Social immobility: Is adding social value to bids a waste of time?

Everyone’s talking about social value. But with vague rules and measurements, is a lack of client knowledge the elephant in the room? Kristina Smith reports

The Public Services (Social Value) Act 2012 came into force just over a decade ago in January 2013. The act requires public authorities to consider economic, social and environmental wellbeing in public services contracts and frameworks above a certain value.

In the years since, social value has gradually become an everyday ask in public sector construction tenders. However, there’s a feeling that local authorities might not be asking for – or measuring – quite the right thing.

“Clients themselves don’t understand how to write the questions within the ITT [invitation to tender],” says Precious Zumbika-Lwanga, founder of Carus Advisory Services, which advises local authorities on procurement. “There can be almost a ‘cut-and-paste’ approach, rather than working out what measures and requirements would mean for an organisation and how to tailor their questions accordingly.”

“Our bid teams have to research the customer base and find out everything they can. In a way, it seems quite arrogant for us to have to say: ‘This is what we think you need’”

Nicola Hodkinson, Seddon

Broad-brush social value demands also mean small local firms may lose out as they don’t have the firepower to provide the statistics and expert drafting when they tender. “The art is in writing the bids,” says Seddon director of business services Nicola Hodkinson. “We only put forward what we know we can deliver and sometimes we lose out.”

In the construction sector, there’s a tendency to think of social value as training and apprenticeships with the odd community project – such as patching up the scout hut – thrown in.

The challenge for a company like Seddon, which already classes 10 per cent of its 680 employees as ‘earn and learn’, is that some bids demand new apprenticeships or trainee places. “In a way we are penalised because we are expected to do more,” says Hodkinson. “We know that we can maintain the 60-plus apprentices we have now because we have the turnover in the business, but then the client says ‘we want you to take on three apprentices from this area’.”

More recently there have been efforts to think of social value in a wider context, says Sarah Fraser, who heads the Willmott Dixon Foundation, which oversees the contractor’s social and community activities.

“Historically we have talked a lot about the economics of the people side of sustainability, whereas now we’re talking more about biodiversity and environmental issues as well,” she says. “Sometimes it can be a challenge when we are talking to customers, frameworks or clients because they may be using sustainability and social value interchangeably. We are definitely on a journey with that.”

Both Willmott Dixon and Seddon talk about the concept of “charity beginning at home”. In other words, employers who treat staff and suppliers well, pay them fairly and invest in training and development are already creating social value before a spade even touches the ground.

Upping the ante

The average weighting given to social value in a tender evaluation is 10 per cent, although some local authorities go higher. Manchester City Council, for example, has applied a minimum 20 per cent weighting to social value since 2015, adding a further 10 per cent for environmental issues in 2021.

Since the Social Value Act came into force, there have been several attempts to make social value mandatory rather than optional. The government finally made a move in January 2021 when it introduced its Social Value Model for central government procurement, setting a mandatory minimum weighting of 10 per cent.

However, there is a caveat: if the market maturity on social value isn’t deemed sufficient for there to be decent competition, the weighting can drop down to become 10 per cent of the quality score.

“I have seen contracts that say ‘use your best endeavours to source all the labour and materials responsibly’. We look at something like that and say, ‘what’s the point?’”

David Cordery, Trowers & Hamlins

There hasn’t been a huge impact yet. “What we are seeing is that procurement teams need help to understand what it means and how we can help them to meet the requirements of the Social Value Model,” reports Fraser.

Most councils ask tenderers to suggest what social value measures their area needs, says Hodkinson, rather than defining it themselves. “Our bid teams have to research the customer base and find out everything they can,” she says. “In a way, it seems quite arrogant for us to have to say, ‘This is what we think you need’. I would much rather work in partnership to determine what the challenges are and how we can help.”

There is more of an opportunity to set targets together in a framework environment, says Alison Ramsey, social value and performance manager at public-sector procurement body Scape. It targets up to 20 per cent for social value and local spend on the frameworks it administers. But it leaves the client and contractor to set the specific requirements.

