Social value in UK defence procurement - what you need to know

The headlines have been grabbed by stories around troop reductions and shifts in foreign policy towards a greater focus on the Indo-Pacific region.

But deeper into the documents there is a quiet revolution taking place; one that will affect businesses throughout the supply chain involved in UK defence procurement.

This is at the heart of a new policy that wants to buy British wherever possible and make the delivery of wider economic, environmental and social goals an integral part of the procurement process.

This is Government using its defence industrial muscle to generate wider public value.

Not, of course, a new concept.  

Legislation has been in place since 2013 requiring people who commission public services to think about how they can also secure wider social, economic and environmental benefits.  

Central Government is currently putting into practice new laws that came into effect on the 1st of January 2021 intended to change the face of public procurement throughout the value chain.

Social value is at the heart of the HM Treasury Green Book guidance for public servants on how to appraise and evaluate policies, programmes and projects.  

The Treasury’s model is aimed at assessing Government plans and proposals in an “holistic way that optimises the social / public value produced by the use of public resources”. 

For the defence sector, social value in procurement policy has only more recently begun to be adopted by the MOD.  

The 2020 Roadmap for Sustainable Defence Support outlined “a set of initiatives” that can make a “tangible contribution” to Net Zero by 2050 by the UK defence industry, including investing resources into reducing carbon emissions and “sustainability-enabling technologies”. 

Now, following launch of the Government’s new strategic approach, social value has been embedded firmly into defence procurement policy to ensure wider qualities such as skills creation and supply chain resilience are explicitly taken into account in tender evaluation. This will be mandatory from the 1st of June 2021.  

For potential bidders for procurement contracts this means that all significant costs and benefits that affect the welfare and wellbeing of the community and environment will be taken into account, not just market effects.

Defence Procurement Minister, Jeremy Quinn MP, set out the implications of this for defence businesses in his statement to the House of Commons in on March.  

Procurements will include an assessment of social value impact. This could include any or all of the main themes:  

• Supporting COVID-19 recovery

• Tackling economic inequality

• Fighting climate change

• Equal opportunities

• General social well-being 

As ministers see it, this is a prime opportunity for contracting businesses to demonstrate the positive impact they have on the UK economy and society at large.  

What does this mean for businesses? What is Government looking for? How will it be evaluated? 

All tenders will contain a minimum 10% social value weighting and a minimum requirement for social value may be introduced such that failure to achieve that score results in a “fail”.  

This means that defence companies will have to upskill their teams quickly. But designing and delivering social value strategies may be unfamiliar territory and will require not just a good grasp of the new evaluation model but a deeper understanding of how to effect positive social impact through contract design and delivery.  

This is not an easy task. While a company may win a tender based on what look like good ideas, the Government will also be monitoring outcomes. Over the next few years, companies that consistently fail to deliver will gain a reputation for not designing and executing interventions well. This could lose them business in the longer term. 

Of course military capability will always remain high priority in any Government equipment purchase. 

But the Government is also signalling very strongly that it now regards defence industrial capability as a vital strategic asset in its own right. 

Build in Britain yes. But also help Britain build back better.  

For its part, Labour has welcomed the approach, with Shadow Spokesperson, John Healey, calling on the Government to set the bar even higher “for procurement of British defence equipment from foreign countries.”  

This is an industrial approach that revolves around national sovereignty and wants to see the benefits of the Government’s defence expenditure felt in as many parts of the UK as possible.  

Levelling up the regions and bringing together the nations of the Union . It’s an ambitious agenda to wring a lot more public value out of the defence pound than British governments have secured in the past. 

For the sector it marks a significant shift in the reality of doing business in the UK, and there is not much time to get up to speed.

How can Lexington help? 

Lexington can help upskill your teams through training on the new evaluation model, help you develop your social value strategy, design programmes and provide social value forecasting and calculations.  

For further information contact Nigel Warner (nigel.warner@lexcomm.co.uk) or Alice Wood (alice.wood@lexcomm.co.uk)