On the 24th September 2020, the Government issued a new Procurement Policy Note (PPN 06/20) on Taking Account of Social Value in the Award of Central Government contracts. This follows a consultation launched in March 2019 at Social Enterprise UK’s Social Value Summit to get central government to go further than the existing Social Value Act.
Who does this apply to?
The changes outlined in social value will apply to all central government departments (e.g. Ministry of Justice, Department for Business, Energy and Industrial Strategy; Executive Agencies (e.g. the Royal Parks, Companies House) and Non-Departmental Public Bodies (e.g. Charity Commission, Crown Prosecution Service). Any contracts issued by these bodies will need to evaluate social value.
“Evaluate” rather than consider
There are two big shifts in this policy note. The first is a move from “considering” social value to evaluating social value in all central government contracts. This might sound like semantics, but it is a big shift and one that Social Enterprise UK has been calling on since the Act was introduced. In broad terms, “considering” social value meant that although officials had to think about social value there was no obligation to actually put social value into contracts. Many did so because they considered it was relevant or had potential benefits, but this was not universally applied.
Evaluate means that the starting point is now that all central government contracts must include social value. Different bids will be scored on what social value they plan to create and in a tight contest, this could be decisive.
In short, social value will now (to varying degrees) be influencing every contract issued by central government covering between £80-100bn in spending every year – potentially around 1/3rd of all public procurement. For suppliers to government, engaging with social value is now not an optional extra but something that they have to engage with. This should open up more opportunities for social enterprises within supply chains.
A minimum 10% weighting on social value
The second big shift was a minimum weight on social value within contracts. This is important as it means that social value will be factored into decisions on who wins contracts issued by central government.
Social Enterprise UK called for a higher weighting (20%) based on best practice from local government and public bodies which had taken social value seriously. Some councils as Manchester City Council have gone even further with a 30% weighting. So, although there will now be some weighting of central government contracts on social value, it is not as high as the sector would like.
It is, however, a small step forward and creates the possibility that in a tight contest, social value could be decisive in awarding the contract. This will create additional incentives for suppliers to government to work with social enterprise or could give social enterprises the edge in competing with private businesses for some contracts. Social enterprise approaching companies that bid for work from central government can use this to get businesses to take them seriously.
A lack of clarity on measurement and transparency
Although there was some criticism for how the Government planned to implement social value, there was some bravery in the original proposals that put forward clear metrics for evaluating social value for government departments.
For example, one metric would even have asked bidders to provide the “number, value and percentage of spend on prime and sub-contracting opportunities won by SMEs and VCSEs” which would have given a powerful incentive for bigger contracts to include social enterprises. The current Policy Procurement Note moves away from these metrics and merely paints what “good could look like” such as “creating a diverse supply chain including new businesses and entrepreneurs, start-ups, SMEs, VCSEs and mutuals.” How this is to be done and measured, who knows?
There is a silver lining in the Procurement Note which says that more detailed “standardised” information will be provided including “metrics for contract management and reporting” but these have sadly not been made public yet. These are perhaps the most important part of the social value process as these metrics will determine how social value is actually created through government contracts.
All this is likely to lead to a lack of transparency. SEUK noted in our submission that transparency is important to raising standards. The key question is simple: how much social value is central government currently producing and how much is it planning on creating in future years? Only if we know the baseline can we see if there is progress or whether the agenda is being taken seriously.
Unfortunately, there is little indication that this kind of information will be reported publicly.
So much as changed since the consultation on social value was launched in March 2019. We have a new Government. Brexit. COVID-19 and potentially one of the largest recessions in global history. Some parts of the Procurement Note have been updated for this reality, particularly around helping communities or those worst affected by COVID-19.
However, as we leave the European Union there is likely to be another look at government procurement. The Prime Minister made a speech during the election campaign where he promised to “Buy British” and support the economy through procurement. The current Brexit talks around state aid show how much interest the UK Government is taking in the role of the state in stimulating the economy and shaping society. This Note is unlikely to deliver the scale of ambition spoken by the PM and his allies and is inherently limited by EU rules. This will not be the last word on procurement, and social enterprises should keep campaigning for social value to be raised up the agenda not just for central government but all public bodies.