analysis

public service delivery

Creative commissioning
The Public Services Act 2012 is now in force Fiona Condron shows how it can be used to drive social value.
The PuBlic ServiceS (Social value) Act 2012 came into force last month, but will it have any real effect on the way that public bodies commission services? i believe there is potential for explosive added value but, as the new Act is not prescriptive about how public bodies must address the subject, this will only happen if all parties (public bodies, service providers and procurement teams) understand the mechanics required to set up and measure social value. To assess the current situation and its potential, BDOs public sector team conducted a survey of 95 local authorities in conjunction with the Municipal Journal, supplemented by interviews with local government officers and other public and privatesector procurement experts. The findings from this research are summarised in Social Supply a guide to improving social value through better purchasing, available from our website. substantial influence over local employment, cohesion within local communities, the quality of physical and natural environments, and the waste and pollution generated within their areas. They can contribute directly through the services they deliver or commission, as well as indirectly through the influence they can have on local partners, residents and commercial businesses. There is an undeniable opportunity here to use this spend to further drive the social value local authorities deliver, yet 83 per cent of the respondents to our survey said that they did not measure the benefits of any social-value initiatives as part of their procurement process.

Barriers
We asked our interviewees what stops them from seeking to drive social value as a core part of their procurement processes: 27 per cent of authorities surveyed stated that a lack of training is a barrier to delivering social value; 41 per cent pinpointed lack of experience as a problem; 48 per cent are reluctant to encourage the delivery of social value through procurement as they believe that costs are more important, and that this may result in increased costs to them; But perhaps the biggest barrier to achieving social value in this way was that local authorities have not assessed the impact their procurement has on their local community 76 per cent of respondents indicated that they had not established an active programme assessing the impact of their supply chain. Suppliers need to be willing to support their clients to achieve goals of this type. Only 7 per cent of authorities we surveyed believe that resistance from suppliers is a barrier to delivering social value through procurement. So the challenge for local authorities is to take this effort and goodwill on both sides and translate it into further delivery of social value. To do this, local authorities have to understand, and take the practical steps to develop, collaborative relationships rather than focusing
civilsociety.co.uk

It may be disquieting that private enterprise can also deliver social value
however, the challenges faced by public bodies are all too obvious. The tension between increasing demand for services and pressure on budgets means that cost is high on the agenda for many local authorities. One obvious way to alleviate this tension is to outsource the provision of services to a specialist third party indeed, over 40 per cent of local authorities expenditure is now allocated to third-party contracts.

Key role
local authorities have a key role in improving social outcomes within their communities. They have

Genesis of the Public Services (Social Value) Act 2012

This legislation began life as a private members bill brought in by Chris White MP in June 2010. The aim was to support community groups, voluntary , organisations and social enterprises to win more public sector contracts and to change commissioning structures so that a wider definition of value, rather than just financial cost, was considered by commissioners. The bill was borne out of a sense that public bodies were not fully, or consistently, embracing the additional value that commissioning could potentially deliver to communities. It came into force from 31 January 2013. Although the Act has been widely supported, its limitation is in not describing how public bodies should actually consider social value.

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Charity Finance February 2013

public service delivery

analysis

only on procuring a defined service from an external provider.

Barriers to local authorities driving social value in their procurement processes (more than one answer could be given)
No process to assess the impact of their supply chain Worry that it may increase costs Lack of experience in doing it Lack of training 27 0% 10% 20% 30% 40% 50% 60% 70% 80% 41 48 76

The only way

i would argue and the research supports this that collaborative relationships are the only way to achieve social value in outsourced contracts. But collaboration is not simply about agreeing a service contract and letting the provider get on with it. A real collaborative relationship is one where both parties understand each others concerns, are open and transparent, agree joint objectives and have a shared commitment to deliver on the strategy of the local authority concerned. Developing and sustaining collaborative relationships takes time and effort on both sides. By ensuring that suppliers are aware of a local authoritys social priorities, and by agreeing plans for a suppliers contribution, an authority can draw on the potential of its suppliers. The desired outcomes must be given strategic priority otherwise authorities risk formalising another box-ticking exercise. in the survey we conducted, 48 per cent of respondents selected economic outcomes as the most important priority for delivering social value. Supporting social outcomes was the second-most important consideration with 16 per cent, followed by increasing quality at 14 per cent. Surprisingly, only 3 per cent of respondents selected environmental considerations as important. Our respondents also had something interesting to tell us about who can deliver social value. We tend to associate social value with the voluntary sector and, indeed, many civil society organisations are involved in the delivery of services for local authorities. however, what may be disquieting for many readers is that the research
civilsociety.co.uk

and case studies clearly demonstrate that private enterprise is often as capable as not-for-profit organisations in delivering social value. With local authorities necessarily so focused on costs, is expecting them to adhere to the Social value Act perhaps just asking too much?

Strong relationships with suppliers will provide the engine power

Increasing social value
Our report has many case studies illustrating how local authorities have been able to combine these two seemingly opposing factors. So how do they do it? By encouraging local spend the data shows that spending on local suppliers has 400 per cent more impact on the local economy than spending on suppliers outside of the area; By creating a procurement environment that does not exclude smaller, local providers a focus on cutting costs can sometimes lead local authorities towards pooled spending and large-scale regional contracts; and By considering the whole-life costs of a contract beyond the initial quoted price. For example,

an authority and its partners may need to also consider the knockon costs of lost opportunities for the local workforce and local businesses such as increased crime, shop closures and community disintegration when evaluating the total costs of various bids. Based on this research, we firmly believe that local authorities are able to overcome commonly identified challenges that have restricted them from drawing on private and voluntary-sector suppliers to deliver social value. To achieve this, commissioners need to steer a course through the risks of legal challenges; shortages of capacity, experience and skills; and tensions with reducing costs. A clear strategic overview of how suppliers are expected to contribute will guide these efforts; and strong, collaborative relationships with suppliers will provide the engine power.

Fiona Condron is a senior audit manager at BDO

Charity Finance February 2013

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