As social, environmental, and economic movements grow post-pandemic, promoting social procurement has become a key focus for public agencies. Procurement teams now have the chance to level the playing field for diverse suppliers and communities through these efforts.
In the United States, new policies from the Biden administration are putting more emphasis on awarding contracts to disadvantaged business enterprises (DBEs). This makes social procurement even more crucial.
Let’s explore what social procurement means for your organization, how to create social value that suppliers can leverage, and how it can positively impact your community.
Social Procurement to Create a Positive Difference
As every public procurement professional knows, governments have a great deal of purchasing power. The U.S. federal government alone spends over $500 billion per year procuring products and services, while the Canadian feds spend $18-20 billion annually. When you look at total spending across all levels of government in the United States, the number exceeds $7 trillion.
Traditionally, procurement’s main goal has been to stretch public dollars by sourcing suppliers at the lowest prices, ensuring high quality and low risk. However, the shift towards social procurement focuses on balancing cost-effectiveness with cultural, economic, and social value, along with creating a positive environmental impact. By directing government purchasing power towards social procurement, qualified DBEs (Disadvantaged Business Enterprises) will benefit, and communities will see improvements.
As Buy Social Canada explains in their Guide to Social Procurement: “Every purchase has an economic, environmental, and social impact, whether intended or not. Social procurement is about capturing those impacts and seeking to make intentional positive contributions to both the local economy and the overall vibrancy of the community.”
Using buying power to deliver social value and environmental sustainability can significantly impact communities, from boosting competitive advantage for DBEs to increasing employment opportunities.
Pursuing Social Procurement Beyond the Pandemic
In the same way that social justice movements pushed governments to prioritize racial and social equity, the pandemic increased awareness of the important role of social procurement.
For government buyers that, up until COVID-19, functioned mostly behind the scenes, this visibility created opportunities to rethink their traditional procurement process, relationships, and decisions. In particular, procurement teams are making the shift toward social procurement by conducting more equitable and inclusive spending to address the social and economic disparities the pandemic has exacerbated.
Through social procurement, agencies can encourage more diverse participation in public contracts. By prioritizing minority- and women-owned local and small businesses, they open doors for a wider range of suppliers.
As director of procurement Joel Neaveill explains, supply chain shortages during the pandemic actually created more opportunities for his organization, the Louisville Metro Government, to diversify their supplier base and bring on new local businesses.
“Our local economy, like everyone’s local economy, is just hurting so much. Through this emergency, we’re turning to [local businesses] to help supply part of the response to the emergency… We also have a list of minority- and women-owned businesses that, as part of the incident management team, we look at through an equity lens—how are we equitably responding to this so we don’t have disparate outcomes?”
— Joel Neaveill, Director of Procurement, Louisville Metro Government
Shifting Policy Toward Social Value and Policy
Beyond the pandemic, public procurement policy has significant power to influence public services, create employment opportunities, and drive healthy competition in the market. Recognizing this, the Biden administration in the United States has outlined intentions to “support small businesses and tackle inequities in the federal contracting system,” including tripling federal contracting goals for small, disadvantaged business enterprises (DBEs) by 2025.
The proposed policy directives would increase participation of small DBEs in business development programs and subcontracting opportunities, and minimize contract bundling that disadvantages minority-owned businesses in the bidding process.
Similar shifts toward social procurement are happening in governments around the world. Driving the evolution is a growing awareness that effective and equitable procurement systems can increase citizens’ faith in government, stimulate economic growth, generate social benefit suppliers can capitalize on, and build more supportive and inclusive communities.
Are you ready for the future of social procurement? Request a demo today to learn how your agency can pursue a social procurement strategy that benefits society.