The Victorian Government has made its first steps towards harnessing the power of government procurement to generate genuine and lasting social change for Victorians.
Victoria’s Social Procurement Framework, which came into effect on 1 September 2018, introduces new government procurement criteria around social value and inclusion.
In the opening message of the framework, Victoria’s Minister for Finance, Robin Scott, says all Victorians should have the opportunity to participate and contribute to Victoria’s growing economy, and that it’s Government’s role to create the right conditions for that to happen. One of the ways Government can do this is leverage its purchasing power – by setting policies and targets for buying goods and services from businesses that share, and help to deliver, its goals for social change and participation.
Victoria’s Social Procurement Framework thus introduces an additional set of procurement thresholds and inclusion criteria for government purchasers to consider when evaluating suppliers for contracts.
Our blog post provides an overview of the key aspects of the framework – its objectives, how it will be implemented, and what it will mean for government suppliers. This will help you prepare to make the most of the opportunity the framework offers.
(Victoria’s Social Procurement Framework covers both social procurement and sustainable procurement. In this post, we focus on the social aspects – but keep an eye out for our commentary on the sustainable aspects soon.)
Objectives and targets of Victoria’s Social Procurement Framework
Social procurement is defined in the framework as organisations using their buying power to generate social value above and beyond the value of the goods or services being procured.
As one of the state’s largest economic drivers, the Victorian Government has both opportunity and responsibility to drive social change through procurement. For example, social procurement can help:
- Create job or training opportunities
- Address inequality and disadvantage
- Unlock potential, or
- Deliver economic growth to local communities.
With this mind, Victoria’s Social Procurement Framework targets seven priority areas:
- Opportunities for Victorian Aboriginal people
- Opportunities for Victorians with disability
- Women’s equality and safety
- Opportunities for disadvantaged Victorians
- Supporting safe and fair workplaces
- Sustainable Victorian social enterprises and Aboriginal business sectors
- Sustainable Victorian regions
In the case of Aboriginal businesses, the Victorian Government has set a target, committing that 1% of government procurement will be from Aboriginal businesses by 2019-2020. (Aboriginal businesses are defined as those with 50% or more Aboriginal ownership.)
The Federal Government has had targets for procurement from Indigenous businesses since 2015. They aim for 2% (by number) of contracts to be awarded to Aboriginal businesses in 2017-18, rising to 2.5% in 2018-19 and 3% by 2019-20.
For another comparison, the NSW Government’s Aboriginal Procurement Policy (APP) will aim for Aboriginal businesses to be awarded at least 3% of the total number of domestic contracts for goods and services issued by NSW Government agencies by 2021.
Whilst local governments in Victoria do not have specific targets and policies to-date, it can reasonably be expected that they may do so in the future, and that engagement by, or with, Aboriginal businesses would be looked on favourably in a bid response.
Implementation of the framework
The Social Procurement Framework essentially introduces an additional set of criteria for government purchasers to consider when evaluating suppliers for contracts. It gives businesses that are (or who use) Aboriginal businesses, social enterprises and Australian disability enterprises (ADEs) a competitive edge in tenders for government contracts.
The Government will implement the policy:
- Directly – by purchasing from Aboriginal businesses, social enterprises and Australian disability enterprises (ADEs), and
- Indirectly – by purchasing from private organisations that include the above in their supply chain.
The framework, as it came into force on 1 September, does not cover state purchasing contracts and prequalification registers; however, it states that, over time, these procurement vehicles will be adapted to include the framework’s objectives.
Thresholds and purchaser requirements
The requirements of government purchasers when setting evaluation criteria depend on the value of the procurement.
The threshold for Victoria’s Social Procurement Framework is $3M in metro or state-wide procurements, and $1M in regional Victoria. For procurements below the threshold, the framework is not mandatory; however, purchasers are still encouraged to incorporate social objectives and actively look for opportunities to purchase from Aboriginal businesses, social enterprises and ADEs.
Above the threshold, procurements are divided into three brackets:
- Lower: up to $20M. Purchasers are required to incorporate social objectives into their planning process and use a weighting criterion of 5-10% to favour businesses whose practices support the policy objectives. They must also consider whether part of the project can be ‘unbundled’ and delivered by an ADE, Aboriginal business or social enterprise.
- Middle: $20M to $50M. Purchasers must develop a Social Procurement Plan. They must include performance objectives against social objectives in the contractual arrangement and set supplier targets for inclusion of Aboriginal businesses, ADEs and social enterprises.
- Upper: over $50M. As for the middle bracket, but with performance targets, rather than objectives, in the contract. In procurements at this end of the scale, the framework formalises existing practice. The Victorian Government already includes social procurement targets for procurements of this size. For example, the Melbourne Metro Tunnel Project had a target of 10% social procurement, including 2.5% from Aboriginal businesses.
How to supply to Government under the Social Procurement Framework
If you are a social enterprise, Aboriginal business or Australian disability enterprise:
- Read and understand the framework – it gives you a competitive edge in bidding for government work, or when competing to work with private companies who are suppliers to Government.
- Become certified with the relevant supply organisation – for Aboriginal businesses, talk to Supply Nation and for social enterprises, see Social Traders. For ADEs, BuyAbility offers government and private business buyers channels to do business with disability enterprises nationally.
- Establish relationships with companies who want to win government business and who could include you in their supply chain. The certifying organisations will help you find the right businesses.
If you are a private sector company:
- Read understand the framework – understand what you need to do to meet the new requirements and how you can use them to differentiate yourself and strengthen your position when bidding for government business.
- Develop a Social Procurement Policy – document the processes and practices that prove your business is aligned with the Government’s social procurement objectives.
- Build an implementation plan to include social enterprises and Aboriginal businesses in your supply chain. Supply Nation, Social Traders and BuyAbility can introduce you to suppliers. STEPS to the future can help with recruitment of Indigenous employees.
Implementation of Victoria’s Social Procurement Framework requires a shift in thinking and practices to accommodate the introduction of social and sustainable outcomes to the evaluation criteria, on top of the usual candidates of price, quality and risk.
It does, however, offer businesses another way to differentiate themselves, by showing that they are committed, like the Government, to truly sustainable social change.