Calculating the cost of social value
Building social value into a contract can incur costs for both sides; buyer and bidder. Who should absorb this in the long term? Should businesses increase prices to account for social value delivery on contract? How do public sector bodies incorporate resourcing requirements within already stretched budgets?
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This topic proved to be very popular at the Lexington Social Value Summit in April. The consensus was that the benefits outweigh the investment – but there are nonetheless core elements to consider when deciding on price when bidding for contracts with social value.
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The opportunity cost
The benefit of social value has long been established and proven, but the cost of delivery soon adds up for the bidder. With weightings for social value on tenders increasing to 20% or even 30%, the stakes are high for bidding businesses meaning a huge effort is put into crafting a winning social value bid.
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In our experience the costs businesses need to consider are (but not limited to):
As Guy Battle from Social Value Portal stated at our Summit, companies are twice as likely to win if solid Social Value strategies are in place. Therefore, if businesses want to remain competitive and relevant in the market, investment in social value strategy and resource is essential.
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The knowledge gap?
Social value practitioners tell us that there senior leadership and budget holders often don’t fully recognise the commercial imperative of getting social value right in the business, making it harder for social value leads to secure funding to deliver the programmes needed to achieve commercial advantage. It can be misunderstood as a simple additional organisational cost, and delivery burden for businesses as it can be viewed as sitting outside of their core activity. Feedback is consistent - businesses both large and small face the same concerns. This knowledge gap could be driving higher costs for delivering social value which ultimately means the taxpayer ends up paying the price either through the public body paying more for the contract or the contract being reduced in scope due to higher costs.?
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Does Social Value need a Health and Safety moment?
At our Social Value Summit, a delegate provided a stellar comparison between how the construction industry has embedded the Health and Safety at Work etc. Act 1974, noting that when it was first launched businesses regarded the extra safety checks as a financial drain eating into the bottom line that would need to be compensated for through contract pricing. Fast forward to today, and health and safety is built into our way of life across all industries and essential for every contract. Learning from the history of how this once burdensome process is now business as usual could help social value practitioners speed up adoption across the industry.?
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Count social value in
The discussion at the Summit underlined a point we know well - there is still a need to effectively communicate and demonstrate the positive impact of social value across internal functions and various sectors to overcome barriers such as cost concerns or lack of awareness. At the end of the day, it is an unhelpful notion that social value is an additional cost because the ultimately the taxpayer bears the cost and they – and our local communities - are disadvantaged as a result.
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At Lexington we help clients to shape a strategic social value framework and build the case for embedding social value across this business. Drop us an email for an informal chat about how we could help you, [email protected] .