Social Value – you can’t measure what you don’t have

 By Dan Ebanks

The ‘transformative’ Social Value Act came into force in January 2013. Two years on and the evidence suggests not a huge amount has changed. Of approximately 480 English councils surveyed by the Social Value Portal, only 15 per cent said they were developing a council-wide approach to Social Value Act.

Why hasn’t the Act been taken up more widely, especially as its potential benefits would be of great succour to resource starved community based organisations and small businesses? A government review, published last week, highlighted three main barriers: a lack of awareness of the Act, varying understanding of how to apply it within government procurement and the lack of agreed standards for measuring Social Value.

We believe the challenge of measuring Social Value has dampened down thinking on how to use the Act to innovate public services and unleash its transformative potential.

The measurement issue is important. Lord Young, who led the review, reflects that, ‘Social Value has real potential to act as a value for money tool for commissioners tackling severe cost pressures, but better measurement is essential to help the Act to take this form.’

Consider the wider context. The Social Value Act encourages government to commission services that create environmental and social value, things that cannot always be attributed a value in terms of pounds and pence. This tends to see a shift in commissioning towards choosing a service provider on the basis of something other than low cost.

On the other hand, if you speak to public sector procurement professionals on the front line, spending cuts have pushed public sector bodies to commission services for low cost, demonstrated by the massive increase in public sector outsourcing over the past five years.

Would a more effective measurement tool for Social Value help? Yes. Tools, for example, which assess and put a figure to the mix of tangible outputs, like new jobs, and the intangible, such as the self-esteem and self-reliance that come from those new jobs. Clearly, we need to make the case for Social Value before we start commissioning services on that basis.

Since 2013, there has certainly been an increase in the number of online tools and resources looking to measure Social Value. But the challenge of measuring social impact goes back to the early 90s. LM3 and social return on investment (see the SROI network) are examples of robust methodologies used by the public sector.

Why hasn’t a clear winner – in terms of a standard – emerged? Consider that it took the current system of measuring global financial performance over 60 years to ‘evolve’ to its current standard, as Jed Emerson remarks in his insightful piece ‘The Metrics Myth’.

Perhaps we should ask ourselves: is the measurement ‘good enough’ or ‘close enough’ to be useful to us? This doesn’t mean we need to settle for simplistic evaluations of impact, or stop thinking about how we can improve social impact metrics. It means when choosing which metric to use, we consider how close enough we need to get to the ‘truth’ for it to be helpful in terms of our wider aims. In other words, the metric has to have practical purpose.

At the other end of the spectrum to SROI, there is the S/E Ratio: a volume metric that swaps a degree of explanatory power for far less dependence on assumptions. It does not try to ‘model the world’, but it can be calculated quickly and is simple to communicate. Commissioners need to be aware of these trade-offs.

But, equally as important, how do we use the Social Value Act to innovate public services? Some say Social Value is a red herring because we’ve seen it all before – in Best Value. If that’s true of Social Value as a policy idea, what is new is the legislation that offers a real opportunity for innovation. We can, if we choose to, make it a requirement of public procurement to create community benefits.

The evidence so far suggests the Social Value Act is being used to get more community-based organisations to bid for government contracts. This is undoubtedly a positive but again, much like the measurement saga, the endeavour to create a mixed economy of providers pre-dates the Social Value Act. Recently, I spoke to a housing association that rightly celebrated the leveraging of £58 million from an initial investment of £5 million, through using community-based organisations to deliver local services. I challenged them to leverage their entire procurement spend.

Opening up the market to third sector organisations is the tip of the ice-berg. What about using the Act to reinforce market making for local public services? How can Social Value leverage the Open Data agenda to improve the quality of local public services? Is there an opportunity to create financial technology, or ‘fin-tech’, products for the public sector through the Social Value Act? Why not? It’s not a huge leap to start thinking about how market forces can be used to increase those community benefits.

Social Value innovation and measurement are flip sides of the same coin. You can’t measure what you don’t have – we need smarter ways of using the public pound to get much needed resources into our communities.

Dan Ebanks is a co-founder of the start-up Firesouls, whose mission is to create new funding models for the public sector.