Centre for Citizenship Enterprise and Governance
Social Value Consulting Services to the UK Public Sector Organisations
Date
October 1, 2014
Contents
E X E C U T I V E S U M M A R Y
What gets Measured gets Done
5
Infogram
Frameworks
7
Rules of Implementation
8
Measuring Social Impact
9
Choice Considerations
10
Analysis of Tools
11
SVA pilots 2014
12
Rank Benchmarking
13
Capacity Development
14
Value Delivery
15
Sharing the Findings
16
P R O C U R E M E N T
1
The Blended Model
17
2
Legislative Framework
19
2.1
Public Services (Social Value) Act 2012
19
2.2
Local Government Act 1999 and Best Value
21
2.3
Public Contracts Regulations 2006
22
2.4
Localism Act 2011
22
2.5
ISO26000 (2010) Social Responsibility
24
2.6
EU Legislation
25
2.7
EU Non-financial Information Disclosure (2014)
26
2.8
EU GECES Social Impact Measurement (2014)
27
2.9
Draft EU Procurement Directive
28
3
Social Innovation Industry Framework
30
3.1
Global Reporting Initiative (GRI-4)
30
3.2
International Integrated Reporting Council (IIRC)
31
3,3
Benefits Corporation (B Corp)
31
4
Procurement Framework
32
4.1
Social Value Commissioning
33
5
National Perspectives on Social Value Act
37
5.1
The View from Newcastle
37
5.2
The Social Value Portal Survey
38
S O C I A L V A L U E C O N T E X T
6
Best Practice in Community Engagement
41
6.1
Establish Link to Broader Strategic Framework
41
6.2
Community Engagement Theory Overview
44
6.3
Frameworks for Community Engagement
45
6.4
Who are our Stakeholders?
46
6.5
Stakeholder Mapping
47
6.6
Facilitating Effective Community Engagement
48
6.7
Avoiding Pitfalls
51
6.8
Monitoring and Evaluating Engagement
51
6.9
International Best Practice Examples
54
6.10
National Benchmarks
59
6.11
Other UK Based Tools and Support
59
7
Governance Perspective of Social Value
62
8
Curating CSR through Capacity Development
71
8,1
Attitudes of Employers and Employees
73
8.2
Current Solutions through Education
76
8.3
What is required for real Capacity Development
77
9
Leading Edge in Social Value
79
9,1
The 2% Levy
79
9.2
Integrated Health and Social Care
80
9.3
The UK Social Value Portal
81
10
Social Impact Analysis Market
83
11
New Generation Impact Metrics
90
12
What you need to Measure
94
13
Building your Social Impact Metric Solution
98
14
Recommended Social Value Specification
101
CASE STUDY
15
Scenario Overview
102
15.1
Current status in a pilot
102
15.2
Moving Forward
104
16
Regional Integration – Third Sector
106
16.1
Wards and Zones
106
16.2
Primary Partnership Targets
107
16.3
Key Deliverers
107
16.4
Needs
108
16.5
Social Responsibility
108
16.6
Third Sector Designation
108
16.7
Regional Recommendations
109
17
Regional Integration – Private Sector
110
17.1
Social Value Considerations
110
17.2
Key Challenges for Professional Service Sector
114
17.3
Key Challenges for SME and Micro Sectors
117
17.4
Regional Recommendations
122
18
Developing the Business Case
124
18.1
Financial Proxy Methodology
125
18.2
Non-Financial Proxy Methodology
126
19
Operational Structure
127
20
A Universal Social Metric
129
21
System Design
133
`
This report is a redaction of multi-disciplinary contributions from various sources all of whom are
acknowledged. Whilst there is a central theme, readers may detect a variety of styles and approaches
which add to the richness of the conclusions. Responsibility for issuing the report is taken by the Centre for
Citizenship, Enterprise and Governance (CCEG is part of the University of Northampton Business School). We are
grateful to the UK Social Value Portal for their assistance under which this report is shared under a Creative
Commons 4.0 license (Attribution-Non-Commercial-No Derivatives 4.0 International CC BY-NC-ND 4.0) details
of which are available from CCEG. The report was based on realistic figures from real life examples in the West
Midlands. Non-public information has been removed to allow other public sector organisations to learn from the
findings of this report.
