Report calls for change in law to increase social value of public procurement’s market power

A thinktank is calling for a change in the law to squeeze more social value out of procurement and harness the market power of housing associations and the public sector to deliver greater benefit for communities.

In a new report, Valuing More than Money: Social value and the housing sector, the IPPR is arguing for the Public Services (Social Value) Act 2012 to be strengthened and extended so that it can drive change and deliver better outcomes for society at large.

“The pubic want to see businesses act not just in the interest of short-term profit but for the long-term good of the economy and society,” said co-author Luke Murphy, the IPPR’s associate director for energy, climate, housing and infrastructure.

“Every year, the public sector spends hundreds of billions of pounds procuring goods and services from the private sector. It can only be right that public money is used to drive better outcomes for us all, whether that’s by boosting local job opportunities or raising standards at work.”

Public spending creates large markets for goods and services, the IPPR points out: total UK public procurement amounted to £292 billion in 2018-19. This is equivalent to around 14% of GDP or 36% of total government spending. Standards driving procurement decisions can therefore have a powerful effect in supporting and encouraging good business behaviours, the organisation argues.

However, its report claims that the opportunity to drive more social value is being underused; at present, estimates suggest that about 9% of public procurement spending is being influenced by the 2012 Public Services (Social Value) Act. This is partially because the scope of the act focuses on the procurement of services contracts but ignores goods and construction and engineering related works.

The report argues that the law should be strengthened and extended to require public officials to consider the social impact of all of their purchasing decisions, amounting to £292 billion in 2018-19.

It comes seven years after the 2012 Public Services (Social Value) Act first required all public bodies in England and Wales to consider the economic, social and environmental implications of the services they commission or procure.

That means they must look beyond a crude “lowest cost” measure of their decisions and consider the wider value that could be delivered – including boosting local job opportunities and supply chains, raising standards at work, increasing skills and creating opportunities for vulnerable people.

IPPR says it examined the application of social value within housing as a particular case study. The report found that welcome progress has been made, with housing associations and local authorities integrating the Social Value Act into their decision-making. But it highlights failings in the way the law is currently used. It argues that the housing sector in particular would deliver better social outcomes if changes are made.

The IPPR report calls for the Act to be strengthened and widened by:

  • Extending its scope from services to include the procurement of works and goods
  • Requiring public bodies to ‘account for’ rather than simply ‘consider’ social value, forcing them to state publicly the additional social benefit they have delivered
  • Applying it to all contracts, below the current EU procurement threshold, but with a lesser expectation depending on the scale

It calls for clearer and more consistent approaches to measuring social value, with less emphasis on devising precise monetary figures for any benefits, with other metrics also considered. Within the housing sector these could include hours volunteered in community engagement; numbers of rehabilitated offenders employed; or impact on the diversity of wildlife, measured in species richness per square metre.

“Social value has come a long way since the introduction of the Social Value Act in 2012, and particularly so in relation to housing,” said co-author Tom Hill, senior research fellow at the IPPR. “Yet if we really want to deliver more social value we need to move beyond a narrow focus on the procurement of services to looking at all aspects of the goods and works that the government procures. In the housing sector this would mean considering all aspects of the housing lifecycle, from the initial design phase through the construction phase and its on-going use once built.”



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