The Public Services (Social Value) Act 2012 came into force on 31 January 2013. It is now a legal obligation for local authorities and other public bodies to consider the social good that could come from a procurement exercise before they embark upon it. It is not enough to think only of price and quality.
We welcome the act as a positive step toward improving local authority procurement processes, however, we think that further clarification is needed on how the process, and the criteria for suppliers to prove social value, can be made less ambiguous.
The provision of public services by independent suppliers is big business and now worth £82bn a year. This figure is predicted to rise to £140bn by 2014, meaning that more than half of the annual £236bn public service budget will be spent on independent providers. This new Act marks an important step in commissioners becoming accountable for the services they procure and clearly endorses the principle of social enterprise.
Experience has shown that the public sector might not be an efficient and cost-effective provider of public services. It may be said that public services delivered by the private sector, when driven primarily by profit and shareholder value, might not deliver requisite quality. It may also be said such services can be delivered efficiently and cost effectively, to an appropriate quality standard, by organisations driven by a public benefit mission which is the same as the public benefit purpose of the service itself.
In 2010 the European Commission published Buying Social: a guide on taking account of the social considerations in public procurement. This encouraged use of procurement to promote ‘employment opportunities, decent work, social inclusion, accessibility designed for all, ethical trade and general compliance with social standards’. Public authorities have always had the power to do this, but it is rarely seriously exercised.
The Social Value Act adds to the power, an obligation ‘before starting a procurement process to consider: how what is proposed to be procured might improve the economic, social and environmental well-being of the relevant area; and how, in conducting the process the authority might act with view to securing that improvement’.
This might be thought a weak obligation, but it is now a clear duty, making failure to ‘consider’ challengeable. It is possible to contemplate cases being brought, analogous to those relating to the Equality Requirements, where public bodies fail to meet their new legal duty.
Clearly ‘social value’ is not as easy to measure as price, or to define as quality. However, its meaning can be understood instinctively and developed into tangibility. There is a value to financial surpluses being applied to public benefit instead of private profit. There may be added value from a disadvantaged workforce delivering a service and in the promotion of the categories identified in ‘Buying Social’. A community transport organisation might offer integration with other services, as well as direct route coverage, or enhanced environmental benefits.
Overall, this Act is good news for society as a whole because it refocuses attention on the integrated public benefit purpose of commissioning, when too much public procurement has become overly focussed on process. The new obligation ‘to consider’ social value is meaningful and is a forceful prompt to commissioners to be more purpose driven and creative in achieving the best value service provision.
It is also a great opportunity for social enterprises, which have always placed social value at the centre of their operations, to demonstrate precisely why they exist.
There have been many well-documented cases where the providers’ profit has been delivered to the detriment of the services they were contracted to supply and examples exist across all corners of society - from care homes to groups supporting the long term unemployed into the workplace. In the end, public services must deliver the best possible value to their local communities.
Going forward, there are principles to build on for drafting social value into procurement specifications and articulating social value in bids to deliver services. There is value in surpluses (profit) being applied to further public benefit and to service defined by purpose, while social impact methodology can provide more directly measurable social value. As highlighted, European Commission guidance sets out a detailed range of potential social value benefits, such as employment opportunities, social inclusion and support for SMEs.
A word of caution though, Social Value must still properly fit within the public procurement criteria requiring objectivity, fairness, equal treatment, transparency and proportionality and required procedures. It cannot, therefore, be seen as a determining factor in itself, but one factor contributing to what is overall the best service provision for the public benefit, or in procurement language ‘the most economically advantageous’ proposal.
Julian Blake is partner at Bates Wells & Braithwaite London LLP.
