REPORT

Social procurement
Creating employment opportunities
through purchasing expenditure
Maria Mupanemunda

RESEARCH & POLICYCENTRE   Work and economic security 2019

Summary • Social procurement initiatives that generate optimal social

value are often place-based initiatives that are backed
This document provides an overview of how public and by frameworks and policies that encourage stakeholder
private sector organisations can strategically utilise their communication as well as a supportive organisational
purchasing power, through a process known as social culture.
procurement, to achieve economic, environmental and
• Key challenges for social procurement include limited
social objectives. It incorporates insights from research
capacity among smaller social benefit suppliers to fulfil
produced both within Australia and internationally
large procurement contract requirements, limited capacity
highlighting the objectives, opportunities and challenges
among commercial suppliers to generate social impact,
of social procurement. It looks at how social procurement,
implementation issues across various stakeholders
particularly in the public sector1 can be used to generate
in procurement supply chains as well as difficulties
social value, specifically the creation of employment
measuring social value.
opportunities for marginalised jobseekers and the
alleviation of place-based economic disadvantage by • Risks of social procurement in the public sector include
directing procurement expenditure into areas of the growth of unscrupulous businesses posing as social
disadvantage. benefit suppliers, burdening commercial contractors
with social benefit requirements beyond their capacity,
overloading public procurement processes with too
Key points many additional policy objectives as well as inadequate
research linking social procurement to sustainable
• Social procurement provides a pathway for government
employment.
to leverage its substantial purchasing power to address
multiple policy objectives and for larger organisations Research shows that when used alongside other
in the private and not-for-profit sectors to generate interventions, social procurement can alleviate various forms
social and environmental impact through their procuring of inequality both in people’s lives and in the communities in
practices. which they live. However, significant implementation
challenges must be overcome to ensure that the social
• Social value is incorporated in the procurement process
benefits generated are distributed equitably across various
through mechanisms such as direct subcontracting,
stakeholders involved in the procurement process.
stipulating employment and social clause requirements
in tender contracts and forming partnerships and/or
purchasing agreements with social benefit suppliers.

1 The OECD uses the term ‘strategic public procurement’ when discussing the use of social procurement by public entities. ‘Strategic public
procurement’ refers to how governments use public procurement as a strategic policy lever for achieving additional policy goals, which aim to
address environmental, economic and social challenges according to national priorities (OECD 2017). In this paper we have chosen to use ‘social
procurement’ in line with the recent Victorian Social Procurement Framework and to reflect the use of social procurement both in the public and
private sectors.
2 Social procurement

