Social Value briefing

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1 Social Value briefing About This Briefing This briefing is provided on behalf of the Department for Education s overarching strategic partnership for voluntary, community and social enterprise sector organisations that serve children, young people and families. Led by Children England, and working with Community Matters, NCVYS, NAVCA, the Race Equality Foundation and Social Enterprise UK, the programme will include information, learning resources and opportunities, and peer support networks. For more information please click here. This briefing has been produced by Social Enterprise UK. We are the national membership body for social enterprise. We offer business support, do research, develop policy, campaign, build networks, share knowledge and understanding and raise awareness of social enterprise and what it can achieve. We also provide training and consultancy and we develop bespoke business and information packages for clients of all kinds. This briefing outlines the meaning and benefits of social value and provides and oversight of the recent changes to policy in this area. Further information, including relevant guides and toolkits, is included in the further resources section at the end of this paper. Introduction The voluntary, community and social enterprise (VCSE) sector has long campaigned for commissioning practice to take social value into account. This would ensure that the full weight of the public sector s purchasing power is directed at achieving social and environmental benefits, alongside delivering financial efficiency. In addition, VCSEs are well practiced at providing added social value through service delivery across many sectors including health, education, housing and transport. Creating an opportunity for bidders to demonstrate this would enable public bodies to assess which potential providers would deliver maximum public benefit to the local community. Most commissioning does not currently seek out the wider social, environmental and economic benefits that providers can bring to service delivery. However, there has been a shift towards

2 this way of thinking in public policy over the last few years and thanks to the recently passed Public Services (Social Value) Act 2012, all public service commissioners will now be required to consider how the services they commission and procure might improve the economic, social and environmental well-being of the area. What is social value? Social value has been loosely defined as the additional benefit to the community from a commissioning/procurement process over and above the direct purchasing of goods, services and outcomes. Examples of commissioning deliberately for additional social value might include: A community childcare organisation that invests in programmes to help local long-term unemployed people into childcare training, qualifications and employment. A transport company that tenders for a contract to run London bus routes and offers to provide added value through the additional delivery of a community dial-a-ride service. A housing management organisation that wins a contract to undertake property maintenance and repair work, and offers to provide social value by promoting careers in construction and trades to local schools, and committing to employing young people. What are the benefits of a social value approach to procurement? The government is the largest purchaser of goods and services in the country spending more than 236 billion on procurement each year. Several local authorities around the UK have already pioneered social value led approaches to commissioning, including Durham, Camden and Wakefield Councils, providing valuable lessons that could help others follow suit. Currently, however, most commissioning does not seek out the wider social, environmental and economic benefits that providers can bring to service delivery, even though delivering such benefits need not result in additional cost. Indeed, as well as delivering benefits for the community beyond the immediate focus of a contract, by tackling multiple needs this approach can also give rise to cross-departmental or cross-organisational efficiencies savings that feed directly back into the public purse and provide an intelligent approach to achieving efficiencies. The VCSE sector has long campaigned for commissioning practice to change. Embedding social value in commissioning would ensure that the full weight of the

3 public sector s purchasing power is directed at achieving social and environmental benefits, alongside delivering financial efficiency. Further, VCSEs are well practiced at providing added social value across many sectors including health, education, housing and transport for example using bus contracts to create jobs for people who would otherwise be unwillingly reliant on the state, or using recycling contracts to train and build the self-esteem of young people who didn't think they could play a part in society. Commissioning in this way would therefore allow social enterprises and voluntary organisations to demonstrate the full value and benefits of their approach to service delivery, putting them in a stronger position to compete for public sector contracts. Specifically, embedding social value in procurement could help to: Minimise the impact of the spending cuts on civil society organisations Voluntary and community groups are feeling the impact of the public sector cuts being implemented to reduce the budget deficit. Ensuring that future public spending decisions create additional social value in the community served could to help mitigate against the impact of cuts and ensure that the decisions that are made create greater value. Support local job creation In some areas of the UK where the public sector is by far the largest employer, spending cuts are inevitably going to impact on unemployment. This is going to be an enormous challenge. Ensuring that all spending decisions require contractors to support local employment opportunities can play a part in reducing the impact of this. Widen the market and increase choice The government has pledged its support for creating plurality of public service providers, but all too often public sector markets are created in such a way that only a small number of large providers are able to compete. In many areas of public services, such as waste and welfare, there is a very small supply side which inevitably limits competition, choice, innovation and value for money. Embedding social value in commissioning would allow the full value VCSEs offer to be taken into account, thereby encouraging them to enter the market and increasing choice. It could also stimulate a role for VCSEs as part of a wider supply chain, fostering greater partnerships between private companies and VCSEs as contracts require providers to draw on their combined skills and resources. As such, adopting this approach could not only draw greater value from our expenditure but also stimulate greater innovation and widen the market and choice of suppliers.

