Social Procurement: Opportunities and Challenges for Social Enterprise

Ingrid Burkett, Social Innovations Manager, Foresters Community Finance

Published - October 2010

Two weeks ago the Victorian Government released the report ‘Social Procurement: A Guide for Victorian Local Government’. This report is part of a broader research and development project focused on social procurement in Australia (commissioned by the Centre for Social Impact and led by Foresters Community Finance). In many ways both these reports represent an exciting moment in the history of the social enterprise sector. Government and corporate sectors are recognising how their purchasing power could contribute to the development of the social enterprise sector and other social benefit suppliers and how this in turn could create social benefits for those who are disadvantaged in our society. This represents a shift beyond grant funding to a much broader and more serious engagement with social enterprises as potential suppliers and deliverers of goods, services and works.

Social procurement presents many challenges, particularly for government, and some of these are outlined in the report. Throughout the process of researching and writing for this report it has been clear, however, that there is a readiness and willingness within government to face these challenges and to address the barriers that exist.

So, while the focus of the Victorian guide is very much on what local government could do to encourage and engage with social procurement, there are also lessons for social enterprises in the guide. It is clear that social procurement opens up many opportunities for social enterprise. However, a number of challenges and questions for social enterprises are raised in the process and these need to be addressed if they are to become suppliers to government and corporations or, for that matter, large not-for-profit organisations.

Why are contracts and procurement important to social enterprise?

Social procurement can create pathways for social enterprises to demonstrate their ability to deliver goods, services and impacts. It can also provide opportunities for these enterprises to build their capacity to compete with other suppliers for larger contracts from public bodies, corporations and not-for-profit organizations.

Contracts can represent an important source of revenue and experience for social enterprises. If they are centred on a larger piece of work or a piece of work that extends over a longer period of time, then they can add some stability and certainty to the cash flow of a social enterprise. Contracts can also provide opportunities for increasing capacity; growth; partnership; attracting new business; and harnessing repeat business.

However social procurement is not a panacea for social enterprises – and contracts can be difficult to win and then to deliver on. Contracts can highlight tensions between social objectives and bottom-line deliverables. And they require careful planning to make sure that the quoted prices cover all the costs incurred. Further, contracts need to be balanced with other sources of revenue, as they are not necessarily recurrent or long-term.

What are the challenges for social enterprises in engaging with procurement?

Both the guide and the forthcoming report seek to address some of the challenges that the procuring organizations face when they are considering social procurement. They need to consider legal challenges, policy changes and cultural shifts. However it is not all about them! Social enterprises also face some challenges if they are to take full advantage of the opportunities that social procurement presents. Some of these challenges are outlined in the table below. 

Social procurement can open opportunities for social enterprises – however it does not involve favouring them nor does it involve guaranteeing work automatically. It does not change the fundamental tenants of procurement rules, rather it recognises that social enterprises often find it difficult to compete for contracts in the first instance, and opens possibilities for them to get onto the pathway of procurement, so that eventually they will be able to effectively compete against mainstream suppliers.

There is no doubt that government, corporations and large not-for-profit organizations are increasingly interested in social procurement and it’s potential for delivering social benefits and impacts. It is likely that there are going to be more opportunities arising for social enterprises to participate in larger and longer contracts over coming years.

The challenge may no longer be in trying to open up opportunities for social enterprises in this space. Indeed, the challenge may shift much more towards the social enterprises themselves:

• Are social enterprises ready for procurement opportunities?
• Are there enough social enterprises, with enough capacity, to participate in the opportunities that will emerge from social procurement?
• Will social enterprises be able to deliver quality goods and services in addition to social impacts, benefits and outcomes?
• Will social enterprises be able to demonstrate and talk about the social benefits that they achieve?
• Will social enterprises be able to leverage increased sustainability and impact from the opportunities that could be presented through social procurement?

These challenges require sectoral responses not just responses from individual social enterprises. There are many opportunities on the horizon. The question we in the social enterprise sector will face will probably not be about how to increase these opportunities, but how to ensure that the capacity is there in the sector and in the social enterprises to be able to respond to, harness and leverage from these opportunities.

Social procurement represents an opportunity to ensure that social impact becomes a key consideration in all purchasing and contracting. If this cultural shift is to be realised, then it is very important that experiences of procurement from social enterprises for both purchasers and social enterprises are positive; are shared; and are celebrated more broadly.

Social procurement has the potential to become a movement and a platform for social change and ultimately for social justice. The tipping point for its acceptance as a practice has almost been reached (thanks to the leadership of various key players, including the Victorian Government). However the real work effectively begins now and will need to involve not just leadership but large numbers of on the ground success stories. We need to ensure that early experiences and good ideas do not just remain isolated examples but that they provide the foundation for broader shifts so that social procurement eventually becomes part of generally accepted procurement practice.

My hope is that we in the social enterprise sector all recognise the importance of this moment, and that we are able to rise to challenges it presents.

Ingrid Burkett, Social Innovations Manager, Foresters Community Finance
http://www.foresters.org.au/  

Social Procurement: A Guide for Victorian Local Government can be found here: http://www.dpcd.vic.gov.au/localgovernment/councils-reforming-business/procurement