Realising true social value in construction

April 12, 2022

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Government efficiency minister Jacob Rees-Mogg is reportedly looking to reduce social value weightings in public procurement, citing concerns that they negatively affect smaller firms. Tiia Sammallahti, founder and CEO of whatimpact.com, examines the challenges of realising true social value in construction – and why rolling back the requirements would be the wrong choice

The one-year-old Social Value Act enhancement (Procurement Policy Note 06/20) that made it mandatory for all government procurement departments to include social value delivery in their scoring criteria for public tender bids has changed the procurement landscape radically.

However, in its early days government efficiency minister Jacob Rees-Mogg presented sudden changes to a long build regulation, which initially has the potential for local communities to access £1.5bn additional resources to increase social and environmental wellbeing. Within the construction sector, the PPN 06/20 has the potential to reward those SMEs and larger companies who are dedicated to making a legacy wherever they operate as contractors.

The Social Value Act has been embraced in different ways and to different extents across industries throughout the years since 2012 when the act was established as a recommendation. We’ve seen the prominence of adopting social value in construction, especially with larger contracts and certain leading social value districts like Manchester, Liverpool and Birmingham, to mention a few.

Now, since January 2021, construction contracts of all sizes across the country are requiring social value plans in the bidding stage and delivery of social value throughout the contract. Thus, there has been a huge learning curve for companies of all sizes facing completely new challenges.

One must remember that the concept of social value and its role in procurement is new. It is only natural that when new practices and processes are created in an already complex procurement environment, it takes time to identify the most beneficial form of implementation. This applies to both companies bidding for tenders and local authorities preparing and evaluating them.

We firmly believe that the opportunities of economic, social and environmental benefits for all parties definitely overcome any early challenges. The minister’s proposed idea of ditching the intention to reach UN Sustainable Development Goals and help communities to recover from the impact of the pandemic is not a solution.

We at whatimpact.com have been operating in the social value sector for years now. Our platform helps companies plan, deliver and report on social value locally with proven impact. During these years, we have been working in collaboration with companies and local authorities in order to identify the challenges in local social value delivery and to come up with efficient solutions.

With the implementation of the Social Value Act, we have identified three key challenges:

Bidding

Due to a lack of prescriptive tender requirements and, in many cases, less emphasis on actionable social value plans, bid writing has stayed mainly separate from social value delivery. This has left companies in a tricky position of being unsure about where to invest, how much to invest and what good/expected social value delivery looks like.

This has especially harmed SMEs, who often do not have access to social value experts, struggle with the bidding process and do not have budgets for expensive SROI tools.

The solution lies in an internal practice to create tangible social value plans with the help of technology and to internally define a more strategic way of how in each location social value can be delivered if the contract is won. Local authorities’ biggest pain point is receiving intangible and unrealistic social value plans, and they are keen to reward those companies standing out.

Delivering social value locally

The experience of companies bidding for tenders is very varied, as some companies are completing multiple bids across the country, while others focus on the specific geographic areas in which they operate.

Expertise in local areas and connections to local organisations vary greatly from company to company and this leaves some companies much better off when it comes to delivery. With many companies still heavily relying on unofficial verbal advice from procurement departments, the delivery models are not efficient and eat up the contract profit margins and do not deliver the intended impact.

To maximise the impact of local social value delivery and having a clear idea of the budget for it, the focus needs to be on efficient matchmaking in terms of outcomes, geographical reach, resources offered and timeframe for delivery.

Companies need access to matchmaking technology to have direct access to local social value organisations in the areas they are tendering in. The more efficient the matchmaking is, the more resources can be allocated to actual social value.

Reporting

Very importantly, attention needs to be brought to reporting on and validating social value activities. Many companies find it frustrating that the winners of a given tender often do not end up providing evidence of their social value promises that might have originally seemed unrealistically high.

Local authorities struggle to understand the impact. This gap in the market is due to lack of standardised, easy to understand impact reporting that has validated data other than SROI calculations to prove the impact. The current state of reporting is especially unfair to smaller companies or companies who are doing realistic bids with a high commitment to delivery.

Impact needs to be monitored in a qualitative manner, understanding the specific starting point, actions delivered and the outcomes generated. When companies work with charities, social enterprises and community groups to deliver social value, the right source of impact information are the beneficiary organisations.

The Social Value Act has transformative potential and thus it is too early to follow Jacob Rees-Mogg’s suggestion of rolling back the focus on social value and ethical procurement altogether. Instead of rolling back social value, the route to success is to develop processes and practices, to focus on realistic, validated social value activities, and not to abandon this amazing government initiative altogether.

You can read more about our research on the impact of the Social Value Act and our proposed solutions to the challenges it presents for companies and local authorities across the UK in our most recent white paper titled Enhancing Impact: Bridging the Gap Between Companies & Local Authorities in the Implementation of the Social Value Act Enhancement, PPN 06/20.

You can also watch a case study of what successful company-charity partnerships in the construction industry can look like in the video in this article.

Throughout the changes in legislation, we’ve been amazed at the commitment of companies in the construction industry to make the most of social value.

There is a true interest to help local communities to recover from the aftermath of Covid-19 and address the increasing inequality challenges in the UK. Community engagement, championed by the construction industry, is helping the UK be a frontrunner in the global movement towards ethical and sustainable procurement.

Tiia Sammallahti

social value in construction