In the fourth part of our series on contract management pitfalls, we look at the risks arising out of varying the terms of construction contracts.
As originally posted by the GM Cooperative Commission.
"Our ambition is to make GM one of the best places in the world to grow up, get on and grow old."
-Greater Manchester Strategy: Our People Our Place
There can be no doubt whatsoever that to do its best for its citizens, let alone to strive for bold ambitions, a public body has to do everything within its power to ensure that it squeezes the maximum value for its citizens out of every pound it spends.
But getting the best “value for money” isn’t just about price and quality. A recent consultation set out to examine social value in Government procurement: how should government take account of social value in awarding contracts?
This isn’t about some icing on the cake: social value isn’t a corporate approach taken to making a business socially responsible through self-regulation – that’s “corporate social responsibility”. Nor is it what a business is willing to offer to its customers over and above its core offer, free of charge (or free of obvious charge). That’s “added value”.
Social value can best be defined by reference to what is often called the Social Value Act¹, which refers to three pillars – the economic, social and environmental well-being of the relevant area. True social value is achieved through wellbeing-focussed procurement.
That’s not just a nice idea; it’s essential. The consultation concludes that “The public sector must maximise social value effectively and comprehensively through its procurement. It cannot afford not to; a missed opportunity to deliver social value is a cost that has to be absorbed elsewhere in public services.”
I would go further than this to say that a missed opportunity to deliver social value is a cost which must not only be absorbed across wider public services but which actively multiplies the opportunity cost, impacting upon the growth and health of the economy as a whole, particularly where multiple and complex needs arise.
Dramatic results can be achieved; but not by tweaking assessment criteria and weightings. It involves changing what you are buying.
If as an individual buying food I choose to support my local community, I’m no longer just buying food. I’m buying food grown locally. If I want to make a stand against human oppression, I will buy food grown and supplied by social businesses. In both cases, I’ll need to check that I’m getting what I want, and I’ll do that. But I’m buying food and social value.
Normally when buying things, we base our decision on cost and quality. Increasingly, people recognise that they can and should recognise other factors, especially if they want certain outcomes. Out of town shopping centres are built because people go shopping there. The patterns of our economic behaviour determine the commercial landscape we inhabit.
It’s not just individuals who can change how and what they buy. Businesses and public bodies can do as well. Central government is committed to use its buying power to drive social change, through its Civil Society Strategy. The Social Values Act introduced a requirement for public bodies to consider in procurement how the economic, environmental and social well-being of an area maybe improved by what is being procured. The Public Contracts Regulations 2015 enables it.
But now, not just a step-change, but a giant leap needs to be and can be made.
Just imagine what a difference would be made if Greater Manchester’s combined spending power was all spent buying social value! But why shouldn’t it be? If a new building is needed, don’t just procure a building: procure a building which creates new jobs, and the training and employment of young people and former offenders. Change what you are procuring². Change it to include specific social value. Use it to get the maximum possible for your local area.
This approach is at the heart of the community wealth-building agenda, championed by CLES, supported by the Co-operative Party and now by the Labour Party’s Community Wealth Building Unit. No laws need to be changed. So why not just do it?
Social value itself needs to be at the core of what is being procured; a contract-by-contract approach needs to be taken, considering how best to achieve social value using all the tools available in procurement law and practice; and making sure that no one stage of the commissioning cycle is considered in isolation.
To help to achieve Greater Manchester Combined Authority’s bold ambitions:
- we encourage everybody to use their power as consumers to buy social value as far as they possibly can when spending their money
- we urge the Combined Authority to commit to ensure that whenever funds are spent on procurement, they are spent on procuring social value.
For more information, please contact Cliff Mills.
1. But its proper title is the Public Services (Social Value) Act 2012
2. The MOD recently procured the development of an electricity supply for an RAF base. It will get 95% of its electricity from biogas generated by fermenting crops grown locally. This will directly save £300,000 per annum and increase power resilience. It will also help to tackle climate change, support the local rural economy with business and employment, support skilled, long-term employment opportunities and apprenticeships, create new jobs in agriculture to produce the fuel, boost soil quality as part of an improved crop rotation, and produce a much sought-after organic fertiliser.
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