Procurement and Social Value - In the spotlight | HACT · 7!! II. Requirements and regulation:...
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Procurement and Social Value A White Paper for Wandle
Transcript of Procurement and Social Value - In the spotlight | HACT · 7!! II. Requirements and regulation:...
Procurement and Social Value A White Paper for Wandle
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With contributions from:
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Executive Summary ............................................................................................................................... 5
Introduction – HACT and Social Value ................................................................................................... 6
I. Aims and objectives ........................................................................................................................ 6
II. Requirements and regulation: elements to consider in the process and development of an approach ................................................................................................................................................ 7
Public Contracts Regulations 2015 .................................................................................................... 7
Market consultations and/or soft market-‐testing ......................................................................... 7
Advertisement ............................................................................................................................... 8
Short-‐listing ................................................................................................................................... 8
Tender evaluation/Selection of Preferred Bidder ......................................................................... 8
Contract Performance Management ............................................................................................. 8
Public Services (Social Value) Act 2012 .............................................................................................. 9
HCA Regulatory Framework .............................................................................................................. 9
III. Current approaches .................................................................................................................... 9
1. Use of apprenticeships and training programmes in procurement contracts ......................... 10
2. Shared employment and skills schemes ................................................................................... 10
3. Direct links with delivery .......................................................................................................... 11
4. Levy applied by housing providers ........................................................................................... 11
5. Procurement hubs and consortia ............................................................................................. 11
6. Social value dividend through procurement organisations, hubs and consortia ..................... 12
7. Flexible/needs based approach ................................................................................................ 12
Summary .......................................................................................................................................... 13
IV. Contractor perspectives .............................................................................................................. 14
V. Challenges .................................................................................................................................... 15
VI. Metrics ........................................................................................................................................ 17
Primary benefits .............................................................................................................................. 17
Non-‐monetary outcomes ............................................................................................................ 17
The Wellbeing Valuation approach ............................................................................................. 17
Secondary benefits .......................................................................................................................... 18
Local Economic Impact ................................................................................................................ 18
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Savings to National and Local Government ................................................................................. 19
VII. Conclusions and next steps ....................................................................................................... 19
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Executive Summary The drive toward achieving social value is relatively new to the housing sector -‐ HACT launched the Social Value Bank just last year. As community investment teams try to get their heads around social value and the necessary step of evaluation, services in other parts of housing associations are already being procured that consider and in some cases deliver, social value.
The legislation that has driven the move toward procuring social value in contracts is intentionally vague. The stated aim of lawmakers is that procuring organisations should be allowed the space to contract services that meet a flexible range of needs1. This provides an invaluable opportunity for housing associations to be creative in procurement maximising social value where appropriate. However, procurement teams are restricted by legislation, and must ensure contractors are treated equally throughout the process (Section ll).
As a result of this legal environment and varying needs across the housing sector, a number of approaches have emerged (Section III). In some cases, housing associations have taken the lead in procuring services; others have drawn on the support of larger organisations, which may help with cost-‐effectiveness, both in the procurement process and being able to access better deals with contractors.
Where HACT has engaged with contractors involved in the housing sector, there has been a surprising desire to learn how social value can be maximised (Section IV). Rather than having to push contractors to offer and deliver social value, it is often the contractor that is asking how best they can deliver value.
Despite the best intentions of both housing associations and contractors, there are key challenges around contract management and accountability (Section V). These challenges can partly be attributed to the lack of widely understood forms of measurement (Section VI).
HACT will be looking to bridge this gap by using the experience of innovating in social impact measurement and partnering with Trowers and Hamlins and Echelon Consultants to ensure the best legal advice and market engagement experience respectively is available to the sector.
In the meantime, the example of Your Housing Group in Anfield provides an exceptional blueprint for working with the tools and approaches currently available.
1 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/403748/Social_Value_Act_review_report_150212.pdf
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Introduction – HACT and Social Value
The social housing sector is increasingly conscious of the need to measure, maximise and demonstrate the social value it creates to inform decision making. Understanding social impact is even more important in light of the Public Services (Social Value) Act 2012, which places a requirement on housing associations to consider their social impact when undertaking procurement activities, and the regulator’s requirement that Value for Money (VfM) statements should include an assessment of the organisation’s social impact.
However, both the Social Value Act and the HCA’s requirement for assessing social impact in VfM statements are non-‐prescriptive, leaving uncertainty around how they should be addressed.
HACT has been undertaking a programme of work to equip the sector with the tools it needs to understand its social value. Working with SImetrica, HACT has developed a set of values using the Wellbeing Valuation methodology, placing the housing sector at the forefront of social impact measurement.
As a robust and acknowledged model for measuring social value, the Wellbeing Valuation methodology can be used within the procurement process to provide an accurate assessment of the social value of potential contracts as well as inform bidding and investment decisions.
