ESG: Evaluating social value in tenders — What should we focus on?

As part of Spend Matters’ summer campaign to think about social value and all things related to “ESG in procurement,” we are delighted to hear from Peter Smith, author and procurement-with-purpose evangelist.

In the UK, as in many countries, the public sector is increasingly looking at “social value” when it comes to selecting suppliers. The term “social value” can cause confusion in that the public sector uses it to include environmental and economic “wider value” issues, and indeed everything considered under the “procurement with purpose” umbrella.

In any case, UK central government bodies are now expected to include social value factors in tender evaluations, with a weighting of at least 10% of the total marks.  But given the huge range of potential issues, how will this play out in real life?  When social value could include anything from the fight against rainforest de-forestation to employment of disabled people, from animal welfare to fair wages in the supply chain, how will public contracting authorities put this imperative into practice?

So it was interesting to see a recent UK government tender document for a major professional services contract. Sure enough, social value was an evaluation factor, with a weighting of 10%.  This was then split into two areas, with a quite detailed question to be answered on each.  I do like that approach, which allows more focus than offering bidders a long “shopping list “of potential social value actions, or simply allowing bidders to offer anything they want.  That can lead to a tick-box mentality from bidders and also supplier proposals that do not directly support the buyer’s goals.

The first question in this case focused on diversity and inclusion in terms of the bidding firms’ workforce. It asked for the current situation and plans for the future, across the whole lifecycle of recruitment and staff management, and went into some detail about the sort of issues and actions that the bidder might want to cover in their response.

This seems like a good and relevant question. It does have a wider social value in terms of helping disadvantaged (by background, race, sex, disability, etc.) people gain jobs in a high-status, high-income sector. That is a wider government policy goal, and is also far more relevant to professional services firms than asking them what they are doing about Orangutans or human rights in Asian factories. You might also argue that a more diverse workforce ultimately benefits clients too.

The second question focused on the health and wellbeing of the bidding firms’ staff.  Again, the question was detailed and asked the bidder to cover a range of worthwhile and relevant areas within that topic. But I do wonder — is this truly “social value?”

It is absolutely a valid question to ask a professional services firm as part of a supplier assessment and selection process, I should quickly add. The delivery of services is very much about people in this sector, and if a supplier’s staff are well-motivated, physically and mentally healthy, feel good about themselves, their job and their firm, then clients are very likely to get better performance from that supplier.

So in many ways it’s a good question to ask – but is it really “social value?”  You might argue that healthy staff reduces the burden on the health service to the benefit of everyone, but it does not appear to be supporting a wider policy objective in the way that the diversity topic does.

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What else could the buyer have asked? Well, in terms of emissions, professional services is not as significant a sector as many, but “net zero” is such a high-profile issue and target, there could well have been questions about that. Such firms do account for a lot of business travel, use a lot of computing power (and paper), so emissions could have been a valid line of questioning. Or what about encouraging diversity in the supply chain?  I might have asked how bidding firms were supporting (for instance) minority-owned businesses, SMEs (smaller firms), social enterprises and charities in their own supply chains. That would have been relevant and supports a core set of social value issues.

Anyway, this is not written in the spirit of criticism. Rather, it is an interesting illustration of the challenges and opportunities that public sector buyers are going to face when they implement the social value imperative. And as the private sector also looks for suppliers to be doing more in these areas, the same issues will face buyers there too. Choosing where to focus attention during supplier evaluation and selection processes is going to be tricky, and no doubt we will see some quite different approaches over the coming months and years.

Peter Smith is a speaker at the UK Public Sector Show on July 29, with a session titled Procurement with Purpose and Social Value — Are We Getting Confused?  (And How Do We Make It All Work!)  Virtual tickets are free to public sector staff.