What is social procurement? to create job opportunities, either directly through

recruiting disadvantaged jobseekers to work on
Social procurement broadly refers to how organisations in procurement projects or indirectly through supporting
both public and private sectors use their purchasing power SMEs such as social benefit suppliers to participate in the
to generate a positive social impact (Burkett 2010). What procurement process (OECD 2017).
constitutes positive social impact, sometimes referred to as
In 2017, 85 per cent of OECD countries endorsed public
social benefit or social value, can include an array of social
procurement processes that also prioritised environmental
objectives such as facilitating employment opportunities for
considerations. The same year, 60 per cent of OECD nations
specific population groups, ensuring local economic and
incorporated clauses in government procurement contracts
environmental sustainability, increasing diversity within
that encouraged SME involvement, while 57 per cent used
procurement supply chains through inclusion of small and
guidelines to ensure strategic procurement outcomes would
medium sized enterprises (SMEs), encouraging ethical
be met (OECD 2017).
supply chain management and fostering social inclusion
(DEDJTR 2018a). The European Union Public Procurement Directives
encourage member states to simplify procurement
Though the social benefits generated through social
procedures and to partition contracts into lots as a way of
procurement are numerous, the focus of this paper is
encouraging supplier diversity through SME involvement
primarily on employment creation for jobseekers
(CCS 2016). The United Nations also identifies strategic
experiencing labour market disadvantage and on
public procurement as a key approach through which
supporting local economic sustainability.
governments can meet the Sustainable Development Goals.
For large institutions in the private sector, social Goal 12, ‘Responsible Consumption and Production’,
procurement is one pathway through which to achieve the encourages governments to ‘promote public procurement
goals set out in organisational corporate social practices that are sustainable, in accordance with national
responsibility frameworks (Burkett 2010). Australian policies and priorities’ (UN 2017, p. 24).
companies adopting social procurement strategies include
In the United Kingdom, social procurement legislation such
National Australia Bank (NAB), which through its Group
as the Public Services (Social Value) Act 2012 requires
Supplier Sustainability Program focuses on increasing
government to consider ‘how procurement could improve
diversity within its procurement supply chains by
the social, economic and environmental well-being of the
incorporating Indigenous and women-owned businesses
relevant area’ (DDCMS 2018, p. 2). In the USA, Federal law
wherever possible (NAB 2017).
under the Javits-Wagner-O’Day Act of 1971 mandates all
For government, social procurement presents an avenue Federal Government agencies to procure certain goods and
through which to align economic, environmental and social services from not-for-profit organisations that employ
policy agendas, effectively using existing procurement people with severe disabilities (SPA 2014).
resources to achieve multiple social impacts (LePage 2014).
In Australia, the Commonwealth Procurement Rules require
Most significantly, social procurement enables government
that, in addition to ensuring value for money, officials must
to create employment opportunities for marginalised
look at other non-financial considerations such as ensuring
jobseeker cohorts such as the long-term unemployed,
that procurement practices do not ‘unfairly discriminate
culturally and linguistically diverse migrant groups, people
against SMEs’ and that they ‘provide appropriate
living with a disability and young people who lack
opportunities for SMEs to compete’ (DoF 2018, p. 14).
experience (Newman, Rawlings & Philippa 2017).
Targeted social procurement initiatives at the federal level
Strategies such as the Victorian Government’s Social
include the Indigenous Procurement Policy (IPP), which is
Procurement Framework reflect a growing international
generating employment opportunities for Indigenous
trend of governments leveraging their procurement
Australians. The IPP requires that a percentage of the
expenditure to deliver additional social benefits.
Commonwealth’s procurement spend be allocated to
Indigenous businesses, with a target of 3 per cent to be
International and Australian policy context reached by 2027. Since its introduction, $183 billion has been
Procurement strategies that pursue additional social and awarded to 1,473 Indigenous businesses across 11,933
environmental policy objectives are increasingly being contracts (DPMC 2019). The value of procuring from
adopted by governments across the developed world. Indigenous ventures is significant, with research showing
In particular, ‘strategic public procurement’ is being used that for every $1 spent, $4.41 is generated in economic and
social return (Burton & Tomkinson 2015).
 Creating employment opportunities through purchasing expenditure 3

How does social procurement work? Importantly, social procurement has the potential to reduce
welfare expenditure by regenerating local economies and
There are various mechanisms through which social benefit creating employment opportunities for jobseekers
can be incorporated into the procurement process. For experiencing labour market exclusion.
public sector social procurement, these can be grouped into
four categories (Dean 2013), as shown in Table 1. Regenerating local economies and addressing
place-based economic disadvantage

Table 1 Four categories of social procurement

Studies show that across Australia, disadvantage is
intensified in certain communities that consistently have
Approaches to social procurement lower outcomes across most social indicators (Mukherjee &
Sayers 2016). In Victoria, 44 postcodes (only 6.6 per cent of
Purchasing agreements and partnerships: the formation
the total) occupy 35.3 per cent of the most disadvantaged
of partnerships with suppliers such as social enterprises,
rankings across 22 indicators such as long-term
that can deliver goods and services in addition to
unemployment, disability support and housing stress. The
achieving positive social benefit. This sometimes also
social problems associated with entrenched place-based
involves setting aside a proportion of larger procurement
disadvantage are complex and require innovative
contracts for social benefit suppliers.
approaches to address them (Vinson et al. 2015). Social
Social clauses in contracts: inserting requirements in procurement is one such strategy.
procurement contracts that oblige commercial suppliers
to achieve specific social goals in addition to delivering Government social procurement initiatives in Australia that
goods and services. Such goals and how they are have helped to address place-based disadvantage include
accomplished can be specified by the purchaser or left to Victoria’s Atherton Gardens Public Housing Tenant
the supplier to identify. Employment Program.2 Through the insertion of
employment requirements into government cleaning and
Employment requirements: stipulating in procurement
security contracts, out-of-work residents were able to
contracts that suppliers employ local jobseekers from
access job opportunities. As a result, unemployment on the
specific disadvantaged cohorts.
estate was reduced from 95 to 81 per cent over a six-year
Direct subcontracting: requiring large commercial period. Not only were jobs created for tenants but the
suppliers to subcontract a percentage of their work to
initiative regenerated what had been a deteriorating
social benefit suppliers.
community, with flow-on benefits in areas such as health
Source: Based on Dean (2013) and justice (SPA 2014).

