08 Dec 2015 / by Liz Sutherland and Heather Laird / in Blog
Buying social: Same price, twice the value for communities
Originally posted on the Canadian Centre for Policy Alternatives’ Behind The Numbers blog site.
What is social procurement? Is this about online dating?
No, we are not talking about your social life here. We are talking about the exciting side of economics (and yes, there is one!). It’s the economics of purchasing power.
What we buy matters—and who we buy from matters just as much. Some individuals use purchasing power to support particular goals, like buying Canadian-made products or fair trade coffee. They do this because they know that “value for money” goes beyond getting a good deal; it includes supporting organizations that they want to see stick around.
With billions at their disposal, governments and other public benefit organizations have so much more purchasing power—and the same principle applies. How do we make sure that these entities have a positive social impact when they spend?
Social procurement just means taking the opportunity that comes with every purchase to leverage spending for further investments in communities, which can create ripple effects with our collectively spent public dollars.
Social procurement can help public benefit organizations put their purchasing dollars to work not just once, but twice by supporting social enterprise and other community benefits, at no extra cost.
Social procurement can be used at any scale for any type of purchase. But the “biggest bang for the buck” often comes with infrastructure investments. Transit and highway projects, hospitals, housing developments, and other capital projects can create many high-quality jobs, training opportunities, affordable housing, parks, small business-oriented “buy local” initiatives, and social enterprise opportunities.
The key is to create a mechanism, like community benefit agreements, to ensure that these spin-off benefits are realized. For more information about how community benefit agreements can build community wealth in Ontario, check out the great report, The Prosperous Province, by the Mowat Centre and Atkinson Foundation.
For the Government of Ontario, adopting social procurement is a great way to ensure that its purchasing power supports broader policy objectives.
By incorporating a measure of social impact into its procurement processes, government can accelerate the scaling up of its budding social economy and direct stimulus to struggling local economies. In the process, it can reduce pressure on social services and catalyze grassroots economic activity, without additional costs.
Simply by requiring private sector infrastructure bidders to include a provision in their bids to support community benefits, the government can leverage its purchasing power in the name of social impact.
Until recently, no framework formally existed to promote this approach in Ontario. That has changed with the passage of Bill 6, the Infrastructure for Jobs and Prosperity Act, 2015.
The Government of Ontario has taken an important step by naming community benefits in Bill 6, and it only happened as a result of advocacy efforts by a coalition of non-profits, labour groups, and social enterprise leaders.
The coalition is now working to ensure that meaningful and practical ways are developed to implement this Act. Our networks are encouraging the Ontario government to reach out to community groups that have expertise in areas ranging from job training to community engagement and to consult broadly on regulations when they are developed under the Act.*
Bill 6 builds on important work in Ontario by social procurement advocates. In recent years, community benefit agreements have been used to ensure that public dollars are spent in a way that benefits not only large construction companies but also local communities, and especially in a way that engages marginalized populations.
These agreements have been put in place in several municipalities, including Los Angeles, Oakland, and recently Toronto. Metrolinx, the transportation authority for the Greater Toronto and Hamilton Area (GTHA), has committed to include a community benefits program for its Toronto Transit Projects, starting with the Eglinton Crosstown.
Beyond infrastructure projects, there are great social procurement examples in Ontario and around the world to build on, including the pilot program of the 2015 Pan Am & Parapan American Games to help social enterprises be part of games procurement. More comprehensively, the Scottish Government has demonstrated the value and practice of undertaking public procurement reform with a focus on social procurement.
There are significant opportunities for social procurement whenever large infrastructure projects are commissioned by government, and in Ontario, that time has come.
The Government of Ontario is planning to spend $130 billion in public infrastructure over the next 10 years.
The newly elected federal Liberals campaigned on a commitment to almost double infrastructure investment to nearly $125 billion over the same time frame.
The Trudeau government also plans to provide new dedicated funding to provinces for public transit, affordable housing, child care centres, and other social and environmental infrastructure.
These levels of investment will represent a remarkable increase over the previous decade.
The community benefits provisions in Bill 6 are a statement of principle. It will take continued pressure to see this principle reflected in the regulations under the Act and in the contracts that are awarded over the next ten years.
But if we are successful in breathing life into Bill 6’s community benefits provision, it will not mean business as usual.
Over the past decade, the province has focused its procurement activities on securing the best value at the lowest cost, making use of Alternative Financing and Procurement (AFP) in many cases to offload costs by partnering with the private sector. The private sector is heavily embedded in the infrastructure procurement process. It will take serious efforts to change how contracts are awarded and what they require.
Beyond Bill 6 and infrastructure projects, there is considerable scope to embed social procurement in other government purchasing policies.
With expertise in Ontario and among key partners in other jurisdictions, a task force of non-profits and other experts on social procurement can be readily convened to provide recommendations for a social procurement action plan.
Such a task force is needed to provide practical, on-the-ground solutions to ensure Ontario’s procurement strategies meet both financial and social outcomes while adhering to the requirements of relevant trade agreements.
Convening this task force is the next step in demonstrating the Government of Ontario’s commitment to maximize its return on investment, through many of its significant purchases.
Social procurement: let’s make all our purchasing work twice for communities.