The CBI and its members have long called for a shift away from focussing on short-term cost reduction in public contracting.
For many years, members consistently say that a disproportionate focus on short-term cost reduction is undermining government’s ability to delivery value for money through contracting.
In 2018, almost two thirds of CBI members operating in this space said that public sector contracts were primarily awarded based on lowest initial bid cost, with just 2% stating it was service quality and 3% social outcomes. In turn, the CBI found this was reducing competition for government contracts, creating unsustainable service delivery models, and stifling innovation.
The CBI therefore welcomed the Cabinet Secretary’s announcement in June 2018, saying he would put social value—rather than price—at the heart of public sector contracts.
To put this commitment into practice, the Cabinet Office is creating a new social value delivery model for public contracts, which will see new metrics included in government tenders. They are currently consulting on their approach before applying the new model to central government contracts from April 2020.
This response fits into our ongoing work on public procurement, and over the coming months we will continue to work closely with the Cabinet Office as they finalise their approach to measuring social value in government contracts.
Business recognises that social value evaluation is incredibly complex, and stands ready to support the Cabinet Office refine the model as it moves into the delivery phase.
To support this, our response highlights five key steps that can help ensure government’s efforts to measure social value have maximum impact in practice:
1. Firstly, government must remove any ambiguity surrounding social value and provide clarity on how the metrics will be evaluated and weighted in practice. This should include working with industry to develop a standard definition, and selecting metrics which build on existing models.
2. Businesses also believes it is vital that the model is tailored and proportionate to the contract being delivered. Members, for example, have strongly suggested that gathering contract-level social value data could place a large administrative burden on suppliers, and dissuade smaller businesses for bidding. Instead the Cabinet Office, should look to measure social value at an organisational level. This approach would also have the advantage of encouraging suppliers to embed practices which deliver social value across all of their operations, rather than incentivising one-off initiatives to win individual contracts.
3. Thirdly, business views diversity of the government marketplace as critical, and believes that careful thought must be put into how to ensure that the new model does not disadvantage SMEs and VCSEs. Our response suggests that the data required under the new social value model is likely to already be being gathered by larger businesses, but not SMEs, and there is therefore a danger that they are placed on the back-foot. Businesses of all sizes therefore support SMEs and VCSEs automatically being awarded some points within the social value section of the tender to encourage more of these businesses to compete for government contracts.
4. The Cabinet Office must ensure that the model is evaluated through the contract delivery phase to ensure that suppliers uphold their social value commitments. In fact, business strongly believes that social value should be embedded throughout the entire commissioning cycle, with a particular focus on the pre-market engagement stage. Early discussions about social value with suppliers will also enable commissioners to consider how to identify the outcomes they want to achieve, and ultimately the social value metrics which will be most helpful. For frontline public services, thought should be given as to whether it is appropriate to consult with end users on the social value commitments they would like to see included. This would mirror the approach taken by some local authorities.
5. Finally, government must ensure that it has the right skills and capabilities to flexibly apply quite a complex model to a range of contracts. While a commitment of initial training for 4,000 commercial staff is welcome, this alone is unlikely to be sufficient. In addition, it is vital that there is ongoing support for these individuals as they begin to apply the framework in their day-to-day roles to a variety contracts. The use of internal champions and peer networks will be important in providing ongoing support, but suppliers also believe there must be sufficient online resources which can be drawn upon, as well as regular refresher training courses.