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

5 Jun 2020

Last year, one of the world’s leading social enterprise advocates singled out the Victorian Government as a global leader in social procurement. Was this simply because he was delivering his address in Melbourne, or was there something more significant going on? Mark Daniels believes it’s the latter.

A staff member from Ability Works working on a steel fabrication contract for McConnell Dowell.

A staff member from Ability Works working on a steel fabrication contract for McConnell Dowell.

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. 


By incorporating these diverse policy agendas within one procurement framework, it becomes easier for departments and staff to prioritise their focus on an area where they can have the greatest impact, or that has the greatest significance to their work.

For example, the Department of Health and Human Services (DHHS) prioritises employment for people with disability and disadvantaged Victorians and is developing more strategic approaches to enable this. The DHHS’s recent announcement of a $500 million commitment to new social housing and maintenance of existing stock is a great opportunity to ensure the very people housed by the Department are given an opportunity to work as a result of this spend.

Over the past 18 months, all seven Victorian Government departments and 270 government entities have developed their own social procurement strategies, incorporating the social and environmental areas they will prioritise, social procurement targets in relation to these areas, and an overall approach to the rollout and implementation of social procurement across their organisations.

The biggest change for buyers undertaking social procurement is change management. With the multitude of traditional rules around procurement, social procurement requires all these rules to be adhered to as well as a variety of additional requirements. The changes start at the planning process and run right through to contract management. 

Source: Social Traders training materials, 2020

Source: Social Traders training materials, 2020