How to set ambitious social value requirements without excluding SMEs and charities

Public procurement is being asked to do two things at once.

Government wants major contracts to deliver more social value. It also wants small and medium-sized enterprises, charities and social enterprises to secure a greater share of public spending.

These aims should support each other. Smaller businesses and voluntary, community and social enterprises, often called VCSEs, can be closely connected to the places they serve. They may employ locally, understand barriers that are easy to miss from a national perspective and keep more contract spend within their communities.

Poorly designed requirements can work against them. A target may look ambitious in a procurement document while favouring the bidder with the largest workforce, the biggest bid team or the most established reporting system. It may say little about which supplier is most likely to create meaningful change.

This guide explains how buyers can set demanding social value requirements while giving SMEs, charities and social enterprises a fair opportunity to compete.

Why social value ambition and supplier participation must work together

PPN 026: The Social Value Model is due to apply to covered central government procurements commencing from 1 January 2027. It sets a minimum social value weighting of 10% for contracts worth £1 million or more and less than £5 million, rising to 20% for contracts worth £5 million or more.

The model focuses on good jobs, fair working conditions, fair pay, training, progression and the development of future talent. At the same time, PPN 001 requires central government departments to set direct-spend targets for SMEs and VCSEs and publish their results annually.

Social value should have greater influence in major procurement decisions, while smaller, mission-led organisations should have a fair chance to win public work.

PPN 026 also recognises the potential tension. It says social value criteria should be relevant to the contract, proportionate and designed without unnecessary burdens or barriers to participation. Buyers should research market conditions, including the presence of SMEs and VCSEs, before choosing award criteria.

Supplier accessibility therefore needs to be considered from the start, not checked after a tender is published.

Scale and social value are not the same thing

A national supplier may have the workforce and resources to offer large numbers of apprenticeships, job starts or volunteering hours. Those commitments may be valuable, but volume alone does not show whether the activity responds to local need or produces lasting benefit.

An SME may create fewer jobs in absolute terms while offering secure employment, investing in hard-to-find skills and retaining more contract spend within the local economy. A charity or social enterprise may have trusted relationships with people facing barriers to employment and know what support will help them stay in work.

Organisation type does not prove that social value will be created. It does mean buyers should avoid designing competitions in which only large organisations can present a credible response.

How social value requirements can become barriers

The issue is rarely whether social value is included. It is usually how the requirement is framed, scored or evidenced.

Absolute targets that reward scale

Suppose every bidder is asked to create 20 jobs. That may be realistic for a large facilities-management contract with hundreds of staff and a substantial supply chain. It may be impossible for a specialist SME delivering a £1.5 million contract with ten employees.

That smaller supplier may be able to create two good jobs, retain an apprentice and invest meaningfully in progression for its existing workforce. An absolute target makes that contribution appear weak, even where it is more credible in relation to the contract.

Ambition should reflect the supplier's realistic influence over the outcome, the size and nature of the contract, and the needs of the place where it will be delivered.

Generic requirements copied from another contract

A commitment can be easy to count and still be poorly chosen.

Job creation may be highly relevant in an area experiencing employment deprivation. Elsewhere, the more pressing issue may be skills shortages, insecure work, poor progression or barriers affecting a particular group.

Starting with local evidence helps buyers choose requirements that make sense for the contract and community. It also gives suppliers a clear problem to respond to, rather than asking them to offer familiar activities simply because those activities appeared in a previous tender.

Local need can shape the intended outcome without making a supplier's location or previous local delivery a condition of winning. Buyers must still treat suppliers equally and avoid discriminatory criteria.

Place Explorer can help procurement teams understand local economic and social conditions before setting a target.

Reporting requirements designed around large suppliers

Smaller organisations rarely have dedicated social value, data and bid-writing teams. Requiring suppliers to enter similar information into several bespoke systems, commission costly certification or produce lengthy narrative evidence can make the cost of bidding and delivery disproportionate to the opportunity.

This does not mean accepting unsupported claims. Evidence still needs to show that a commitment was delivered. Buyers should ask for the evidence needed to manage the contract and no more.

A payroll record, anonymised employment confirmation or training completion record may be enough to support a straightforward claim. A significant outcome claim may need follow-up data or stakeholder evidence. The depth of evidence should follow the significance and complexity of the claim.

For a fuller explanation, see our guide to proportionate social value measurement.

Scoring presentation rather than delivery

Large bidders are more likely to have professional bid teams, established case studies and polished social value policies. Smaller suppliers may have strong local practice but less experience of translating it into procurement language.

Clear questions and transparent scoring criteria help reduce that advantage. Buyers should assess the credibility of the proposed delivery model, including resources, responsibilities, timescales and evidence, rather than rewarding the volume of commitments or the quality of the prose.