Drawing upon material obtained directly from a number of housing associations, this paper considers current approaches used by housing providers to integrate social value within their procurement strategy. A broader sector survey was distributed to the HACT Housing Innovation Partnership (formerly the HACT 100 Club), which includes housing providers of various stock sizes, types and geographies. This survey gathered additional perspectives from 19 housing associations to further inform how housing providers approach social value in procurement and identified the various challenges they encounter in embedding social value within their procurement activity.
A review of the relevant legislation at UK and EU level has been kindly written by Rebecca Rees at Trowes and Hamlins and advice on procuring for social value in practice was given by Echelon Consulting Ltd.
I . Aims and object ives Aim: The aim of this white paper is to explore practice and regulation around the incorporation of social value in the procurement process and inform procurement activity at Wandle. Objectives:
• Consider regulatory requirements under the Public Services (Social Value) Act 2012 and the Public Contracts Regulation 2015.
• Investigate current practice through examples at housing providers. • Outline potential metrics and approaches for measuring the social value delivered by
suppliers, along with a consideration of contract management.
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I I . Requirements and regulat ion: elements to consider in the process and development of an approach
Delivering social value objectives through procurement has often been difficult to accomplish in a legally compliant manner2. Certainly at EU and national level, the UK government has traditionally been more reluctant to use its purchasing power – perhaps on the basis that "non-‐commercial" activities add to the cost of the contract and are therefore not in the interest of the taxpayer, who is likely to be more concerned with lowest cost delivery.
Nevertheless, there has recently been a significant shift in the legislative framework, and contracting authorities, which includes registered providers, are now encouraged to consider social value initiatives in procurement activities.
This section sets out the legal parameters within which a housing association can act when looking to incorporate social value into its procurement with specific reference to:
• the Public Contracts Regulations 2015 (PCR2015); • the Public Services (Social Value) Act 2012; and • the Homes and Communities Agency's (HCA) Regulatory Framework.
Registered providers will also need to be mindful of any internal Standing Orders and Financial Regulations.
Public Contracts Regulations 2015 The Public Procurement Directive 2014 (Directive 2014/24/EU) requires member states to take appropriate measures to ensure that in the performance of public contracts, economic operators comply with the international, EU, national and collective obligations in environmental, social and labour law.
The PCR2015 (which implements the Directive into the laws of England, Wales and Northern Ireland – not Scotland) became effective in February 2015. The PCR2015 provides a number of Regulations which can assist Registered Providers in effectively including social value initiatives in their EU-‐regulated procurements at all stages of the process.
A procurement process (whether conducted under an EU process or under the housing association's own internal rules) typically comprises the following stages:
• market consultation and/or soft market testing; • advertisement and ITT (or selection of a long-‐list of bidders) • assessment of bidders/short-‐listing process (which may use a PQQ) • tender and bid evaluation • selection of preferred bidder • contract implementation and performance management
Market consultations and/or soft market-‐testing The PCR2015 allows contracting authorities to consult the relevant market-‐place prior to publishing a Contract Notice in the Official Journal (or selecting their preferred short-‐list of bidders). This is the first and ideal opportunity for the Registered Provider to find out from prospective bidders how 2 This white paper is intended in part to provide a general review of relevant law, and should not be relied upon as specific legal advice.
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social value could be delivered through the relevant contract or framework agreement. Such consultation could include the Registered Provider researching what would be reasonable to ask as part of the tender process.
Advertisement If a Registered Provider wants to include social value in its procurement then it needs to set out those requirements in the Contract Notice or put the potential tenderers on notice that contract performance is likely to include social requirements. Social value criteria should not unfairly discriminate against a tenderer or particular class of tenderers.
Short-‐listing A Registered Provider is allowed to assess the tenderers' eligibility to tender against certain mandatory and voluntary exclusion criteria, as well as look at their financial robustness and professional/technical suitability. In the event that too many tenderers have expressed an interest, the Registered Provider will use such assessment in order to short-‐list to a suitably sized tender list.
Discretionary exclusion criteria, which registered providers may choose to apply, include a tenderers' violation of social and environmental laws (which could include health and safety or employment legislation, non-‐payment of taxes or social security contributions).
Assessment of professional/technical suitability and capability can include social value short-‐listing criteria, as long as these are published in the OJEU Notice (or Pre-‐Qualification Questionnaire (PQQ)), are objective, non-‐discriminatory and are related to the subject matter of the contract. Registered providers are therefore able to evaluate a tenderer's experience and track record of delivering social value under previous contracts or framework agreements. Care should be taken at this stage not to frame the short-‐listing criteria in such a way, which would unfairly discriminate against SMEs or new-‐entrants to the market place.
Tender evaluation/Selection of Preferred Bidder Under the PCR2015, Registered providers are now permitted to use any tender evaluation criteria, including social value criteria, provided they:
• are linked to the subject-‐matter of the contract; • comply with EU law; • enable the Registered Provider to evaluate the "Most Economically Advantageous Tender"; • do not discriminate or favour a particular tenderer or class of tenderer; and • are published in advance in the procurement documents.
Specifically, Regulation 67(3) (a) of the PCR2015 allows award criteria to focus on the social characteristics of a tender, provided the above conditions are complied with.
