Based on our research, here are five ways that procurement professionals can generate more social value from their next construction project
Many governments around the world, including the UK, are focussing on construction-led recovery post-COVID.
Here are 5 ways Procurement can play a key role in re-shaping not only our buildings and the way we live, but also our communities through the way we buy during the construction process.
1. Have a clear social value strategy and framework
There needs to be a clear, transparent and needs-based social value strategy and framework for both procurers and bidders which is embedded at all stages. Procurement frameworks, with required levels of social value commitments, can bring efficiency and good practice application across public sector contracts. They can provide suppliers with more clarity on what is required for social value and how this will be recorded. Procurement services that guarantee work once suppliers are on the framework can incentivise well-considered social value commitments for both SMEs and larger organisations.
2. Prioritise outcomes in monitoring and evaluation
There is fragmented market of tools and metrics used in both procurement and evaluation. Most do not take into account geographic disparities in their monetisation, nor include negative effects of development to arrive at the final value. A focus on ‘tick box’ outputs like number of people trained, or number of apprenticeships started, can lead to more aware suppliers knowing how to score well on social value weightings in the tender process, as discussed previously. By procuring outcomes instead of outputs, the procurement profession can open up the doors for innovation and creativity in bid responses, and evaluate bidders on the impact they will achieve, rather than bums on seats.
3. Consistency and holding to account
There are different procurement frameworks, regional models, and different sector frameworks, adding to the confusion in this area, and sometimes a ‘buy local’ requirement as well – there is no homogeneity in the procurement landscape. Given that Social Value typically accounts for anywhere between 2%-25% on tender scores, it is a key part of the procurement process. Having consistent, appropriate, clear goals at all stages, engaging in more pre-tender dialogue with bidders, and stating the evaluation methodology or tool to be used, will help achieve greater outcomes. Most importantly, hold suppliers to account for their contractual outcomes. Our research showed that rigorous monitoring and enforcement of contracted social value activities was very variable and inconsistent. With the high value of contracts in construction, ensuring that what may have secured a major win is actually delivered on the ground is imperative.
4. Enable straightforward comparisons of value
We recommend that environmental components are separately weighted in procurement, and that ‘normal or good business practices’ e.g. internal diversity/inclusion initiatives, prompt payment codes, training of existing supply chains, modern slavery, managing noise or disruption, should be considered as a given. Social value has to go beyond ‘business as usual’. Activities which may be commercially beneficial to the supplier, such as apprenticeships and educational visits, could be considered as social value if they were supported by a robust needs analysis in the area that this is going to make a difference. Even so, focusing on apprenticeship completions rather than starts would be a step in the right direction.
5. Guard against potential for disconnect
Our research suggests that a procurement framework approach may provide a further layer of disconnect between local beneficiaries and the provision of social value. The delivery of a locally responsive approach, which links to and utilises community groups and organisations, requires greater clarity. There could be an opportunity for procuring organisations to identify initiatives and local organisations in the tender documentation, embedding local knowledge and understanding of need into the brief, rather than leaving suppliers to try to work this out or to ‘reinvent the wheel’ during the process. Procurers could also consider requiring the upskilling of the voluntary and community sector, as well as the enabling of local businesses not in their supply chains to become fit to supply, which would leave a more enduring legacy.
The construction sector is the sixth largest source of employment in the UK, contributes nearly 7% of the UK’s GDP and is a major recipient of public spending – it is critical for placemaking, economic development and job creation, all of which highlight its importance to Boris Johnson’s ‘New Deal’ and post Covid-19 recovery.
With construction spend estimated to be £500 billion by the end of this decade there is also a need to make sure that every one of those pounds delivers additional tangible social impact, and makes a major contribution to addressing the significant inequalities faced by our most disadvantaged citizens and left-behind communities.
The Social Value Act, published in 2013, requires people who commission public services to think about how they can also secure wider social, economic and environmental benefits. Before they start the procurement process, commissioners must therefore determine how they can secure maximum benefits at all stages of the project for their local communities.
“No common definition of social value”
Given the significance of construction to our economy, we undertook research to support greater understanding of what ‘good practice’ social value looks like, and to find and share examples where innovative, replicable and impactful social value has been delivered at all levels of place-based interventions as a result.
Our final report, From the Ground Up – Improving the Delivery of Social Value in Construction, finds that we are a very long way from the social value nirvana we desire. The barriers are significant, and whilst social value plays an increasing part in the procurement process, there are some pretty hefty challenges running across procurement, definitions, activities, partnerships, monitoring and evaluation.
There is no common, comprehensive definition of what counts as social value, to frame understanding, benchmarking or reporting, and aid comparison of tenders and to determine best practice. This has given rise to significant disparities in what counts as social value activities, and no requirement to focus on improving the wellbeing of the most disadvantaged.
Current examples include attracting/retaining staff, prompt payment codes, internal equality and diversity programmes, fair pay, training of the supply chain, ethical/low carbon sourcing, managing risk/noise, and increasing awareness of the construction sector as a career for young people. So there is a high risk of social value lacking focus and becoming too diffuse.
We also found that projects spanning geographies have multiple project stakeholders often competing for social value outputs, different frameworks with differing social value requirements, and a real lack of alignment around desired benefits and outcomes. There was clear consensus on one of the biggest barriers – the lack of understanding of what social value is – and that substantial improvements need to be made in its monitoring and evaluation.
“Procurement must be a much more effective tool for change”
As covered previously, social value procurement must be a much more effective tool for change. This means putting people at the centre of place-based development, engaging and working with them to understand their needs and wants, so that the development happens with them, not to them. We need to change how we measure the value of our place interventions to take into account what matters to the stakeholders in them, and move from outputs to considering how we can achieve an improvement in wellbeing outcomes as an important deliverable.
In our report, you will see we have made five recommendations in response to our key findings. You can also view our report launch. To join us in the next phase of our discussions for driving change, please email me at [email protected].
Bev Hurley CBE is Chair of the Institute of Economic Development, the UK’s leading independent professional body representing economic development and regeneration practitioners working for local and regional communities.