The government's move to make social value have a more decisive influence in the award of public contracts is part of a steady shift in policy over the last decade. Some valuable lessons are on offer in parts of the public sector and business that are already well ahead in prioritising corporate social responsibility as part of their strategies and supply chains.
Procurement Policy Note (PPN) 06/20 is ground-breaking, as outlined in the first article in this series, namely in that it will require all central government departments (and their executive agencies and non-departmental public bodies, including NHS Trusts) from 1 January 2021 to include in their procurements a social value award criterion weighted at a minimum of 10% of the overall score.
Even prior to the publication of PPN 06/20, social value has driven contract award decisions in many public procurements – but most notably in NHS procurement. In early October, the NHS published a report announcing its commitment to become the world’s first "net zero" national health service.
One of the ways the NHS will aim to achieve this is by using its enormous buying power to drive carbon reductions and sustainability initiatives in its supply chain through its contracts. NHS Supply Chain, which supplies 55% of all products to NHS buyers, has in turn developed a sustainable development strategy, in which three out of four strategy pillars relate to sustainability:
- waste and the circular economy;
- plastic products and packaging; and
- climate change, energy and greenhouse gas emissions.
In order to drive improvements, NHS Supply Chain has started requiring that suppliers appointed to certain framework agreements commit to reducing their carbon footprint by completing a new carbon, waste and water self-assessment. The tool enables NHS Supply Chain to measure a suppliers' sustainability and provide them with improvement plans to further reduce their carbon footprint.
The fourth pillar of NHS Supply Chain's strategy focuses on human rights and labour standards. Four years ago, NHS Supply Chain introduced its Labour Standards Assurance System (LSAS), which outlined the principles of good labour standards and guidelines to be achieved by NHS suppliers. It required suppliers appointed to certain framework agreements to undertake an external audit that measured their compliance against the LSAS matrix.
Due to the challenges many suppliers are facing in completing LSAS audits during the pandemic, NHS Supply Chain has now started requiring successful suppliers to complete the government's labour standards assessment tool and modern slavery assessment tool, both of which require bidders to carry out a detailed self-assessment of labour standards in their supply chain. Failure to complete the tools within a specified timeframe could lead to the supplier's appointment to the framework being terminated.
Some contracting authorities are utilising specialist external platforms to help them develop and evaluate award criteria on social value. The Social Value Portal is one such platform, which provides organisations with data analysis and support services to enable them to measure, monitor and benchmark the social value generated by their supply chains.
Part of this service includes supporting public sector bodies in evaluating bidders' responses to social value award criteria. The Social Value Portal is working with a growing network of private and public sector organisations, including local authorities, universities, NHS organisations and a number of major public sector suppliers.
What are suppliers doing to meet public sector social value requirement? The changes to public procurement are part of a growing emphasis on corporate social responsibility across government and business. Many businesses have already starting responding to the changes by putting social value initiatives at the centre of their growth strategies for the coming years.
For example, Mitie, the facilities management business, recently published its Social Value Report 2020, which sets out in detail the progress it has made against each of its own social value pillars (employment, responsibility, community, environment and innovation) over the last 12 months, and sets out targets for the next five years, including its commitment to reaching net-zero carbon emissions by 2025.
Vodafone has also recently introduced a new social value requirement into its vendor assessment criteria, weighted at 20%, meaning that social value will form a part of all of its contract award decisions going forward. Vodafone's suppliers will be assessed on their carbon reduction and waste targets, and their environmental, diversity and inclusion, and health and safety policies. For contracts where health and safety is a significant factor, health and safety will account for half of the 20% criterion.
How to score highly
In order to score highly in evaluated questions on social value, businesses will need to be in a position to provide responses that:
- Set out clear, measurable and objective targets to achieve the specific outcomes identified in the procurement, and include a measurable road map for achieving those targets.
- Demonstrate "added social value" (in other words, the creation of social value in addition to the core requirements of the contract), rather than just "inherent social value" (that is, where the outcome is core to the delivery of the contract).
- Focus on quality, not quantity. The Cabinet Office has already confirmed that evaluators will focus on the qualitative nature of social value responses, rather than evaluating purely on volume or quantity.
- Include proposals that are linked to a particular contract, rather than built on general corporate policies.
Steps for success
Businesses should carry out the following steps so that they are in a position to set out comprehensive, robust and achievable commitments when responding to questions on social value:
- Undertake a wholesale review of all your business' social value initiatives across each of the priority focus areas set out in the PPN. Focus on obtaining clear and measurable data that you can refer to and build on in your responses to social value questions.
- Identify gaps or weaknesses in your social value initiatives, and put in place new initiatives or internal governance procedures to make up the shortfall. Have you covered all of the areas of priority focus? Are some of your initiatives failing to have the impact you intended, or are you failing to meet some of your targets? If so, why and how can you address this?
- Set clear targets for the next one to five years in each of the priority areas, and create a detailed plan of how you will achieve those targets, building in reporting obligations and measurable outputs to keep you on track.
- Implement action plans, and schedule regular reviews so that you can (a) understand what you are achieving and how you are achieving it; (b) understand what impact your initiatives are having; (c) consider whether you need to make any adjustments in order to meet your targets.