CAPS: Only 32% of surveyed social sector organizations participated in government procurement in Asia

Capacity constraints and procurement processes inhibit government procurement from generating social value

Hong Kong, 7 May 2024 – The Centre for Asian Philanthropy and Society (CAPS) , a uniquely Asian, independent, action-oriented research and advisory organization, today released its latest Policy Brief, "Procurement for Good: Government Procurement from the Social Sector in Asia.” The report draws insight from 23 individuals and 2,183 social delivery organizations (SDOs)[1] in 17[2] Asian economies participating in the Doing Good Index 2024 Survey.[3] The study highlights that government procurement of goods and services from the social sector can be a win-win for both sides but is underutilized in the region due to capacity constraints and burdensome procurement processes. In the policy brief, CAPS recommends a policy framework to strengthen the participation of the social sector in government procurement.

Underutilized tool in generating benefits for communities in Asia

By procuring from SDOs, governments can leverage the subject expertise and community networks these organizations have built over the years to deliver positive outcomes, support the social sector, and create social benefits. Additionally, government procurement provides a vital source of income to the social sector. However, only 32% of the surveyed Asian SDOs for the Doing Good Index 2024 participated in government procurement.[4] Among the 17 economies, participation rates are highest in China (73%), Korea (58%), and Japan (49%), while the lowest levels are in the Philippines (8%), Sri Lanka (12%), and Cambodia (13%). On average, government procurement provides only 9% of an SDO’s income in Asia.

Capacity issues are the biggest inhibitor of SDO participation in government procurement. They vary from resource constraints that limit production and quality assurance, human resource constraints that impede access to information, and financial constraints that discourage SDOs from participating in government procurement. Onerous and complex procurement processes exacerbate these capacity-related challenges.

Preferential government procurement policies in the social sector favor social enterprises over nonprofits. Governments view social enterprises as part of the startup ecosystem and a tool to generate youth employment, whereas nonprofits are seen as charitable organizations. Opening up procurement opportunities for nonprofits can help them secure more sustainable funding and reduce their reliance on charitable donations, philanthropy, and government grants and subsidies.

Nonprofits are contracted mostly as knowledge partners and welfare service providers, whereas social enterprises are more likely to be suppliers. The government offers limited opportunities to nonprofits, and they tend to be in traditional social welfare services such as eldercare, disability care, and childcare.

Large and older SDOs with existing government relationships crowd out smaller and newer SDOs. This is partly because the current social procurement policy design embeds structural disparities between established SDOs and newer ones. The absence of formal sectoral representation within the social sector and the heavy reliance on relationships further contribute to inequalities in accessing opportunities.

In the policy brief, CAPS introduces a three-step policy reform framework that targets specific bottlenecks unique to the social sector, improves the economy’s overall procurement ecosystem, and expands decentralized social procurement.

“We are pleased to provide insights into the policy landscape of government procurement from the social sector in Asia. Governments can strengthen the organizations working on the front lines with the most vulnerable parts of society by partnering with them through procurement mechanisms, said Dr. Ruth Shapiro , the Co-Founder and Chief Executive of CAPS. “We should be mindful of the need for customized solutions instead of a one-size-fits-all strategy. Partnering with SDOs can help to develop time, geography, and constituency solutions.”

To access the full research report, please visit https://caps.org/work/our-research_procurement-for-good-government-procurement-from-the-social-sector-in-asia.

If you would like to discuss the content with our research team, please contact Annelotte Walsh Kithmina Hewage Jodee Fok .

For media enquiry, please contact Willa Wong

#socialsector #Doinggoodindex #DGI2024 #CAPS#Asia #governmentprocurement #Asia #CAPSpolicybrief #socialenterprise #NGOs

[1] Social delivery organization (SDO) refers to entities engaged in providing a product or service that addresses a societal need. The term “nonprofit” is not useful because many organizations include a for-profit or social enterprise income stream. “Nongovernmental organization” is also not quite right in Asia where many such organizations are affiliated with the government.

[2] The 17 economies are Bangladesh, Cambodia, Mainland China, Hong Kong SAR, India, Indonesia, Japan, Republic of Korea, Malaysia, Nepal, Pakistan, Philippines, Singapore, Sri Lanka, Chinese Taipei, Thailand and Vietnam.

[3] Source: CAPS. (2024) Doing Good Index 2024.

[4] The Doing Good Index 2024 surveyed 2,183 SDOs and interviewed 140 experts.