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How good public procurement helps government deliver long-lasting value

Engaging in responsible business conduct should have always been an essential aspect of public procurement, but it’s particularly relevant now. Given the context of a pandemic, climate change and tensions over social inequality, a recent OECD report says governments have the opportunity to leverage their buying power to improve environmental and socio-economic outcomes related to their purchases. 

“Until recently, economic and fiscal arguments have been at the forefront of government public spending considerations and policy design, given constant budget pressures and citizens’ demands for accountability vis-à-vis public spending,” the OECD says. 

“Increasingly over the past decade, however, the concept of value in public spending has been evolving to encompass a wider range of considerations known as ‘complementary policy objectives’, such as the Sustainable Development Goals, as well as the means to achieve these objectives, including through promoting responsible business conduct and supply-chain due diligence.” 

With public procurement representing 13% of member countries’ GDP, the OECD believes governments have a fundamental responsibility to carry out procurement efficiently to ensure the high quality of public service delivery and safeguard public interests. It states that the provision of public services, especially health, transport and education, are crucial for economic recovery. 

Dr Warren Staples, a lecturer in social procurement in the Melbourne School of Government at the University of Melbourne, says Victoria and Western Australia have embraced social procurement frameworks, as has the federal administration with Indigenous procurement. He says the recent amendments to the commonwealth procurement rules, which came into effect on July 1, promote more opportunities for SMEs.

“What you’re trying to do is think about what you’re procuring and what the potential opportunities are within that,” Staples says. 

Governments can achieve good public procurement by engaging directly with those who are marginalised in the labour market or with indigenous communities and enterprises. It can also be through encouraging major contractors to directly engage with marginalised labour force groups – those impacted by gender inequality, long-term unemployed, disengaged youth, single parents, migrants or refugees. Achieving environmental and sustainability goals are also important.

“If this doesn’t happen on government expenditure, then it doesn’t happen,” Staples says. “It could be stationery; it could be printing. It could be an IT contract. 

“You’ve got to be getting the value of the good purpose for construction works. It’s about thinking about who can be involved in the delivery or the production of that good or service, or how can we use the production to create other benefits, whether they’re regional development goals or SMEs.”

He says the Victorian social procurement framework outlines 10 goals – seven are social criteria and three are sustainability criteria. These range from opportunities for people with disabilities, Indigenous citizens and enterprises and disability businesses or procuring directly from social enterprises or social benefit providers.

“[Victoria] has strengthened the framework to include building equality policy, which is about trying to strengthen the construction sector in terms of gender equality,” he says. “This type of procurement isn’t necessarily new because government has always wanted to see itself as a model contractor. 

“If you think about the 40 or 50 years of market production of public goods or services, it stands to reason that this is important. If you don’t put these conditions on your interactions with markets, then it can be forgotten and not happen.”

Staples says COVID-19 has sharpened this focus. “I think the pandemic has in some way accelerated the thinking because the people most affected are those who are already marginalised.”

Learning public-sector procurement

Staples admits public servants tend to learn procurement practices through experienced colleagues. “It tends to be peer-to-peer because procurement people tend to know,” he says. “But you’re limited by your experience within government; it might even be limited to particular categories.”

At the same time, governments procure a wider range of goods and services than other organisations. “During the pandemic, they have had to procure pathology and PPE, plus other health and social services, child protection, hospitals. Procurement people aren’t necessarily going to have experience across all of that, and I think that’s where there’s space for formalised education. A lot of that education has previously been private-sector focused.”

Staples believes the Australian Public Service Commission should play a significant role in helping to educate effective public-sector procurement. “We’re talking about huge economic productivity,” he says. “In that modern sense of government, a lot of what you do is created through contracts and procurement. If you’re not doing that well, then you’re not creating the most value you could. 

“Procurement as a profession hasn’t always had the recognition within government that it probably should. The Australasian Procurement and Construction Council is doing a lot of work to raise the status and understanding of how important procurement is. In some ways, that’s been a 15-year crusade.”

Rather than public servants learning about best practices in procurement from the private sector, Staples believes the opposite is true. “The public sector is unique in the scope and breadth of what it does,” he said. “The private sector can learn about creating broader value from the public sector. 

“There are instances where some firms are starting to do social value creation well because they have to, otherwise they can’t win government contracts.” 

Effective procurement in the public sector

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