How good are local authorities at awarding contracts to SMEs and VCSEs

At the National Social Value Conference 2020 we presented our league table of local authority social value procurement. Read on or click the button below to access the full report.

The UK public sector is the biggest customer in the country, spending almost £300bn per year on procurement of goods and services.

 

In recent years, the government has become increasingly focused on ensuring its procurement is not only good value for money, but produces 'social value' as well. Social value can be defined as taking into account the wider economic, social and environmental effects of your actions. In 2012 the government passed the 'Social Value Act', which requires contracting authorities to consider how its procurement of services could improve the social, economic and environmental well-being of the relevant area.

 

 

Procurement through voluntary organisations and social enterprises (VCSEs), through small and medium enterprises (SMEs), and through local organisations, is often thought to bring more social value than procurement through large private companies.

 

We have often highlighted that Local Government is considerably better at awarding contracts to SMEs and VCSEs, and this continues to be the case. But some local authorities are much better than others. Our report ranks local authorities by their performance on social value procurement last financial year, to provide a benchmark against which to measure progress in the years to come.

 

Social value procurement local authority league table

 

Social value procurement

 

In recent years, the government has become increasingly focused on ensuring its procurement is not only good value for money, but produces 'social value' as well. Social value can be defined as taking into account the wider economic, social and environmental effects of your actions. In 2012 the government passed the 'Social Value Act', which requires contracting authorities to consider how its procurement of services could improve the social, economic and environmental well-being of the relevant area.

We have often highlighted that Local Government is considerably better at awarding contracts to SMEs and VCSEs, and this continues to be the case.

Last financial year Local Government awarded contracts worth £3.9bn to SMEs and VCSEs. This is 16 percent of the total value of contracts awarded by Local Government. In contrast, Central Government awarded contracts worth £3bn to these organisations, only 6 percent of its total contract value.

Local authorities also awarded £4.4bn worth of their contracts to organisations based in their local area. Please note, for the purposes of this report we have defined 'local organisations' as those based in the same region i.e. London authorities awarding to London organisations, South West to South West, Welsh to Wel.

While local authorities are performing better than their colleagues in Central Government on awarding contracts to SMEs and VCSEs, it would be wrong to treat them as one homogeneous group. Some local authorities are standout performers, while others are lagging behind.

This report delves further into this, categorising local authorities in the UK depending on the proportion of their contract value that is awarded to SMEs, VCSEs and organisations in their local area.

 

 

Local authority social value procurement

There is considerable diversity in the performance of local authorities on social value procurement. On average, authorities awarded 43 percent of their 2018/19 contract value to SMEs and VCSEs, and 48 percent to local organisations.

 

As you can see from the size of the bubbles, authorities that are awarding particularly valuable contracts tend to perform fairly poorly on awarding to SMEs and VCSEs, while authorities with lower procurement spend are generally much better.

 

 

Local authority social value procurement

Drilling into this finding on value a little more, we can see that authorities we have classified as 'Needs improvement' actually awarded the highest value of contracts to SMEs and VCSEs last financial year. It is the fact that this is such a low proportion of their overall contract value that drags them down.

This implies that local authorities are already working very well with SMEs and VCSEs on their smaller packages of work, but large and valuable contracts are still being awarded primarily to large firms.

 

 

London has the highest number of 'High Performers' (10), and 'Locally-minded' (10) authorities. UK devolved authorities are also performing well, with 7 out of the 8 local authorities in Northern Ireland included in this report being classified as 'High Performers'.

The North West, East of England and South East all have a considerable proportion of their authorities classified as 'Needs improvement'.

 

 

 

High performers

 

This group of authorities is performing incredibly well on social value procurement - 46 percent of the value of contracts awarded by the 70 High Performers was awarded to local SMEs or VCSEs, compared to only 16 percent that went to non-local large companies.

High performers are concentrated in London, Yorkshire, the North West and the devolved administrations, with nearly 70 percent of all authorities in this category in one of those regions. These regions are potentially advantaged by having both a large number of local companies to procure through and a diverse group of capable SMEs and VCSEs.

 

Locally minded

Three quarters of the value of contracts awarded by the 45 Locally-minded authority were awarded to non-SMEs based in their local area. Authorities in London are obviously advantaged in this regard because many companies are headquartered there.

 

These authorities could do well with considering how they can engage with more SMEs and VCSEs - only 12 percent of total contract value was awarded to these organisations.

 

Socially-orientated

Two thirds of the contract value awarded by the Socially-oriented local authorities was awarded to SMEs and VCSEs.

That a large proportion of this is going to SMEs and VCSEs from outside their local area shows that these organisations do not just need to look for opportunities nearby, but can look nationally for procurement opportunities.

The South West has the most socially-oriented authorities.

 

Needs improvement

 

Do more business with government

 

Book a demo today to discover how Tussell data can help you understand your market, displace your competitors, enable your sales team and improve your bids.