B U S I N E S S C A S E
22
Financial Modelling
136
22.1
Indicative Platform Pricing
136
22.2
Financial KPI’s
137
22.3
Summary Tables – Likely Cases
142
22.4
Summary Graphs – Worst Case
144
22.5
Stress Test Analysis
148
22.6
Other Public Sector Organisations
151
22.7
The Broader Marketplace
155
23
Financing Options
156
24
Roll Out Strategic Options
160
24.1
Strategic Structural Options
160
24.2
Option 1: Internally Created System
161
24.3
Option 2: External Contractor - Payment
162
24.4
Option 3: Third Party – Commission
162
24.5
Option 4: Gain Share
163
24.6
Option 5: SPV/JV with Third Party
163
24.7
Strategic Options - Conclusions
164
25
Risk Assessment
166
25.1
Conceptual Risks
166
25.2
Strategic Risks
168
25.3
Operational/Technical Risks
169
25.4
Financial Risks
170
26
Recommendations
172
F U R T H E R I N F O R M A T I O N
27
Authors and Advisors
174
28
Access to More Information
175
28.1
Background to case study
28.2
Social Earnings Ratio
28.3
Further Support
28.4
Related Media
29
Contact
176
30
Financials
177
30.1
Assumptions
177
30.2
Numbers – Worst Case
181
30.3
Other Local Authorities
189
31
IT Platform Solution Estimates
196
31.1
Atos: global multinational
197
31.2
Boiler House: SME provider
204
Executive Summary
WHAT GETS MEASURED GETS DONE
This report proposes a system to transform public procurement in the UK so that it delivers many
millions of pounds of social value. We can, for the first time, give companies and social enterprises a
built-in incentive to provide social value, not just once but in an ongoing competitive race to outdo each
other. In the public services we can have a race to the top, instead of a race to the bottom.
This report is the work of the Centre for Citizenship Enterprise and Governance by a large inter-
disciplinary team with sections covering the relevant legislative, industry and procurement frameworks. It
is not an academic research paper but concludes with a proposal for a pragmatic solution, which can be
made available to all suitable public sector organisations within 6 months.
ALL CONTRACTS WON ON SOCIAL VALUE
The climate for public sector organisations could not be more difficult. Increasing non-statutory social
costs set against rapidly decreasing budgets have led to crisis. Most western economies, including the UK,
still face many years of pressure on public spending. Governments are increasingly looking for ‘blended
solutions’ – bringing together the public, private and third sectors to make limited public funds go further.
Such blended solutions are not easy to make work.
The Public Services (Social Value) Act 2012 (SVA) offers a tool which public sector bodies can use to
create these blended solutions but it has not yet lived up to its promise. Under the SVA public sector
organisations such as Local Authorities can consider ‘social value’ as a criterion when awarding tenders
for services – for example awarding 10% of the marks. Awarding 10-20% of the marks for a tender on
social value may sound a small amount, but if the margin of winning contracts is usually less than 10-20%
this means that all contracts will be won or lost on social value. ‘What gets measured gets done’ and if
companies need to add social value to win contracts then that is what they will do. But what does taking
social value into account mean? How can the criteria be set in a way that complies with EU procurement
rules? How can it be measured and assessed by overstretched procurement teams, who lack the time and
experience to pick their way through claims of social value?
Then there is a problem of scalability. Most public bodies have very large numbers of suppliers. A
standard consultancy led manual social impact tool is too costly, too cumbersome and resource intensive.
So when used social value criteria are used at all, they are often assessed simply by a slick presentation and
written submission, which probably tends to favour the larger organisations than a small passionate social
enterprise. It becomes is a tick-boxing exercise rather than a means of measuring real commitments and
using the power of competition to drive more and more social value.
We believe the missing element has been a robust, objective, legally compliant, marking and assessment
system for public procurement tenders. The portal we are proposing in this paper will resolve this issue.
It is fully financially modelled, achievable, and can be delivered within 6 months at no/minimal cost to
the public organisations using it. Importantly, it can scale to measure the many thousands of supplies
used the larger public sector organisations.
HAVING YOUR CAKE AND EATING IT
This report has been prepared particularly with Local Authorities in mind as they face severe funding
pressure while being expected to deliver a huge range of services. This will help them have their cake and
to eat it too – to comply with SVA, to deliver significant resources into non-statutory responsibilities (and
thus to relieve the delivery pressure), to create and educate all organisations with their areas on socially
responsible business, to cover all costs associated with the initiatives but also to generate income for the
Local Authorities to develop their social ambitions. Other public sectors will have their own challenges
and opportunities. We have mapped out a low risk and a low cost measured pathway to ensure these
ambitions can be achieved and have given detailed guidance on best practice in community engagement
drawing on historical implementations of very similar roll-outs.
THE KEY THAT UNLOCKS THE POTENTIAL
The portal we are proposing would enable any public sector organisation to effectively and safely set
criteria for social value in their tenders and have bidders’ performance against these criteria assessed. It is
this objective measurement, made possible by the correct social value metric that can be fully automated,
that unlocks the potential of the SVA. Under the system:
The organisation can set either general social value criteria or set specific criteria for particular tenders,
with our guidance on how to comply with EU procurement rules
By using criteria that specify the ‘local’ social value added, organisations can legitimately give local
firms a chance to do better than bigger (inter)national firms, and deliver to the UK £100m’s of social
value annually.