Contract Performance Management It is essential for Registered providers to transform any promises made at the tender stage into contractual obligations, so that the social value initiatives and ideas put forward by the preferred bidder can be captured and delivered during the lifetime of the contract.
It will therefore be important for the housing providers to expend appropriate effort in converting social value requirements into contractually certain obligations and ensure that the contract manager has appropriate contractual power and tools to monitor and enforce such requirements.
Unless social value obligations are contractually certain, they will be unenforceable and therefore registered providers will need to work with their legal advisers to determine how its social value conditions will actually be managed and monitored and what contractual remedies will be applicable, in particular, if payment deductions are to be made for failure to deliver on the relevant tender promises.
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Public Services (Social Value) Act 2012 The Public Services (Social Value) Act requires contracting authorities to consider the social benefits of their contracts and is a further incentive for providers of social housing to measure their social impact. It incentivises them to consider how the services they procure might improve the economic, social and environmental well-‐being of the area.
• The Act is deliberately flexible to encourage social value to be considered in the local context giving commissioners and procurement officials the freedom to determine what kind of additional value would serve the needs of the community.
• Value for money is the key factor considered during public sector procurement decisions. The Public Services (Social Value) Act 2012 marks the shift in understanding how value for money should be calculated and should include social and economic requirements.
• All English and some Welsh public authorities are required to comply with the Act including local authorities, government departments, NHS Trusts, CCG’s, fire and rescue services, and registered providers .
• The Act applies to contracts for public services which are over the EU threshold (currently £111,676 for central government and £172,514 for other public bodies) and includes all public service markets, from health and housing to transport and waste.
• The Act sets out value as “the benefit to the community from a commissioning/procurement process over and above the direct purchasing of goods, services and outcomes”.
• Being non-‐prescriptive, the Act leaves uncertainty around how it can be applied. Therefore, emphasis is placed on how commissioners, including registered providers can deliver, and evidence their social value through their areas of work.
HCA Regulatory Framework For social housing providers there is another regulatory area, which necessitates consideration and measurement of social value. The HCA’s Regulatory Framework for Social Housing in England from 2012 requires housing providers to “maintain a robust assessment of the performance of all their assets and resources (including for example, financial, social and economic returns)”3.
These regulations make it particularly important to adopt a method of social impact measurement which is internally consistent as they state that a housing provider must “have a robust approach to making decisions on the use of resources to deliver the provider’s objectives, including an understanding of the trade-‐offs and opportunity costs of its decisions”. A proper understanding of trade-‐offs can only be achieved where it is possible to compare the options being considered on equal terms. In order to demonstrate their compliance with regulations, housing providers are required to publish an annual “robust self-‐assessment”.
I I I . Current approaches In order to embed social value within their procurement strategies, social housing providers are using a variety of approaches to leverage third parties’ spend to deliver social value through their procurement process and benefit their communities.
1. Use of apprenticeships and training programmes in procurement contracts
The use of apprenticeships and training programmes is one of the most popular methods of delivering social value in the housing sector. Generally, a number of training and work opportunities
3 http://www.homesand communities.co.uk/sites/default/filesour-‐work/regfwk-‐2012.pdf
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are sought in the supply chain depending on the value of the proposed contract e.g. one apprentice per £ 1m of contract value.
Examples This approach aligns with government policy to increase the uptake of training and apprenticeships through public sector procurement. 94% of those who responded to the survey include the apprenticeship model and education and training opportunities in their organisation’s approach to social value and procurement.
Benefits of utilising this model include improved employability as well as the attainment of qualifications amongst the local population, which may not be achieved by the housing association alone. One survey respondent indicated this approach to integrating social value into its procurement processes is beneficial to its community as it is “helping to get our tenants into employment”.
The Circle Housing Group places emphasis upon the creation of apprenticeship opportunities for its communities and seeks to achieve this by placing requirements for social value in its procurement contracts for repairs, maintenance and construction. For instance, Circle has implemented measures including a requirement for contractors to provide one apprenticeship opportunity within their businesses for every £0.5m that Circle spends on their services4.
2. Shared employment and ski l ls schemes The construction industry appears to be one sector where the creation of apprenticeships is most prevalent. Recognition that not all contracts are long enough to support an apprentice has led to the creation of employment and training schemes shared between employers.
Examples Circle has partnered with public and private sector partners including other housing providers, contractors and the Construction Industry Training Board (CITB) to establish Evolve, a social enterprise and shared apprenticeship scheme within the construction industry. According to the Department for Business, Innovation & Skills’ review of Procurement and Skills Policy in 2010, a large number of procurement staff across the public sector (66%), indicated that it is often the supplier that contributes towards funding apprenticeships5. This often prevents small and medium enterprises (SMEs) from participating in apprenticeship schemes due to the costs involved. With Evolve, as a shared scheme, the costs of delivering an apprenticeship scheme and skill requirements are shared amongst partners enabling more SMEs to partake and contribute towards the creation of more training and apprenticeship opportunities.