“While Scape can set high standards for certain things, like meeting health and safety requirements and being on time and on budget, our partners work with the clients on a case-by-case basis when it comes to local economic measures,” says Ramsey.

Scape’s most recent annual benchmarking report, published in 2022, shows that 402 contracts with a total value of £5.53bn were delivered under its frameworks in 2021. During the delivery of these projects, the Social Value Portal calculated that 18.5 per cent local economic value was added and 1 per cent social value, adding up to £1.08bn.

Wriggle room

While that all sounds very fruitful and uplifting, there’s a slightly different view from lower down the supply chain. Tony Yianni, the outspoken managing director of Winchmore Brickwork, finds that many local authorities fail to put their money where their mouth is when it comes to social value.

“Some of the big housing developers are playing with the councils,” he says. “The contract can only say ‘use your best endeavours’ to employ locally.” The result, says Yianni, is that the contract goes to the cheapest bidder who can put in a lower price because they work with agency tradespeople and do not take on apprentices.

David Cordery, a partner at law firm Trowers & Hamlins, makes a similar point. “I have seen contracts that say ‘use your best endeavours to source all the labour and materials responsibly’. We look at something like that and say, ‘what’s the point?’ It has to be measurable, obligatory, and use technical terms, with sanctions or rewards. Articulate the contract so that they get a bonus payment or a share of a pot of mutually beneficial outcomes.”

Unequal measures

Measurement systems can be misleading too, according to both Hodkinson and Fraser. Unscrupulous companies could play the system to get the targeted scores, which are often based on the themes, outcomes and measures system (TOMS), delivering poor-quality outcomes. Meanwhile, projects that make a huge difference to a community may only be ‘worth’ a small proxy value using TOMS.

As a tier one contractor, Seddon can afford the resources needed to gather information and input it into a variety of portals. Even so, the burden of data collecting is huge, says Hodkinson. She would like to see pipelines of work established and communicated, so that firms like hers can plan and enhance social value over longer time periods.

“What we are seeing is that procurement teams need help to understand what it means and how we can help them to meet the requirements of the Social Value Model”

Sarah Fraser, Willmott Dixon Foundation

Fraser says creating a model where contractors can work collectively would also help multiply the social value effect. “I am a great believer in collaboration,” she says. “We work with our customers to develop a social value plan for them but how great would it be if a number of contractors working in an area had a joint plan to make a difference over a larger period of time?”

Contractually, social value remains in the domain of the public sector but interest from the private sector is growing. “There is much more of a conversation in the private sector around ESG [environmental and social governance],” says Cordery. “And where that might have previously focused on the ‘E’ bit of environmental and sustainability rather than the social side, the ‘S’ is now much more part of the conversation we are having with private developers. They are asking how they can achieve it.”

Fraser reports that some private-sector clients already see the brand and reputational benefits of adding social value. “Just this month we had two cases where customers of our interiors fitout business said they went with us because of social value,” she says.

However, the growing appetite for social value in both the private and public sectors could soon begin to wane in the face of a sluggish economy. “The feedback we sometimes get from the private sector generally on sustainability targets is that when budgets are tight it’s the first thing that gets struck out,” says Cordery. “It is seen as a ‘nice-to-have’ rather than essential. However, there are some developers who are willing to pay the premium and they see that there are economic benefits as well. But it is still a tough sell if you don’t embed it in your governance.”

Even the government seems to have pulled its punches on social value, perhaps with economic factors in mind. When it published its Transforming Public Procurement green paper in December 2020, social value got plenty of enthusiastic mentions. By the time that had been translated into the Procurement Bill, now at the committee stage in parliament, the specific mentions have dwindled to none at all.

“It will be interesting over the next couple of years,” says Fraser. “Will customers be willing to pay a little bit extra and get a lot more on social value? Will they stick to their guns when they say they want companies to pay a real living wage? We will be testing our mettle now.”