Treating charities as free delivery infrastructure

Working with VCSE partners can improve delivery. Local organisations may have the relationships and expertise needed to reach people who are poorly served by mainstream routes.

Partnership should not mean asking a charity to deliver somebody else's contractual commitment for free.

If a supplier depends on a VCSE to recruit participants, provide support, host activities, collect evidence or manage relationships, that work needs to be recognised in the delivery model. Responsibilities, resources, payment and evidence should be discussed before the commitment is made.

Otherwise, public procurement risks extracting capacity from the very organisations it is trying to support.

Start with the market, not the tender document

Early market engagement is a practical way to test whether an ambitious requirement is realistic.

The PPN 002 Social Value Model provides a useful starting point while detailed PPN 026 guidance is awaited. It advises in-scope organisations to discuss social value with the market early, test whether proposed outcomes and criteria are relevant and proportionate, and consider the mix of suppliers likely to compete.

That conversation should include smaller suppliers and VCSEs, not only the organisations already best equipped to engage with procurement teams.

Useful questions include:

• Can suppliers of different sizes realistically influence this outcome?
• What would credible delivery cost?
• Does the requirement favour a particular business model unnecessarily?
• What information do suppliers already collect?
• Would delivery depend on a charity, social enterprise or community partner?
• What evidence would demonstrate the result without creating duplicate reporting?
• Could a smaller supplier offer a different route to the same outcome?

If the answers expose a barrier, the buyer can improve the requirement before suppliers are scored against it.

Five tests for an SME-friendly social value requirement

Before publishing a procurement, apply these five tests.

1. Relevant

Can delivery of this contract genuinely influence the proposed outcome?

There should be a clear link between the requirement, the contract and the people or place expected to benefit.

2. Achievable

Could a credible smaller supplier deliver it?

This does not mean removing challenge. It means distinguishing an ambitious requirement from one that depends on organisational scale.

3. Proportionate

Does the commitment and reporting effort reflect the value, workforce, duration and complexity of the contract?

The same target should not be copied across contracts with very different delivery models.

4. Flexible

Can suppliers propose different credible ways to create the intended outcome?

Overly prescriptive activity lists can exclude good ideas and favour organisations that already provide a familiar set of initiatives. Defining the outcome while leaving room for a well-evidenced delivery approach can support better solutions.

5. Evidencable

Can the commitment be defined and demonstrated without excessive administration?

Agree what will count, when it will be reported, what evidence is required and who owns delivery. Our guide to designing a good social value KPI provides a practical framework.

Cost the requirement honestly

Social value does not appear without time and resources. Recruitment, training, workplace support, community engagement, environmental improvements and outcome measurement all have a cost.

If buyers expect these commitments to be delivered through the contract, they should account for that cost during procurement design. Unrealistic expectations can encourage inflated tender promises, followed by pressure on delivery teams and community partners once the contract begins.

Good procurement gives suppliers room to explain how a commitment will be resourced and integrated into delivery. This is often a stronger sign of credibility than a large headline number.

Keep evidence proportionate and meaningful

Smaller suppliers should not face weaker standards of truth. If an organisation claims to have created five jobs, trained 30 people or improved participants' employment prospects, the evidence should support that claim.

Proportionality is about using an appropriate method, not dispensing with evidence. It can help to separate three questions:

1. Was the activity delivered? For example, did the training take place?
2. Can it reasonably be attributed to the contract? For example, was the opportunity funded or enabled through this work?
3. What changed as a result? For example, did participants gain skills, enter work or progress into better-paid roles?

Not every commitment needs a full outcome evaluation. Equally, an attendance figure should not be presented as proof that people's lives improved.

Clear definitions and evidence-ready commitments make it easier for suppliers of every size to report consistently. Where jobs and skills are central to the contract, our guide to measuring jobs and skills social value explains what to record beyond headline job counts.

Stronger social value should widen participation

Higher social value weightings create an opportunity to give jobs, skills, fair work and local opportunity greater influence over how major public contracts are awarded.

A higher percentage alone will not produce better social value. The quality of the requirement determines whether it rewards meaningful delivery or simply favours organisations with greater bidding and reporting capacity.

Buyers can be ambitious while keeping procurement accessible. Start with local need. Speak to the market early. Scale the requirement to the contract. Allow credible delivery routes. Pay community partners properly. Ask for evidence that is robust enough to support the claim and proportionate to the decision being made.

Done well, social value and supplier diversity reinforce one another. Public contracts can create better outcomes while opening opportunities to the SMEs, charities and social enterprises that understand their communities and help keep wealth within them.

Sources

• Cabinet Office, PPN 026: The Social Value Model
• Cabinet Office, PPN 001: SME and VCSE procurement spend targets
• Cabinet Office, PPN 002: Guide to using the Social Value Model