In addition to this, Circle has also established the Enabling Enterprise programme supporting SMEs in their supply chain to create employment opportunities for their communities and support start-‐up businesses. As a result, Circle has contributed towards the creation of 50 new jobs and apprenticeships within its supply chain, and has supported 71 SMEs and social enterprises6. This highlights the need to work in partnership with the various stakeholders in the procurement process.
4 http://www.circlegroup.org.uk/~/media/13F931503F404F329A89D5E7BE5DAFC0.pdf 5 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/32359/11-‐537-‐review-‐of-‐procurement-‐and-‐skills-‐policy.pdf 6 http://www.bitc.org.uk/our-resources/case-studies/circle-housing-enabling-enterprise#sthash.Er3mB4Ds.dpuf
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3. Direct l inks with del ivery Housing associations are involved with the creation of businesses that use operational surpluses to invest in their local communities, which can loosely be defined as using a social dividend to create social value. 35% of those who responded to the survey indicated a social dividend is included as their approach to social value and procurement. Examples
Liverpool Mutual Homes (LMH) has established a subsidiary, Housing Maintenance Solutions, to undertake LMH repairs and maintenance and provide efficient and effective service delivery and asset management. Operational surplus is used by LMH to generate a social dividend, which contributes towards a fund used for employment and community initiatives. As part of its strategic objectives, LMH is also forming partnerships with SMEs in the local area to deliver interventions using the dividend.
As part of the its approach to social vale in procurement activity, the First Ark Group has established Vivark, a social enterprise that offers property maintenance services both internally and externally. Profits generated through Vivark are returned to First Ark and reinvested in the local community to create jobs, training and apprenticeships.
Many public sector organisations including those outlined above, place emphasis upon the benefits of utilising the local supply chain and the positive impact that supporting local business has upon the local community. Both LMH and First Ark place emphasis upon supporting the local economy by developing partnerships and procuring supplies and services with contractors and suppliers in the local area. Survey respondents shared these sentiments and highlighted a range of techniques they use to encourage local businesses to tender for contracts.
4. Levy applied by housing providers Another widely used method for delivering social value is through a levy, which is often a percentage of contract value placed into a fund designed to deliver social value. It is an approach adopted by 35% of survey respondents.
The fund can be used by the procuring organisation directly or more loosely managed, allowing other groups in an area to draw on the fund. Levies provide a simple way of delivering social value, with a high level of control and flexibility around the types of interventions that are possible. However, the method is open to criticism that it is essentially a convoluted way of an organisation paying itself to deliver social value.
5. Procurement hubs and consort ia Procurement hubs and consortia are widely used to by public service organisations to support the procurement process. These organisations include amongst others: Fusion21, Northern Housing Consortium, Housing Procurement Portal, Places for People Procurement Hub, Procurement for Housing, and NE Procurement all of which facilitate dialogue between public service authorities and the supply chain, enabling partners to identify and construct frameworks for the procurement of services, supplies and goods.7
7 The extended version of this paper will explore these hubs in more detail, drawing out the benefits of using this approach and the challenges that both public sector authorities and organisations within the supply chain encounter.
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These frameworks are essentially agreements with contractors and suppliers setting out terms and conditions of subsequent procurement activity. The procurement organisation opens up each framework -‐ themed around commonly procured services -‐ to new contractors on the condition they fulfil a criteria, which sometimes have a social value element, then allowing a contractor to bid for work from member housing associations. The frameworks offered by these hubs and consortia are also EU-‐compliant, allowing contracting public sector authorities to access multiple contractors and streamline their procurement process to make it more efficient and effective. In effectively outsourcing part of the procurement process, housing associations may also lose the ability to be creative when procuring and managing contracts.
Procurement hubs and consortia also provide members with access to additional services including consultancy and advice on legal matters. The use of such organisations within the social housing sector was highlighted in responses to the survey where 74% of respondents indicated that they are members of a procurement consortia or hub and 69% of survey respondents indicated that they are in a consortia that includes social value as a contract component in their procurement framework.
6. Social value dividend through procurement organisations, hubs and consort ia
Some procurement organisations also create a social dividend from profits or operational surpluses.
Examples Procure Plus is one such organisation, which aims to create social value for clients through their procurement activity. It works across the North-‐west of England on physical and social regeneration, procuring goods and services relating to new builds and repairs and maintenance of social housing. The social dividend comes from a 1% levy on turnover, and funds training schemes for the long-‐term unemployed. All Procure Plus commercial profits are put back into this programme, all of which is channelled through its charity Re:Vision North. Procure Plus also makes sure its supply chain creates social value by getting all suppliers to commit to providing apprenticeships, the number of which is in proportion to their turnover.
Another procurement organisation that offers to create social value for clients is Fusion 21. Similarly to Procure Plus, Fusion 21 creates a fund for social value projects by reinvesting 1% of the management fee, in a method agreed with the member. This means that the social value outcome is a ‘bespoke offer’, decided in conjunction with the client, matching its strategy and business objectives with Fusion 21’s social objectives. The social value dividend can be altered to suit the specific demands of members, by providing access to a range of local businesses and services.
