The Procurement Act, Social Value And SMEs – A Match Made In Heaven?

The new procurement era is now here following the go-live of the Procurement Act 2023. The move from MEAT to MAT is set to benefit both suppliers and procurers in relation to social value efforts, being underpinned by Procurement Policy Note (PPN) 002. But what does this mean under the new regulations – and is there an open door for SMEs? Our social value engagement lead, Will Campbell, explains.

The Procurement Act has now gone live, introducing what is intended to be a more straightforward, flexible, and transparent commercial system. With its introduction, procurement is no longer a process driven solely by cost; it is now a tool for delivering long-term social value.

We are leaving an era in which price is the only real concern and are now in a time when keeping social value at the top of the agenda will be essential to procurement.

Inherent links to social value

A new National Procurement Policy Statement (NPPS) was developed by the government, bringing it in line with the current political power’s priorities after 2024’s general election. This new NPPS inherently links to social value by emphasising the broader impact of public sector spending beyond just cost efficiency. Building a key drive for ‘value for money’, suppliers will be required to demonstrate their contributions to areas such as the local economy, job creation, and fair working conditions.

It strengthens commitments to net zero targets, ethical business practices, and community wellbeing, ensuring that procurement decisions lead to a fairer, greener, and more inclusive society. Elsewhere, it reinforces procurement’s role in supporting community safety and social mobility, while encouraging suppliers to recruit from disadvantaged groups, support skills development, and address regional disparities.

In simple terms, this means businesses must go beyond simply delivering a service – to actively support community development and sustainability goals.

PPN 002: Taking account of social value

PPN 002 ties everything closer to social value – representing an important shift in how public sector procurement is viewed, formalising social value as a criterion in the process. Additionally, PPN 003 sees updates to the Public Services (Social Value) Act 2012 to bring the terminology in line with the new Procurement Act.

By integrating social value into the procurement process, the government is signalling that it recognises the importance of considering benefits and outcomes on a longer-term basis. A positive aspect of this policy is that it encourages suppliers to not just compete on cost and quality, but also on how they can create wider social impact.

This could potentially lead to more innovative solutions where suppliers go beyond simply fulfilling contractual requirements and actively contribute to improving local communities and their specific needs.

However, a potential challenge could be the subjective nature of evaluating social value. Unlike cost and quality, social value can be harder to measure consistently across contracts and sectors, with multiple measurement frameworks out there. It will be important to ensure consistency in how different departments or contracting authorities manage their approach in taking account of the additional social and economic benefits achieved from the delivery of their contracts.

MEAT to MAT

The move from MEAT to MAT most obviously removes the ‘E’ – standing for ‘economically’ – a move further representing the move away from lowest cost to best value. More subtly, it is going to create a heightened focus on leveraging procurement as a facilitator for social impact.

This has been the indicated direction of travel in the built environment sector for a while, but this directive to central government around procurement is likely to firmly set the course for the wider industry. Contracting authorities are going to have more autonomy and choice when assessing tenders, and suppliers will be provided with more opportunities to operate in the public sector because price is not the only determining factor in awarding contracts.

One of the opportunities now the new regime is in place is for everyone involved in procurement to fully embrace social value, making it properly central in the creation of positive outcomes. This includes well-recognised national suppliers through to SMEs and VCSEs – which should be competing for and winning more contracts if the overarching goal of opening public procurement to new entrants is fully realised.

Social value software like our own can also support the MAT agenda, providing the most effective way to capture and report social value, while also contributing to continuous evaluation and improvement.

Unlocking the door for SMEs?

PPN 001: ‘SME and VCSE procurement spend targets’ was released just before the Procurement Act went live and outlines the requirement for central government departments to set targets for SME procurement spend. However, what this didn’t specify was a mandatory percentage or amount when it comes to that spend – and this lack of defined target could lead to variability in how different departments approach their SME spend goals.

Without a standardised target, departments may set targets based on different internal priorities, which in turn could lead to inconsistent outcomes. It may be more beneficial for central government to have a consistent target or a clear framework to ensure departments do not fall short of promoting SME participation in government contracts.

That being said, some procurers will no doubt see the lack of standardised target or percentage as a benefit that allows them to be appropriately flexible. Rather than imposing a ‘one size fits all’ target, this approach would allow each department to tailor its objectives to its specific needs and the nature of the procurement is handles.

Transparency barriers?

A concern does remain around the increased administrative burden that the new act – and embedding social value into procurement – may bring to deliver the intended transparency agenda. While prioritising social, economic, and environmental benefits is essential, some organisations particularly SMEs and voluntary, community and social enterprises (VCSEs) may struggle to meet the increased reporting requirements and demonstrate their social value impact effectively. This could create barriers to entry for smaller businesses, despite the government’s intention to level the playing field.

Now live, the Procurement Act offers not only a unique opportunity to redefine public procurement, but also for procurement processes to add to society and make a difference. At a time when the purse strings are tight, by keeping social value at the top of the agenda, the public sector can work towards every penny being spent in a way that delivers meaningful benefit for communities, businesses, local and national economies, and the environment.

Whether it’s the concerns or the opportunities – time will be the ultimate truthteller on whether the act delivers a future where value is measured not just in pounds and pence, but in positive impact too.