The Social Value Act, introduced in 2013, allows councils to take social value delivered through a contract into account when procuring services. The legislation was intended to help local authorities commission services based on the best overall value to the community, rather than just awarding contracts based on lowest cost.
The Department for Communities and Local Government defines ‘best value’ as “the additional benefit that can be created by procuring or commissioning goods and services, above and beyond the benefit of merely the goods and services themselves.” The 2013 legislation requires local authorities to take social value into account for contracts over the OJEU procurement threshold; however, councils are free to use the powers more generally in procurement.
However, a recent survey of English councils found that fewer than 10% of respondents had a social value policy in place, while 50% had no policy and are not intending to develop one.
With the recent announcement that London councils must cope with an average 4.3% cut in spending power, there will continue to be pressure on authorities to deliver more while spending less and to find innovative ways to manage demand for services, for example, through early intervention.
Croydon council has been at the forefront of developing social value policy in London since before the Social Value Act became law. Influenced by authorities in Scotland and Wales, and keen to spend increasingly scarce resources to best effect, the council developed a Social Value Toolkit [pdf] in 2012. The toolkit gives advice to council commissioners on how to use social value procurement effectively, with examples of best practice. It also advises businesses on how to demonstrate their social value.
Croydon has the largest population of any London borough and is experiencing rising income inequality. Fourteen of the borough’s 24 wards have average incomes below the London average, and this is compounded by a skills gap, leaving residents unable to take advantage of new employment opportunities.
Sarah Ireland, Director of Strategy, Communities & Commissioning at Croydon, says that the council spends around £400m on services from third-party suppliers, and is now exploring how to ensure that this money is spent in ways that will provide most benefit to the borough’s residents and businesses.
In developing a social value strategy and toolkit, the council has been able to integrate its priorities with the broader services that businesses can offer. Croydon has highlighted skills and employment, wage inequality and in-work poverty as issues that need addressing, but the approach is flexible and could be used to prioritise other issues over time.
As examples of how the policy has been put into practice: the provider of Croydon’s housing repairs service also offers residents free DIY workshops; an IT supplier supports ICT developments within schools; and £80m of health and social care contracts have been awarded to suppliers committed to paying the London Living Wage.
While some sectors – construction, for example – have a good track record of providing employability skills as part of contracts, Croydon’s approach is beginning to shift the focus from outputs (such as number of apprentices taken on) to outcomes (how many people find work as a result).
The policy is particularly useful in helping small businesses, charities and voluntary organisations – all of whom are less likely to have corporate social responsibility programmes in place – to take advantage of the new commissioning processes.
Furthermore, while such organisations might already provide high social value, they often lack the capacity to measure and show evidence of it. The council offers support and guidance on how to do this, to give them a better chance of competing for contracts.
The council is also looking to give local businesses more supply chain opportunities. As well as organising Value Croydon, a match-making event for major contractors and local SMEs, the council is setting up an e-portal for low-spend projects where registered businesses can be notified of supply chain opportunities. The aim is to keep spending local where possible and multiply the effect of investment.
The flip-side to commissioning is decommissioning: how to end contracts that are not needed or not working. Croydon has also published a Decommissioning Toolkit [pdf] to give transparency to the process. The guidelines are intended to allow the council the flexibility to reconfigure services when necessary, to limit the impact on citizens, and to provide clarity on the decommissioning process for all involved.
In January 2015, Lord Young published a review of the first two years of the Social Value Act, noting that despite low uptake in general, the act has had a positive impact where it has been implemented, encouraging a more holistic approach to commissioning.
Sarah Ireland agrees, and says that more work must be done to get the most out of social value commissioning. While the Social Value Act and new EU procurement changes give clarity to what authorities are allowed to ask of contractors, wider adoption will only follow if it can be shown that this approach saves money over awarding contracts based on lowest value.
Croydon is currently updating the toolkit to reflect the priorities of the new administration which came to power in the 2014 local elections. This will likely include information on implementing the London Living Wage as part of all new contracts – Croydon is committed to being a Living Wage employer, but is looking at how to expand this to contract workers. Social value procurement was a central part of the new administration’s manifesto commitments and this will continue to be reflected in the council’s Commissioning Framework.
- Future of London’s report, Doing More With Less [pdf], explored a range of service delivery innovations. We’ll be updating this report over the coming year. If you would like to be involved, email firstname.lastname@example.org.
- For more information on Croydon’s approach to the London Living Wage, see our 2014 seminar, Tackling Low Pay in London