Private and public sector collaborative projects such as

Using one or more of the above methods, government can GROW are using social procurement to sustain local
integrate social benefit into the specifications of a contract economies in the Geelong region. GROW strategies include
either directly through a social benefit supplier or indirectly encouraging local business collaborations as a way of
through a commercial supplier (DEDJTR 2018b). At the end of supporting regional economic participation (GROW 2019).
the contract, a social benefit has been delivered alongside
the goods and services. Creating employment for jobseekers facing labour
market disadvantage
Benefits of social procurement Unemployment is a significant policy issue for the
Australian Government, with over 158,100 people classified
With pressures on government spending, social as long-term unemployed in April 2019 (ABS 2019). Many of
procurement offers a way to achieve multiple policy the people dealing with prolonged unemployment want to
outcomes within existing procurement budgets (LePage find jobs but face significant obstacles to getting work. For
2014). Social procurement allows government to form new jobseekers such as culturally and linguistically diverse
partnerships with SMEs and to develop innovative ways to migrant groups, people living with a disability and young
align public procurement goals with broader social policy people experiencing disadvantage, the obstacles to finding
objectives (Barraket & Loosemore 2018). employment are often more pronounced. Creating
opportunities for these groups to gain decent work assists
individuals, their communities and the nation.

2 This program, which was delivered in collaboration with BSL, continues to run as the Community Safety and Information Service Program.
4 Social procurement

Social procurement can support employment for these Risks associated with social procurement
cohorts by either directly using purchasing agreements with
While social procurement has impressive potential,
social benefit suppliers that employ people facing labour
it is not without risks for various stakeholders. Several of
market disadvantage or indirectly using employment
these are identified below.
requirements with commercial contractors who are then
obliged to take on such jobseekers. Social procurement initiatives rely heavily on partnership
with social benefit suppliers. While this is certainly
International and local case studies demonstrate how social
beneficial for such businesses, researchers in Canada argue
procurement can be used to create jobs, include migrant
that it may cause some social enterprises to become too
populations and challenge gender norms. Swedish
dependent on government contracts—which might inhibit
examples show the successful use of social procurement
them from becoming competitive in the mainstream market
in the construction industry to integrate immigrant
(Mah 2014, p. 75).
populations into the labour market (Peterson & Kadefors
2016). In the United Kingdom, social procurement has been The financial incentive presented by government social
used to simultaneously provide employment opportunities procurement contracts might entice some commercial
for women and address gender imbalances in the male- businesses to pose as social benefit suppliers, to the
dominated construction industry through projects such as detriment of smaller social enterprises (Mah 2014).
Women in Construction (Wright 2015).
OECD sustainable procurement evaluations conducted
In Australia, social procurement initiatives such as those across multiple member states draw attention to the
used by the City of Gold Coast have generated measurable potential risk of incorporating socioeconomic
employment outcomes. By incorporating employment considerations into government procurement processes
requirements in recycling tenders, the council was in 2012 as this might compromise the economic and timely delivery
able to help 74 residents facing labour market disadvantage of necessary public goods and services (OECD 2015).
into employment, at no extra cost to ordinary procurement
While social procurement can create jobs for disadvantaged
procedures (SPA 2014).
jobseekers, there is a lack of research to show whether such
employment can be sustained past the life of the
Conditions that strengthen social procurement procurement project and indeed whether social
Policies and frameworks are not enough on their own to procurement is an economically efficient way to tackle
ensure effective social procurement initiatives. These unemployment.
initiatives need to be backed by a supportive organisational There is also a danger of viewing social benefit suppliers
culture as well as by effective communication and only through the lens of employment creation. This can
transparency between stakeholders. undermine the many other social missions that social
For social procurement to generate meaningful social value, enterprises are devoted to, such as creating opportunities
organisations must be structured in ways that allow high for people to participate in the community or advancing
levels of collaboration between sectors. The degree to which cultural awareness, all of which are just as important as
an organisation generates social benefit through employment creation (Castellas et al. 2017)
procurement is often related to the strength of its networks
with community organisations such as social benefit
suppliers (Burkett 2010).