7. Flexible/needs based approach Where housing associations want to fully tailor a service to a local need, they have taken the lead in procurement.
Examples The Selwood Housing Group includes the Silva Social Enterprise, which aims to support the development of enterprises that can reinvest funds in their communities. In working with these social enterprises as well as its own suppliers, Selwood identified an extensive range of skills and knowledge that could be used to benefit its communities. This contributed towards the formulation
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of the Silva Social Enterprise Clause, which now forms the foundation of most procurement decisions around the whole Group8.
Whilst pricing is as an important aspect of decision making when it comes to procuring services and goods, the Selwood Housing Group also places emphasis upon the social impact, quality of the outcome and the benefits to the community. Taking a project-‐specific approach to social value and procurement, these three elements are scored and weighted accordingly, taking into account the nature of the contract and its specific details. The Silva Social Enterprise Clause emphasises the importance of social value and enables contractors to increase their score by including components that contribute towards community benefit. Bids without a community benefit can still be successful as price and quality are also key factors to consider in the tender process.
Your Housing Group (YHG) has the most comprehensive approach that we have identified to driving social value through the contract lifecycle. This approach provides a foundation for future development of an approach, using tools currently available. Community Insight is used to understand the needs of local communities and communicate clearly with contractors. This information is then used alongside market consultation to create lots – smaller contracts designed to attract different bidders – led by Echelon Consulting Ltd. YHG share this information with bidders as part of the Invitation to Tender (ITT), providing them with the information needed to incorporate needs based social value within their tender. The HACT Wellbeing Valuation is used to measure against the KPIs embedded in the contract.
Rhondda Housing Association has also adopted a flexible needs-‐based approach to the way it incorporates social value into its procurement activity. Central to this approach is community involvement whereby the housing provider has actively consulted with tenants to determine what its priorities should be in delivering social impact. These discussions identified a range of key issues that are important to the communities and tenants with which Rhonda Housing Association works, including employment and training opportunities, health and the affordability of services9.
Rhondda requires all contracts for the procurement of services and goods, regardless of scale, to include a social value component. These have included employment and training opportunities, contributions in the form of funds, services and goods and support for social enterprises led by tenants of Rhondda Housing Association.
Summary As illustrated above, providers of social housing are adopting a range of different approaches to implementing social value into their procurement activity. The majority of respondents to the survey indicated that their approach to social value and procurement includes the apprenticeship model and the provision of educational and training opportunities, with many opting to utilise other approaches in addition to this. In adopting more than one approach, contractors and suppliers are afforded more flexibility, which ensures that the process is not overly prescriptive.10
Central to any approach is the importance placed upon social value by both the housing association and the contractor or supplier. This ultimately informs how social value is weighted in the
8 http://www.socialenterprise.org.uk/uploads/editor/files/Case_studies/Case_study_Selwood_Housing.pdf 9 http://www.socialenterprise.org.uk/advice-‐services/sector/housing-‐associations 10 The extended version of the paper will include more in-‐depth case studies to explore current approaches taken within the social housing sector drawing out the internal processes undertaken within organisations, the benefits of using their approach and the challenges they have encountered in seeking to embed social value within the procurement activity.
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assessment of contracts during the tendering process, the extent to which this is achieved and how contracts are managed11.
IV. Contractor perspectives
The need to consider social value is not only apparent in public services. Private businesses are also looking at how they can create social value through their work, whether that is by directly creating it, or by endeavouring to work with suppliers who create social value. Taking social value seriously is not only driven by the Social Value Act, but also by the desire of contractors to support the communities in which they work.
For example Wates, one of the UK’s largest building and construction firms, has a stated commitment to sustainability not only environmentally, but also to the communities in which it works. One way it seeks to do this is through employment and training programmes that aim to raise and harness the skills of long term unemployed by creating local training and employment opportunities. To this end, Wates runs a programmed called ‘Building Futures’, which is a QCF accredited 2 week training course. Since 2005 850 people have been through the programme, with 55% moving into education, employment or further training. Similarly, the Wates Apprenticeship Training Agency (WATA) has been launched, which creates apprenticeships either within Wates or one of its supply chain organisations12.
Keepmoat, based primarily in the South East, have a dedicated community impact team that seeks to enhance social and economic value in the parts of London that Keepmoat works in. This includes delivering a wide variety of training to residents to reduce unemployment, improve people’s wellbeing and increase spending power in their local communities. After conducting a SROI, they found £108 million of social value had been created over 10 years of work in London13.
Mullaley has founded the Mullaley Trust, whose aim is to invest in local communities, help develop local skills and knowledge and engender community spirit14. Mullaley itself also expresses a similar commitment to local communities, via its Resident Liaison approach, which aims to actively involve local business and training or recruitment initiatives in Mullaley’s work, as well as primarily recruiting from local communities. Mullaley also commits to working closely with any local initiatives or programmes with whom a client already works.
