Stronger legislation and data needed boost social value in public procurement, report says

Demos calls for "Making Public Spending Digital" programme to digitise public sector procurement data
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The government should set up a “Making Public Spending Digital” programme to improve data on social value in procurement, the cross-party think tank Demos has said.

In a report urging ministers to review how government spends its £300bn public procurement budget, the think tank also calls for strengthen procurement legislation that formally requires public bodies to account for social value.

The new Labour government made a manifesto commitment to capitalise on government procurement, which represents around 13% of UK GDP. Its plans include rewarding businesses that create wider social and economic impact, and creating a Social Value Council, which would advise a new Office for Value for Money to ensure that public money is spent responsibly. 

Demos's latest report, Taming the Wild West: How technology can charter a new frontier for social value, endorsed the idea of a Social Value Council, which it said should be established on a statutory footing. “This would take the first step towards an approach that makes the most of both central and local government in progressing the social value agenda,” today's report said.

But it said the government should go further by strengthening the Social Value Act 2012 – which requires public sector commissioners in England (and some in Wales) to consider how they could improve the economic, environmental and social wellbeing of their local area through their procurement activities – to ask all public bodies to “account for” social value.

At the moment, the Social Value Act requires central government bodies to "account for" social value in their procurement decisions, but only says local government organisations must "consider" social value.

The Social Value Council should be used to bring about “a level of national standardisation on social value measurement”, as well as encouraging tech innovation, the think tank said.

Making Public Spending Digital

Demos has also called for a Making Public Spending Digital programme, similar to HM Revenue and Customs’ flagship Making Tax Digital programme to digitalise the tax system, to digitise public sector procurement data and make collection of data from businesses easier and faster.

It said the Social Value Council should call on technology providers to help with elements of the programme and set up a Trusted Social Value Data Taskforce, made up of public bodies, social value practitioners and technology providers.

It should use this task force to standardise the measurement of social value data and encourage tech innovations, using a series of working groups to achieve specific aims, Demos said.

One such aim should be to develop a social value methodology that sets out best practice for how public bodies and businesses should measure their social, economic and environmental impact, the think tank said.

Another aim would be to build on plans set out by the previous government to create a centralised, publicly available digital platform that brings together information on public procurement contracts. This should include information on social value, the report said.

The task force should also set guidance for any tech providers looking to build tools or software to help measure social value through a Social Value Code, the think tank said. The code should cover transparency criteria for how providers calculate their impact, the regularity by which their data is updated, and sources of information.

Much of today’s report focuses on the need for better data to enable public bodies to achieve their social-value goals. Anne Godfrey, chief executive of GS1 UK, which carried out the project in partnership with Demos, wrote in the foreword to the report: “Too often, we see a myriad of different reporting metrics, statements and policies, resulting in a confusing landscape that leaves governments and consumers asking the question – ‘are we really getting the social value that’s being claimed?’” 

The Trusted Social Value Data Taskforce could also work to develop innovative technological tools that will help to measure, monitor or report on social value, Demos said. This could include software that enables the tracking of the social value of a product or service, and for consumers and buyers to monitor how the product or service is doing on social value.

The report also recommends setting up a Social Value Tech Hub to share information on the strategies used by central government, regional authorities and local authorities in a central database. It should commission annual reviews on the progress of social value based on analysis of this data, and set out any areas where more data is needed, Demos suggested. 

Technology is a "crucial tool" for enabling transparency around social value, and an "opportunity that the UK cannot afford to miss", the report said. 

"Data enables taxpayers to see how public money is being spent, consumers and investors to see how products and services are delivering social value, contractors to evaluate how bidders are delivering against their promises, and the government to track progress on social value as a country – which it is currently unable to do.

"Without establishing an accurate picture of the social value landscape, we will not be able to advance the agenda in a targeted way."

Local and global

The Social Value Council should work on both a national and a local level, the report said, working with combined authorities to set up social value units and develop a social value strategy to guide their procurement.

It should also work to encourage a focus on social value in local areas that aren’t covered by combined authorities, for example through embedding it in new Local Growth Plans for towns and cities that were promised in Labour’s general election manifesto.

And on a grander scale, Demos said the council should work towards helping to develop global interoperable standards that countries will need to sign up to by 2035. It could start by considering the use of global interoperable standards in the reporting requirements of major government contracts – for example starting with government Strategic Suppliers.

“This could be an opportunity for the UK to lead the charge on purpose beyond profit on the international stage… and to push for the technological innovation needed to make this happen on a global scale,” the report said.

Trust concerns 'have real impact'

Surveys carried out by Demos for the report underscored the importance of building trust in public sector spending.

In a representative survey of 2,082 members of the public, 57% of respondents said they feel companies and organisations actively hide information about their social, environmental and wider economic impact, rising to 63% among those who consider social environmental and/or wider economic impact in their purchasing decisions. Just 5% disagreed with the statement.

"Such concerns have real impact – on investors’ willingness to invest in purpose-led businesses, on public trust in the concept of social value, and the ability of public sector contracts to deliver it, particularly given recent scandals, such as ‘VIP’ lanes used to fast track PPE contracts during the pandemic," the report said.

"Without the trust of investors and consumers, the entire concept of social value is at risk, as we have seen with concerns around ‘greenwashing’ and the backlash against the environmental, social and governance movement in the US," it added.

The report noted that both the Conservative and Labour parties "have seen the importance of building public trust in public sector spending".

The previous Conservative government set out plans for more transparency in public procurement, while Labour put "make sure public procurement is fair and transparent" at the centre of its plans for business, it said.

"We need to take advantage of this rare cross-party consensus by building on both parties’ plans to increase transparency, which is a key part of our vision," Demos said.

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