The business case for Social Value in local government procurement
With local authority budgets coming under unprecedented pressure, it is tempting to view Social Value as a cost – and one that can be cut when considered against other important priorities.
From my experience of working in local government procurement and as Social Value Portal’s Head of Public Sector Delivery, I would suggest that this perspective is critically mistaken.
Social Value is not a cost. Rather, it is an extremely important investment that local authorities must make to support their communities and unlock more value from their supply chain. Moreover, it is an opportunity to boost key local government priorities.
Why does Social Value matter?
Social Value is an effective mechanism for public sector buyers to work with their suppliers to maximise positive impact on local communities. This could include protecting and regenerating the environment, giving more people access to work and training, or strengthening small businesses.
Legislation has made Social Value progressively more integral to local government procurement, from the 2012 Social Value Act to the Procurement Act 2023.
But while local authorities are obligated to address Social Value in their procurements, the community and financial benefits of Social Value create a powerful case on their own.
The community case for Social Value
Social Value and its importance for local communities is far more than simply a compliance issue; it is central to a local authority’s ability to serve its residents and communities effectively.
Where a local authority spends money on a contract, the outcomes of that contract will benefit its residents. These benefits will go even further, however, if the expenditure provides additional positive impacts on the community. These could include local employment opportunities, increased spend with local businesses, and many other positive outcomes.
Ultimately, embedding Social Value in procurement helps local authorities:
- Maximise the positive impact of procurement spend on communities
- Support the achievement of corporate objectives
- Encourage key stakeholders to mirror this approach in their own activities and procurements
- Tackle climate change at the local level
- Address inequality – especially in areas with large disparities, like health, social care, opportunities for children, education outcomes and skills levels
Why Social Value is an opportunity for SMEs
The work of small and medium sized enterprises (SMEs) is a part of the lifeblood of a community. Local authorities are naturally highly invested in supporting SMEs to thrive.
There has, however, been some debate concerning whether SMEs are disadvantaged by Social Value requirements in tenders.
This is not what we have found at Social Value Portal. On the contrary, our work has shown that SMEs are uniquely placed to provide Social Value, as they are often locally based and understand community needs.
As detailed in our Power-up your Procurement report, SMEs on average deliver around 100 percent of their committed Social Value. Of the organisations that have won two or more bids through our platform, over half are SMEs.
Moreover, local authorities’ engagement with Social Value is currently creating a significant positive knock-on effect for SMEs. Spend with local SMEs is one of the most popular Measures within the TOM System, accounting for the delivery of over £56 million in Social Value.
Boosting social care with Social Value
Many of the services provided by local authorities stand to benefit from a stronger focus on Social Value – an especially significant one being social care.
For commissioners of adults’, children’s and public health contracts, Social Value is an opportunity to maximise purchasing power and take a wider view of costs and benefits beyond financial implications.
Concerns have been raised that social care service providers are struggling financially and that Social Value requirements in procurement constitute an unreasonable additional burden.
I would challenge this assumption, for three key reasons:
- Most local authorities’ Social Value requirements simply focus on ensuring suppliers hire, train, and buy services locally – which social care providers are often already doing.
- Many of the social care projects that have been managed through our platform have generated strong Social Value results, with no indication of unreasonable burdens on the suppliers - check out our spotlight on Durham County Council's 0-25 Family Health Service.
- Social Value is just one of the evaluation criteria alongside price and quality. Companies bidding for work can adjust the balance they place on these different areas of evaluation according to their capabilities.
The financial case for Social Value
Value for money is a fundamental element of Social Value in procurement. Social Value Portal analysis has found that the average procurement managed via our platform generates a 20% Social Value-add, relative to contract value.
It is also important to note that these Social Value gains do not come at the expense of additional contract costs. This is because…
- Weightings in local government tenders require bidders to demonstrate value for money if they are to have a chance of winning the bid.
- Contractors already need to buy services and hire staff. Social Value requirements just encourage them to do this locally, which can often lower costs due to reduced transport requirements.
- Many businesses have already embedded Social Value into their processes. Local authorities that don’t seek Social Value in procurements therefore risk missing out on Social Value they could receive at no additional cost.
- Including Social Value criteria in public service contracts can widen and strengthen the supplier pool. By seeking Social Value in their procurements, local authorities enable voluntary organisations, community groups, and social enterprises to compete against larger organisations – boosting value for money, supply chain resilience, business partnerships, and innovation.
- Social Value requirements which are relevant and proportionate to the contract will be much less likely to generate additional costs.
Social Value: A win-win
Embedding Social Value into procurement processes presents commissioners with a unique opportunity to make each public pound go further for communities.
With ongoing cuts in local authority resources, it is far from an additional cost – it is a financially sustainable way to create good for communities.
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