Supply Side
Deirdre Halloran on Social Value in Public Procurement

Deirdre Halloran is a third year Ph.D Candidate in the School of Law at NUI Galway in Ireland.  Her research is titled Community Benefit Clauses in Public Procurement: A Comparative Legal and Policy Analysis.  She is a lawyer by training and is an expert in the use of Social Clauses in public procurement.

At the recent early career researcher event in London, organised by Dr Pedro Telles (see our overall report of the event here), Halloran started by explaining that government and contracting authorities can simply strive to achieve “value for money” or can look to achieve more. So you can ask for a proposal to build a school – to provide the building on competitive terms. But if the authority also wants to get training for long-term unemployed, or guaranteed apprenticeship places as part of the contract, then it can add the requirement for employment or training – that is social value.

There has been a “renaissance in recent years” in these ideas, according to Halloran, and the 2014 European Directives strengthened the ability to include social value in procurement processes. Her focus for the presentation was around social value versus cost – she explained that she did not intend to get into the legal ability to use social value clauses or criteria – she would purely focus on the costs. And these are very practical arguments. If you as a buyer force suppliers to take on apprentices, how much has it cost? (If we don’t think these costs will be passed back to us somehow, we are probably being naive)! So we need to be able to measure social value, but it is an elusive concept.

There are indeed many definitions even before we come to the measurement. “Collective benefit to the community” seems to sum it up reasonably well.  Then in order to measure that, we need to look at outputs and outcomes. An output is “through the contracting process we successfully got 5 apprenticeships from the supplier”. But an outcome is what actually happened to the people and community involved, which is fundamentally more important in policy terms.

Halloran explained that there are many ways proposed to track this – she knows of “76 frameworks that measure social value”. But many of these are run by commercial entities looking to sell their services, and there is a lot of PR around their material and less in the way of real analysis. She briefly described a handful of the better and more prevalent tools.

The New Economics Foundation developed the “Social Return on Investment” concept, the most popular method employed to evaluate social value. It has positives but is “hugely complicated to use”. The Scottish Government in 2010 developed its own framework and in 2012 commissioned a report which found that if SROI is to be used successfully as a tool by the public sector buying community then there there is more work to be done in simplifying and communicating its potential uses.

As Halloran says; “Academic studies on the use of SROI have found many issues with it as an objective tool: standardisation of the application of financial proxies was needed; the tool was too complex and time consuming; it was not clear that the data and evidence used in SROI can be aggregated meaningfully to produce an accurate cost measure, and therefore it is not clear whether it is possible to put an accurate monetarised value on all interventions and outcomes”.

The local multiplier effect is another methodology that looks at the specific area of how money is circulated around a local economy to provide a multiplicative benefit compared to the original public expenditure. But this “requires a huge amount of data” (and we have doubts about its fundamental premise, to be honest).

The “Wellbeing Valuation” is yet another approach, favoured by the UK government. It puts a monetary value on “competence level” or sense of community. It tries to consider how much people value different things – it has 72 metrics and creates “financial proxies”. But, as Halloran explained, again it needs huge amount of data to get results, and costs a lot to put in place. The more basic problem was identified though in that report by Glasgow University for the Scottish Government. Basically, there is no monitoring data available on the outcomes of social value actions, so it cannot be assessed in a conventional cost / benefit manner.

We find this a really interesting area. Seeing for instance the different approaches of England, Scotland and Wales to social value in public procurement, anyone might ask “which approach is best”, “what is working” and “is this cost-effective for the taxpayer”? It is somewhat shocking really that no-one seems to be able to answer those questions, despite significant investment, so Halloran’s study is very welcome.

But one difficulty perhaps for her is that we suspect many politicians don’t really want to know the answer to those questions! If the research shows it does work, then fine. (England might be more inclined to strengthen their approach in that case.) But if the research came up with more negative answers, then there might be pressure to drop policies, even though the voters seem to like them. If social value actions proved to have some effect but to be a very expensive way of creating jobs, or providing other benefits, which is my personal suspicion, then that could be the worst of both worlds. There would be some public demand to continue but the politicians would also know it was an inefficient use of money – that would create a dilemma for them!

Anyway, we look forward to hearing more in time about Halloran’s work.