Bidders submit information on their ‘social value add’ to the portal. This information is
independently verified and assessed against the council’s criteria.
There is no cost to the public sector organisation. It will be funded by a 1% levy on the winning
contractor to cover cost of independent social impact analysis and monitoring contract compliance
across the period against Social Value Act and under the Best Value obligation
A further optional 1% raised will go into a fund to support social value projects chosen by the public
sector organisation and provide training for bidders, including local social enterprises, to maximise
their social value add - raising millions of pounds of funding on top of the social value benefits.
The system funds capacity development across the public, private, third, and community sectors in
CSR and social value provision
Stress testing the financials leads us to conclude the system has guaranteed sustainability and
scalability to be adopted by other public sector organisations
CONCLUSION
This report is not a talking forum, a discussion point, or an academic study. It is an eminently practical
‘what, how, when’ report with an implementation goal of April 2015 launch for the first public sector
organisation, and 30 days for subsequent organisations. The findings utilise the most current and rapidly
adopted methodologies in the world now in practice across 5 continents, have been risk assessed, with
numerous pilots carried out in the UK. We value your feedback to our collective understanding of
creating social value, and hope we are able to engage everyone in providing an agreed solution. We would
welcome a dialogue with other organisations.
1 The Blended Model
In the past six years there has been a seismic shift in the social innovation industry stemming from the financial
crisis of 2008. Before the crisis things were best described as adequate with the Private Sector enjoying a burgeoning
period with company stock market listings at an all-time high. The Public Sector benefited from taxes on increasing
company profits, and the Third Sector
1
enjoyed Lottery money – a fairly recent addition to their funding. The
community was the recipient from all this. Since the crash, however, no sector has adequate resources forcing us to
become reliant on each other to survive and to develop new blended solutions to meet the challenges of society.
To encourage blended solutions governments all over the world have created frameworks and legislation to try to
ensure the needs of people are met despite what at times appears unsurmountable and unpredictable problems at
local, national and international levels most of which we cannot control. What it has created in the middle is a need
to articulate financial and social value using a common language. The problem is that whilst financial value is a
mature and well defined concept, we have yet to arrive at a common language and definition of social value. Indeed,
not only is there not a robust consensus on social value between the three sectors, there is not even consensus
within a sector.
legislation
, regulatory
standards and industry
frameworks
Public
Sector
Private
Sector
Third
Sector
Community
Sector
offer contracts and social
business eco-system
share burden of
service delivery
Awarded contracts and
receive CSR education
offer cash,
expertise and
resources
embed social values and
provide community access
receive resources
to become
sustainable
LOCAL
NATIONAL
INTERNATIONAL
FINANCIAL
VALUE
SOCIAL
VALUE
1
The Third Sector describes the space taken up by voluntary organisations, charities, not-for-profits, and some Community
Interest Companies (CIC) and Social Enterprises.
The blended model describes our current imperative all round the world that as Public Sector
funds recede, we are increasingly turning to the Private Sector to deliver our community services
through Third Sector agencies. Easy to articulate, but extremely difficult to do.
The inherent complexity of social value instruments does not stop there. With the rapid escalation of legislation,
procurement directives and industry frameworks – 5 since March 2014 alone (UK, EU, India, USA), the conflicting
advice and structures between local, national and international initiatives, means that dependent procurement
decisions are increasingly leading to significant litigation. Typically procurement metrics within the usual PQQ/ITT
2
process usually have less than 5% difference between success and failure, but social value structures are typically
asking to demonstrate 10-20% social impact in contract value (20% being the EU/UK goals
3
, larger in Wales), so
the importance of getting proper processes right cannot be underestimated.
All this within a backdrop of decreasing available resources to the public sector but increasing commitment to
promote ‘good’ businesses often linked to the complexity of attendant ‘difficult to do’ agendas such as health, well-
being, education, poverty, deprivation, unemployment, crime, etc. With some local authorities preparing for a very
significant reduction in staffing whilst simultaneously aiming to expand CSR values across their localities the
potential problems are evident. In effect procurement departments aim to target the tens of thousands of varying
sized businesses registered on their digital tendering platforms or procurement portals in a manner which is both
transparent and efficient; this means inevitably scalability of existing approaches is a severe bottleneck. Not only
measuring but also monitoring social value performance puts an onerous burden on the public sector and
SME
4
/micro businesses. This is worsened by the use of not-for-fit purpose social impact analysis techniques which
are usually expensive, overly complex, slow, resource intensive, subjective, easily challenged, difficult to articulate
and niche; shockingly there are over 1150 social impact metric techniques internationally so creating a bewildering
choice for the naïve operator.
