The collapse of Carillion should lead to a renewed focus on the positive impact that construction businesses can have on society.
I’ve been pleased to see some positive thinking in response to issues raised by the collapse of Carillion. I’m wary of jumping to rash conclusions about the sad turn of events earlier this year, but, as the saying goes, we should never waste a good crisis. This situation is an opportunity to learn from mistakes and create real change in the industry, so a disaster of that magnitude doesn’t happen again.
Worryingly, the Carillion episode also served as ammunition for those who were suspicious about private sector delivery of public services and sought to undermine the very concept of outsourcing. Within the context of a general decline of trust in big business, some commentators were questioning whether private companies should be making a profit doing public sector work, and whether they should be involved at all.
More reasoned thinking is prevailing. For example, cabinet secretary David Lidington delivered a speech in June in defence of outsourcing, providing a good overview of why it’s needed – for example, for delivering economies of scale, encouraging innovation, and bringing in specialist expertise. A recent report sponsored by the CBI, Partnering for Prosperity, says the outsourcing market is worth about £242bn per year, so it’s potentially a powerful lever for the government to encourage innovation, prosperity and social value.
There has already been progress in moving away from purely price-based evaluations towards collaborative public-private arrangements that deliver social value. Generating social value should be at the heart of everything we do in the built environment, especially when it comes to delivering on public sector contracts. As the Carillion situation showed, trust in business is at stake.
Since it became law in 2012, the Social Value Act has been a useful tool for ensuring that public procurement benefits society and, by extension, fosters trust. Lidington’s announcement in June that the government will be extending the Social Value Act was warmly welcomed. The extension will require central government to evaluate (not just consider, but account for) the social value created when procuring certain public services contracts.
This could be a great move towards giving the act more teeth, and ultimately increasing social value by actually measuring the impact and using that data to guide central government investment. I hope the requirement will also be extended to local government contracting. It’s positive as well that the government is developing a specific method for measuring social value, which should be applied consistently across Whitehall departments.
The suite of frameworks managed by Scape Procure warrants highlighting for enabling good practice by helping the public and private sectors work together to deliver social value. For example, under Major Works UK, part of the Scape National Construction framework, Wates Group recently began work on a £58m building for Nottingham College, which will house about 2,000 students.
Using Scape’s framework, we will be providing new employment and apprenticeship opportunities, as well as work placements for local young people, and community training workshops. The project will also include a student engagement programme, as a way to demonstrate to young people the variety of career opportunities available in construction and the broader built environment sector.
Engaging with a local supply chain is also key to generating social value. In Nottingham, we have made some substantive commitments to local spending, with a target of 85% of our subcontractors being SMEs. Many of those will be social enterprises – buying from these can yield significant rewards for both ends of a supply chain, because the social enterprises benefit from gaining new business, and contractors tap into a source of innovation and diversity. There’s a false impression that spending with social enterprises is a compromise. But social enterprises can be as competitive and productive as any business – they simply have the objective of generating social benefit at their core.
I’m pleased that so much is happening to foster partnerships between government, contractors and social enterprises – such as the Constructionline online platform, which has just been enhanced to include social enterprises – and the way the whole sector is reaching out explicitly to social enterprises to take part in supply chain events.
Wates Group has also been conducting research – together with Social Enterprise UK – to better understand how exactly we can do more to reach out to social enterprises and tap into the expertise and innovation they have to offer. We will be publishing this research in November and continuing to impress on policymakers and businesses alike the tremendous benefits that working with social enterprises brings.
James Wates is chairman of the Wates Group, the BRE Trust and the CBI Construction Council
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