Social procurement tenders, especially in the public sector,

are often complex documents. Where government
assistance navigating such complexity is provided,
contractors are better able not only to participate in the
procurement process but also to produce the social
objectives desired (Burkett 2010).

Social procurement projects that generate the most impact

are often those that have a clear purpose, such as creating
employment for specific cohorts, rather than those that
have broader aspirational goals (Newman, Rawlings &
Philippa 2017).
 Creating employment opportunities through purchasing expenditure 5

Social procurement initiatives Victoria’s Level Crossing Removal Authority (LXRA)

Numerous initiatives, both abroad and in Australia, show As a government agency overseeing the improvement and
how social procurement can generate positive social value. construction of the state’s rail infrastructure, Victoria’s Level
In the following section two such projects are discussed, Crossing Removal Authority (LXRA) incorporates social
one in Birmingham UK and the other in Melbourne Australia. procurement throughout all of its projects. The initiative,
which falls under the state government’s Social
Procurement Framework, requires 3 per cent of LXRA total
Birmingham City Council Public Procurement contract value to be allocated to social benefit suppliers
Framework for Jobs and Skills (PPFJS) and the employment of Australians from disadvantaged
Birmingham City Council’s Public Procurement Framework communities (DEDJTR 2018a).
for Jobs and Skills (PPFJS) leverages public procurement Social procurement projects such as the LXRA present a
expenditure to reduce unemployment and create training significant opportunity for social enterprises such as the
opportunities for local people living in disadvantaged Brotherhood of St Laurence’s Given the Chance employment
communities. Through PPFJS, all government contracts program to provide jobseekers with employment
worth more than £200,000 must include community benefits opportunities (see panel).
(Macfarlane 2014).

In 2010, the council spent an estimated £193 million on

building the City Library. As part of the jobs and skills GIVEN THE CHANCE
requirements, 306 jobs and 82 apprenticeships were created
Given the Chance is a Brotherhood of St Laurence
for Birmingham residents, with 54 per cent of these
social enterprise that helps disadvantaged jobseekers
opportunities reserved for people from disadvantaged
access job opportunities and offers employers a
communities (Macfarlane 2014).
supported recruitment model to help them secure
Factors enabling the success of the initiative included: more diverse sources of labour for the purposes of
meeting corporate social responsibility, social
• extensive collaboration of public and private sector
procurement and workforce diversity objectives. The
stakeholders in developing procurement frameworks
labour market intermediary model offsets risk by using
• working with senior management staff to ensure high- the status of legal employer (as a Group Training
level commitment to adopting procurement policies Organisation) to assist mainstream commercial
across different sectors contractors with integrating and supporting
• resource allocation for hiring expert procurement staff to marginalised jobseekers.
support policy implementation and develop evaluation
The model is supported by three Jobs Victoria
systems across departments and sectors
Employment Network programs in Epping, Dandenong
• educating private sector employers on how to run and Flemington, funded by the Department of Jobs,
targeted recruitment campaigns and the value of Precincts and Regions. These sites have the capacity to
inclusive employment support large pools of diverse jobseekers, preparing
• inserting flexible social clauses into contracts to allow them and funnelling them to supported recruitment
large commercial suppliers to achieve social impact in opportunities with the BSL and its partner employers.
ways that complement their commercial objectives. Given the Chance establishes a host hire agreement
Birmingham City Council conducts regular training and with partner employers and charges an hourly oncost
awareness sessions with procurement staff and heads of rate3 for participants hired by BSL who are placed in
departments as well as shared learning events that jobs at the partner’s worksites. The enterprise does not
showcase social procurement initiatives that have worked in charge release fees for host employers to employ
other policy settings. In addition, the Council ensures that candidates directly, to remove any barriers to
evaluation and monitoring systems which accurately participants gaining ongoing employment.
measure the impact of social procurement are implemented Continued page 6
across all sectors (Birmingham City Council c.2010).

