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What does the Procurement Act 2023 mean for Social Value?

vchasmgWith the Procurement Act 2023 set to 'go live' in February 2025, Ian McKinnon, Chief Product Officer at Veriforce CHAS, explores the background of Social Value and where it fits in relation to the Act.

As many businesses can evidence, Social Value has become a core component in public sector procurement over the last ten years. Yet, while Social Value is far from a new concept, its integration has proved slow. Hampered by a lack of clarity around its definition and measurement, it has been left open to interpretation.

In recent years, legislation has clarified the definition of Social Value and outlined how to advance the Social Value agenda. Additionally, the frameworks and assessment solutions being developed under the Procurement Act are streamlining the integration of social sustainability principles into the policies and operations of organisations across a range of sectors.

Background of Social Value

The first significant piece of legislation concerning Social Value was the Public Services (Social Value) Act 2012, which came into force in January 2013. It was established to ensure that all public bodies in England and Wales considered how their commissioning and procurement decisions could positively impact the social, economic, and environmental well-being of their communities.

What followed was the gradual development of various strategies and frameworks to strengthen the Social Value Act. However, it was only in the publication of Procurement Policy Note (PPN) 06/20 in 2020 that it became mandatory for central government departments and non-departmental public bodies to explicitly evaluate Social Value (with a minimum weighting of 10%) when awarding contracts. This represented the largest change in the drive to establish more prevalent social value. Towards the end of 2020, The British Standards Institution (BSI) published BSI 8950:2020 Social Value. Understanding and enhancing. Guide supporting businesses from both public and private sectors to demonstrate social responsibility and embed sustainability practices.

Today, although local authorities are not yet required to incorporate Social Value into their processes, many have voluntarily adopted it. Some have even assigned a Social Value weighting of 20% or more in their evaluations.

What does Social Value mean for businesses?

Social Value is the governance element for organising the impact your business has on the people and places it interacts with. So much of what a business does has an impact—whether it's who and how we employ people, how we interact with communities, or how we manage our resources like recycling and water. Understanding, measuring, and managing that impact is how we can determine the value created by these activities.

This understanding of Social Value is crucial, as it ensures businesses can clearly see the effects of their operations on society and the environment, and subsequently enhance their contribution to sustainable development.

What does The Procurement Act 2023 say about Social Value?

While the Procurement Act 2023 doesn't explicitly reference the term 'Social Value', there is plenty within the legislative text to convey—with certainty—that it remains a central principle:

  • Maximising public benefit; contained within section 12 of the introduction, 'maximising public benefit' is an objective which mirrors the same terminology used by charity law. And for the Procurement Act 2023, it has been widely interpreted as a direct reference to Social Value. Nonetheless, it is probable that the cabinet office will take steps to properly clarify its definition in due course.
  • The MEAT to MAT approach; section 19 of the Act looks at competitive tendering and outlines the transition from most economically advantageous tender (MEAT) to most advantageous tender (MAT). This represents a move from value for money being the primary driver of a winning public contract bid with more weight afforded to the environmental and social benefits that are being offered. Section 23 of the Act provides more detail on award criteria.
  • KPIs; section 52 of the Act introduces key performance indicators for contracts worth more than £5 million. The KPIs will be set out to measure progress and hold contractors to account for the promises they make at the start of a project. KPIs will be publicly available to incentivise good performance. With Social Value commitments at the forefront of many new tenders, suppliers can expect start-to-finish scrutiny on their Social Value pledges.
  • National Procurement Policy Statement (NPPS); under section 13 of the Act, contracting authorities (with some exceptions) will be required to have regard to the policy objectives contained within the NPPS that is current at the time they are carrying out a procurement. Published in May, the NPPS, which is set to go live in conjunction with the Procurement Act 2023, explicitly cites Social Value as a strategic national priority for public procurement.

How will the Procurement Act drive Social Value progression?

While the focus of the Act is to cut red tape and streamline the process of public procurement, there's no doubting it offers a mandate to enable the delivery of wider benefits for the public good.

By insisting, via the NPPS mandate, that public authorities evaluate Social Value criteria in their tender processes, the Act ensures that procurement activities contribute to community well-being, promote sustainability, and support inclusive economic growth.

The MAT approach will level the playing field by breaking down barriers to SMEs who might have shied away from competing for tenders in the past. Small local businesses are often better placed to understand the challenges faced in their communities and the Act will grant them increased opportunity to put forward the solutions.

Meanwhile, the extra scrutiny tied into the KPIs will hold businesses to account for their social responsibility promises and should further support the quest to eliminate deceptive practices such as greenwashing.

Embedding and assessing Social Value

For businesses ready to embark on their Social Value journey, there is support available. For example, Veriforce CHAS has recently launched CHAS Social Sustainability, their ground-breaking ESG assessment solution.

CHAS Social Sustainability enables organisations to strengthen and validate their internal processes while offering independent verification of their supply chain’s social sustainability practices. Our comprehensive assessment helps businesses not only meet regulatory obligations but also foster positive social and environmental impacts, in line with modern procurement standards. We evaluate key business activities that contribute to social impact, such as Equality, Diversity, and Inclusion (EDI), employee wellbeing, recycling, water management, and sustainable procurement. Additionally, we assess each organisation’s maturity in managing and maximising social value through these initiatives.

With more businesses armed and ready to deliver Social Value in line with the recognised standards, communities nationwide will soon begin to acknowledge the benefits of positive social change.

Conclusion

Public procurement has already made significant inroads with social responsibility. The Procurement Act will strengthen what has already been started by driving Social Value through its requirements to ensure procurement decisions consider not only cost and quality but also social, economic, and environmental impacts. The onus will be on all businesses to align with these best-practice standards to meet increasing regulatory compliance as well as fulfil market and societal expectations.

For more information about CHAS Social Sustainability, visit here.