Public sector procurement requires a new lens on value

Simon Payne, Client Director at Proxima, discusses the challenges that public sector procurement teams are facing and how they can deliver social value

Over the past two decades, public sector procurement has been very much geared towards delivering Value for Money, or VFM as popularly known since the 2003/4 Gershon
Review and as such public procurement processes have been designed to enable this VFM with a traditional focus on creating tangibles that relate to a comparable cost.

But it’s time to turn our heads towards a new value debate that moves beyond cost. Why? Well, firstly because the cost might be becoming less predictable, but also in response to a shift in focus from Government. The most recently published paper on procurement removed a focus on finding the ‘most economically advantageous tender’ broadening the criteria by which a tender is deemed advantageous including environmental and community benefit.

Redefining value

When the term ‘value’ has been discussed among teams looking at supply chain management, traditionally the focus has been on value for money. We are now seeing a shifting paradigm whereby the supply base has been recognised as a tool to deliver social and environmental impact that reaches beyond the direct work of the organisation or department.

This change in mindset is key to delivering beyond cost, as public sector procurement teams go further to truly ingrain social value. It is by no means an easy process as it requires a cultural shift as well as dealing with the complexities around measuring impact. Ultimately it is about creating a new value model that does not abandon the traditional aim of balancing cost and quality but that also adds the lens of both social value and carbon reduction. For example, the Government’s procurement policy note 06/21 looks at taking account of Carbon Reduction Plans in the procurement of major government contracts

Setting an agenda for change

The good news is that the public sector is leading the charge and local authorities, in particular, are leading the way, shifting the dial from solely economically advantageous decisions to those which deliver additional environmental and social benefits via supplier selection. But where and how to begin? The first step to achieving positive change is to look at both the organisation and the community it serves and ask the question – what does value look like? And what role can suppliers play? Once that is quantifiable then teams can set a strategy in place to deliver on targets.

Following that, dialogue with suppliers is key and teams must set out to understand how each of their suppliers can help in delivering positive social impact. Procurement professionals should look at the existing processes and add the lens of social value into those to ensure that all supplier activity contributes towards a clearly defined achievable outcome, taking the intangible, and making it measurable. The good news is that it is not a case of reinventing the wheel, it’s more about layering these emerging value concepts into existing processes.

The emerging focus on delivering environmental and social value presents an opportunity for procurement teams to be judged on more than just savings. Swift action now will mean that positive societal and environmental change is embedded across all of an organisation’s activity to truly deliver for the community it serves.