3 The hourly rate combines wages, related costs (e.g. leave and superannuation), and management fees.
6 Social procurement

Table 2 Goals of the Victorian Social Procurement Framework

Continued from page 5

Support features of the Given the Chance model for Social procurement goals
employers include: Provide opportunities for Victoria’s Indigenous peoples
• a relationship manager who is appointed to support by purchasing directly from Indigenous businesses and
employers, answer questions and provide further urging government suppliers to take on Indigenous
support and services where needed throughout the employees.
contract Support Victorians living with a disability by purchasing
• an employer training workshop that develops directly from Australian Disability Enterprises and urging
managers’ skills to integrate new employees into government suppliers to employ people with a disability.
the workplace. The training provides practical tools Provide opportunities for Victorians from disadvantaged
and information to help the whole team navigate backgrounds by procuring goods and services from social
cultural differences enterprises that directly employ disadvantaged
• field support to help direct line supervisors manage jobseekers such as refugees and migrants and long-term
employees who have diverse or complex needs. unemployed people.

Support features of the Given the Chance model for Support women’s economic security by ensuring gender
participants include: equality within government suppliers and by encouraging
suppliers to adopt family violence leave.
• job preparation support through one-on-one
Promote fair and secure workplaces by procuring goods
assistance to navigate the recruitment process and
and services from suppliers and contactors that adhere
complete any necessary screening such as medical
to safe workplace laws and practices.
and police checks, as well as prepare CVs and gain
interviewing skills. Promote the growth of Victorian regions experiencing
disadvantage by providing employment as well as job
• tailored job preparation training with an emphasis
readiness training for people living in those areas.
on workplace culture and behaviour. Training covers
11 modules over four days, including a practice job Encourage the viability of the Indigenous business and
interview. social enterprise sector by procuring goods and services
from them.
• field support for employees with complex
challenges to navigate the transition to employment. Sustainable procurement goals
Promote environmental sustainability by ensuring all
suppliers and contractors are engaging in sustainable
business processes.
Victorian Social Procurement Framework
Encourage environmentally sustainable outputs by
The Victorian Social Procurement Framework (hereafter SPF) requiring suppliers and contractors to manage waste
which applies across all 270 Victorian government agencies responsibly and to use recycled materials.
and departments came into force in September 2018. As Achieve climate change policy objectives by requiring
Table 2 shows, the framework sets out seven social and suppliers and contractors to adhere to specific
three sustainable procurement goals aimed at creating stipulations regarding greenhouse emissions.
social value (DEDJTR 2018a).
 Creating employment opportunities through purchasing expenditure 7

Regardless of contract value, all government suppliers are Like their public sector counterparts, procurement staff in
encouraged to deliver at least one of the SPF goals. The SPF the private sector often also require training around social
also regulates what is required for procurement contracts of procurement processes. Additionally, private sector
differing value (Table 3). organisations must find ways to effectively and efficiently
incorporate social benefit into their everyday commercial
Table 3 Procurement requirements at different budget levels activities. Managers often also require training to
adequately support disadvantaged jobseekers with complex
Individual procurement activity requirements needs moving into their work teams (Sourani & Sohail 2011).

Below threshold: regional under $1 million or metro

under $3 million – SPF not mandatory. However, suppliers The challenge of measuring social value
are actively encouraged to engage social benefit suppliers Measuring social value further complicates the social
and to integrate social objectives into their planning. procurement process. Here the challenge is twofold: there
Lower band: up to $20 million – In addition to integrating are resources constraints especially for social benefit
social objectives into their planning, suppliers must also suppliers and there is lack of agreement as to what
seek opportunities to have social enterprises deliver a precisely constitutes social value (Hebb & Hachigian 2017).
part of their contract, with a weighting of 5–10% used to
Resource obstacles include a shortage of evaluation skills
favour suppliers who do so.
among contractors involved in the supply chain, as well as
Middle band: $20–50 million – Suppliers must develop a the amount of time required to collect meaningful data. The
social procurement plan which includes performance burden of data collection is felt most heavily by smaller
standards that pursue social and sustainable social benefit suppliers that have less financial resources to
procurement objectives. Targets for the inclusion of social allocate to evaluation (Castellas at el. 2017).
benefit suppliers must also be provided.
The absence of a clear definition of what constitutes social
Upper band: over $50 million – As above. In addition, impact muddies measurement and evaluation processes.
suppliers must provide a social procurement plan which Researchers argue that it is difficult to measure social value
includes targets for social and sustainable procurement when the very concept is not an objective one (Burkett &
objectives. McNeill 2016).