Whilst some contractors and suppliers are beginning to get to grips with social value, understanding what social value is and how to consider it in terms of procurement activity is still a challenge for many private businesses. Important challenges facing many of these organisations include the need to demonstrate and provide evidence of their social impact, and to determine the most appropriate metrics to measure and track the value they create. Public services are now tying social value into contracts as a requirement, meaning that it is measured as a KPI in the same way as other deliverables. As a result, there is a demand for an accessible approach to measuring and evaluating
11 The weighting of social value in procurement decisions will be discussed further in the expanded version of this paper. 12 http://www.wates.co.uk/sites/all/modules/filemanager/files/CR/Building_Futures_Case_Study_Leaflet_Jun_10.pdf 13 https://www.keepmoat.com/about-‐us/news/keepmoat-‐community-‐impact-‐team-‐strengthened-‐to-‐maximise-‐social-‐and-‐economic-‐value-‐in 14 http://www.mulalley.co.uk/mulalleytrust.htm
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social value, particularly in the context of recent legislation.15 In light of this, a number of contractors are in dialogue with HACT with a view to developing their understanding of social impact and utilising the various tools offered by HACT, including Community Insight and Value Insight, to ensure that they deliver social value in their offer of services.
V. Challenges Housing associations encounter a range of challenges in their various approaches to social value in their procurement processes16.
1. Understanding between housing associat ions and contractors
One of the key challenges for housing associations seeking to deliver social value is building understanding between themselves and contractors about what is meant by ‘social value’ and what the housing association wishes to achieve through its procurement process. The biggest challenge then is how it can be delivered.
Even once social value has been defined, and a method of measuring it found, 38% of survey respondents felt that understanding how to include it as part of decision-‐making processes is a challenge in itself. Relating to this is the issue of allocating too few marks or insufficient weighting to the social value criteria included with a tender.
Once social value considerations are added as part of a tendering process, contractors will obviously strive to provide social value to win contracts, whilst housing associations will often be ambitious about the social value that can be created. However, there needs to be an open dialogue between association and contractor over what is suitable, appropriate and achievable. If there is not a feasible and specific agreement about what the contractor will deliver, social value is unlikely to be created effectively.
Once the method of social value creation has been agreed between contractor and provider, it is important to be clear about how the service is being funded. While it is possible for a contractor to work with a housing association to design a service that can provide social value without identifying any added cost, in most cases, social value elements of services are better understood as being paid for. Regardless, it is key to have clearly defined contractual obligations and communication across the lifecycle of the contract.
2. Accountabil i ty
Once a contract and plan for delivering social value have been agreed, the next challenge becomes how to ensure its delivery and how to make sure there is accountability in the process. Given that 88% of respondents feel that measuring social value is a challenge, it is perhaps unsurprising that accountability is an issue. Indeed, whilst 95% of respondents have a mechanism in place for holding contractors to account on social value delivery, 44% nonetheless stated that ensuring accountability remained a challenge. Survey respondents indicated that a popular way of trying to create
15 The extended version of this paper will consider the perspectives of contractors and suppliers within the supply chain, as well as efforts being made by various organisations such as consultancy firm, Echelon to bring together a joined-‐up view of procurement from the supply chain. 16 The expanded version of this paper will consider some of the mitigation tactics that housing providers can undertake into order to ensure that the procurement of social value considerations are effective.
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accountability currently is to build social value into contracts, so it is measured as a KPI, the same as any other deliverable within a contract would be.
Certainly, ‘contractualising’ social value would seem a necessary step towards ensuring accountability. This chimes with the response provided by one survey respondent, who suggested that within the housing sector social value is “specified as something suppliers are scored and evaluated on. If Social Value is to be truly integral to the requirement it needs to be built in a part of the specification and specified in the form of Contract clauses and performance KPI’s”. By setting out requirements in the brief and framing the contractor’s response into a ‘Promises Document’, social value can be integrated within the contract creating a defined promised outcome against which performance can be measured.
3. Measurement
The effective enforcement of social value obligations throughout the lifecycle of the contract is key to success: without it, the opportunity to think creatively about services provided by the social value act may slowly be reduced to farce.
This will likely create an unequal condition between the contractor who bids on the basis that the delivery of its social value promises will be enforced during the life of the contract, and the contractor who takes the risk that they won't be.
Measuring social value is an important aspect to consider in ensuring procurement activity delivers social value, as it evidences the positive changes and benefits generated. Demonstrating or evidencing social value is often a key challenge for social housing providers as well as suppliers and contractors throughout the procurement process. The variety of needs amongst public sector organisations and providers of social housing in particular means that what constitutes social value can also vary.
A recent report into the creation of social value in procurement activity at social housing providers indicated that 55% of housing associations and local authorities reported encountering difficulties in measuring social value, both before and after the commissioning of services.17 For instance, some housing providers encounter difficulties comparing the proposals of different organisations and the level of social value offered during the tendering stage. This might be exacerbated by the
Other housing providers encounter difficulties in measuring the social impact of their procurement contracts during the contractual period, highlighting the need to ensure that the offer of social value is drawn out during the procurement process.18 A key complaint is that the dominant model of using apprentices and training opportunities in the supply chain to create social value is open to abuse. For instance, a contractor might use the same apprentice in a number of contracts for a number of clients.
