There is a conundrum developing at the heart of public sector procurement. How do we balance the need for local authorities to save money on a scale that maximises competition with supporting the local economy, jobs, and hard-pressed social enterprises?
The Social Value Act, which has now come into effect, encourages consideration of the social, economic and environmental impact of purchasing decisions by public bodies. It has long been known that local spending has a massive multiplier effect on local economies and that local authority supply chains have a large carbon footprint. The Act is a licence to make sure these factors are considered in purchasing decisions as well as the relentless pressure to make savings.
Public sector bodies can respond in a number of ways. They can work with potential suppliers to help them understand how best to work through the procurement regulations to win contracts. They can try harder to reduce the hurdles that make life dfficult for competitive smaller organisations. With live contracts in place, customers can collaborate with suppliers to reduce environmental impact and increase opportunities for job creation and training.
In the case of the North East Procurement Organisation we now have a well-established programme of support for local suppliers – Business Generator – that includes sustainability as a core requirement in our tenders and use of our systems to make it easier for local suppliers to bid online for local authority contracts in the region.
As a purchasing consortium, our main role is to make savings by encouraging authorities to buy collectively. We know, however, that savings need to be sustainable and we will be using the Social Value Act to help balance our priorities. The same will go for other consortia across government who have a lot on their plate trying to get an increasingly fragmented landscape of public bodies, including free schools, hospital trusts and NHS clinical commissioning groups, and local authorities to work together.
To be really effective at saving money and increasing social value from procurement, the answer has to include making larger contracts accessible to more local suppliers. New systems are available to help, such as dynamic purchasing systems, online marketplaces for holders of personal social services budgets and neutral vendor contracts where a lead organisation manages a whole supply chain, making it easier to innovate quickly.
Another way to maximise the impact of procurement on social value could be to encourage all public sector organisations in an area to work together to put their combined spending power behind common programmes of work.
In the north east, we are developing even better relationships across local government, universities and colleges, housing associations, and health and blue-light organisations to save money together and support local suppliers.
Written by Ian Taylor for The Guardian