Does social procurement offer part of the solution to the COVID recession?

Australia is turning its attention to imminent recession, the federal government is predicting 10% unemployment when JobKeeper comes to an end in September, and many economists believe there is little chance of returning to 5% unemployment before 2024. As governments consider what the back-to-work stimulus should look like, they will do so with one eye fixed firmly on preventing people who have lost jobs over the past three months from becoming long-term unemployed.

As the state and federal governments develop their stimulus packages, we need to consider how parts of these packages might be used to bring people at risk of long-term unemployment back into training and employment. If someone is unemployed for more than two years, studies show there is less than 25% likelihood they will ever work again. The faster we’re able to give those who face the greatest risk of long-term unemployment access to training and job opportunities, the more we’re likely to prevent entrenched unemployment.

In Victoria, there has been an innovative approach for addressing inequality and long-term unemployment that has been active for a number of years, which should play a significant role in the recovery from the COVID recession.

That solution is ‘social procurement’, through which governments commit to using their purchases of goods and services to generate positive social outcomes. Social procurement can be as simple as requiring that 3% of your project spend goes to social enterprises, Aboriginal businesses, or the employment of disadvantaged groups – a stipulation of Melbourne’s Level Crossing Removal Project – or buying car-washing services from businesses that employ people with disability – a strategy of VicRoads. Employment and training opportunities can be delivered by businesses employing people at risk, or by ‘social enterprises’ that support disadvantaged jobseekers through training and the creation of low-skilled, entry-level jobs.

In Australia, most of our state governments have been exploring social procurement for a number of years – particularly in major infrastructure projects. Victoria has been a standout in this regard, adopting a concerted whole-of-government approach which encourages impact outcomes across all major areas of government buying.

A framework for the future

The COVID pandemic was far from people’s minds when the Victorian Social Procurement Framework (SPF) was initially launched in April 2018. Finance Minister Robin Scott said the SPF’s buying power would enable the State Government to make a real difference to disadvantaged Victorians’ lives. “Whether it be creating job opportunities or skills-based training in areas of disadvantage, addressing structural and systemic inequalities, or delivering environmental benefits for local communities, government procurement can add value that all Victorians can share in,” he said.

While the SPF provides a framework for a procurement-led response to the looming COVID recession, it also represents a significant elevation of the role of procurement – from compliance and savings, right into the heart of government policy.

Most governments have adopted a form of social procurement related to a specific issue – such as the Federal Government’s Indigenous Procurement Policy, which was created to increase Indigenous employment and is now part of the Closing the Gap Strategy, encouraging several states to follow suit. Similarly, every state and federal government has built employment targets for targeted cohorts into major infrastructure projects.

Victoria has taken social procurement a step further than other governments by creating a ‘whole-of-government framework’ that applies to all 270 government entities, all procurements, and with a broad focus on social impact – allowing it to meet a range of different government objectives. Some of these projected outcomes are outlined in the following table.