The majority of respondents to the survey shared these sentiments, with 91% stating that measuring social value is their biggest challenge with their current approach. This suggests that difficulties with evaluating the social impact of procurement activity are prevalent within the social housing sector.
17 http://www.socialenterprise.org.uk/uploads/files/2014/06/communities_count_final_report.pdf 18 A future paper will consider issues surrounding how social value generated is attributed in instances of a social dividend or levy.
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VI. Metrics
Primary benefi ts Non-‐monetary outcomes Many organisations, including social housing providers, do not solely exist to maximise profits but have a social imperative to improve their tenants’ and residents’ lives. A company that is purely focused on profit making can judge its success by looking at the bottom line. Market values for outcomes such as employment or volunteering do not exist because they cannot be bought or sold, therefore, a social business will need to use techniques other than reference to the bottom line in order to gain a measurement of its social impact. In recent years, interest in social impact measurement has been growing within the housing sector as it has become increasingly important to demonstrate the effect it has. This measurement of social impact within the procurement process, particularly in the housing sector, is extremely important when embedding social value. Procuring organisations might look to outcomes or KPIs that align with their values themed around economic, social, political, and environmental areas. Environmental outcomes often concern the amount of waste that is being recycled as well as perception of the neighbourhood. More subjective outcomes like this may overlap with political aims like the desire to build community cohesion. To evaluate the success of contractors in delivering these outcomes, providers might draw on a range of resources, from housing management data to interviews and focus groups. As most of these outcomes look to the individual level for change, they can be termed primary benefits.
The Wellbeing Valuation approach Wellbeing Valuation is the latest thinking in social impact measurement. Wellbeing Valuation allows you the measure the success of a social project by how much it increases people’s wellbeing. To do this, the results of large national surveys are analysed to isolate the effect of a particular factor on a person’s wellbeing. 19 Analysis of income data reveals the equivalent amount of money needed to increase someone’s wellbeing by the same amount.
HACT and SImetrica have developed 53 outcomes based on the Wellbeing Valuation approach. These values represent the uplift in wellbeing the average individual experience from taking part in the activity or the change they feel afterwards. The monetary value is the amount of cash you would have to give someone to increase their wellbeing by the same amount if they had not participated in the activity.
HACT outcome values are consistent and robust, which means that while examining values of different types of outcome it is still possible to compare like with like. The use of a rigorous approach to measuring social impact will help housing providers to ensure that their annual self-‐assessments as part of HCA regulations are suitably robust.
The values were established with the housing sector in mind and focus on outcomes around: Employment, Financial Inclusion, Environment, Health, and young people. Many of the outcomes are applicable to and could be incorporated into the procurement process within the housing sector. For example, a repairs contractor may provide an apprenticeship programme. The added social value created by this programme could be predicted, evaluated and reported using the HACT approach, allowing housing associations to plan, and award and monitor social value throughout the procurement process.
19 The values are calculated through statistical analysis of four large national datasets that contain data on wellbeing and life circumstances: British Household Panel Survey (BHPS), Understanding Society, The Crime Survey for England and Wales, and The Taking Part Survey
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Offering a standard set of metrics, this approach enables comparisons between different values and thus different areas of the business. In terms of procurement activity, this approach enables housing providers to compare the social value of contracts bid for and delivered by different organisations on equal terms. It also enables contractors to select those values that are most relevant to their business, to the needs of the commissioner and the local environment ensuring that the social value considerations are proportionate and appropriate for the specific contract.
An initial programme of value calculation has focused on the social value generated by outcomes typically associated with community investment activities. This has resulted in the creation of the largest bank of methodologically consistent and robust social values ever produced20 The Social Value Bank has become the de facto industry standard for social housing providers to assess and measure their social impact and has provoked considerable interest beyond the sector. The approach is recognised in the HM Treasury Green Book as a robust method for establishing the social value of goods and services that are not traded in the market. Additionally, the recent Social Value Act Review references Wellbeing Valuation and HACT’s associated tools as amongst the few examples of robust approaches to generating financial proxies to measure wellbeing21.
Secondary benefi ts
Local Economic Impact Many outcomes relate to the experience of individuals that a housing association might seek to support, including residents and those that live in the surrounding area. These might be termed primary benefits. Broader outcomes, like a change in the local economy, can be still be measured by looking at individual experience, with say a movement to employment, but it may be more suitable to look at the economy itself. The Office of National Statistics has produced guidance on using their economic data and helped to evaluate some projects where the aim is to improve the economy, rather than people directly22. This approach might be relevant when quantifying a large-‐scale regeneration where several contractors are involved.
