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Social Value and the Magic Money Tree

27 Aug 2019 - 10:38 by Nigel Rose

I’ve been involved in Greater Manchester Social Value Network since its beginning in 2015. I have been to dozens of meetings about social value, run many workshops, attended a fair few conferences and, despite the efforts of the network and other social value organisations, there is still a lot of basic misunderstanding about some aspects of a social value approach. One of the mistakes I come across frequently is the confusion of social value with “additional” or “on-top” value and that’s what this blog is about.

This idea of additional value is particularly attractive in procurement, as it seems to be same as getting stuff free from the “magic money tree” that beneficent private sector companies nurture. This is just wrong. Social Value is not about getting stuff free, everything that a business does will come out of the contract price in some way. They are not charities, they are businesses and there need to be sound business cases for what they do. If you want charity then it is best to go to an actual charity who do raise additional money, and where effectively procurement agencies often do get free stuff funded from elsewhere (please don’t do this, this is already a major problem for some of the bigger charities who are now expected to subsidise contract price with their own fundraising). Thinking that social value is about additional value has a series of consequences which can be perverse and ultimately damaging to the outcomes that all of us want to see.

Put simply, but powerfully, the overall aim of a social value approach in procurement is to encourage virtuous organisations that have community good at the heart of what they do, and to discourage and not contract companies that don’t. This creates a virtuous circle where there are increasing expectations of organisations in an area. It is not just about social value through procurement, which is a relatively small amount, it is about encouraging lots and lots of “good” organisations doing good in the whole range of things they do including reducing their overall harmful impacts.

For the purposes of this blog and for blatantly rhetorical purposes we are going to take the example of two organisations, Good Inc and Bad Inc and compare and contrast.

Good Inc has, over many years, developed good employment practices, it has a wellbeing policy that offers in-work opportunities for exercise, it has a training policy that encourages in company advancement with a focus on women leaders, it takes on apprentices, from a wide range of backgrounds, at a living wage but only those that they know they can offer good support to. They have long-term ties to a disability organisation that helps them to recruit people with disabilities and to keep staff in jobs. They have a loan scheme for employees that find themselves in debt and are at risk of homelessness. The business, as a whole, does its best across the board and is led by a board who cares about its community impact and attempts to measure it. Overall they have a positive social value.

Bad Inc doesn’t do any of this. It sees social value as another hurdle to get over in winning contracts. It has employed specialist social value consultants to game the system so they can maximise their score on the “social value” question. There is no link between their aims as an organisation which are focused on maximising profit for share-holders and social value outcomes. They do not attempt to measure the overall social value generated by the company, as they know that many of their practices would create negative social value, instead they cherry pick positive things they are doing. It’s not that they do nothing that’s “good” but it’s really not the point of the company. The company has poor employment practices, low diversity including a board made of older white men. It’s a company where profit is the only significant driver.

What happens if Good Inc and Bad Inc apply for the same contract and the procurement agency are using the idea of additional value. Which of the agencies can offer more?
Bad Inc makes a number of strategic offers. It will take on 50 apprentices, it will offer £10,000 in grants, it will employ local people, it will save so many tons of carbon. It offers to help 10 voluntary sector organisations. It offers to make a playground. Nothing wrong with these offers but the only reason they are making them is to win the contract. It’s not built into the way the company runs, it’s effectively a loss leader, a business cost that they’ll swallow in order to get the contract.

Good Inc can’t match that offer, it has a thought through policy on how to employ apprenticeships, it prioritises training and retention of existing staff rather than taking on new staff, it is already working with a number of voluntary sector organisations and doesn’t want to take on more,.  It has made considerable effort to lower its carbon footprint. Its policy around social value is to build on its own social value objectives and incorporate them into every contract as they think this is more efficient and effective.

Simply put the consequence could be that a procurer who believes in the “free stuff” model rewards Bad Inc for its poor social value performance and penalises Good Inc. The procurer sees itself as maximising the return for their community by extracting the biggest social value because Bad Inc has offered more but they have failed to weigh that against the unmeasured negative social value of Bad Inc. Rather than maximising overall social value they are operating a system that minimises it. No-one meant to, but that is the consequence. The focus on additionality rewards new things that people are offering and penalises what organisations are already doing. On the surface it might appear to offer a level playing field, a phrase often used in procurement, but it can only pretend to do this by excluding any activities that are not specifically part of the tender.

To be clear, I am not making an argument for the status quo, that Good Inc should stay as it is and not develop. I am making the opposite argument. Development based on evidence of the good work that Good Inc is already doing has much more chance of succeeding than the “cheap” offers of Bad Inc. Let us value the Good Incs of this world and discourage the Bad Incs until we get to the situation when, hand on heart, we can say that all the organisations that we procure do more good than bad.

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