A Disadvantage of Social Value – An International Business Lens
While Social Value is recognised as a meaningful mechanism to ensure that Government contracting delivers benefit to local communities and important agendas, there is a disadvantage. The focus the UK Government has placed on Social Value has discouraged international companies bidding to win these contracts. While, that may not sound like a disadvantage, with the globalisation of industry over the past decades, often global companies hold the capabilities and resource to deliver the best outcomes for the best value, however cannot demonstrate Social Value impact easily.
An end of summer read (a Lexology article) highlighted this reality to me. With novice level knowledge of economic theory of free trade, combined with more proficiency in defence procurement both international and domestic, I started to unpack the elements of Social Value policy which may make it difficult to attract international companies and then untangle potential ways this could be resolved. The following is a brainstorm looking at how achievable is it for an international company, offering no in-country production, to meet with Social Value model award criteria, to a level that would be considered successful in being awarded government contracts:
Theme 1: Covid 19 Recovery
Policy Outcome: Help local communities to manage and recover from the impact of Covid-19.
Model Award Criteria (MAC)
Achievable for an International Company?
Difficulty Category
MAC 1.1: Creation of employment, re-training and other return to work opportunities for those left unemployed by COVID-19, particularly new opportunities in high growth sectors.
Difficult due to prerequisite knowledge on demographic, skills shortages, employment challenges in each geography and community.
Inability to create jobs if there is no legal entity set up in domestic location
Local knowledge gap;
Commercial/legal disadvantage
MAC 1.2: Support for people and communities to manage and recover from the
impacts of COVID-19, including those worst affected or who are shielding
Not possible if being delivered with no legal entity in the domestic location.
Commercial/legal disadvantage
MAC 1.3: Support for organisations and businesses to manage and recover from the impacts of COVID-19, including where new ways of working are needed to deliver
services.
Possible through the use of supply chain in the domestic location
Commercial/legal disadvantage
MAC 1.4: Support for the physical and mental health of people affected by COVID-19,
including reducing the demand on health and care services.
Not possible if being delivered with no legal entity in the domestic location.
Commercial/legal disadvantage
MAC 1.5: Improvements to workplace conditions that support the COVID-19 recovery
effort including effective social distancing, remote working, and sustainable travel
solutions.
Not possible if being delivered with no legal entity in the domestic location.
Commercial/legal disadvantage
Theme 2: Tackling Economic Inequality
Policy Outcome: Create new business, new jobs and new skills
Model Award Criteria (MAC)
Achievable for an International Company?
Difficulty Category
MAC 2.1: Create opportunities for entrepreneurship and help new organisations to grow, supporting economic growth and business creation.
Possible through the use of supply chain in the domestic location
Commercial/legal disadvantage
MAC 2.2: Create employment and training opportunities particularly for those who face barriers to employment and/or who are located in deprived areas, and for people in industries with known skills shortages or in high growth sectors
Not possible if being delivered with no legal entity in the domestic location.
Commercial/legal disadvantage
MAC 2.3: Support educational attainment relevant to the contract, including training schemes that address skills gaps and result in recognised qualifications.
Potential if there is support from the government to provide a platform for the international company to provide free career talks, literacy support etc.
Potential if there is support from the government to provide a platform for the international company to provide free career talks, literacy support etc.
Commercial/legal disadvantage
Local knowledge gap
Theme 2: Tackling economic inequality
Policy Outcome: Increase supply chain resilience and capacity
Model Award Criteria (MAC)
Achievable for an International Company?
Difficulty Category
MAC 3.1: Create a diverse supply chain to deliver the contract including new businesses and entrepreneurs, start-ups, SMEs, VCSEs and mutuals.
Potential if there is the ability to co-design and co-create services with the supply chain which are based in the domestic market
Commercial/legal disadvantage
MAC 3.2: Support innovation and disruptive technologies throughout the supply chain to deliver lower cost and/or higher quality goods and services.
Potential if there is a supply chain in the domestic market which can collaboratively develop disruptive technologies.
Commercial/legal disadvantage
MAC 3.3: Support the development of scalable and future-proofed new methods to modernise delivery and increase productivity.
Achievable with a domestic supply chain which can contribute to this.
Commercial/legal disadvantage
MAC 3.4: Demonstrate collaboration throughout the supply chain, and a fair and responsible approach to working with supply chain partners in delivery of the contract.
Achievable with a domestic supply chain which can contribute to this.
