Social Value — how local marketplaces could provide the next model for public service delivery

This is the last of a three-part series (part one and part two here) by Dan Ebanks, co-authored with Frank Zeng, where they look at the potential for government becoming stewards of local market places, where residents are matched with local providers…

In two earlier two posts Dan reflected on how stock market investors are looking more and more at social impact metrics because “new economy” companies are increasingly creating public goods that can’t be measured using standard financial metrics. He then examined a potential role for government in creating open platforms, which aggregate information on local citizens’ needs, prices of services, details of providers and then deliver public goods. In the final article, we consider how government may have already started down that road with the Social Value Act.

Measuring or maximising social impact

Measuring social impact is important but, done properly, is a time consuming process. At one end of the spectrum, we have the cost-benefit analysis camp, advocating tools with lots of explanatory power. But these exercises take a lot of time and require quite specialised skill sets that, for instance, councils have to buy in.

At the other end, new ‘killer apps’ have emerged that ‘at the press of a button’ generate findings that are very easy to communicate. But possibly explain much less.

Is there another way? At Firesouls, we’re looking at moving away from measuring social impact. Why? Mainly because our customers have told us that current tools are either too simplistic or too complex to use. Our goal is maximising social impact, and we’re looking at an aggregator model to do it.

The Social Value Act as a game changer?

Traditionally, government has provided public goods directly to communities. In Dan’s last post, he reflected on how, aided by technology, the Social Value Act could potentially drive the transformation of local councils from service providers and commissioners to aggregators. They would become organizations that collect and manage information and draw residents to platforms to facilitate a matching of needs around transparent prices and quality ratings.

The debate around Social Value presents an opportunity to move councils towards this aggregator model.

Consider that local community based organisations already meet the needs of many in our communities — often where statutory services fall short or where other public services have been decommissioned in recent years.

These local organisations know where the need is, are part of local networks and understand the local histories in a way that private sector suppliers and even local councils never will. They simply lack resources.

Is there anything wrong with the current approach?

The Social Value Act has provided a ‘nudge’ to suppliers to integrate ‘additional community benefits’ into the delivery of contracts. But we have not seen the increase in community benefits that both the legislation and the sheer size of government procurement spend — £140bn a year by our estimates — warrants. The way in which Social Value is currently created is inefficient.

Typically, a supplier bidding for a government project would pre-determine the amount of resources needed to meet a given level of social outcome and work this into its tender bid. Often this means opening up the supply chain and sub-contracting work out to community based providers. Or offering a number of apprenticeship schemes in connection with the delivery of the contract.

Getting more work to local businesses and creating more local jobs is fundamental to the growth of our local communities. But is Social Value just about satisfying economic development objectives around jobs and apprenticeship schemes? Doing Social Value any other way would be inefficient for the supplier, but is this a reason for limiting what Social Value can do?

While it is inefficient for suppliers to deliver wider social outcomes, remember that community based organisations have Social Value hard-wired into them — it is part of their DNA. Why not continue to support them delivering Social Value through the services they provide to their local communities, services that help councils and other agencies meet their commissioning outcomes?

Making the public pound go further

As well as matching suppliers with community based organisations, we’ve created a voucher system that facilitates the exchange of resources between these stakeholders. Using the vouchers, we are able to maximize the amount of resources provided by suppliers to community based organisations and at the same time guarantee a fair price to be paid by suppliers. And we can monetise the benefits going from supplier to community based organization. This means we don’t have to measure Social Value.

We’re actually doing this — in a pilot with a national housing association, facilitating the Social Value component of a £20m deal.

So for us, the Social Value Act is an example of how we can shift government away from being a provider / commissioner organization and towards an aggregator model. We think councils and other local government agencies will increasingly become stewards of local markets, where residents can search for service providers and make their buying decision based on transparent pricing and a robust ratings system. What we’re doing with the Social Value Exchange is a small step in that direction.