Our public services are losing money to haphazard ‘social value’ procurement
Public procurement is a third of all government spending, a tenth of the entire economy, yet it is a topic that attracts almost no media attention. Discussions of procurement are rare and typically only get attention when something goes wrong, like the controversy around PPE contracts during the pandemic.
Think of it this way, for every pound spent in the UK, 10p of it is spent by a faceless bureaucrat following rules and systems that most of us never even consider. But if you want to know why nursing home care is so different from area to area, why government projects are always so over budget, and why hospital food is as bad as it is, the answer lies, in part, with procurement.
Now, this should not be a controversial statement, but the goal of public procurement should be the same as the goals of private procurement or even just the spending that you do in your day to day. We should be trying to balance cost against quality so that taxpayers are getting good value for money. But, this seemingly uncontroversial idea is in tension with another idea – social value. It is the idea that procurement budgets should be spent to add extra positive benefits on top of the product provided.
Under the David Cameron coalition and Theresa May’s government, social value in procurement moved up the agenda. Social value is a broad term and includes anything that benefits the environment, local communities, equality, the economy, wellbeing, and community cohesion. This causes confusion. When a company is filling out a procurement tender, it is unclear to them which kinds of social value the public servant who is processing their bid will think are the most important.
For example, if you are running a company seeking to provide cups to an outdoor event run by your local council, you will have to wonder if it is in your best interest to provide the cups at the lowest cost possible, if you should charge a bit more and provide the most environmentally friendly cups, or if you should charge even more and make the cups in a local community centre. Companies that know the procurement process well and companies with government affairs staff who know the actual procurers well, have a clear advantage over newer and smaller firms.
Even if you care a lot about everything under the social umbrella, it is not clear that you are getting good value for money. The true cost of these policies is obscured and the money comes not from the budget for communities or for the environment, but it instead is coming from the budgets for transport, the NHS and schools. We might be slightly improving wellbeing and community through local government procurement budgets, but this scatter-gun approach is likely to be less effective than targeted and direct spending.
Procurement has been getting worse over this past decade. Single-bid tenders are tenders that only one company submits a bid to, meaning that there is no competition to deliver the service to the government. And they’re on the rise.
The government is also incredibly reliant on a few strategic suppliers, companies they spend over £100m with. They are therefore of strategic importance to the government. Carillion was one-such strategic supplier and when it collapsed the government was left with almost 400 contracts that could not be fulfilled.
The Procurement Bill that is going through parliament seeks to remedy many of the issues outlined, and, if delivered, it’s going to make a huge difference, even if it doesn’t manage to make headlines. Marginal improvements are important and procurement intersects with everything else the government does. A lean and responsive state that isn’t overly reliant on the fortunes of a handful of big businesses is going to be much more effective at delivering the promises that the next prime minister makes – whatever they may be.