How social value is understood and the frameworks chosen

for measurement are likely to differ from organisation to
Challenges of social procurement for organisation depending on policy priorities or political
views (Westall 2012). Social value can be assessed from
different stakeholders
various perspectives: impact on government policy goals,
Across all stakeholders, issues with implementation as well impact on social enterprises and impact on specific target
as difficulties measuring social value constitute the biggest populations and individuals within those groups.
challenges for social procurement. Consequently, deciding which evaluation framework to use
can be a challenging process (Arvidson & Kara 2013).

Implementation challenges Furthermore, not only does social procurement aim to

address social issues that involve the interlocking of many
In the public sector, staff may lack the specialised training
complicated and changing factors, but also it is hard to
required to deal with the complexities of incorporating
connect outcomes to one specific intervention under a
social objectives into procurement processes. They may also
single procurement contract.
struggle to monitor the multiple policy objectives social
procurement tries to achieve (Dutra et al. 2017).

Both public and private organisations must also actively

find ways to shift organisational cultures that may be
resistant to adopting new procurement frameworks that go
beyond merely achieving economic value (Brammer &
Walker 2011).
8 Social procurement

Specific sector challenges Challenges for the social enterprise sector are greater than
for other sectors and go beyond implementation and
Burkett (2010) has identified other challenges for different
impact measurement issues. Most notable is the fact that
sectors (Table 4).
the Victorian social enterprise sector, as it is currently, lacks
the capacity to satisfy the demands of larger government
procurement projects. This raises concerns as most
Table 4 Social procurement challenges by sector
procurement initiatives rely on social enterprises both
directly and indirectly to deliver social benefit.
Sectors and challenges
Public sector The following section discusses the Victorian social
• maintaining frameworks that effectively measure enterprise sector and explores some of the unique
social impact challenges social enterprises face in relation to social
• establishing and implementing strategic social procurement.
procurement goals
• ensuring legal clarity for procurement policies across
diverse jurisdictions
Victoria’s social enterprise sector
• helping social benefit suppliers improve their capacity Social enterprises are businesses driven by a social,
to ensure sustainability cultural, environmental or economic cause that is in
Private sector alignment with a public or community benefit (ST 2016).
• ensuring that corporate social responsibility policies—
In the SPF, the term ‘social benefit suppliers’ is used when
the primary pathway through which social impact is
referring to social enterprises (DEDJTR 2018b). To qualify as
incorporated in purchasing—are no longer seen as
a social benefit supplier, a business must be located and
secondary business objectives but rather become
operating in Victoria and must satisfy at least one of the
embedded in organisational procurement policies
following:
• limited knowledge of and contact with social benefit
suppliers • be certified as a social enterprise by Social Traders or be
• limited knowledge of how social benefit suppliers can listed on the Victorian Social Enterprise Mapping Project
help business productivity • provide assisted employment services to people living
Not-for-profit sector with a disability as set out in the Disability Services Act
• adopting policies that link purchasing practices to 1986
social objectives
• be verified by Kinaway, Small Business Victoria or Supply
• advocating for and engaging in social procurement
Nation as meeting the requirements for a Victorian
to help build the capacity of social benefit suppliers,
Indigenous business as set out in the SPF.
thereby preparing them to tender for larger
government procurement contracts Examples of social benefit suppliers include Australian
disability enterprises (ADEs) as well as Indigenous
Social enterprise sector
businesses.
• building capacity, not just in service delivery but also
in quality of goods and services Social enterprises employ over 300,000 people nationally
• understanding the legal frameworks governing social and account for 3 per cent of Australia’s GDP (DEDJTR 2017).
procurement contracts, as well as supplier obligations Of the 20,000 social enterprises in Australia (DEDJTR 2017),
contained therein. the majority are small to medium sized business operating
primarily in the healthcare and retail industries (Barraket,
Mason & Blain 2016). Some 34 per cent of these list
employment creation as their primary purpose (ST 2016).