To get around such hurdles public sector organisations have come up with some interesting but questionable
solutions. The usual outsourcing the responsibility to the corporate professional advisory industry is, of course,
illegal due to the conflict of interest; the poacher cannot become the gamekeeper unless it disowns the clients which
they are also measuring. In frustration some have developed their own metric, ignoring the industry standards that
have been developed by professionals over years of research and refinement; naturally they are incomplete and fail
to conform to the plethora of global industry frameworks. Unfortunately the sector is also often counter intuitive
falling foul of broader EU regulations that mean you cannot give preference to local suppliers. Even selected
sampling for monitoring contracts is discriminatory.
This report is not just fact finding, not only about best practice and neither simply researching what acceptable
would look like. It not only sets out the details of the issues, but provides pragmatic solutions that can be readily
implemented within the normal operating operandi of public sector organisations. It is not academic research but
sits within an agnostic, non-agenda, non-partisan university approach with significant advisory across all sectors..
This is a developing understanding of the space and thus it is not perfect but it is comprehensive. We have given
what is legal, compliant with national and international frameworks, the choices available, how to compare apples
with oranges in social value, best way to implement and how to avoid significant costs.
2
Pre-Qualified Questionnaire (PQQ) and Invitation to Tender (ITT)
3
Minimum of 20% of ESF funding to LEPs is ring fenced from ESIF/EDFT to deliver social inclusion and
eradicating poverty
4
Small to Medium Sized Enterprises
Practices that are likely to end you in expensive litigation include ignoring extensive EU
and UK legislation, positive discrimination for local suppliers, the use of conflicted
corporate advisory services to determine procurement, use of metrics outside industry
standards, sampling of monitoring performance, failing to take into account social value
performance outside your region. Ignorance is no defence in court.
27 Authors and Advisors
The Centre for Citizenship, Enterprise and Governance is grateful to the support and contributions from the
following people.
5
ACADEMIC PUBLIC THIRD PRIVATE
Sajin Abdu Prof Christine Bamford Guy Battle Joel Blake
Paul Adams Laura Choake Tony Clabbe David Cunningham
Simon Blake Brett Crabtree Estella Edwards Charlie Helps
John Michael Daly Deirdre Noonan Cynthia Figge Karl Mehta
Sarah Digby Amardeep Singh Bahar Gidwani Vicky Sargent
Dr Inge Hill Dr _______________
6
Philip Sweet
Rani Kaur Kirk Williams
Abhijith Nair
Adrian Pryce
Priyanka Rajdev
Prof Olinga Ta’eed
5
Some of the views expressed in this report are personal contributions and may not necessarily convey the organisations they
represent. As a report – those City Councils, Public Body, Public Sector Organisation or Local Authority members have no
obligation to accept or adhere to any of the advice given.
6
Redacted for sensitivity
28 Access to More Information
28.1 Case Study
Infogram of report http://ow.ly/Bsr9Y
Intro video (part 1) http://ow.ly/BALSM
Intro video (part 2) http://ow.ly/BqrbK
Implementation http://ow.ly/Bgx2d
Case Study pilot http://ow.ly/BgxpJ
An exemplar support agent www.cultiv8solutions.com
28.2 Social Earnings Ratio
Prezi introduction http://ow.ly/BgvR9
Timeglider history http://ow.ly/Bgw1S
Online course http://cceg.edcastcloud.com
Jorum http://ow.ly/BgzZU
Application 2% Law India http://ow.ly/BgAOc
28.3 Further Support
Consumer brands www.brandanomics.com
Public sector www.bigredsquare.com
Listed companies www.sii2000.org
Social Value Portal www.socialvalueportal.com
28.4 Related Media
Vatican Video http://ow.ly/BgAwB
Vatican Interview http://ow.ly/BgACg
Vatican coverage http://ow.ly/BgB1J
House of Lords http://ow.ly/BgBqT
Institute of Financial Services http://ow.ly/BgBI6
London Guildhall http://ow.ly/BgBQK
The Dorchester http://ow.ly/BgCmD
29 Contact
Specific correspondence to: Professor Olinga Ta’eed PhD FIoD
7
Director
Centre for Citizenship, Enterprise & Governance
University of Northampton Business School
Park Campus, Boughton Green Road
Northampton, NN2 7AL
UK
Mob: +44 (0) 7798 60298
Tel: +44 (0) 1604 892363
Fax: +44 (0) 1604 893537
www.cceg.org.uk
Twitter @theCCEG
Facebook facebook.com/TheCCEG
YouTube youtube.com/TheCCEG
LinkedIn linkedin.com/company/centre-for-citizenship-enterprise-and-governance
Google+ plus.google.com/+CcegOrgUk
Blogspot thecceg.blogspot.co.uk
7
Professor in Social Enterprise, University of Northampton
Visiting Professor in Capacity Development, Birmingham City University
Programme Board, Healthy Villages, Birmingham Community Healthcare Trust
Non-Executive Steering Committee and Chair of Advisory Board, Social Value Portal
