Public procurement requires a new look at value

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

Over the past two decades, public sector procurement has been very focused on value for money, or VFM, as it has been commonly referred to since Gershon 2003/4.
The review and, as such, public procurement processes have been designed to enable this VFM with a traditional focus on creating tangible goods that relate at comparable cost.

But it’s time to turn your head to a new debate on values ​​that goes beyond costs. Why? Well, firstly because the cost might become less predictable, but also in response to a change in government direction. The most recently published document on public procurement removed the emphasis on finding the ‘most economically advantageous tender’, broadening the criteria by which an offer is judged to be advantageous, including environmental and community benefits.

Redefine the value

When the term “value” has been discussed among supply chain management teams, the emphasis has traditionally been on value for money. We are now witnessing a paradigm shift in which the supply base has been recognized as a tool for having a social and environmental impact that goes beyond the direct work of the organization or department.

This shift in mindset is critical to delivering beyond cost, as public sector procurement teams go further to truly embed social value. This is by no means an easy process as it requires a cultural shift as well as dealing with the complexities of measuring impact. Ultimately, it’s about creating a new value model that doesn’t abandon the traditional goal of balancing cost and quality, but also adds the prism of social value and carbon reduction. For example, the government’s purchasing policy note 06/21 envisages the inclusion of Carbon Reduction Plans in the award of major public contracts.

Establish an agenda for change

The good news is that the public sector is leading the charge and local communities in particular are leading the way, shifting the dial from decisions that are only economically beneficial to those that provide additional environmental and social benefits through supplier selection. But where and how to start? The first step in achieving positive change is to look at both the organization and the community it serves and ask the question: What does value look like? And what role can suppliers play? Once this is quantifiable, teams can put in place a strategy to achieve the goals.

Second, dialogue with suppliers is essential and teams must strive to understand how each of their suppliers can contribute to producing a positive social impact. Procurement professionals need to look at existing processes and add the social value lens to them to ensure that all supplier activities contribute to a clearly defined achievable outcome, taking the intangible and making it measurable. The good news is, it’s not about reinventing the wheel, it’s more about integrating these emerging value concepts into existing processes.

The emerging focus on creating environmental and social value presents an opportunity for procurement teams to be judged on more than just savings. Rapid action now will mean that positive societal and environmental change is built into all of an organization’s activities to truly serve the community it serves.

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