the Public Services (Social Value) Act remains low

The Public Services (Social Value) Act 2012 was greeted warmly by the voluntary sector in the hope that the chances of sector organisations winning more public sector contracts would get a significant boost.

The act, which began as a private members' bill by the Conservative MP Chris White, laid down the principle that public bodies - including local authorities and central government - in England and Wales should avoid awarding public service contracts on price alone and take into consideration wider social, economic and environmental benefits.

Because the voluntary sector is generally considered to deliver more social value than the private sector, it was expected that the act would help it win a larger share of public sector contracts, estimated to be worth £236bn a year.

But 16 months after the act came into effect, sector umbrella bodies say awareness of the law remains low and charities do not appear to be benefiting from it as much as many had hoped.

Earlier this month, the National Council for Voluntary Organisations said in its general election manifesto that the act was welcomed by the sector, but it had "yet to be implemented in many areas". The NCVO called on the next government to create a centre for social value to promote its principles and to help councils "share best practice and assess value for money more rigorously".

The NCVO's call came a month after Social Enterprise UK, the national body for social enterprise that led the sector's call for the introduction of the social value act, published a report, The Future of Social Value, in which it argued that "awareness of the act is still not high enough among key decision-makers in public sector agencies".

In January, the government published The Public Services (Social Value) Act 2012: One Year On, in which it said it would do more to promote "the potential of this agenda" among commissioners and suppliers. It is also running the Commissioning Academy to encourage commissioners to use the act, and the Inspiring Impact programme to help voluntary sector groups take advantage of it.

A "mystery shopper" programme is also investigating cases in which the government believes commissioners have not followed the act. A Cabinet Office spokeswoman says that 42 spot checks have been carried out so far, of which 14 have been concluded: in 12 cases commissioners were complying with the act, and in two they agreed to change their practices in future. The spokeswoman says: "We are also supporting SEUK to bring together a range of materials in an online one-stop shop for commissioners and providers, to help them incorporate social value into commissioning."

So what needs to be done if more voluntary sector organisations have to take advantage of the act? Nick Temple, director of business and enterprise at SEUK, says the act is still in its infancy and there should be no rush to judgement. But he says it has not yet lived up to the initial hype. "Expectations were high when it was introduced, but there has been a bit of a reality check," he says.

He says SEUK broadly welcomes the NCVO's suggestion of the creation of a centre for social value, but it would like to see more detail about the proposal before it puts its weight firmly behind it.

Temple believes that use of the act has been low partly because the legislation was not as strong as had been hoped, in that it says public bodies must "consider" social value when awarding contracts but doesn't oblige them to take account of it. He also points out that many public service contracts have yet to come round for tender since the act came into force.

The adoption of social value principles has also been a "mixed bag", he says: some local authorities, such as Birmingham, Durham and Liverpool, have been quick to embrace them and put in place specific policies, but many others have not. "There are some amazing local authorities, but there are others that are struggling to implement the legislation for reasons such as budget cuts," he says.

There is also a shortage of data, Temple says: no one seems to be collating evidence on the use of the act or compiling examples of good practice. Such measures would help more organisations to gain a better understanding of how it can be used and promote it more widely, he says.

Barney Mynott, public affairs officer at the local infrastructure body Navca, attributes the limited use of the act partly to the financial thresholds in the legislation. At present, the social value act applies only to central government contracts worth more than £111,676 and other contracting body contracts worth more than £172,514. Such high thresholds exclude many smaller voluntary sector organisations, he says, because they usually compete for contracts of lesser value.

"The legislation applies only to larger contracts, many of which are beyond the reach of most voluntary sector organisations, although some public bodies have lowered the threshold to which some contracts apply, " he says.

The situation could get worse, Mynott says.

A new EU public procurement directive, due to come into force before the end of the year, is expected to introduce a Europe-wide rule that only public sector contracts worth more than about £600,000 would have to take social value into account. If commissioning bodies follow the letter of the European law, voluntary sector organisations could be further disadvantaged.

SEUK's Temple says, however, that the directive could be viewed as an opportunity rather than a threat. For example, it encourages the breaking down of contracts into smaller lots, which would tend to favour voluntary sector organisations, and it allows services to be awarded for a limited period, which will be helpful to the sector. "Although various issues have been raised about the EU directive, it is quite a good thing," he says.

Generally, Temple says, the existing legislation needs to be given more teeth. Suggestions by SEUK members include extending the act from the supply of services to other areas, such as the provision of goods and construction work. Some want the act to be made an obligation and not a consideration, with clearer statutory guidance. He says it is crucial for examples of organisations benefiting from the act to be promoted more widely.

