Deliver social value to win contracts, government tells suppliers

Commercial officials to get training in new rules to take account of the wider impact of firms bidding for work from departments
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By Richard Johnstone

25 Sep 2020

New measures to allow departments to measure social value when awarding contracts to suppliers have been set out by the Cabinet Office today.

Under the plans, which will come into effect in January, departments will use a social value model to assess contract bids alongside price. Factors in the model include: supporting Covid recovery, helping local communities; tackling economic inequality by creating new businesses, jobs and skills; fighting climate change and reducing waste; driving equal opportunitites; and improving health and wellbeing.

Value for money will still be paramount in contract awards, according to the announcement, but a bidder’s social value score will be incorporated into the assessment. This will be applied to all bidders, irrespective of their size and type, the Cabinet Office said.

Announcing the new measures, Cabinet Office minister Julia Lopez highlighted that government spends £49bn each year on contracts for vital public services, giving it both tremendous buying power and a duty to secure value for the taxpayer.

However, she said value has too often been narrowly defined by price without taking into account other important factors like job creation, environmental impact, or the use of small- and medium-sized firms in the supply chain.

“We want to see a greater variety of companies deliver government contracts, from every corner of our country – not just because that benefits local economies and communities but because it helps diversify our risk, create a more resilient supplier base and deliver some of our critical priorities,” she said.

“If we can use government’s buying power to drive that broader value, the better our chances of levelling up our country and investing in our people as part of our COVID recovery.”

The announcement is the latest in a number of government procurement reforms floated since the collapse of outsourcing firm Carillion in January 2018. Among these was the publication of an Outsourcing Playbook that set out a number of new policies intending to help departments make better outsourcing decisions and deliver better public services. The playbook introduced a requirement for all complex outsourcing projects to go through a full project-validation review, including a “make versus buy” assessment for new outsourcing that considers if the service would be better provided in-house.

Today’s new process means departmental procurement will go further than the obligations under the Public Services (Social Value) Act 2012 to “consider” social value, and will instead explicitly evaluate it in procurement decisions.

Commercial teams in all government departments will be given training in implementing the new model and how to ensure the maximum social value is derived from each contract, it was also announced.

The move has been welcomed by some business groups. Arnab Dutt, the chair of the Social Value Policy Unit at the Federation of Small Businesses, said that it represented “an important step forward for public sector supply chains”.

“Its focus on addressing economic inequality, the climate emergency and societal wellbeing is a 21st century agenda,” he said. “Social value has the potential to be transformational in bringing opportunity to all parts of our country and to the many small businesses that are the lifeblood of our communities.”

Mark Fox, chief executive of the Business Services Association, which represents a host of consulting, outsourcing and legal firms, added: “This is a good initiative putting people first by focussing on social value. It helps push up standards and best practice.”

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Commercial Policy
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