Survival of the SME and the importance of addressing economic factors through Social Value

Times are tough across the construction sector and most noticeably for our local supply chain businesses, which make up a fifth of all SMEs in the UK. As small businesses, they are more vulnerable to economic volatility and the implications of them going bust are significant for local economies. It leads to local unemployment, a loss of skills and contractors looking to national suppliers, taking away vital local income streams.

Quantifying economic factors as part of delivering social value has become increasingly important to make sure that procurement is focussed and tailored to provide maximum benefit to the local economies. This is particularly true for public sector projects, where there is greater scrutiny to illustrate ethical spend with further economic benefits.

Quantifying economic value in spend and employment

There are varying measurements around quantifying or adding an economic value to local spend as part of a build project – for example a common measure is that for every £1 spent locally, this equates to ≈£2 worth of value. In addition, there are a variety of ways of calculating employment through projects – either through the cost for those that may otherwise be unemployed or apprenticeship values through those that go on to become qualified operatives.

However, measuring social value at source starts by listening to what the supply chain needs, understanding from the coal face of delivery the pressures, trends and ambitions of suppliers. Engaging in two-way dialogue is key to understanding and ultimately delivering higher local economic impact through the procurement process.

At NACF, we share key performance requirements across multiple public sector frameworks to ensure consistent information across similar public sector procurement projects- and beyond – it saves resources and focuses efforts on those with the greatest impact. Our latest baseline carbon tool is a prime example of that and this will be adopted by other NACF members.

Employment, skills & training to support local employment

Construction jobs account for between 5-7% of all jobs in the UK and so the supply chain needs us to provide a clear pipeline of opportunities so that they can resource manage effectively. It is also our duty to help SMEs with our own skills and expertise to be ahead of legislation and lead on best practice. We can boost local skillsets through guidance, training and CPD sessions and make these readily available and accessible.

NACF Members are championing a series of initiatives, all designed to support their contractors and the supply chain to boost employment through skills and training in their local communities. Here’s two examples:

Best Practice – North Wales Construction Partnership

Helen Spafford, Project Officer – Community Benefits at North Wales Construction Partnership (NWCP) tells us about their current initiatives in North Wales.

The Wellbeing of Future Generations Act (Wales) 2015 sets out seven goals for all public bodies in Wales. They are all essentially interlinked but our initiatives focus around the Economic, Social and Environmental drivers and underpin what we do as a framework to support our contractors and supply chain SMEs. All our initiatives are aimed at our contractors but we encourage and work with them to filter and disseminate training information and insight to share with their suppliers.

The first of our initiatives is our dedicated Community Benefits (in England called Social Value) Special Interest Group. Each 6-weekly meet is chaired by a Construction Industry Training Board member, Ceri Rush-Jones, who shares insight on industry initiatives, contractor funding opportunities plus any relevant news, the Group also highlights best practice and learning. We invite clients and contractors alike to the table and choose guest speakers that each tie directly into the Well-being of Future Generation Act priorities; in supporting the community, economic development and reducing waste.

For example, one of our speakers in 2022 was ReSource based in Denbighshire, a CIC that we work with to look at creative ways of re-using waste materials on building sites. This could be through upcycling, repurposing or simply recycling items that otherwise would go to landfill. In 2023, we are launching a new dedicated Zero Carbon Special Interest Group which will be chaired by Kier Construction.

Personal Learning Accounts

We also support our supply chain by raising awareness and sharing information on a Welsh government-funded programme which supports people aged 19 and over with skills and training – Personal Learning Accounts (PLA). In November 2022, PLA received a £3m boost to focus on digital and net zero skills, supporting construction, energy, engineering and manufacturing sectors, to address identified skills shortages.

The relevant PLA courses are free to access and available across Wales through 13 Welsh colleges. Their focus is on delivering vocational training in sectors where there is a skills shortage to meet the future needs of the economy. We have been supporting our contractors to use this fantastic training programme, which are all highly applicable to our working practices.

Supply Chain Sustainability School (SCSS)

Many people will be familiar with the Supply Chain Sustainability School, which was created to provide support to the construction industry through free training resources to build skills and knowledge in sustainability. A key driver for us in Wales is ensuring that projects are delivered in a way that enhances the environment, creates new jobs and apprenticeships and benefits local communities through new investment.

As a SCSS partner, we have access to a number of workshops each year. In 2022, supporting our carbon pathways delivery, we ran two workshops – one for our Local Authority clients and the other for contractors. It was entitled ‘Embedding Carbon into Sustainable Procurement’ and was designed to support engagement with the supply chain on working together to reduce carbon impacts, recognising that most organisation’s climate change impact lies in their supply chain.

Best Practice – YORhub

Julie Crawford, Senior Construction Officer at YORhub tells us about their current initiatives.

Small and medium-sized enterprises form the backbone of the construction industry so YORhub understands the value of supporting SMEs in order for the industry as a whole to thrive. Our frameworks are structured to be accessible for SMEs to apply and incorporate features such as project bank accounts to promote fair payments through the supply chain.

Our SME initiative is YORscep, YORhub’s Supply Chain Engagement Programme. It was set up in 2010 as a way of giving suppliers access to subcontract opportunities on projects awarded to our tier 1 framework contractors. It is a great way for sub-contractors to get in front of contractors and to hear first about new projects.

Meet The Buyer event

The programme also gives SMEs access to our annual Meet The Buyer event, as an opportunity for subcontractors and suppliers to meet YORhub’s building and civil engineering main contractors. Around 140 construction-related businesses from across the Yorkshire and Humber region attended our 2022 event in Goole, East Riding of Yorkshire.

Attendees were able to find out how to join our contractors’ supply chains, find out more about YORscep and meet members of the YORhub team. Twenty-six main contractors from YORbuild and YORcivil exhibited at the event, as well as The Supply Chain Network which provides support for SMEs in the East Riding. We are underway with planning our next Meet The Buyer event, provisionally timetabled for 13^th June at a venue near Leeds. We look forward to inviting SMEs from across the region to connect with our main contractors and find out how we can support their business.

We are also proud to sponsor the SME of the Year category every year at the Constructing Excellence Yorkshire and Humber Awards. The awards offer a great opportunity to celebrate the exemplary best practice and innovation made by firms across our region. Supporting the awards underscores our commitment to supporting SMEs and showcasing their achievements.

Constructing Excellence Yorkshire & Humber logo

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Tackling the big issues

And finally, we hosted a panel discussion in September 2022 entitled Inflation Challenges to the Supply Chain to discuss the effect of construction inflation and supply on all levels of the supply chain. Attended by 50 delegates, a diverse panel of tier 1, tier 2 and tier 3 contractors, and a client, we discussed the impact from their individual project positions of the combination of Brexit, the war in Ukraine, the Coronavirus pandemic and subsequent economic turmoil on a typical construction project. The discussion was used as a platform for contractors and clients to explore the realities of quoting for services in the current climate and ways to navigate and manage the issue moving forward.