Commercial/legal disadvantage
MAC 3.5: Demonstrate action to identify and manage cyber security risks in the delivery of the contract including in the supply chain.
Achievable with a domestic supply chain which can contribute to this.
Commercial/legal disadvantage
Theme 3: Fighting climate change
Policy Outcome: Effective stewardship of the environment
Model Award Criteria (MAC)
Achievable for an International Company?
Difficulty Category
MAC 4.1 Deliver additional environmental benefits in the performance of the contract
including working towards net zero greenhouse gas emissions
Possible – would require investment into the domestic area to enhance natural environment. Potential to work with charities to provide this.
Local knowledge gap
MAC 4.2 Influence staff, suppliers, customers and communities through the delivery of the contract to support environmental protection and improvement.
Difficult if there is no legal entity in the domestic location
Commercial/legal disadvantage
Theme 4: Equal Opportunity
Policy Outcome: Reduce the disability employment gap
Model Award Criteria (MAC)
Achievable for an International Company?
Difficulty Category
MAC 5.1: Demonstrate action to increase the representation of disabled people in the contract workforce
Difficult if there is no legal entity in the domestic location
Commercial/legal disadvantage
MAC 5.2: Support disabled people in developing new skills relevant to the contract, including through training schemes that result in recognised qualifications.
Difficult if there is no legal entity in the domestic location
Commercial/legal disadvantage
Theme 4: Equal Opportunity
Policy Outcome: Tackle workforce inequality
Model Award Criteria (MAC)
Achievable for an International Company?
Difficulty Category
MAC 6.1: Demonstrate action to identify and tackle inequality in employment, skills and pay in the contract workforce
Can be done to some degree through the supply chain (domestic). However the effect/ evaluation of this intervention will not be as strong as those doing it with a legal presence in the country.
Commercial/legal disadvantage
MAC 6.2: Support in-work progression to help people, including those from
disadvantaged or minority groups, to move into higher paid work by developing new
skills relevant to the contract.
Can be done to some degree through the supply chain (domestic). However the effect/ evaluation of this intervention will not be as strong as those doing it with a legal presence in the country.
Commercial/legal disadvantage
MAC 6.3 Demonstrate action to identify and manage the risks of modern slavery in the delivery of the contract, including in the supply chain
Potential with domestic placed supply chain.
Commercial/legal disadvantage
Theme 5: Wellbeing
Policy Outcome: Improve health and wellbeing
Model Award Criteria (MAC)
Achievable for an International Company?
Difficulty Category
MAC 7.1: Demonstrate action to support health and wellbeing, including physical and mental health, in the contract workforce.
Achievable with a domestic supply chain which can contribute to this.
Commercial/legal disadvantage
MAC 7.2: Influence staff, suppliers, customers and communities through the delivery of the contract to support health and wellbeing, including physical and mental health.
Potential with domestic placed supply chain. An intervention would be possible to support the supply chain to enhance working environment.
Commercial/legal disadvantage
Theme 5: Wellbeing
Policy Outcome: Improve community integration
Model Award Criteria (MAC)
Achievable for an International Company?
Difficulty Category
MAC 8.1: Demonstrate collaboration with users and communities in the co-design and delivery of the contract to support strong integrated communities.
Potential with support from the third sector. However it will be difficult to quantify the number of hours spent supporting local community integration when not in the country.
Commercial/legal disadvantage
MAC 8.2: Influence staff, suppliers, customers and communities through the delivery of the contract to support strong, integrated communities.
Potential with domestic placed supply chain. An intervention would be possible to support the supply chain to have outreach efforts in the community they work.
Commercial/legal disadvantage
After that brainstorming analysis, only 25% of the model award criteria can be achieved by an international company with no UK footprint. If this is the case, the government will soon be realising suboptimal outcomes in their procurements where only domestic suppliers take part in the tender, limiting innovation and value for money, as a result of Social Value in procurements.
The heart of Social Value is to ensure that taxpayers’ money is being spent not just on goods and services but also to reap a Social Value to provide good for stakeholders and society. Could it be that interpreting or thinking about Social Value in terms of absolutes, forces government bodies to award contracts to domestic producers? An alternative could be that international companies generating minimal domestic produce can still offer Social Value by the provision of investing (not monetary) time and effort within the contract for Social Value goodness – offered from overseas?
The takeaway for me is the additional work and cost to responding to procurement notices that global companies will inevitably have to endure in order to comply. What do you think global companies can do to overcome this? What can the UK Government do to support?
