Measuring Up: The hidden implication of the Social Value Act

| 1 response | Posted by: David Floyd | Theme: Social Innovation & Investment

Everyone’s been talking about the Social Value Act, from the biggest public authorities to the smallest social ventures. In the social enterprise world, there’s a lot of hope, anxiety and scepticism around the Act. Will it give social ventures a noticable edge when competing for procurement bids? Or does the vagueness of the legislation make it less powerful than it seems? The reality of the situation is that it’s a bit of both. However, one pretty significant implication of the Social Value Act that’s been much less examined is that it will provide a big incentive for social ventures to prove their social impact, and thus be encouraged towards increased measurement. In this post, we’ll step through the Act itself and a case study of its application to see what this might mean for other social entrepreneurs.

via Flickr user kayaker1204

So, as of 31st January 2013, most public bodies in England (and some in Wales) have a duty to consider social value as part of their procurement process. Specifically the act states that public bodies must consider:

(a) how what is proposed to be procured might improve the economic, social and environmental well-being of the relevant area, and
(b) how, in conducting the process of procurement, it might act with a view to securing that improvement.

What this means, in theory, is that rather than designing tendering processes and subsequently awarding contracts based on getting the job done for the lowest possible price, councils and other public bodies will now have to consider the wider social impact of their spending. Theoretically, this means that social ventures should have a better chance of winning public contracts.

The two big questions that will determine whether this theory becomes reality are:
(i) will the Act really lead to significant positive changes in the way public bodies buy services? and
(ii) are there large numbers of social ventures who can convince those public bodies that they’re able to both deliver services to a high standard and deliver additional social value in the process?

It’s too soon to judge whether, or to what extent, the answer to either of these questions will be ‘yes’. In the case of (i), the Act will not lead to public bodies giving contracts to social ventures just because they think they’re great but it is likely to persuade more public bodies to include a social value element in their tendering processes.

Social Enterprise UK’s booklet, “Public Services (Social Value) Act 2012: A brief guide” describes a process in 2011, where the London Borough of Waltham Forest re-tendered a 7-year contract for community transport services:

“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.”

The process was ultimately won by social enterprise transport provider, HCT Group. Their ability to deliver additional social value was clearly important in winning the contract because:

“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.”

However, the other 90% of the contract score was based on the bidder’s ability to deliver a high quality service at a price the council was prepared to pay. If they hadn’t been able to do that, HCT Group’s ability to deliver additional social value wouldn’t have won them the contract.

Crucially, aside from needing to show that they can deliver a high quality service at a competitive price, many social ventures still face a challenge to prove – rather than assert – that they can and do deliver additional social value. Notably, HCT Group is relatively unusual amongst social ventures in publishing a social impact report.

This may be partly because HCT Group are a relatively large social enterprise. However a recent SEUK report on social enterprises that have spun out of the NHS (which also tend to be relatively large) noted that:“the respondents were not very strong in articulating their social impact. Some of the organisations surveyed are known to have produced relatively robust social impact reports but this did not come through in the survey for the spin-outs as a whole.”

Neither the Social Value Act nor procurement law in general allow public bodies to discriminate in favour of particular types of organisations. So if social ventures are not able to articulate and demonstrate how they deliver additional social value, then the Act won’t make it any easier for them win contracts ahead of private sector competitors. It could even make it more difficult.

Ultimately, the Act represents a positive challenge to both public bodies and all the organisations that might potentially bid to deliver their services. It seems slightly bizarre to think that public bodies, spending public money, could ever have been in a position to buy anything without regard for the wider impact of that spending. Any positive change to that situation is a good thing.

For social ventures, the challenge presented by the Act will be to prove that we can deliver both high quality services and additional positive social change at a competitive price. Quite reasonably, many of us in the sector are hoping this will lead to more contracts. but we should also want it to lead to social ventures becoming more effective organisations in the process.


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