But Navca disagrees about making the act compulsory. "There have been some calls to make the act compulsory for all public service contracts, but we fear that it could become a tick-box exercise," says Mynott. "There is something good about the voluntary nature of the act."

Chris White MP: The man behind the act

The Public Services (Social Value) Act 2012 began as a private members' bill put forward in 2010 by Chris White (left), Conservative MP for Warwick and Leamington. The government backed it and it received cross-party support in parliament.

Sixteen months after it came into force, White says he is reasonably pleased with its progress. "From my perspective, there's a lot of positivity around the act and a great appetite for the measures it contains," he says. "I think people see it as a great tool and people have been able to use it to make their argument."

White, who last year was appointed as the government's social value ambassador, says the act has already become an essential part of the commissioning landscape, despite the fact that it is "pretty light-touch", requiring commissioners only to take social value into consideration rather than compelling them to take account of it. "Many local authorities are now developing policies that take the legislation into account," he says.

He says that in the current financial climate there is great pressure on commissioners to drive down costs. It will take time for the act's effect to be felt because it requires a cultural change, but the act is making them think more creatively and look beyond the price, he says. He also believes the government-backed Commissioning Academy, which is providing training to senior commissioners in public services, will help. "It means that cohort after cohort of commissioners can be guided through the process," he says.

If the act is to be successful, commissioners and suppliers will need to work more closely together and there will have to be much more "co-design" of contracts, says White. He agrees that more needs to be done to raise awareness of the act among both commissioners of services and those supplying them. "Providing better guidance and better case studies will shape this area, I hope," he says.

Of the NCVO's suggestion that a centre for social value should be created, White says: "I don't think anything should be off the table. The NCVO has some useful suggestions and they need to be looked at seriously. But at the end of the day you need to ask what such an organisation would look like, how it would work and whether the role could be performed by an existing organisation."

Case study: Fusion 21

Fusion21 is a social enterprise that was set up in 2002 as a procurement consortium by seven housing associations based in the north west. It uses its buying power to get the best prices for its members and to insert social clauses into contracts with commissioners and suppliers.

It has also used the experience it has developed to help local authorities and other organisations to implement their own social clauses and policies.

Dave Neilson, chief executive of Fusion21, says that since the social value act was introduced, there has been an increase in the number of commissioning bodies and suppliers from the private and not-for-profit sectors seeking advice on inserting social clauses into contracts and bids.

Neilson says Fusion21 has benefited from the requirement in the act for commissioners to consider social value when awarding contracts. In March, after a competitive tendering exercise, it took over the running of Construction Futures, a scheme that uses the planning and procurement system to secure jobs and training on construction sites.

"We were told that we won the bid because of our approach to social value and because no one else was doing that," he says.

But he adds that the trend for the government to commission large prime contractors - mostly private sector firms - means many smaller organisations are excluded from public sector contracts. "It's all well and good for government to say it wants to commission for social value, but when you look at the reality of the situation it's still the private sector contractors that are the only ones able to win larger contracts," he says.

Case study: Birmingham City Council

Birmingham City Council last year created the Birmingham Business Charter for Social Responsibility, a set of guiding principles for awarding contracts. It is encouraging others - including businesses, public sector bodies such as schools and third sector organisations, including grant recipients - to adopt them.

The principles of the charter are headed: local employment; buy Birmingham first; partners in communities; good employer; green and sustainable; and ethical procurement. A spokeswoman for the council says some aspects of the charter are mandatory and others voluntary for contracts and grants that are smaller than £200,000 a year; the entire charter is mandatory for organisations with individual contracts and grants that are larger than £200,000 a year.

She says the council doesn't have any evidence yet to show that the charter is helping voluntary sector organisations to win contracts. But one initial signatory of the charter, she says, was a social enterprise that did not previously have a contract with the council, but wanted to get involved because of the charter's social aims.

Brian Carr, chief executive of Birmingham Voluntary Service Council, says the charter has been welcomed generally by the voluntary sector, but it's too early to say whether it has been a success.

He says one barrier for many voluntary sector organisations is providing evidence of their social impact to support their contract bids; although many third sector organisations can speak about their social value, only a minority of them are measuring it systematically. There is also a lack of consistency in defining, measuring and comparing social value, either in the sector or in local government, he says.

Carr believes the implementation of the social value act on the ground would be improved if more consistent guidance was published and organisations were to reach local agreements about what constitutes social value and how it can be measured.

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