The New Economics Foundation has taken a different approach to understanding local economic impact. In 2002 they produced a metric called LM3, or the Local Multiplier 3, which is more directly relevant when evaluating bids from different contractors23. Defining a territorial area as local, and then quantifying how much contractor staff spends in that area gives an idea of an organisations commitment to supporting local people. What counts as local can be somewhat arbitrary and hard for staff to fully understand when surveyed; nevertheless contractors do draw on the approach when writing bids. For instance, Mitie refer to the local impact they make by employing high numbers of local employees24. If a housing association sees improving the local area as desirable, these sorts of metrics could be useful.
20 (HACT’s Social Value Bank) and associated guidance and tools (the Value Calculator and Value Insight). 21 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/403748/Social_Value_Act_review_report_150212.pdf 22 https://www.visitengland.com/sites/default/files/files/guidance_note_2_-‐_measuringtourism2_tcm77-‐248594.pdf 23 http://www.neweconomics.org/publications/entry/the-‐money-‐trail 24 http://www.mitie.com/documents/services/specialist-‐services/social-‐housing-‐maintenance/basildon_council_fact_sheet.pdf
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Savings to National and Local Government Another system that it is worth considering on it’s own terms is government, and the formal public sector. Many contractors who bid for contracts likely tendered by housing associations have worked with local authorities. When evaluating the success of social value elements, either the local authority can look to their datasets or national unit cost databases can be drawn on to give an idea of whether or not the contract delivered on it’s social value elements25. These databases pull together likely costs of public services, such as spending one night in a hospital bed, from a number of different sources. If the relationship of a service to a local authority is of interest, the unit cost being used is from a robust source and is applied correctly; this metric could be of use. Trafford Housing Trust used such a metric in its evaluation of the much-‐lauded Cleanstart, a service that uses ex-‐offenders as the primary source of labour26.
VII . Conclusions and next steps
This paper has identified some of the challenges, faced by housing providers, in integrating Social value within their procurement process. Delivering social value through procurement has traditionally been difficult to fully incorporate in a legally compliant manner; however, a recent shift in legislative frameworks has placed pressure on providers to achieve greater social value through procurement (Section II).
Although many housing associations are including social value within their procurement practices (Section III), showing innovation, there is little consistency in their approaches resulting in greater complexity for contractors especially during tendering process (section IV). This demonstrates a need for greater understanding between housing associations and contractors as to what is meant by social value and how it is scored during the tendering process.
Section V demonstrated the challenges faced by housing providers in measuring social value throughout the procurement life cycle and ensuring providers are accountable for the social activities.
The next step is to begin thinking about what housing providers can do with regards to incorporating social value into its procurement process.
For some housing providers, a flexible, needs-‐based approach may be the most appropriate direction for the organisation to take in its development of a procurement strategy. For example, Wandle is involved in various community investment projects, such as the Start-‐up Microfinance project in partnership with HACT and a community grants programme, that could be incorporated into their procurement strategy to create social value. If Wandle was to place emphasis upon supporting local businesses and services, such as those financed through the Microfinance project, an approach could be developed to encourage contractors and suppliers to utilise these businesses wherever possible. Likewise, Your Housing Group has established a clear and effective process to engaging with contractors to maximise social value.
As this paper has made clear, there are a number of different approaches to creating social value when procuring services and several metrics that can be used to manage contracts. To determine what is appropriate, housing providers should first collect information on all of their contracts, from
25 http://data.gov.uk/sib_knowledge_box/toolkit 26 http://www.bitc.org.uk/our-‐resources/case-‐studies/trafford-‐housing-‐trust-‐%E2%80%93-‐clean-‐start
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maintenance to internal IT contracts. Gaining visibility of existing approaches, and considering every way they might help to deliver strategic objectives, is important in trying to maximise the social value that can be achieved in procurement.
In order to explore the consideration of social value in procurement, HACT will undertake a further in-‐depth investigation of procurement practice within the social housing sector, drawing upon particular examples of how social value consideration have been applied practically to the procurement activity of housing providers. HACT will also explore the ways in which the public sector organisations and private companies procure services and goods and look at what can be learnt from existing practice.
HACT is now beginning a project working in partnership with housing associations, components of the supply chain and other stakeholders with a view to collaboratively addressing the issues faced in the consideration of social value and procurement. The intention is to support housing providers to not only embed social value into procurement whilst complying with regulation, but also incorporate metrics to ensure they can effectively measure social value.
The outcomes will be a framework and tools for housing associations and the supply chain to use through the life cycle of procurement, with legal advice given by Trowers & Hamlins and key insights in market engagement provided by Echelon Consulting Ltd. Involvement will enable housing providers and organisations involved in the supply chain to be part of shaping the final product, ensuring that their input and requirements are taken into account during the design, meaning that the final product will be agile, appropriate and proportionate for social value delivered in different circumstances.
If you are interested in hearing more about this project, please contact Mary-‐Kathryn Rallings Adams: mary-‐[email protected] or Andrew van Doorn: [email protected]. Likewise, if you have feedback on this paper or if you are interested in sharing your own perspectives on challenges, please get in touch with us.
