Social value under the spotlight

At a time when government spending is being cut back but the demand for public services is rising, it's vital to squeeze the most from every pound of public money spent. From the contractor building social housing to the caterer who supplies the sandwiches for meetings, the decisions public bodies make about the people they do business with can have a huge knock-on effect in their communities. Take the right decision and you can create apprenticeships and jobs, support fledgling social enterprises and put extra money into the most disadvantaged neighbourhoods.

That's why social value has become such a hot topic for the people delivering our public services. Politicians also want to seize the opportunity to gain wider social benefits from spending decisions. The Social Value Act, which comes into force next year, will require commissioners to at least consider social value when they are agreeing public services contracts.

But for the focus on social value to have real impact, both buyers and suppliers need to be geared up for the challenges ahead. At a roundtable on commissioning for social value in public sector contracts hosted by the Guardian in association with Fusion21, there was agreement that in this economic climate, it was vital to find new ways of working.

The debate was conducted under the Chatham House rule, which allows comments to be reported without attribution to encourage a frank exchange of views.

One participant kicked off the discussion by saying: "It's about a shift from a needs-based to a change-based approach. We are looking at how we generate value by using the investment we already have on the table differently."

A mixed picture

Already, some organisations are making great strides at both measuring social value and embedding it in their business.

But it's a mixed picture. One contributor, referring to public sector procurement, said: "Some areas seem to be doing very well and have the energy to make things happen and some don't, even though they are all working to the same rules."

Among those taking the issue seriously, the roundtable heard, is Liverpool city council, which has said it will go beyond what the Social Value Act sets out by giving preference where possible to social enterprises bidding for contracts. It has also changed its procurement rules to favour organisations with the smallest gap between the lowest and highest paid earners. A participant said: "Cost and quality are always going to be predominant but we think if we can send out a signal to the market that's important."

The roundtable heard that local authorities and other big commissioners should ensure the contract requirements they put in place are not too onerous for smaller social enterprises to fulfil. Requiring three years' of accounts or a £2m turnover, for example, could rule out new social enterprises that might otherwise be able to use the benefits of the contract they win in the local economy. That sentiment was shared by another contributor, who said: "There are numerous hurdles within the current procurement process which really restrict social enterprises. We need to look for new models of working and we need to look at how we avoid a monopoly.

Unless we really upskill SMEs [small and medium enterprises] we will have the big boys coming in and the small ones being squeezed out."

Another barrier is the concern over potential legal challenges to procurement decisions in what is traditionally a risk averse part of the public sector.

According to one participant, for that to change, both sides of the deal should be clear about what's expected and a strong relationship of trust needs to be fostered among procurement teams.

But it's not just about commissioners changing the way they do business. Suppliers also need to adapt. "It is difficult for [social enterprises] to compete," said one contributor. "There are barriers around things like OJEU [the Official Journal of the European Union, which publishes tender notices]. But it is also important that we understand what matters to people."

The roundtable was also heard that defining social value is not an easy task.

Different public service providers will have their own views about what added social benefits they want to gain from the money they spend. As one participant said: "Social value is in the eye of the commissioner."

But giving communities a big voice in setting their own priorities is bound to help make sure social value provisions really do have a positive impact on the ground – as is good dialogue.

"If social value is in the eye of commissioner, then how do you influence that eye?" asked another contributor. "For me it's about who influences the key people before they start making decisions about what they are going to commission. It's not just about opening up the process to different smaller competitors, it's how do you influence key policy makers when they are sitting down and thinking about what they will spend the money on?"

On top of that, public services providers will need to have robust ways of measuring outcomes – without getting bogged down in bureaucracy – and a sense of what they are trying to achieve. "You need to have a whole understanding of social value going through the organisation right down to the people ordering the sandwiches recognising that if you go to that person it might be slightly more expensive but you create jobs," said one contributor. "There needs to be a cultural shift in getting this embedded on the ground." Another participant added: "Procurement isn't a silver bullet. It's got the potential to do a lot of things, but just including a requirement for social value in a contract doesn't guarantee outcomes . You need to make sure the outcomes are delivered and proven.

Decisions should be made at the highest level, not just pushed down."

If this change is to be successfully implemented, good leadership will be essential, the roundtable was told. So too will be creative thinking. There are some fresh ideas out there already. Sometimes they involve changing the way an organisation works to bring about positive outcomes. For example, the roundtable heard that Fusion21, originally set up by housing associations as a procurement vehicle, has now become an employer too, seconding people into jobs because of the inherent instability of the construction market.

Another idea, suggested one participant, would be to bring construction programmes together to create sustainable employment opportunities. "The problem with our construction industry is it is stop-start. If we work together to aggregate our build programmes, we can create relationships with the supply chain, we can get consistently low costs and can deliver consistently long-term jobs and training.

It's not about more money, it's about using the money we have more strategically."

There are signs the focus on social value could be extended beyond it simply being negotiated on an ad hoc basis as contracts come up. One participant said they would like to see savings in procurement channelled into a specific pot to fund social programmes, rather than allowing suppliers to adopt their own approaches and risking "gimmicks or tokenism". "This is the art of the possible," the participant said. "There is potential through a pot mechanism to fund lots of social programmes – tackling worklessness, reducing reoffending, getting single mums into work: solutions that have meaning in the community."

That might not only pay off for stretched public bodies striving to squeeze every penny they can out of the funding going into their communities, but for the wider business world. According to one contributor, some forward-thinking companies are starting to recognise that a commitment to social value demonstrates to their customers that they are in it for the long term. "The public sector is leading the way," the roundtable was told. "A real measure of success would be if it's picked up by the private sector and recognised as a good thing not just for ethical reasons, but because it makes business sense."

The Social Value Act

The Public Services (Social Value) Act 2012 requires public authorities to have regard to economic, social and environmental wellbeing in connection with public services contracts.

The policy has been largely welcomed by commissioners. "The act should empower organisations to be a little bit braver," said one participant to the roundtable. "We probably can do most of what we want to do under the existing framework, but it will give added comfort to those who have been receiving cautious advice that they can go ahead."

At the table

Hannah Fearn (chair), editor, Guardian Local Government Network

Anne Lundon, enterprise consultant, Plus Dane Group

Dr Jo Meehan, University of Liverpool

Steve Agger, social strategist, Fusion21

Rosie Jolly, chief executive, Social Enterprise Network

Bill Taylor, retrofit consultant, Fusion21

Louise Harris, head of social responsibility, First Ark Group

Cllr Paul Brant, chairman of the board, Riverside Housing

Caroline Price, director, The Big Life Group

Dave Neilson, chief executive, Fusion21

Ken Talbot, new-build consultant, Alliance Procurement

Steve Moore, executive director business development, Helena Partnerships

Chris Murray, director and chair, Core Cities and Fusion21

Roundtable report commissioned and controlled by the Guardian. Discussion hosted to a brief agreed with Fusion21.

Funded by Fusion21.

Contact Trish Holst on 020 3353 2347 (trish.holst@theguardian.com)

For information on roundtables visit: theguardian.com/sponsored-content