In an Australians first, the Victorian Government has laid down the
gauntlet in a fresh attempt to solve societies most complex social and
My second article in a series, I now take you on a deep dive into the newly released Victoria’s Social Procurement Framework. Don’t know what the framework is, read my previous article here.
With all new policy initiatives, there will be challenges
implementing them. It is not my intention to criticise this policy, far
from it. I’m offering an opinion piece to share my thoughts on some of
the challenges and opportunities that lie ahead for Victorian government
agencies, the private sector and social enterprises. I invite you to
challenge me where you disagree and share you experiences and thoughts.
Here are some of the challenges that lie ahead.
Defining social value outcomes
There are literally hundreds of ‘social value’ metrics. Choosing a
wrong metric for a project by people not working in that field may not
serve the best interests of those intended.
The social procurement framework is trying to address complex
societal problems. Neither Government, the private sector nor the Not
for Profit sectors has yet succeeded. Expecting departments and agencies
to become subject matter experts on non-core business functions like
family violence, for example, is a big call. Expecting procurement
officers and project managers to choose appropriate objectives and
targets that will have meaningful long-term social benefits is
presenting challenges. Shifting the emphasis away from government to the
private sector is also presenting challenges.
This policy, like many others, largely ignores the pivotal role of
the Not for Profit sector. These social enterprises, often run by
volunteers, are increasingly picking up the ‘forgotten ones’ and
addressing social and environmental problems from the grass roots. This
sector exists largely because governments and the private sector has not
yet addressed these issues adequately.
I want to stress that I don’t believe that government has failed
us. I also don’t want you to think that I believe the private sector
can’t be trusted to play a significant part in solving societies most
challenging social and environmental problems. It’s just that the guys
that know the most about the subject are not being invited to
participate in defining social value metrics.
Social enterprises don’t have a say in setting priorities,
objectives, programs or determining which value metrics will have the
most impact for their communities.
This policy is new and before throwing the baby out with the
bathwater, lets acknowledge we will face a challenge in getting the
right metrics for a year or two. There are already great examples in
this space and let’s focus on those, not the ones we didn’t get quite
right the first time.
Be prepared that earnest efforts from both suppliers and buyers might fall short of expectations to begin with.
For policy makers and evaluators, it’s a warning not to judge
success too critically in the beginning. A process of continual
learning, adaption and persuasion will offer the greatest long-term
Engaging social enterprises
This framework largely places the responsibility for social and
environmental action on the private sector. Asking these suppliers to
lock in their social procurement activities before a project has begun
will cause problems. Typically bid time frames are very short. This
means that with limited time, little or no meaningful engagement will
occur with social enterprises until the supplier wins the job.
Social enterprises will be asked to deliver activities they weren’t involved in designing.
Collaboration, engagement and empowerment is now common practice
for most government agencies. I’m worried the new social procurement
framework falls short on effective engagement. We all know what happens
when key stakeholders are not involved in early stages.
Using contract clauses to lock supplier into commitments prior to
signing a purchase order or contract is paramount if we are to progress
social and sustainable outcomes. Let us not look at this as a compliance
obligation. If the social intent is met and there is room to flex and
adapt social and environmental outcomes throughout a project.
Continual improvement and adjustments could be achieved through
milestone payments linked to effort. It will give more time for
meaningful engagement with social enterprises. It can allow
opportunities to evolve. It will also allow unworkable activities to be
The flip side of this argument is that this introduces flexibility
to contracts. Government project managers will need to be strong enough
to negotiate with suppliers but not too strong that they screw them down
too much. Many see contract management as a win-lose game. This has got
to stop. What do you think?
There are 275 government agencies that must nominate their own
social justice priorities in their annual plans. It can only be assumed
that more than several agencies will be competing for the same pool of
social enterprises. With Victoria’s infrastructure boom, a few large
projects in the same area, with the same social priorities will drain an
unsuspecting and unprepared set of social resources very quickly.
With annual cycles, government agencies will then re-prioritise the
following year or for the next project as they discover their competing
with other agencies for the same resources. Suppliers then ditch
previous commitments in pursuit of the next contract.
Many might argue that this is how it works already, so what’s the
point? Priority issues or election promises flood a sector with funding
for a short period of time and then it dries up.
One of the challenges I see is that the Victorian Audit-General’s
Office is most likely to audit government departments as to how they
have performed against DTF’s
policy framework in the coming years. What will no doubt arise, having
been audited myself on many occasions, is that stated objectives will
not have been met by some departments.
The policy places obligations for social procurement on government
agencies. The private sector is expected to facilitate it. The social
enterprises are expected to deliver it.
