Social enterprise procurement ad hoc, ready for strategy and growth

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Australian social enterprise would receive a significant boost if governments incorporated social procurement principles into their processes, argues a new report on the sector.

Governments are, in fact, already engaging in social procurement — purchasing goods and services with the purpose of creating social value — but without actually meaning to in many cases, says one of the report’s co-authors, Centre for Social Impact Swinburne director Professor Jo Barraket.

Because it’s not explicitly incorporated into procurement policies, Australia’s social procurement processes are “patchy” and mostly ad hoc, Barraket tells The Mandarin.

Success is “typically based on relationships rather than guided by clear policy and practice imperatives”, notes the Finding Australia’s social enterprise sector 2016 report, co-produced with Social Traders, released Tuesday.

When social procurement and social enterprise — organisations that pursue both social benefit and profit — are introduced to public servants they often realise they’ve already been dealing with social enterprises for a long time without knowing it was a specific approach, Barraket explains. This makes the idea of explicitly including it in policies “more palatable”.

The sector has enjoyed growth in the last few years as awareness has grown, but the concept is not as new as it seems — it has just been invisible until recently. This invisibility, and its dual role in pursuing profit and social outcomes — there is no specific legal form in Australia for social enterprises, and they operate under a range of organisational structures — has meant such initiatives are often not private sector enough or not-for-profit enough for things like government grants and industry research programs.

“Social enterprise has been a relatively under the radar part of the social economy and wider economy,” she says. “But it has the potential to do more with some structured and integrated public policy support.”

Procurement a ‘strategic’ element

Thanks to governments’ “benign neglect”, the sector has missed opportunities to grow. On the upside, the ecosystem that does exist is “diverse and sustainable”, Barraket explains.

But if social enterprises are to scale up and play a bigger role in delivering services traditionally in the realm of government “they will need more support”, she says.

The report was informed by 13 focus groups across the country with 75 people — mostly social enterprise managers and owners, but also a few policy makers.

Integrating social procurement principles into procurement processes was one of the most commonly cited ways for government to help develop the market by industry people in those workshops.

This requires having more training staff with relevant skills, Barraket notes.

In part it’s about “recognising procurement is a strategic rather than functional element of government”, she says.

There are already examples of social purchasing around — a Council of Australian Governments commitment to buying from indigenous businesses is one — but social benefit organisations have not really figured thus far.

Barraket concedes procurement officers already labour under a pile of other desired outcomes in their decision-making and adding another “has the potential to increase complexity”. This is why she thinks it should be incorporated into a “strategic integrated framework” as part of a broader commitment to sustainable procurement, rather than simply as an add-on.

Workshop participants — in particular, not for profits moving into social enterprise — also raised the problem of government risk aversion as a barrier to innovation, expressing concern about the over-specification of social services contracts.

The report also notes that procurement processes that give a heavy weighting to price can be a barrier to social enterprises getting contracts. The flipside to paying a slightly higher cost is improved social outcomes, the industry argues.

Barraket adds that the creation of the Australian Charities and Not-for-profits Commission “has had some potential benefits” for some social enterprises by increasing the information available.

She says the best examples of governments making an explicit effort to develop social enterprise at the moment are in Canada. “There’s a strong commitment there to raising the profile, knowing the value and supporting the development of social enterprise.”