Supply chain visibility and buy-in key to social value success

Delivering positive social value outcomes should be at the heart of any development, few would dispute that position. But, that principle should apply across the whole lifecycle of the development, from initial planning, throughout the design and construction stages and should even apply to what happens once the asset has been completed and is in full operation.

That is why it was with some concern that we saw the latest annual guidance from Social Value Portal on the National Themes Outcomes and Measures (TOMs) 2022. Although there are some improvements especially around a “Light” version of TOMs and environmental measurements, what it appears to suggest is that supply chains are not obliged to contribute to social value commitments at the tender stage of the project.

It has to be said this is still under review but in our view, it would be a huge opportunity missed and abrogate supply chain firms of any responsibility for social value delivery at the procurement stage.

Because, unless it’s embedded into the procurement activity, you’re losing that maximum benefit around social value.

The guidance was released in June and there is a lot of good work in the document and many things we would welcome which makes it easier for some businesses, particularly SMEs, to achieve their social value goals. And for the first time they have included social value contributions through the supply chain, which is in itself a really positive thing to do.

However, when it comes to the supply chain contribution, our feeling is that the guidance is over complicated, to the point where it could be causing some confusion. But of greater concern is around social value commitments from the second-tier supply chain at the point of procurement.

What this latest guidance appears to be saying is that while the supply chain during project delivery can contribute to social value, you can’t consider that activity or that contribution at procurement stage.

As it stands, social value plays a big role in the tender and procurement process, with at least a minimum 10% weighting, and we will look to maximise our contribution in order to stand out from competitors, which is one aspect of it. But the other is that without those commitments, there is the potential for a whole raft of social value work to be lost along with the benefit to the communities impacted by the development.

The reason you incorporate social value into your tender is that it is considered as part of the process so that it’s not just the economics, it’s not lowest price, but it’s the whole offering around your tender i.e., the added value, which should be considered from the perspective social value. This consideration will become even more important if the changes proposed in the Procurement Bill become legislative.

What this latest guidance appears to be saying is that while the supply chain during project delivery can contribute to social value, you can’t consider that activity or that contribution at procurement stage.

Without the obligation to make those contributions at tender stage, the reality is that those supply chain firms are less likely to do it.

At tender stage we’ll request commercial quotes from our supply chain to incorporate into our tender bid submission. But in light of the new guidance, social value commitments can’t be included, so our supply chain is under no obligation. Our supply chain is still likely to contribute to social value but this is for the wrong reason i.e., they will do it to ensure they will secure more work from us and not for the social benefit to improve people’s lives.

So, if those businesses don’t perform or achieve their social value commitments, there’s very little to hold them accountable to, because it’s not contractual. There is potentially a conflict of contractual terms between the first tier suppliers and their supply chain. That means we’re actually not going to optimize the delivery of social value on that project, so it’s fundamentally not achieving what you’re trying to achieve in driving social value.

But more than that, it’s depriving the tax payer of the full social value that an asset could be offering. If you’re looking at building a new school for instance, as the Contracting Authority you have to look at every aspect of the development and what offers the greatest social value benefit.

When you’re embarking on a project you should be looking at achieving 100% maximum benefit for the local community. If the supply chain/procurement activity is not contributing to that overall benefit, that is a material loss for the tax payer.

We recognise that for larger organisations such as Atkins and Faithful+Gould, there are social value managers who are able to manage supply chain accountability. However, for smaller businesses that may not have that resource in-house, it is acknowledged that this would be more challenging to determine a contribution from their supply chain which could inadvertently put them at a disadvantage. It is clear that supply chain accountability warrants further discussion and clarity.

The Social Value Portal guidance documents are essential reading for all in the sector and there is a lot of good new guidance in this latest version. But it is our hope that this issue around supply chain social value reporting is reviewed and resolved in favour of ensuring every project delivers the maximum social value possible.

Peter Masonbrook is head of social value at Faithful+Gould and Pamela Paul is head of social value at Atkins