It’s always the same story. As your organization’s Chief Procurement Officer (CPO), you issue an RFP (Request For Proposal) and, pretty soon, suppliers dive into the ring with their competing bids. Under normal circumstances, the difference between the winning bid and the runner-up is negligible. Suppliers are all too aware of this and each makes his bid accordingly, with the full knowledge of how they compare to the competing bidders.
When the difference between the winning bid and the close second is insignificant, your contribution as the CPO amounts to little more than pushing paper. (Note here that we are fully aware of how think pieces and impassioned speeches on how procurement needs to be roused from its traditional “cost savings” mode and be turned into a more strategic role, make for great motivational literature but do not tell you how it can be done).
Indeed, most CPOs, in such a situation, wouldn’t know what to do even if they wanted to. But in a situation where the difference between the winning bidder and the runner-up is only a couple of percentage points, Social Value — which under the UK’s Social Value Act 2012 is weighed at 10% — can not only be a huge differentiating factor but also the decisive factor behind which supplier gets the contract.
What is Social Value?
Local government and any responsible entity can request Social Value under their offer for goods and services. How a product or service is delivered, its environmental impact, social impact and the governing ethics of an organization that is supplying the goods are equally important. If only price, time and quality are taken into account, then vital and important local considerations can be missed, and thus the wrong supplier appointed.
Alignment is vital. So answer these questions of your organization: How important is local employment, community engagement or support, training, welfare and well-being of staff? How important is the quality and fair treatment of a supplier’s own supply chain, their level of regulatory compliance and reputation? How aligned are they, to your own company goals?
So to get greater alignment with your supply chain, to get your suppliers to deliver to your agenda and your priorities, build in your Social Value goals into your procurement requirements.
Here are the top 5 ways to drive Social Value in your organization:
- Get your senior team to agree; determine the key areas for Social Value impact.
- Set your Social Value goals; give expectations, but do allow creativity from your suppliers.
- Set expectations of delivery — the norm is 20% in the UK and Europe on top of the delivery of the contract itself
- Make sure you have a robust and recognized measurement process in place and state it in your documentation
- Assess all bidders equally and monitor the delivery of the winning supplier