3 Reasons Why Victoria Holds The Keys To Unlocking Social Procurement Across Australia.

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Read time: 5 minutes

Victoria holds the keys to unlocking the potential of social procurement in Australia.

"Why, and how exactly?" You might ask.

Great question!

Today I am going to unpack the unique role Victoria plays in the future state of social procurement in Australia.

I might be biased, but I think Victoria is doing something right. Not only on a local and national scale, but also a global one too.

It's also the best place in Australia to live, work and pretty much do anything (controversial, I know. Sorry Sydney).

Through this newsletter edition, I hope to uncover how we can leverage Victoria's unique position as a social procurement leader to enhance the broader implementation of social procurement practices across other states and territories in Australia.

Bit of a mouthful of a sentence, but let's take this piece by piece. Here's why you should even care about this.

Why does this topic matter?

Three reasons.

• Micro: Social procurement is inconsistent across each state and territory. Many have different and, at times, conflicting definitions of what defines social (or even local) procurement.
• Meso: Theoretical definitions aside, the practical implementation of social procurement across each state and territory remains an even bigger challenge to achieve any consistency across the nation.
• Macro: While social procurement policies are state-based, many buyers (i.e tier 1 contractors) and sellers (i.e social benefit suppliers) operate nationally or even internationally. This duplication and inconsistency across states and territories can be confusing to navigate, let alone comply with.

"Okay I get it Michael, but you still haven't told us why Victoria?!"

Sorry, sorry. I got side tracked. Here's why.

According to Social Traders' Impact Report for 2021 highlighted that:

"55% of Australia's social procurement activity happens in Victoria."

(Click ?HERE? for the report)

Take that everyone else! Okay, that's enough gloating from me (for now).

There are many theories why I think Victoria has the lion's share of social procurement activity in the nation.

These include:

• Theory 1: A strong pipeline of public procurement opportunities.
• Theory 2: An innovative state government.
• Theory 3: A supportive ecosystem.

Let's unpack each theory together.

Theory 1: A strong pipeline of public procurement opportunities:

The Victorian government has really put its money where its policy (mouth) is.

Over the next four years, they are projected to ?spend $85.3 billion? on investment on roads, rail, hospitals and more across the state. IPA’s Budget Monitor listed Victoria first for its infrastructure spending.

By comparison, NSW has a pipeline of $88.4 billion over four years (Infrastructure Magazine) South Australia has $18.6 billion over the next four years (State Budget 2022-23) and Queensland has $37.6 billion over four years (Media Release) in the pipeline. This makes Victoria slightly less than NSW but more than our other east-coast neighbours (I was about to brag again, but didn't. This is growth).

I know it might sound gross to say. But money matters. A lot.

Why?

The majority (if not all) of those projects will be subjected to the requirements of the Social Procurement Framework and the other suite of social value policies (i.e Local Jobs First Policy, Major Project Skills Guarantee, Building Equality Policy, etc) to varying degrees.

The bigger the project, the more requirements placed upon them (minimum of $1million up to $50million).

This is massive.

A policy is only meaningful if there is a monetary incentive to do it.

Any builder, contractor, consortium or subcontractor will have to respond to this incentive, willingly or dragged kicking and screaming.

The healthy pipeline of public infrastructure and procurement positions Victoria to create more social procurement opportunities. But is money everything?

Theory 2: An innovative state government

While there is a cash splash over the next decade...

More money does not necessarily mean better outcomes.

Opportunities need to be directed in right way, by the right people and to the right communities.

Policy drives incentives. And incentives drive behaviour change.

Get the policy right and you'll get the right outcomes.

Victoria's social procurement leadership can be boiled down to two core policies:

1. The Social Procurement Framework 2018
2. Victorian Social Enterprise Strategy 2021-25

Before you interrupt me, I know there are more policies that apply.

But these two policies are major drivers for how procurement and recruiting decisions are made.

For example, the Department of Family, Fairness and Housing's Social Procurement Strategy, specifically only reference these two policies. Don't believe me? Read it for yourself: HERE (Page 3).

