The Public Services (Social Value) Act 2012 came into force on 31st 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.
The act requires public bodies to judge whether the services they procure will improve the economic, social and environmental well-being of their area. There is a strong argument that this was good practice for such bodies before the Act came into force. Whilst we welcome the Act as a positive step towards improving local authority procurement processes, it does raise questions surrounding the ambiguity of ‘social value' and how this can be measured.
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. This means that more than half of the annual £236bn public service budget will be spent on independent providers. This new Act marks an important step towards commissioners becoming accountable for the services they procure and clearly endorses the principle of social enterprise.
In 2010 the European Commission published "Buying Social: a guide to 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 a power that has been exercised only sporadically.
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".
Clearly "social value" is not as easy to measure as price, or to define as quality, but its meaning can be understood instinctively and developed into tangibility. There are principles to build on for drafting social value into procurement specifications and for articulating social value in bids in ways that can be evaluated properly. There is a value to surpluses (profit) being applied to public benefit, instead of to private profit. Meanwhile, social impact methodologies can demonstrate more directly measurable social value.
There may be added value from a disadvantaged workforce delivering a service and 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, the Act is good news for society because it refocuses attention on the integrated public benefit purpose of commissioning, at a time when much public procurement has become driven excessively by 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.
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 and 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 a partner at Bates Wells & Braithwaite London LLP
j.blake@bwbllp.com
