Understanding social procurement

Defining 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.

In the Victorian Government context:

• Social value means the benefits that accrue to all Victorians when the social and sustainable outcomes in the Social Procurement Framework are achieved.
• Procurement refers to all business processes associated with sourcing activity to obtain goods, services and construction. It spans the whole life cycle from identifying needs to the end of a service contract or the end of the useful life and subsequent disposal of an asset. It also includes the organisational and governance frameworks that underpin the procurement function. Procurement does not include stored management and logistics, which are part of the wider subject of supply chain management.
• Construction includes ‘Works’ and ‘Construction Services’ as defined in the Ministerial Directions for Public Construction Procurement in Victoria.

This definition of social procurement can apply to organisations in the public, private and not-for-profit sectors and to all levels of government. However, in the context of the Social Procurement Framework (and the suite of guidance materials that support it), social procurement refers only to Victorian Government procurement.

Commitment to social procurement

Collectively, the decisions that organisations make throughout the procurement process have a significant impact on the economy, the environment and the community. These decisions include what organisations buy, who they buy from, what standards they set for their suppliers, how they manage their supply chains, and what outcomes they seek to achieve.

Victorian Government procurement is one of the largest drivers in the Victorian economy. Value for money underpins Government procurement. It is the achievement of a desired procurement outcome at the best possible price – not necessarily the lowest price – based on a balanced judgement of financial and non-financial factors relevant to the procurement. The Victorian Government recognises environmental, social and economic factors as a core component of value for money.

There is a growing national and international focus on the strategic use of the procurement function to deliver social, economic and environmental outcomes. Although social procurement is not new, it is increasingly recognised as an important tool for governments to:

• leverage their purchasing power to achieve broader public policy objectives
• increase opportunities and expand markets for ‘social benefit suppliers’
• influence mainstream suppliers (i.e. suppliers that are not social benefit suppliers) to prioritise social value creation
• diversify supply chains to, among other things, drive competition, promote innovation and provide all suppliers with a full and fair opportunity to compete

The social procurement framework is designed to embed social procurement throughout the procurement process and implement a consistent and streamlined approach to achieving social and sustainable outcomes through procurement. It achieves this by establishing:

• social and sustainable procurement objectives and outcomes
• mandatory planning requirements and individual procurement activity requirements
• mandatory measurement and reporting requirements.

The social procurement framework provides the authorising environment and sets a clear expectation to make social procurement business-as-usual.

Social procurement framework case studies and highlights report

This report showcases some of the benefits of social procurement using case study examples.

Social procurement examples in action

These video case studies showcase some of the outcomes being delivered through social procurement.

Building a career in the construction industry

Social procurement in action – Building a career in the construction industry shows the story of Aydarus Mohamed, a migrant from Somalia, finding work in the construction industry through a program run by the Department of Health and Human Services, the Brotherhood of St Laurence and The Huddle.

Knoxbrooke’s Yarra View Nursery

Social procurement in action – Yarra View Nursery shows the story of Knoxbrooke’s Yarra View Nursery, a social enterprise that provides employment for people with disability. Yarra View Nursery has supplied plants and landscaping services to several projects run by the Level Crossing Removal Project.

Approaches to social procurement

Direct versus indirect approaches to social procurement

For practical purposes, social procurement may be grouped into two broad approaches. These approaches are differentiated according to who Government is contracting with and the way in which the Government is delivering a social or sustainable outcome.

• The direct approach to social procurement is where a department or agency purchases goods, services or construction from a ‘social benefit supplier’. By purchasing from social benefit suppliers, Government is directly delivering social and/or sustainable outcomes.
• The indirect approach to social procurement is where a department or agency purchases goods, services or construction from a ‘mainstream supplier’ (i.e. a supplier that is not a social benefit supplier) and the Government uses invitations to supply and clauses in contracts to deliver social and/or sustainable outcomes. By purchasing from mainstream suppliers, and imposing requirements on those suppliers to deliver social and/or sustainable outcomes, Government is indirectly delivering social and/or sustainable outcomes. This approach includes scenarios where a department or agency requires a mainstream supplier to involve social benefit suppliers through the supply chain (e.g. by way of subcontracting).

Both approaches create opportunities to deliver social and sustainable outcomes, which means that all suppliers can deliver one or more of these outcomes when doing business with Government.

Social procurement opportunity analyses undertaken by departments, agencies and government buyers should actively consider both direct and indirect approaches to social procurement. The preferable approach will depend on several factors, including:

• the circumstances of an individual procurement activity, such as the value of the activity, the goods, services, or construction being procured, and the social and/or sustainable outcomes being sought
• the extent to which ‘social benefit suppliers’ participate in the market, as well as their current capabilities and capacities
• the applicability of social procurement sourcing tactics outlined in the Social Procurement Framework
• the assessment of value for money, taking into account:
  • the total benefits and costs over the life of the goods, services or construction being procured
  • environmental, social and economic factors
  • any risk related to the procurement

The two approaches are not mutually exclusive. Government buyers may, for example:

• decide to unbundle an individual procurement activity and use both direct and indirect approaches
• use invitations to supply and contract clauses to deliver social and/or sustainable outcomes when purchasing goods, services or construction from social benefit suppliers

Social benefit suppliers

Social benefit supplier means a business that:

• is a ‘Victorian social enterprise’
• is a ‘Victorian Aboriginal business’ and is verified by Supply Nation or Kinaway
• provides ‘supported employment services’ as defined in section 7 of the Disability Services Act 1986 (Cth), and operates and has business premises in Victoria

Victorian social enterprise means an organisation that is:

• certified by Social Traders and operates, and operates and has business premises in Victoria
• Victorian Aboriginal business means a business that:
  • is at least 50% Aboriginal and/or Torres Strait Islander-owned
  • undertakes commercial activity
  • operates and has business premises in Victoria

On 30 June 2023, the map for impact was decommissioned. Buyers are now required to find certified social enterprises through the Social Enterprise Finder.

The Victorian Government continues to explore opportunities to engage social procurement partners to identify and verify other types of social benefit suppliers.

Mainstream suppliers

Suppliers that are not social benefit suppliers are referred to as ‘mainstream suppliers’ throughout the suite of Social Procurement Framework guidance materials. The Victorian Government considers that all suppliers can deliver one or more social and sustainable outcome when doing business with Government.

Tools and support

Browse social benefit suppliers to support social procurement activities.

This content on this page is taken from Victoria’s Social Procurement Framework – Buyer Guidance – Guide to key concepts. Access a PDF version in the social procurement document library.

For more information about social procurement, please contact the Social Procurement team.