Community challenge

In an arena where the mantra of best value has long meant ‘the lowest possible prices’, talk of a culture change is afoot.

As the financial landscape has grown less and less forgiving, commissioners of public service contracts might be excused for becoming even more fixated with the bottom line.

The law, however, has other ideas. As of last month, those commissioning contracts worth £173,934 or more are, for the first time, being required to consider how the service they’re procuring can improve the social, environmental and economic well-being of the areas being served - and how the procurement process can secure that improvement. If social landlords do not comply, they could potentially be taken to court.

The Social Value Act, which came into force on 31 January, opens the door to greater community consultation and an increased social enterprise role in delivering public service contracts.

It offers procurement teams a legislative framework - specific measurable targets - which they can use when working on contracts. What is not yet entirely clear, is the implications for those that do not adhere to them. ‘It will need several areas of clarification through its implementation and therefore it remains to be seen whether its requirements will have much of an effect on the activities of those organisations that are covered by its remit,’ says the National Housing Federation in its briefing note on the legislation, published last month.

The Chartered Institute of Public Finance and Accounting, meanwhile, states that there are, ‘no penalties for non-compliance’ with the act. Its briefing, also published in January, does, however, add that not adhering to the legislation ‘can be potential grounds for a judicial review challenge’ - this is the procedure through which courts examine the decisions of public bodies to ensure they act lawfully and fairly. Anybody with sufficient interest in a case can make an application for a review.

A question of necessity

Housing associations already invest a great deal into the communities they serve - more than half a billion pounds in 2010/11, according to the NHF’s Building futures neighbourhood audit report, published in July last year. Social landlords and their contractors help people into jobs and training, improve community spaces and improve residents’ health and well-being - so isn’t the Social Value Act a bit unnecessary as far as they are concerned?

The act’s architect, Chris White, member of the international development select committee and MP for Warwick and Leamington, explains that he thinks ‘organisations need to move away from a top-down approach to delivering goods and services, towards one that’s more collaborative’.

He adds: ‘Social landlords [should] think of themselves in a wider community context: engaging with community organisations to improve well-being beyond providing housing. This will allow them to show the additional value they can create and help to reduce costs in the long term.’

Mr White acknowledges that many providers have been operating in the spirit of the act for years. For example, Procure Plus - a buying consortium representing around 40 social landlords including Your Housing Group, Together Housing Group and Symphony Housing Group - also delivers job creation schemes and community enterprises. Mike Brogan, its chief executive, is enthusiastic about the benefits of the ethos encapsulated in the act.

‘It goes without saying that it’s the right thing to do, but it makes business sense as well,’ he says. ‘We trade £130 million a year, more than any one housing association would get near to spending. That means we get discounts, and we use a little of that discount to do the added values - [members] get those and pay less money.’

Others are more circumspect. John Skivington, director of LHC - another major procurement consortium that counts 70 councils and housing associations among its members - welcomes the opportunity the Social Value Act offers service commissioners for crystallising social, environmental and economic factors within contracts. But he warns that landlords must maintain a sense of perspective.

Balancing act

The act itself does not include any explicit guidance on how organisations should balance all that it requires while also controlling costs. Mr Skivington says his advice ‘would be to re-evaluate your best value equation [price vs quality] and understand that if you give social, environmental and economic factors greater emphasis, something else has to give’.

‘You might get a better social outcome, but you need to ensure you’re not compromising quality,’ he adds.

His concerns are partially echoed by Katy Mills, group head of procurement at 62,000-home Places for People, which has created 40 apprentice places within its supply chain since 2009. She too says the Social Value Act strengthens what her organisation already does while ‘encouraging it across the sector’, but acknowledges the need for pragmatism.

‘The biggest challenge for us is the fact we’re nationwide,’ she says. ‘The act will be teaching us to look at social, environmental and economic benefits across the UK, which will be a tough requirement. It’s got to be proportional to what we’re buying, and with the market we’ll come up with solutions as far as we can. It comes back to procurement best practice.’

Gary Stephens, procurement director at Orbit Group, which owns more than 37,000 homes, flags up a further common concern. As well as complementing, rather than superseding, the best value framework, the Social Value Act sits within existing European Union procurement directives - which enshrine transparency and competition.

‘If you say in your document that you’re doing local engagement, you’ve got to be careful how you word it,’ he says, ‘so it’s not a contract that’s unavailable to someone in France or Germany.’

Citing a 2010 procurement process Orbit carried out for Gwent-based Tai Calon Community Housing, Mr Stephens stresses the importance of engaging small and medium enterprises via the local press, community engagement exercises and, where necessary, training around tendering.

‘I use the example of someone who may be brilliant at painting houses or doing cyclical decorations, but not so good at completing the paperwork. But you can’t lower your standards when it comes to insurance, working at heights and safety,’ he counters. ‘Just because they’re a smaller company doesn’t mean they don’t have to comply with requirements.’

Spreading the word

The success or failure of the Social Value Act hinges on more than mere compliance. ‘The most important step is to get the message out there that social value is not just another tick-box exercise,’ says Mr White. ‘It’s a tool to help commissioners, providers and communities to develop services that can help communities, not a burden.’

Developing strong communication channels between teams procuring services and those managing contracts down the line is crucial if landlords are to achieve this aim - so everyone is clear what’s expected. But starting with the right attitude is also crucial.

‘Let’s be clear about this,’ cautions Mike Birkett, chief executive of Lancashire’s Calico Homes, which runs its own social enterprise operation providing housing-related support. ‘[Some] commissioners will be thinking, “Costs will go up, there’s too much bureaucracy, we’ll need more resources to assess contracts and everything else”. There’s wriggle room in that legislation.’

Beyond instilling can-do cultures within commissioning providers, there’s a broad consensus that effective tools must be found to guide contractors in the same direction. This means ensuring social value factors are built into key performance indicators, while also recognising that longer contracts point the way towards commitments being taken more seriously.

If they don’t, social landlords are now more likely to be challenged. Procure Plus’ Mr Brogan for one predicts a slew of complaints from small and medium enterprises and the social enterprise sector if a lip-service approach is detected.

Reshaping partnerships, and identifying and evaluating social value, will constitute a steep learning curve for social landlords, believes the Social Value Act’s champion, Mr White. But if the legislation is to realise more than localised benefits, it’s one that needs to be embarked upon.