In her book, ‘Reimagining Capitalism: how business can save the world', renowned Harvard economist Rebecca Henderson, writes: ‘Free market capitalism is one of humanity's greatest inventions and the greatest source of prosperity the world has ever seen. At the same time, its single-minded pursuit of profit has led to rampant inequality and the looming threat of climate catastrophe – and now threatens to destroy the society on which it depends.'
In tackling ‘wicked' social problems and climate change we can have full and functioning trust and still end up way off course. There is an element that has to supersede even trust when steering a true course, which is intentionality. And this relates to the economics of purpose which Henderson has helped to elucidate. Or as stated by Larry Fink, CEO of Black Rock, the largest asset company in the world in 2018: ‘To prosper over time, every company must not just deliver financial purpose, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers and the communities in which they operate'
And with economics of purpose must come providers of purpose. Suppliers contracting with the public sector for the sake of delivering public services and the creating the maximum public value.
In the UK government context, total government expenditure is slightly north of £1 trillion and total spend on goods and services across all public sector verticals will be above £300bn. It should be noted that among developed countries we are middling when it comes to the proportion of such public spend. Next year we will be and should be celebrating 10 years of the Social Value Act – which served to broaden the criteria for procurement and the awarding of contracts to one that incorporated the economic, environmental and social wellbeing of a relevant area.
At the time of writing, we are awaiting legislation to reform how our public sector goes about buying goods and services, shifting to a more flexible and principled procurement process and system. A system that supports speedier payment and the right to investigate the payment performance of suppliers and a new approach to transparency in respect of processes, performance and results.
A procurement system in which public sector buyers do not have to pick the lowest price bid when procuring and should take a broader view of value for money that incorporates social value.
The extent to which better public service commissioning can be harnessed to attain a marked increase in public efficiency and social benefit won't attract the hullaballoo around say other domestic policy issues. But in shaping and improving the daily life of ordinary people everywhere, it's every bit as important as issues which attract louder concern. If not more so.
Local government has a pretty big dog in this fight. Some £180.6bn was spent with third parties in the last three years and £63bn alone was spent on third parties in 2019-2020. The trick for the next decade will be to ambitiously boost the value of the local pound in delivering for people and places – whether better local wages or enhanced skills acquisition for the age of net zero. That is, to maximise public and social value from a common lever that – despite all else going on – can be controlled and whose exercise improves through adaptation.
We don't know what ‘best' or even ‘good' will look like in ethical public service commissioning. So in this report we have sought, through open dialogue and free exchange conducted via webinars and interviews with experts and practitioners, to get an educated understanding of the direction of where true value lies through the prism of:
- transparency and openness;
- ethos and values
- and finally local economic benefit – or levelling up as we'd best have it.
There are some great instances of councils using social procurement well and effectively. Our report highlights the work of Durham County Council, the North East COVID-19 economic response group partnership and Salford City Council as exemplars of what can be done locally to get the greatest value from the ethical and purpose driven commissioning of public services.
It is to be hoped that our efforts in our report published this week ‘True Value', will stimulate further debate and furnish understanding for a valid model of ethical public service commissioning, one that will deliver true value for people and places everywhere.
Jonathan Werran is chief executive, Localis
