Industry Watch – Social Procurement – How Political Do-Goodery Is Affecting Procurement And What Procurement Professionals Need to Do About It.

What do Australia, the UK, Canada, the City of Portland, and the State of Minnesota all have in common?

These governments have all made pledges to incorporate social values into their procurement systems.

Towards the end of last year, a story from the Calgary Herald caught my eye.  It was a report about a City Administrator in Calgary that was pushing forward a recommendation that the City adopt social concerns as part of their procurement system.

The article stated that this action followed a, “motion in April that passed unanimously, asking city administration to look into the issue of social procurement“.  Following that motion, a 56 page report was prepared. The report, outlined pilot programs and describes the goals the program is meant to achieve.

The City adopted the recommendation 2 days later.

Like most other government procurement systems, prior to this, the City of Calgary’s procurement practice was entirely focused on quality and cost.  According to the report, in 1969, Calgary also began considering environmental concerns.  Now the city plans to incorporate social concerns as well.  Adding this consideration raises the bar and potentially increases the number of small business and marginalized groups who do business with the City.

So what does Social Procurement mean?

The City of Calgary’s Report defines it as;

“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.”

Here is how the Government of Victoria in Australia defines Social Procurement;

“Social procurement is when organisations use their buying power to generate social value above and beyond the value of the goods, services, or construction being procured.”

The City of Portland describes Social Procurement as such;

“As a procurement strategy, sustainable procurement promotes fiscal responsibility and smart risk management. Long-term, sustainable procurement contributes to the City’s social responsibility, local economic development goals, and preservation of natural resources.”

Here is how the United Nations defines Sustainable Procurement;

“Sustainable procurement means making sure that the products and services we buy are as sustainable as possible, with the lowest environmental impact and most positive social results.”

And the UK uses the following definition;

“Sustainable procurement allows organizations to meet their needs for goods, services, construction works and utilities in a way that achieves value for money on a whole-life basis in terms of generating benefits not only to the organization, but also to society and the economy, while remaining within the carrying capacity of the environment.”

The common element between all of these definitions is that they are all different!

What is worse, is that they are all very subjective and ambiguous.

If you are in procurement, you know that there is nothing more problematic in an RFP than ambiguity.  That’s not to say that a seasoned procurement professional wouldn’t know how to address ambiguity.  We do so all the time.  The problem is when the ambiguity is built-in to your procurement policy.

Statements such as; “the overall vibrancy of the community”, “social value above and beyond the value of the goods”, “contributes to the City’s social responsibility”, “lowest environmental impact”, “generating benefits not only to the organization, but also to society”, are all intangible and extremely subjective measures.

Don’t get me wrong, I think adding social value is a great and valuable thing for procurement organizations to consider.  I think these are especially well-placed in government procurement.  I also believe (and have advocated for) incorporating social procurement in private business.

My issue lies with the vagueness surrounding it all.

How do we measure if a Vendor has “intentional(ly)…contribut(ed) to both the local economy and the overall vibrancy of the community?”

Or which product has “the lowest environmental impact and most positive social results?”

These statement are the result of well-intention-ed, but hasty do-gooders with little more than a political agenda to promote.  In order for these to become meaningful, they must be restated to tie back to a specific measurable objective.

Before the concept of social value became a political objective, procurement organizations had percentage targets for awarding minority, local, and small business enterprises.  These took the concept of social value and turned it into a tangible measurable goal.

We took the criteria of “minority business”, “local business”, and “Small Business Enterprise” and systematized them by establishing certifying entities.  Certifications granted by recognized professional groups like the National Minority Supplier Development Council made the measure of whether a business met the criteria for a minority business simple and verifiable.

How does one measure the “vibrancy” of the community?  How do you assert that a product has the “lowest” environmental impact?  How do you measure environmental impact?

These are the questions that we must address if we are going to incorporate these metrics into procurement.

In order for these social objectives to become meaningful, we need to move beyond rhetorical, politically correct, feel-good language, towards measurable, tangible, actionable targets.  Without this level of specificity, awards made on the basis of these criteria are subject to legitimate award challenges.

Governments that award one vendor over another on the basis of their contribution to social value will begin to see legal action from Vendor’s who were not awarded.

These actions will delay contract awards and cause incumbents to retain long-standing contracts indefinitely.  It will also create financial burdens on the very same vendors these policies are intended to support.  For small businesses, such burdens may not be tolerable and the length (and cost) of defense may render them insolvent.

We must consider the cost of these unintended consequences and prevent them from happening.

So what do you think?  Does your organization consider social value in your procurement system?  How does your organization measure social value?  Tell me your stories.

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