Measuring More Than Money: Evaluating the Social Return on Public Procurement – Part 1

Social Procurement Framework

Public procurement is undergoing a transformative shift. This shift isn’t just about spending money more wisely but about spending it in a way that creates lasting social value.

This concept, known as social procurement, is not merely about acquiring goods and services; it’s about leveraging public spending to generate positive social outcomes. It’s a strategy that evaluates success in monetary terms and social impact – a concept we can term as ‘Measuring More Than Money’.

There is an increased demand for greater accountability in government purchasing decisions, emphasizing the need to consider broader outcomes and multi-dimensional risks, including those in global supply chains. Governments, as large buyers, have the power to set standards that can shift markets towards Responsible Business Conduct (RBC) and create a level playing field for suppliers adhering to RBC standards.

The Growing Importance of Social Value in Public Procurement 

The paradigm of public procurement is shifting from a narrow focus on cost-efficiency to a broader consideration of social value. This transition is driven by an increasing awareness that public spending can and should contribute to societal well-being. Governments and public institutions now recognise that their procurement decisions can foster social inclusion, promote sustainable practices, and uplift communities.

This enhanced focus on social value is reshaping procurement policies and practices. It’s no longer sufficient for entities to select vendors based solely on price and quality

There’s a growing demand for procurement also to address social challenges such as unemployment, social inequality, and community development. By doing so, procurement becomes a tool not just for economic activity but for social transformation.

The integration of social objectives into procurement strategies represents a paradigm shift. It requires a balance between economic efficiency and social impact. Governments and organisations are, therefore, developing new methodologies to measure and evaluate this social impact, ensuring that procurement decisions contribute positively to societal goals.

Social Procurement Trends and Success Strategies  

Trends and strategies emerge as organisations strive to align their operations with social values.

Highlighting an insight from a recent AECOM article, the diverse approaches in different infrastructure industry sectors are emphasised. This diversity in delivering social value points to the need for each sector to recognise and harness its unique strengths. Contractors typically provide social value through local employment and spending, while professional services contribute differently, focusing on leveraging their regional office teams and knowledge. Moreover, the role of professional services in long-term solutions is crucial. They are uniquely positioned to sustainably identify their core competencies and share them with communities, aligning with the overall organisationals culture and strategy. This strategic approach underlines the significance of adapting to sector-specific strengths in delivering social value.

One prominent trend is the focus on inclusive supply chains prioritising diversity and support for marginalised communities. Organisations can drive social change through their procurement processes by consciously choosing suppliers that align with these values.

Another key trend is the integration of social criteria into procurement policies. This involves setting specific social goals, such as job creation for disadvantaged groups or support for local small businesses, and evaluating suppliers based on their ability to contribute to these objectives. Such policies promote social good and encourage suppliers to adopt more responsible and inclusive practices.

Collaborative approaches are also gaining traction. Partnerships between public entities, private sector players, and social enterprises are proving effective in achieving social procurement goals. These collaborations leverage the strengths of each partner, leading to more impactful outcomes.

Success in social procurement also hinges on transparency and accountability.

Organisations are increasingly developing monitoring and reporting mechanisms to track the social impact of their procurement activities effectively. This commitment to transparency not only fosters trust among stakeholders but also plays a crucial role in refining strategies for a more significant impact. In parallel, understanding market dynamics is essential. Are your analytics effectively pinpointing the right market opportunities? It’s pivotal to ensure that your strategies are inclusive, focusing on participation from SMEs to social benefit suppliers. Our expertise can guide you if you want to enhance this aspect of your procurement process – find out more here.

Global Perspectives and Responsible Business Conduct  

Globally, the concept of Responsible Business Conduct (RBC) is becoming integral to procurement strategies. RBC emphasises businesses’ ethical, social, and environmental responsibilities in their operations. This global perspective acknowledges that procurement decisions have far-reaching impacts, from local communities to international supply chains.

Different countries and regions are adopting unique approaches to integrate RBC into procurement. For instance, some European countries are setting the bar high with stringent environmental and social standards for suppliers. In contrast, developing nations focus on leveraging procurement to bolster local economies and reduce poverty.

