Social Value Maturity Within Local Councils and SMEs

On 2 May 2023, the Chartered Institute of Builders (CIOB) released a wide-ranging Special Report outlining the increased emphasis of social value in public sector tenders, and how SMEs are struggling to stay competitive with larger construction companies in response to the changes. Conclusions from the report comprised:

• The current advantage enjoyed by Tier 1 contractors, who have greater capacity and resources to understand and implement social value than small- and medium-sized businesses.
• An evolving approach to determining the depth and success of social value commitments suggests that SMEs will need to allocate additional time and resources to accurate measuring, monitoring and reporting of social value offerings.
• An increasing number of local councils are integrating social value as part of their permanent procurement practices, with a method statement or proposal of commitments included in the quality portion of each tender.

In spite of the new developments social value presents, it is important to view the increased integration of social value within public procurement as a benefit rather than an obstacle. Small- and medium-sized businesses that gain competence in social value will achieve a significant competitive advantage when bidding for public sector opportunities.

Social value maturity within local councils

The CIOB report further included an assessment of local councils’ social value ‘maturity’ as categorised by the Social Value Maturity Index. Councils were scored based on the Local Government Association’s (LGA) National Procurement Strategy, which organises social value maturity into five different levels – minimum, developing, mature, leader and innovator.

Examples of immaturity vs maturity within an authority’s processes for evaluating and monitoring social value are outlined below:

Local councils and authorities are also paving the way for more inclusive procurement processes by integrating social value principles into wider tendering requirements. For example, Preston City Council has pioneered the Preston Model over the past decade, which prioritises ‘community wealth-building’ which ‘ensure[s] the benefits of local growth are invested in their local areas’. This includes requiring a minimum contract spend within the local area and the payment of Real Living Wage to all employees. To date, the outcomes have been exceptionally positive – £112.3 million of procurement spend has been circulated within local businesses, and around 4,000 additional employees are receiving the Real Living Wage.

Regional disparity

When examining social value maturity within public sector tendering, it soon becomes apparent there is a marked disparity in councils across different regions of the UK. While important to note that the councils’ maturity levels are initially self-assessed, they were required to demonstrate evidence supporting their claims to the LGA.

Scotland and Northern Ireland were not included in the report, as Scotland has its own methodology for assessing social value based on legislation from their devolved government, and Northern Ireland has only implemented mandatory social value requirements from June 2022.

The future of social value in procurement

To echo the conclusions drawn by the CIOB report, it is imperative for SMEs to understand the principles of measuring, monitoring and reporting social value as soon as possible to maximise their chances of success in public procurement. This is particularly pertinent when tendering for local authority contracts and frameworks. According to Tussell, 38% of local councils’ procurement budget is spent directly with SMEs, over three times as much as the proportion of central government authority spend. Should small- and medium-sized enterprises fail to adapt to maturing social value norms, they will be isolated from a significant source of revenue and potential opportunities.

The report also emphasises the likelihood of the adoption of social value into private sector procurement in the future, due to the positive reception from external stakeholders and supply chain partners. With central government authorities required to prescribe a minimum 10% weighting for social value to all contracts and framework agreements since 1 January 2021, both public and private sector buyers are fully embracing social value as part of the tender process, requiring tenderers (and SMEs in particular) to be adaptable.

Social value tips for SMEs

In response to ongoing changes, SMEs who are unfamiliar with social value but wish to remain competitive within public procurement should consider implementing the following:

Begin learning the principles of social value

Many SMEs will feel they are at an inherent disadvantage due to fewer resources than larger Tier 1 contractors. However, authorities are looking to award full marks to organisations who offer cohesive, targeted and considered commitments. Far from a competitive disadvantage, social value is an opportunity for small- and medium-sized businesses to demonstrate how they can best leverage their status as a community stakeholder to create added value.

Furthermore, many tenets of social value are activities SMEs are already performing daily. These include:

• Providing stable, long-term employment to local residents, thereby enhancing community outcomes.
• Apprenticeships and work placements for college students and unemployed individuals, providing valuable experience and qualifications which will support a long-term career.
• Supply chain spend with local/small businesses ensuring that contract spend is circulated locally.
• Volunteering, in-kind contributions or supporting community projects could include food bank donations, labour donated to a school or litter picking in parks, beaches or other communal areas.
• Environmental and decarbonisation efforts such as diverting waste from landfill, use of electric/hybrid/reduced emission vehicles and prolonging plant/equipment lifecycles through regular scheduled maintenance.

If you are not already familiar with social value, some beginner resources include the Social Value Portal, the devolved Scottish government’s Sustainable Procurement page and LGA social value case studies.

Research the purchasing authority’s characteristics and practices

As evidenced in the previous section, the maturity and development of social value processes can vary widely from council to council. The same holds true for their preferred outcomes – these are often shaped on the environmental, social and economic profile of the authority’s residents and boundaries.

Therefore, it is recommended that you tailor all social value offerings to the authority profile. Examples of helpful information which can shape your social value offerings and commitments could include.

• Local challenges the authority is facing including environmental concerns, high rates of unemployment or low community wellbeing.
• Long-term objectives with which you can demonstrate alignment, such as carbon neutrality by 2030.
• Partner organisations that the council has previously engaged to deliver volunteer or community projects.

In addition to generating ideas and evidencing a willingness to work with the buyer, research will also add specificity and persuasiveness to any social value method statements, leading to higher scores from evaluators.

Propose clearly defined and quantifiable offerings

In accordance with maturing social value programmes, purchasing authorities are more stringent in their requirements, requiring offerings to be more specific and quantified. A response which received high marks several years ago may be outdated, particularly if you do not assign a target and value to each offering. For example, the National TOMs calculator allows SMEs to calculate and measure social value based on a template, producing specific, quantifiable and categorised commitments.

Equally, it is important to be mindful that social value commitments will form a contractual KPI over the contract or framework lifecycle. Failure to fulfil offerings may result in the purchasing authority dissolving your service agreement. Therefore, it is important to focus on commitments which are realistic, tenable and proportionate to value. A good rule of thumb for social value is to offer proposals which generate 20% of the expected contract revenue.

With over 6,000 ITT and SQ submissions and our own in-house Social Value Practice division, led by Director of Social Value Stephen Kennett, Executive Compass are ideally positioned to provide insight to SMEs on how the maturation of social value within local authorities will affect public sector bid and tender writing and management opportunities. This includes social value training tailored to your organisation, allowing you to submit higher quality and more competitive tenders.