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Social value behind waste contracts

As of January this year, the Social Value Act has placed a duty on public bodies to consider social value in procurement. The theory is that smaller, community-based social enterprises that can demonstrate added value, such as apprenticeship schemes for the long-term unemployed, should win more work if consideration is not simply taken on cost alone.

The Act requires public bodies to make the considerations at pre-procurement stage and only applies to contracts that exceed the EU Public Procurement thresholds of £113,057 for ‘schedule 1’ entities such as the NHS and £173, 934 for other public sector contracting authorities, which would include local authorities.

REalliance programme manager Emma Hallett explains: “The legislation is not very specific in terms of what social value is. Within the social enterprise field there has been concern expressed as to whether it is powerful enough to make a significant difference. My view is that that is too gloomy. There is the possibility for the Act to really make some difference but it is not going to automatically happen. The legislation is very typical of the approach the Coalition is taking with the localism agenda. I think this means it will be more messy, but not necessarily in a bad way. It will be different in different local areas and localities.”

Concerns have been raised within the waste and recycling sector that the thresholds are too high for many of the contracts where the third sector is likely to be involved. Speaking at the event, Surrey Reuse network coordinator Alex Green said: “It is a shame the threshold is set the way it is. It means words like ‘collaboration’ and ‘consortium’ are essential.” While London borough of Richmond waste minimisation officer David Ingham agreed that “at the moment most social value is created below the threshold”.

Both Ingham and Green illustrated how examples of great partnerships between local authorities and the third sector were already in existence as good practice. Ingham explained how the selling of collected recyclable material and Richmond’s textiles bring site collections were areas where the council was generating considerable social value already. As an example, it has specified a local group with learning disabilities as a subcontractor within a contract. Ingham added that currently price was “the biggest chunk of our value tender, then quality, which includes social value”.

One of the keys to the third sector gaining more contracts is the need to be able to deliver on the requirements of a contract. Green, from Surrey Reuse warned: “The act is not a panacea. We have to prove we are effective organisations delivering what we say we do.”

He flagged up the issue of measuring social value and the need for data, and said that groups needed to collect data, and to try to do it in the same way. “[Data’s] not easy to get, yet alone consistently from any organisation,” he warned. He also urged third sector groups to look more at collaboration and the benefits to be had by working in networks: simple factors such as having access to more vehicles as a group and therefore being able to take on larger contracts.

Ray Georgeson, of Ray Georgeson Resources (RGR) and non-executive director of Bryson Recycling and REalliance, said he was “optimistic” about the Act and it offered “an opportunity to forge new partnerships”.

He said: “The purpose of the exercise is to illustrate the potential and the need for change in attitudes.” But he again raised the issue of measuring what social value is.

“We need to agree on methodology and create a level playing field – how can we assess if we have not collectively agreed the social impact?” he asked.

“There has been thin guidance from the Cabinet Office and nothing from Defra. We are going to have to apply our own resources. Otherwise we have a real danger that this will go the same way as other worthy private member’s bills.”

Sita director of external affairs Gev Eduljee quoted research published in the company’s report ‘Creating Social Value’ that was published in October 2012, on the potential of the Act to increase the market share of the third sector in waste and recycling contracts. This had estimated the third sector currently has 0.25% of the £1.2 billion contract value in the sector. “Even if that increases to 2%, that’s a lot of money,” he said.

“Up until recently the third and private sector have been going head to head on some contracts. Now, there is a better case to work together,” Eduljee said. He added that there were advantages for both parties in such an arrangement but admitted that the company often didn’t know who topartner with, particularly in new areas.  This echoed Sita’s report, which suggested creating a regional or central third sector ‘register’.

Eduljee said that for the Act to really deliver “we need to hardwire it into the procurement process”. The feeling among the group was that it would be “up to the sector” to make the Act work for it in the absence of any Government intervention. Ideas of a code of practice, voluntary agreement or a social value in waste forum were mooted.

Aside from this, the need for ‘buy in’ from elected members was also raised, as there was concern that many were likely to be unaware of the potential impact the Act could have.

LCRN business development manager Mike Webster said: “What you can see, from players like Sita, is that there is industry interest, and they can look to make competitive advantage.

“There needs to be simple consensus on what social value is and there needs to be agreement on that. So step one would be to determine what social value is and how to measure it. It is incumbent on us getting together a forum or some way of formalising what value is and what needs to be measured.”

The question is, does the industry have the will to make it happen?

The Social Value Act 2012

The Public Services (Social Value) Act 2012 became law on the 8 March 2012 and ‘live’ on 31 January 2013. Chris White MP initiated the Act as a Private Members Bill.

The Act, for the first time, places a duty on public bodies to consider social value ahead of a procurement. It states: “The authority must consider (a) how what is proposed to be procured might improve the economic, social and environmental well-being of the relevant area, and (b) how, in conducting the process of procurement, it might act with a view to securing that improvement.”

During the Bill’s second reading in the House of Lords, Lord Addington said: “The Bill constitutes a good idea that has been given a few teeth. Whether those teeth are sharp enough, or the jaw that contains them is strong enough, we do not yet know.”

Viewpoint from the charity textile collector

Paul Ozanne, Salvation Army Trading company national recycling coordinator

“We hope the Social Value Act will help to highlight the wide array of benefits besides financial that are available to local authorities when seeking materials collection contractors and support the Act as a positive step towards creating a fairer tendering process for operators who might not be able to match the prices of some commercial collectors but which may have many other valuable benefits to offer its customers.” 

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