When will local authority tenders take social value seriously?

By Dec 02, 2015

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The 2015 Spending Review put the spotlight on local authority budgets, raising the question: how will cuts affect their commissioning?

The response of Lord Porter, Chairman of the Local Government Association, to the 2015 Spending Review throws the state of local authority budgets into sharp relief:

“Even if councils turned off every street light they will not have saved enough money to plug the financial black hole they will face by 2020.”

Where then does this leave charities and social enterprises when it comes to bidding for contracts to deliver local services? Will local authority tenders ever be able to take social value seriously?

The Social Value Act, which asks commissioners to consider social value when they buy services, is a space worth watching. It’s not the sharpest tool in the box for changing the way councils commission, councils are under no obligation to take its recommendations into account, but it does promise to put social value in the commissioners’ line of sight.

Matthew Gardiner, chief executive of the Trafford Housing Trust, Sarah Norman, chief executive of Dudley Council and Sarah Sharlott, chief executive of Realise Futures share their views on whether local authorities can be swayed by the offer of social value.

So does social value have any influence on the way councils choose which organisations will deliver services in their area?

According to Matthew Gardiner, chief executive of the Trafford Housing Trust, councils often ask the wrong first question: “What can I do with my budget?” For Gardiner if your focus is benefitting a community, it should be mission (not budget) first. "When our staff are making a decision, what I expect is that they ask whether what they might do is contributing to the mission? If it’s not, I don’t do it.”

So a different question emerges for councils to consider, one that looks beyond immediate costs, which could level the playing field for purpose-driven organisations: “How good will this service be for the community and is it worth the money?”

Can councils afford to consider social value?

But can councils afford to think outside the box, to prise their focus away from the bottom line? Sarah Norman, chief executive of Dudley Council, belives that re-thinking commissioning is a gargantuan challenge.

“We have to think about the lowest possible price we can afford.” Sarah Norman, chief executive of Dudley Council

Government funding cuts mean Dudley Council has had to reduce its budget by around 25% over the last three years. Over the next three years it will need to save another 25% and will be operating at just over half of the budget it had six years ago.

Some councils are in better positions, others are worse off depending on the incomes they are able to generate from council tax and business rates. Sarah is frank when it comes to the question of commissioning: “We have to think about the lowest possible price we can afford.”

Looking after communities on a shoestring budget

At the same time, she is adamant that “if we are not bold, creative and imaginative, we will be bankrupt in six years.” So a huge re-design of local authority commissioning is underway at Dudley Council. “Though the Social Value Act itself is rarely mentioned, social value definitely comes into it,” said Sarah.

Far from turning their backs on charitable organisations, Sarah made it clear that councils will need community organisations, charities and social enterprises as close allies. “Building up voluntary action and civic pride is the only way we will be able to look after entire communities. People will need to want to keep their local areas clean and be good neighbours to help people on their doorstep avoid the perils of isolation.”

"Social enterprises must be credible in their claims of social value and their return on investment. It isn't just social enterprises that deliver social value," Sarah Sharlott, chief executive of Realise Futures

The view from a social enterprise

Sarah Sharlott, chief executive of Realise Futures, has been at the other end of the commissioning relationship, as an organisation bidding for the opportunity to deliver local services. One of the current barriers she has witnessed to commissioning for maximum social good is the difficulties that councils experience in distinguishing between competing offers of social value.

“There are extremes of the commissioning process whereby some commissioners are very clear about their understanding of what constitutes social value but others find the array of competing claims made by providers somewhat bewildering.

My business makes recycled plastic benches which are very popular with commissioners from smaller organisations because they offer value for money and are very environmentally friendly.” But social value, unlike numbers, is difficult to measure, which makes some councils reluctant to take it into account.

The solution is in "better measurement and producing measures of social value that are transparent and comparable within, and ultimately across, sectors." Matthew Gardiner, chief executive of the Trafford Housing Trust

The biggest barrier though, is still the disproportionate attention given to an organisation’s finances compared to the quality of its services and impact on peoples’ wellbeing. For Sharlott, the cost of reconfiguring a tender so that commissioners take wellbeing wholeheartedly into account would be well worth the value gained. It is argued that there are economic benefits to taking social value seriously because not measuring and seeking to create maximum social value can lead to future costs.

When will wellbeing be more important than cost?

The logic is there. So how close is the day when all councils will look closely at an organisation’s ability to maximise the wellbeing of a community versus opting for business models sharpened to get the job done cheaply?

For Sarah Norman of Dudley Council, it comes down to education. "Councils like investors need to be better informed about the benefits of taking social value into account. Once they have the facts at hand, they need to be bold and move out of their comfort zones."

For Matthew Gardiner of Trafford Housing Trust, the solution is in "better measurement and producing measures of social value that are transparent and comparable within, and ultimately across, sectors." Despite the growing need for social impact as austerity bites even harder, he anticipates that the journey towards commissioning for social value will remain slow, with the opportune moment for implementing change having passed some years ago when councils were not under the pressure of such severe cuts.

For Sarah Sharlott of Realise Futures, the success of social enterprise in the competitive public services arena hinges on credibility: "social enterprises must be credible in their claims of social value and their return on investment. It isn't just social enterprises that deliver social value so they must be seen and understood as credible alternatives to private enterprise."

"Councils like investors need to be better informed about the benefits of taking social value into account." Sarah Norman, chief executive of Dudley Council

Keep talking

So the road towards commissioning for social value is an uncertain one. But while some are avoiding tenders others are finding opportunities. The honest discussion between three people from different ends of the commissioning spectrum made it clear that the best way to gauge whether contracts are worth bidding for is to talk. Talk to fellow social enterprises, talk to local authorities; and build a picture of what opportunities exist.

This feature is based on a session that took place at the UK’s Social Investment conference, Good Deals: Does the social value act have any value in an age of austerity?