Cathy Pharaoh, co-director of the Centre for Charitable Giving and Philanthropy at Cass Business Centre, has said that the Social Value Act could “backfire” on voluntary organisations.

Giving evidence in London yesterday to the Panel on the Independence of the Voluntary Sector, Pharoah said there was now a major drive for all organisations bidding for public service contracts to itemise components of social value in their bids.

As a result, she said: “It is only a matter of time until such items are commoditised as part of contracts, monetised by the private sector in the race to win contracts, with the largest organisations in the best position to offer competitive prices because of economies of scale.”

Pharoah said the Act was introduced to enable voluntary organisations to more effectively compete for contracts, but it is beginning to appear that there are unintended consequences.

She said that the Act may mean there is significant pressure on voluntary organisations to use unrestricted funds to supplement the services they offer, in order for them to remain competitive against larger providers.

The Public Services (Social Value) Act 2012 requires public commissioners to think about whether they can secure added economic, social or environmental benefits for their local area when they are buying services.

Pharoah added that the recently launched social value portal is already offering consultancy advice, helping those bidding for public service contracts to “make the most” of their social value credentials.

Last month, the government announced a review of the Social Value Act, which will look at the potential for it to be extended more widely.