In my eyes, the Victorian government's Social Procurement Framework is the most ambitious strategy that exists in the world. Not necessarily the best when it comes to implementation, but one of the most ambitious on paper.

In combination, these policies determine how, what and where organisations buy, sell and work with each other when it comes to social procurement.

Social procurement requires strong leadership from state governments. As of writing, Australia does not have a comprehensive national social procurement strategy. I was privileged to be part of creating Social Enterprise National Strategy but that work is still ongoing.

Victoria's relatively strong suite of social value policies means it can convert social procurement opportunities into meaningful outcomes for local communities and those who support them.

Theory 3: A supportive ecosystem

While policies set a direction, a supportive ecosystem is what creates meaningful outcomes.

Even the best technology fails if the ecosystem can't support it.

Don't believe me? Look at the Segway.

Billed in 2001 as the most significant disruption to how people would move, many experts predicted it to be the most profitable company in history. Entrepreneurs such as Steve Jobs invested their personal money into the business. The media was fawning over the 'genius' founder.

The Segway seemingly had everything going for it, except for one critical thing:

It did not have a supportive ecosystem.

Regulation ambiguity meant people didn't know if Segways belonged on the road or pavement. What insurance would you need to buy? Many didn't know where they would park it. Most car parks didn't have dedicated space to fit a Segway safely. The size of the Segway meant is was not possible to put into a car, or comfortably take onto public transport.

When the company was eventually sold in 2009 (8 years after launching), it still wasn't commercially profitable.

From all the hype and hysteria, it turned out to be a major flop.

The diffusion of technology is the similar to the diffusion of policy.

The grand intention of a policy means nothing without an ecosystem to make implementation possible.

The social procurement ecosystem in Victoria includes:

• Buyers - tier-1 contractors, government, etc.
• Sellers - social benefit suppliers (think social enterprises, disability enterprises, Aboriginal businesses, etc).
• Intermediaries - consultants (like me), brokers, state-based networks
• Government - regulators, compliance, policy mandates

While not perfect, Victoria's social procurement ecosystem is one of the most advanced in Australia.

• Forward-thinking buyers (like John Holland, Spark Consortium, Laing O'Rourke, plus so many more) are constantly innovating and diversifying their supply chain with social benefit suppliers or ring-fencing work to be undertaken by social enterprises.
• An abundance of local social benefit suppliers that are rapidly growing in scale and quality to meet the social procurement demand curve.
• The pivotal role of intermediaries to broke opportunities. The HQ of Social Traders is located in Melbourne, SENVIC is nurturing the next generation of youth-led social enterprise (and doing a banging job, IMO).
• A state government that has created structures and policies (mentioned before) to nurture the growing social procurement and social enterprise ecosystem.

Did I mention I love Victoria? If you're a social procurement practitioner you should too ;)

Aside from my gloating, all of this contributes to the disproportionate amount of social procurement spending happening in Victoria compared to the other states.

Summary:

So, which of these theories explains Victoria's success?

In reality, all of these theories contribute to position Victoria as the leader of the pack.

Picking a silver bullet would be close to impossible.

For now, Victoria remains the leader in the social procurement space and can serve as a useful model for how other states and territories can model their own social procurement strategies.

But we can't rest on our laurels. The tide is constantly shifting and other states are catching up. Quickly.

At the time of writing, The NSW government is preparing to release its Sustainable Procurement Framework. The rumours tell me that it has the potential to eclipse Victoria's policy.

As a die-hard Victorian, I don't want to see NSW overtake Victoria. But overall, this is great for Australia and the vulnerable communities and employment opportunities that social procurement aims to create.

We are moving in the right direction and if that means Victoria taking second place, I am willing to make that sacrifice. Yes, read that again.

Thanks for reading,

Michael.

Whenever you're ready, there are three ways I can help you.

1. If you're still looking for traction in your business, I'd recommend starting with a discovery call. You can book it ?HERE?.
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3. If you're a Social Enterprise, take our ?FREE Supplier Capability Assessment Scorecard?.