Social value creation: The art of the possible

This month the requirements of the public services (social value) act become legal, creating an opportunity for public agencies to think about social and environmental benefits their procurement can leverage for the local community. The act requires public agencies to consider how procurement choices improve ‘economic, social and environmental well-being of the relevant area’.

There is much talk about the social economy, and how it levels the playing field for social enterprises, but the act should make us think about the economics of place too. Using the scope of the act, local authorities and other public agencies can focus on local buying and encouraging local supply solutions to services as a way of maintaining economic value in the local economy and helping to tackle spatial disparities that continue to be problematic.

There are still bridges to be crossed of course. No local authority wants to find itself in court being pursued by a corporate firm which believes that the council didn’t judge competing tenders fairly. And I wonder if any social enterprises will find themselves at the high court seeking a judicial review of tendering process? I suspect not.

We also need to make the supply base less dependent on single contracts: there are too many high dependency organisations whose periodic threatened existence distorts the debate about social value creation and doesn’t help buyers to manage their risk. Other challenges will be found in buyers trying to fairly balance price with quality, or value for money with social impact and so on. And of course, procurement will still have the old trade-off between meeting strategic needs and mitigating risks to supply.

In some recent work, we found that social enterprises tend to be type-cast into the ‘bottle-neck’ quadrant of Kraljic Matrix, one of the tools the procurement specialists use to evaluate and manage their supply needs. In part this was because buyers did not have a specific demand for the social value proposition on offer and in part the proposition itself was unaligned to the value needs of the buyer.

So some work will still need to happen to convert purchasing frameworks to strategic supply management. As Kraljic himself once stated, ‘purchasing must become supply management’. Commissioning for social value will need more upstream thinking about the strategic outcomes purchasing investments can deliver. In turn this will require more pre-market dialogue about the strategic possibilities and priorities of buyers and investors.

But there are many opportunities too. The act creates a lot more space for pioneering commissioning practices to put in place different models that recognise that a diversity of suppliers – in terms of both sector and size – is key to quality, innovation,  environmental protection and social value creation.

This shouldn’t just be about consortia models either. They’re intrinsically valuable and can bring a wide range of agents into the marketplace for change, but there are many other ways to create the value required by the act. For example, the act creates the space for more cross-sector collaborations and it should be encouraging wider involvement of citizen engagement through, for example, co-production.

Social value creation is an imaginative enterprise – it’s the art of the possible – and public service buyers should be using the provisions of the social value act to find creative solutions for better places. The act has so much potential, let’s hope that 2013 sees it realised in a meaningful way. We’re going to need it!