Recognising social value in public procurement

Charities bring unique value to public services, yet two thirds aren’t paid enough to cover their costs – a situation which could be dangerously unsustainable as inflation pushes charity finances to breaking point. One solution is to recognise social value in the new Procurement Bill – the successor to EU law.

• £17bn of public procurement goes to charities. Charities have huge potential to bring their local knowledge, experience, and relationships to delivering public services – bringing additional social value and reducing demand on other services.
• Two thirds of charities doing contracts aren’t paid enough to cover their costs. With inflation making everything more expensive, there is a very real risk of failure – with devastating consequences for people who rely on these services.
• We need a new approach which recognises wider social value and prices it accordingly, so that contracts are sustainable and communities enjoy the full benefits. The Procurement Bill going through Parliament offers a chance for change. The Bill’s definition of ‘value for money’ should recognise social value (e.g. wellbeing) and cost savings from reducing demand on other services (e.g. healthcare or police time). Commissioners must be mandated to score contracts against this definition.

Our recommendations

1. The Procurement Bill’s definition of ‘value for money’ should recognise social value (e.g. wellbeing) and cost savings from reducing demand on other services (e.g. healthcare or police time). Commissioners must be mandated to score contracts against this definition.
2. Detailed guidance and secondary legislation should explain why and how commissioners should approach social value and savings from reduced demand. The proposed ‘Procurement Review Unit’ should scrutinise commissioners on how far social value is being achieved and how commissioners evaluate contracts on wider cost-savings and other social benefits in the long-term.
3. Local authorities should not wait for Westminster to legislate. They can and should act now to implement a definition of value for money which recognises social value and cost-savings. The best way to do this is by co-designing with charities, civil society, and businesses in their area to reflect local needs.

These proposals emerged from our work with Kent County Council to work towards full cost recovery for charity contracts.