One of the key global challenges in RBC is ensuring that ethical practices are maintained throughout the supply chain. This requires diligence and a commitment to transparency, ensuring that every link in the supply chain adheres to the set standards. It’s a complex task, given the globalised nature of supply chains, but it’s critical for ensuring that procurement practices are truly responsible and sustainable.

Another aspect of global RBC in procurement is the focus on human rights. This includes ensuring fair labour practices, gender equality, and the avoidance of exploitative practices such as child labour. Procurement becomes a powerful tool for promoting global social justice by prioritising suppliers that uphold these human rights standards.

Adding a local perspective from Australia, as highlighted in the ASVB article on Social Procurement, success in this area is achieved at multiple levels. At the policy level, governments and private companies are creating targets for social impact, mandating them across their procurement activities. Contracts increasingly include social clauses, breaking up large contracts to allow participation from social-purpose businesses. At the supplier level, there’s a focus on developing existing or new suppliers to meet social procurement standards. This approach in Australia reflects a comprehensive strategy to unlock social procurement value, including setting targets and KPIs, supporting passionate individuals, auditing existing spend, and sharing success stories. These initiatives underscore the commitment to viewing social procurement as an opportunity rather than a challenge and seeking guidance from intermediary brokers to foster responsible business conduct.

Case Study: Victoria’s Social Procurement Framework  

Victoria, Australia, presents a pioneering case study with its Social Procurement Framework. This comprehensive approach harnesses the state government’s considerable purchasing power to deliver social and economic benefits.

Social procurement is described as organisations using their buying power to create social value beyond the procurement of goods, services, or construction. In Victoria, social value refers to the benefits for all Victorians when achieving social and sustainable outcomes.

The Framework outlines clear objectives, including support for small and medium enterprises, promoting social enterprises, and advancing Aboriginal businesses.

Key to Victoria’s strategy is the dual approach of direct and indirect procurement. Direct procurement involves buying directly from social enterprises and marginalised groups. Indirect procurement, on the other hand, includes integrating social objectives into broader contracts with private sector entities. This holistic approach ensures that social procurement is embedded across various levels of government spending.

  • Support for Regional Small and Medium Enterprises (SMEs): The framework encourages government departments and agencies to consider place-based approaches to support regional SMEs and address entrenched disadvantage.
  • Purchasing from Social Enterprises: Social enterprises are businesses that intentionally address social problems, with most income derived from trade. They are important for providing employment and training opportunities, especially for Victorian priority job seekers.
  • Purchasing from Aboriginal Businesses: The Victorian Government has a procurement target from Aboriginal businesses. These businesses are diverse and active in various fields, including primary production and cultural tourism.
  • Purchasing from Australian Disability Enterprises: These are Commonwealth-funded organizations providing employment opportunities to people with disabilities. The framework encourages engagement with Victorian Australian Disability Enterprises offering award-based pay rates.

Inclusive Opportunities from Suppliers: The framework incentivizes suppliers to adopt fair, inclusive, and sustainable business practices, especially in providing employment opportunities to disadvantaged communities and those with disabilities.

Employment of Victorian Priority Jobseekers: It encourages the employment of priority jobseekers by suppliers, leveraging government programs to support job seekers at risk of being left behind.

Victoria’s Framework is particularly notable for its emphasis on place-based approaches. This means tailoring procurement strategies to address local needs and challenges, fostering regional development, and addressing local disparities. The Framework’s success lies in its ability to create tangible social outcomes, such as job opportunities for disadvantaged groups, while also ensuring economic value.

Conclusion of Part 1

As we conclude Part 1 of our deep dive into the transformative world of social procurement, we’ve uncovered how public spending is evolving to serve economic, social, and ethical objectives. We’ve explored the growing importance of social value in public procurement, innovative trends and strategies, and how global perspectives are shaping Responsible Business Conduct. But the journey doesn’t end here.

Part 2 addresses the crucial aspects of ‘Challenges and Opportunities in Social Procurement.’ Join us as we navigate the complex terrain of measuring social impact, balancing economic efficiency with social goals, and the innovative solutions emerging in this dynamic field.