The pandemic has promoted fresh discussions about the need to build a more equitable, fair and sustainable society. It has forced the revaluing of aspects such as public services and public health and made visible the underpaid and insufficiently appreciated work that is performed to carry out frontline services and care for the most vulnerable in society such as the elderly and children.
How governments define value in public contracts matters and is changing. In 2017, 72 people died in the Grenfell Tower fire disaster, which was closely followed by the collapse of the giant public services and works contractor Carillion Construction.
In the aftermath, the UK government conceded that it had been overly focused on cost savings when awarding public contracts. By 2021, the explicit evaluation of social value was mandated across central government procurement.
This month, mandatory social value procurement, requiring taxpayer-funded contracts to align with one or more of five key policy objectives – Covid recovery, tackling economic inequality, fighting climate change, providing equal opportunity and improving wellbeing – will also be adopted by the NHS.
When done right, public procurement, worth £326bn in the UK of goods, works and services in 2020, or 16 per cent of GDP, can have a major influence in stimulating more sustainable and socially responsible innovations and business practices. In sectors such as transport, education or housing, public demand can influence not just the rate but also the direction of innovation towards more sustainable goals.
For instance, Greater Manchester has set a goal to make the city region’s bus fleet 50 per cent electric by 2027 and 100 per cent electric within a decade, which would reduce carbon emissions by 1.1 million tonnes. Under a new government plan, potential bidders to major government contracts have to first demonstrate that they have a plan for net zero carbon by 2050.
Public procurement can also reward bidders based on their commitments to tackle inequality and improve working conditions by paying the real living wage, providing secure living hours or closing the gender pay gap among its suppliers. According to the Living Wage Foundation, in the social care sector women outnumber men four to one, and 71 per cent of care workers are paid less than the real living wage. Greater Manchester has developed a Good Employment Charter and is on track to becoming the first UK city-region where all borough councils will have pledged payment of the real living wage in their contractual arrangements with adult care providers. As of this month, all workers in adult social care, in Rochdale, Oldham, Salford, Manchester, and Bolton will be paid the real living wage of £9.90 per hour, while the remaining boroughs of Bury, Stockport, Tameside, Trafford, and Wigan are on track to deliver the same hourly rate for all their adult social care staff as soon as possible.
The recently published Levelling Up White Paper* includes plans to put social value at the heart of government spending and to simplify procurement processes, making it easier for small businesses and social enterprises to bid for and win public contracts. This is significant because the tendency by central government departments to favour large, aggregated contracts has led to an increased concentration of spending on a reduced number of large strategic suppliers, as well as geographically in London and the South East of England.
A more social and regionally sensitive approach to procurement by central government departments is needed if the levelling-up objectives are to succeed. It will require brokerage mechanisms to bring together public buyers to align needs and practices, involving service users and workers, and encouraging the formation of consortia and alliances between SMEs, universities and the voluntary sector to create an ecosystem able to deliver innovative solutions to pressing public sector and community needs.
All too often public authorities continue to award contracts based on lowest price, missing opportunities to generate innovation, sustainability and incremental social value. It is now time to ensure that public procurement is better leveraged to advance social good.
Sandra Hamilton is designer of Canada’s first social procurement frameworks, a PhD researcher at the Manchester Institute of Innovation Research, and a member of Mayor Andy Burnham’s Real Living Wage City Region Steering Committee. Elvira Uyarra is professor of innovation studies at Alliance Manchester Business School and co-director of the Manchester Institute of Innovation Research and Productivity Institute. She is an academic co-lead of the Consortium for Research in Innovative and Strategic Public Procurement (CRISPP), a partnership between Manchester and Birmingham universities and the Connected Places Catap
Photo: The Grenfell Tower disaster led to re-evaluating contract awards (Andy Rain/Shutterstock)