Victoria has an estimated 3500 social enterprises which

generate jobs for over 60,000 people, over 30 per cent of
whom belong to groups facing high barriers to employment.
Victorian social enterprises employ about 20,000 people
with a disability, which is double the number of people with
a disability in the mainstream labour market (Castellas et
al. 2017).
 Creating employment opportunities through purchasing expenditure 9

Although Victoria’s social enterprise sector continues to Conclusion

grow, there are significant concerns relating to social
procurement. There is no doubt that social procurement has the potential
to create systemic change in how organisations utilise their
In 2017, respondents from almost 75 per cent of Victoria’s
purchasing expenditure to achieve economic, social and
social enterprises said that social procurement represented
environmental value.
their biggest opportunity for growth, yet only 41 per cent bid
for government contracts (Castellas et al. 2017). This might However, to fully utilise the opportunities presented by
suggest limited knowledge of social procurement tender social procurement initiatives, much work needs to be done
application processes and procedures. to address the implementation challenges faced by various
stakeholders across the procurement chain. In addition,
Nearly 73 per cent of Victoria’s social enterprises are small
Victoria’s social enterprise sector needs significant
businesses (with fewer than 20 employees), 22 per cent are
government capacity building support to ensure such
medium and 5 per cent are large businesses (Castellas et al.
businesses are ready and able to fulfil procurement
2017). This is significant as most high-value social
demands.
procurement contracts are awarded to businesses that have
the scale to deliver results rather than to small social Realising the employment opportunities presented by social
enterprises. procurement projects means providing people experiencing
various forms of labour market disadvantage with the
The average value of government contracts awarded
support and training necessary so that their skills match the
to a Victorian social enterprise in 2017 was $473,928, with
needs of contractors. Furthermore, mainstream commercial
a median of $200,000 (Castellas et al. 2017). This points to
employers need to be educated about the economic and
the fact that most social enterprises are operating at the
social benefits of having inclusive workforces.
low threshold of the Social Procurement Framework (see
Table 2) and cannot compete for the higher value contracts. For government, the impacts generated by social
Even where mainstream suppliers who get the high-value procurement could be substantial. However, social
tenders can subcontract part of the work to smaller social procurement must not be viewed as a replacement for
enterprises, many remain reluctant to engage them and existing policies aimed at creating employment and
underestimate the quality of goods and services that such addressing place-based disadvantage, but rather as just
enterprises can deliver. one of many policies through which social problems can be
addressed.
Also, current opportunities are concentrated in certain
sectors. For example, major Victorian Government projects
involving social procurement, such as the LXRA, are in the
male-dominated construction industry, a sector with
relatively few existing social enterprises. The top three
industries in which Victoria’s social enterprises operate are
Cultural and Recreational services (29 per cent), Retail Trade
(20 per cent) and Health and Social Assistance (15 per cent)
(Barraket, Mason & Blain 2016). However, as public
procurement contracts expand into industries with a higher
concentration of social enterprises, gender imbalances are
likely to be addressed.

Much remains to be done to help Victorian social

enterprises develop their capacity so they can satisfy the
demands of large procurement contracts. Government
initiatives such as the Victorian Social Enterprise Strategy
that encourage coordination between government and the
social enterprise sector and the Victorian Small Business
Commission that gives Victorian SMEs access to assistance
with government procurement applications, processes and
procedures are necessary and must be strengthened
(DEDJTR 2018a).
10 Social procurement

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12 Social procurement

Westall, A 2012, Social value: briefing 2 – measuring social Acknowledgements

value, social outcomes and impact. NAVCA’s local
commissioning and procurement unit, NAVCA Local Thanks to Dina Bowman for her guidance and valuable
Commissioning and Procurement Unit, UK, viewed 20 May feedback throughout this research, to Jo Barraket for her
2019, <http://176.32.230.22/commoncause.org.uk/images/ insightful feedback on earlier drafts, to Jo Tabit and Brian
PDFs/measuring%20socal%20value%20briefing2.pdf>. Finnigan for their practical insights and to Deborah
Patterson for her meticulous editing.
Wright, T 2015, ‘New development: can “social value”
requirements on public authorities be used in procurement
to increase women’s participation in the UK construction Author
industry?’, Public Money & Management, vol. 35, no. 2,
pp. 135–40. Maria Mupanemunda is a Research Officer in the Work and
Economic Security team in the Brotherhood’s Research and
Policy Centre.

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