4 Is anyone already using social value in procurement? Whilst most commissioning does not seek out the wider social, environmental and economic benefits, there are already examples of procurers embedding social value in their processes. For example, in September 2011, the London Borough of Waltham Forest was looking to retender a seven year contract for the provision of transport services. The contract included Special Educational Needs transport and adult day centre transport, as well as other local services. In designing the tender, Waltham Forest s procurement officers wanted to make sure they got as much value out of the contract for local residents as possible. To help evaluate the all-round contribution of potential providers, they included a question in the tender asking bidders to demonstrate how their operational model could contribute to efficiencies and give added value to the service. This question counted for 10% of the final contract score and gave all bidders the opportunity to think about how they could achieve a wider impact from their services for the local community. The contract was won by HCT Group, a social enterprise that was founded in 1982 in Hackney, and now runs transport services in a number of London Boroughs as well as elsewhere in the UK and Channel Islands. As a social enterprise, providing community value is central to how HCT Group operates, with a focus on helping the most marginalised to access transport services and creating employment opportunities for those furthest from the labour market. However, all too often there is no opportunity for them to demonstrate this in bids for contracts. The fact that Waltham Forest s contract included a scored question about added value gave HCT Group the space to set out the additional social impact of their approach, explaining that any profits they made on the contract would be re-invested into a learning centre that would provide training for long-term unemployed people in the borough. HCT Group was therefore able to score very highly on this section, contributing, along with their competitive pricing and high quality delivery model, to their success in winning the contract. Are there any policies that support social value?

5 Value for money is the over-riding factor that determines all public sector procurement decisions, but there is a growing understanding of how value for money is calculated, and how the whole-life cycle requirements can include social and economic requirements, as shown in the example above. This has also been reflected in a series of recent policy developments. Public Services (Social Value) Act The Public Services (Social Value) Act is the most significant development in this trend towards embedding social value in procurement. Under this Act, for the first time, public bodies are required to consider how the services they commission and procure might improve the economic, social and environmental well-being of the area. The Act was designed to support social enterprises, charities and employee-led organisations as key components of the Big Society. In particular, the Big Society vision supports a greater role for VCSEs in delivering public service, and yet commissioning activity sometimes does not seek out the wider social, environmental and economic benefits that such providers bring to service delivery. The Act therefore aims to support the creation of a mixed market of providers and effectively encourage market entry for civil society organisations by taking into account of the full value that these organisations deliver. The Act applies to all public service contracts and those public services contracts with only an element of goods or works. It doesn t apply to public work contracts or public supply (goods) contracts. However, there is widespread approval for public bodies considering social value in all forms of contracts including support from Nick Hurd, Minister for Civil Society 1. The implementation date for the Act is yet to be determined, but once it comes into effect, all English and some Welsh bodies will have to comply with the new law, including local authorities, government departments, NHS Trusts, PCTs, fire and rescue services, and housing associations. Best Value Guidance 1 See column 19

6 The Department for Communities and Local Government (CLG) has issued statutory guidance on the Best Value Duty, which sets out expectations of the way authorities should work with voluntary and community groups and small businesses when facing difficult funding decisions. Contrary to common perceptions, the Best Value Duty is not simply about value for money: rather, it requires best value authorities 2 to make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness. In 2011, CLG revised the statutory guidance on the meaning of best value in commissioning. The department s consultation on these revisions stated that the new guidance would be more explicit about the scope for authorities to consider social value in their functions and that that the Best Value package supports a range of other related initiatives, such as the Governmentsupported Private Members (Social Value) Bill 3. This was confirmed when the guidance was issued in September 2011, with CLG stating that, Under the Duty of Best Value [...] authorities should consider overall value, including economic, environmental and social value, when reviewing service provision. As a concept, social value is about seeking to maximise the additional benefit that can be created by procuring or commissioning goods and services, above and beyond the benefit of merely the goods and services themselves. 4 EU changes As well as complying with UK guidance and legislation, commissioners in the public sector must procure goods and services within the EU procurement rules. These rules were reviewed in 2011 with a view to simplifying them and making procedures more flexible. The revised procurement framework also makes it clear that social requirements can be fully embraced in procurement practice providing certain criteria are met 5. 2 A local authority; a National Parks authority; the Broads Authority; police and fires authorities, the London Fire and Emergency Planning Authority; a Waste Disposal Authority, Joint Waste Authority, an Integrated Transport Authority; Transport for London; the London Development Agency. See Section 1 of the Local Government Act 1999, economic prosperity boards established under section 88 and combined authorities 3 Best value: new draft statutory guidance and other measures: Equalities impact assessment initial screening, Department for Communities and Local Government April 2011, page These requirements are that social requirements should reflect policy adopted by the public body; should be capable of being measured in terms of performance; should be defined in ways that do not discriminate against any bidders across the European Union; and social requirements drafted in the specification become part of the contract.

7 In a report on the modernisation of public procurement from October 2011, the European Parliament states that, in order to develop the full potential of public procurement, the criterion of lowest price should no longer be the determining one for the award of contracts, and that it should, in general, be replaced by the criterion of most economically advantageous tender, in terms of economic, social and environmental benefits taking into account the entire life-cycle costs of the relevant goods, services or works 6. Further, the report stresses that supporting the criterion of maximum economic benefit would foster innovation and efforts to achieve the best quality and value, and emphasises that public procurement rules should be flexible enough to ensure that passive consumers, for example in hospitals, care facilities for the elderly, schools and kindergartens, have equal access to healthy, value-for-money food, rather than merely the cheapest available option. Further resources A guide to the Public Services (Social Value) Act, Social Enterprise UK, February 2012 An outcomes framework for young people's services, The Young Foundation on behalf of the Catalyst consortium, final draft available from April 2012 A social investment wiki, The Race Equality Foundation East Sussex a case study of putting social value and commissioning into practice, NAVCA, March 2012 Your Value! tool, Community Matters 6

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