How SMEs can win more work using social value

Neil Macdonald
04 March 2022

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SMEs would do well to familiarise themselves with the Social Value Model because it contains many measures that place smaller firms at an advantage when bidding for public work, says Thrive’s Neil Macdonald. 

Small businesses aren’t exempt from the need to demonstrate social value when they bid for public contracts. And an SME that finds itself in competition with the big players is certainly not at a disadvantage. In fact, the Social Value Model goes a long way to level the playing field, giving the edge to SMEs in a lot of areas as well as making it easier to partner with Tier 1 and 2 contractors.

The government’s Social Value Model has brought much-needed clarity to the question of what counts as social value and how should it be dealt with in public procurement. It helps explain the rules stated in government procurement policy note PPN06/20, which specifies that a minimum of 10% weighting be given to social value in decisions to award central government contracts.

SMEs are given particular prominence in a number of areas.

• Covid-19 recovery - under MAC 1.3 - “Supporting organisations and business to recover”.
• Tackling economic inequality – under MAC 2.1 - “Create opportunities for entrepreneurship and help new organisations to grow, supporting economic growth and business creation”.
• Tackling economic inequality – under MAC 3.1 - “Create a diverse supply chain to deliver the contract including new businesses and entrepreneurs, start-ups, SMEs, VCSEs and mutuals”.

So, contracting authorities are obliged to give equal consideration to bids from organisations of these types when assessing social value, because it is government policy to ensure that they are fairly represented in public procurement decisions. 

The wording of MAC 3.1 says this very clearly, stating “whether as prime contractors or within the supply chain, it is essential that [small businesses] have the same opportunity to tender for and, where appropriate, win government contracts as other firms”. It is particularly important to highlight that point about “within the supply chain”. 

SMEs that embrace social value are in a strong position, even when they’re not bidding for public contracts directly. That’s because they can help large Tier 1 and 2 contractors to meet their social value obligations and that can be a big plus point when it comes to winning business further down the supply chain. 

How does social value give SMEs an advantage?

Social value is all about the additional benefits brought to a local community or environment as a result of projects being carried out there. SMEs’ positions in their communities are a big plus here. Small businesses tend to hire locally and many contracts will specify increasing employment in affected areas as an objective. Locally focused SMEs will be providing all of their employee training, apprenticeships and work experience opportunities in those areas as well. 

SMEs are also frequently deeply embedded in their communities - sponsoring events, engaging with local business associations - making it easier to be responsive and consultative in designing and delivering projects. Crucially, SMEs tend to have relationships with other local businesses, which is advantageous in diversifying project supply chains. National and international organisations would need to spend considerable time and money to replicate these factors which simply flow from being an SME! Measurement is also harder for huge companies that don’t have immediate visibility over all their activities. 

So, with contracting authorities required to give at least 10% weighting to social value considerations in awarding contracts (and many giving more), these points go a long way to counterbalance the big players’ strengths when in direct competition. 

But when looking for sub-contract work, by making it easier for primary contractors to quantify the value of supply chain activities, SMEs that have a clear view of their contribution to larger projects will find themselves singled out as preferred partners. 

How the Impact Evaluation Standard helps SMEs win with social value

Notwithstanding all the above, many SMEs don’t realise just how much the Social Value Model stacks things in their favour. In fact, some see it as red tape - another box to tick - that benefits contractors with dedicated bidding expertise. That’s not the case. 

The Social Value Model goes to great lengths to help SMEs understand what they need to report on by providing a list of some 52 different metrics. Even so, some of these can be hard to put into practice. The language used is often quite abstract. It can be hard to see how many of the things your business is already doing could be classified as social value. 

That’s where a framework like the Impact Evaluation Standard is invaluable. It digs down further into the Social Value Model’s metrics to give a comprehensive 109 metrics, along with robust proxy values for all of them. This makes it very simple to translate non-monetary benefits into valid, recognised cash equivalents. 

Just consider some of the areas that SMEs can report on.

• Jobs, apprenticeships, or other recognised training places created and/or completed.
• Work experience hours and placements offered.
• Learning interventions (mock interviews, mentoring, CV advice, etc) provided.
• Steps taken to treat suppliers fairly and pay them on time.
• The value of subcontracts awarded to other SMEs.
• Enhancements made to the natural environment in the course of delivering the work.
• Reductions in waste and improvements in recycling.

And that’s just the tip of the iceberg. The social value revolution is a massive opportunity for SMEs to help make their environments and communities stronger and more resilient, as well as accessing a larger share of public spending themselves. 

Click here to find out more about how to use the Impact Evaluation Standard to measure and report your social value.

Neil Macdonald is the chief executive of online software platform and consultancy Thrive. If you believe your business could benefit from social value support or measurement, you can contact Neil at neilm@thrive-platform.com