Here is a tip for government agencies all trying to compete for the
same pool of unsuspecting social enterprises. Document your processes
and clearly record all your attempts to fulfill your social procurement
priorities. This should include emails from the local employment agency
that can’t now fulfill their agreement to supply a quota of apprentices
because they all now have jobs.
Document, document and document.
An attitude shift is required
Government purchasing for decades now has focused on ‘lowest dollar
price’ purchasing. A shift is required in not only the attitudes of
government staff but probably 275 policies and the procedures and
systems that support procurement.
Government purchasing systems and workflows are built to ‘red flag’
bids that are not the cheapest. Processes make it harder and longer for
procurement officer to justify expenses that don’t cost the least.
What’s more, they are shit scared that they might been seen to favour
someone or called out for fraud or corruption.
When government staff are afraid to accept a free coffee at a
stakeholder meeting, public sector employees are rightly paranoid of
every purchase they make.
Project Managers with tight time frames are scrutinised more
thoroughly when recommending higher cost projects. Why make it harder
for yourself and recommend one with a bit of community benefit and
slightly more expensive?
Typical government purchasing practices don’t give a supplier any
financial credit for purchases with tangible social and environmental
outcomes (even though they most definitely feature heavily in the
buyer’s business case for most projects).
We are not yet seeing total life cycle cost bids for a project and
are we are still far from including social and environmental
externalities in terms of dollars in the overall evaluation of bids.
Unfortunately, dollars will still dominate the buyers and
supplier’s mentality. Even with a 20 per cent social weighting for
tender bids, unless social criteria are made mandatory like safety
standards, bid evaluation still has an 80% weighting for capability and
On a $20 million project, price will need to be within at least 5
per cent (that’s about $1 million) of each other to remain competitive.
Only when two businesses compare on capability, price and experience
might social procurement factor in a buyer’s decision.
What this means for a supplier is that they either place a mediocre
social bid to keep costs down, absorb the costs within the business, or
start partnering with social enterprises well before the bid process
The big end of the infrastructure is working on the later but I
suspect the rest are waiting to see if real change starts happening in
Social Enterprises capacity
The framework places no obligation on government to work directly
with social enterprises. Social enterprises don’t have to participate.
If they do choose to become involved in government purchases, they are
not accountable if they fail to deliver. It falls back to the business
engaged by the government department.
We don’t know yet how social enterprises will respond to a
potential influx of supplier and sub-contractor requests. As stated
before, there is great potential for competition for the same resources.
I’ve witnessed it first hand with the recent interest with
Indigenous engagement. Commendable but utterly exhausting and
frustrating for Traditional Owner groups. They are being asked to get
involved in absolutely everything. Unfortunately, there is no support to
fund resources and most will not be paid for their early involvement.
Pay only comes when or if the supplier wins the work.
The poorest funded and least supported sector has now become an
integral component of the multi-billion-dollar infrastructure, health
and education sector. The governance, capability and availability of
social enterprises is about to be tested by ASX listed companies and
Many of these social enterprises run on very small budgets, are
governed by volunteers and intentionally managed lightly to spend what
precious resources they receive on the things that matter most to them.
Many are simply not ready and will miss out on incredible opportunities.
The lion’s share of the work will go to the not for profits that look
very much like a branch of government agencies and only distinguishable
from big business by their tax status.
Even if social enterprises had the capacity and capability, they
are now at the mercy of big contracting companies. On their own, they
are effectively locked out from bidding outright as most large projects
are tendered as a complete package. There is currently no intention to
tender the social and environmental elements separately to allow social
enterprises and non‐profits to participate and remain competitive in a
bidding process. If they want a piece of governments purchasing budgets,
most will need to form alliances with bigger companies.
Many social enterprises are currently not capable or ready to
respond to the expected demand that will arise from Victoria’s Social
Procurement Framework. They will need help from government and the
bigger suppliers to develop and respond to the growing desire for their
The good news is that the big end of the infrastructure industry is
taking proactive steps to address their risk and capitalise on their
opportunities. They are partnering outside the bidding phases to secure
their social licence and ‘banking’ it for up-coming projects.
What are your thoughts and opinions? I’d love to hear some of the
good examples people have worked on or seen to share with you all.
How to make the most of the Social Procurement Framework
Next up is Part 3 which I’ll explore how Government agencies can
embrace Victoria’s Social Procurement Framework and deliver greater
public value through their procurement practices.
Part 4 will explore the suppliers guide to winning Victorian Government goods or services contracts.
Part 5 finishes off helping Not for Profits get a piece of the Victorian Governments $16B goods and services budget.
Part 1 offers an overview of the Framework and can be found here. – Buyers and suppliers guide to Victoria’s Social Procurement Framework.
Share your thoughts
I would love to hear your thoughts and experience working on social
and environmental procurement so that together we can make Victoria the
best place to live.