Late last year, the Victorian Government started rolling out a new Social Procurement Framework which signals a profound change in the way we do business with the government.

Widely regarded to be the world’s leading and most ambitious social procurement framework, its aim is to better utilise government spending power to encourage industries like construction to create new jobs and training opportunities for those facing major barriers to employment. These people include those from an Indigenous background, refugees and migrants, youth at risk, people with a disability, local workers, women and long-term unemployed. Expect this trend to gather pace as governments wake-up to the untapped power of their construction procurement spending to enhance the social and environmental fabric of the communities they serve.  

This new social procurement framework in part of a global trend called New Public Governance, where governments are seeking to partner with the private sector, not-for-profits, community organisations and third-sector organisations like social enterprises and minority businesses, to address social challenges like unemployment. Australia is leading the way internationally and this recent framework, sits alongside other social procurement policies like the Commonwealth Indigenous Procurement Policy and state-based procurement policies which require government agencies and departments to consider factors other than price in construction tenders and to use their best endeavours to procure products and services from local, ethically, environmentally and socially responsible businesses.  Local Authorities like Brisbane City Council, City of Parramatta and major government clients like NSW Health are pioneering policy in this area, with their own bespoke social procurement tender requirements which require construction companies to respond to the needs of the communities in which they build. These non-price requirements can be up to 30-50% of a bid – with social requirements representing around 15%.  Major private sector businesses within and outside construction like Telstra and Multiplex are also experimenting with social procurement as a way to meet their corporate social responsibility goals.

This is a massive change for the contractors, subcontractors and consultants working in the construction industry – since it means it will be no longer good enough to be lowest price. You will need to show you are contributing ‘social value’ to the communities in which you work too. And those that can, will have a significant competitive edge over those who cannot.

In practical terms, while ‘social value’ can be created in many ways by the construction industry, the main focus of these policies will be on those who can provide ‘meaningful’ and ‘sustainable’ employment and training opportunities for people suffering disadvantage in the employment market. There will also be a major commercial advantage to contractors, subcontractors and consultants which use social enterprises, local businesses, minority and disability enterprises and Aboriginal businesses in their supply chains. It is important to note the emphasis above on ‘meaningful’ and ‘sustainable’ employment and training opportunities since there is a lot of deception going on in this emerging space. Many companies, large and small, are simply ticking-the-box, recruiting from dubious sources and providing poor quality and lowly paid jobs that would have been there anyway and which simply disappear when the project finishes.

The problem for the construction industry in complying with these new policies is that the concept of ‘social value’ is completely alien to most in the industry. Most companies, subcontractors and consultants have little experience of working with the disadvantaged groups targeted by such policies and generally see them as risks rather than opportunities. Conversely, the problem for governments introducing such policies is that without understanding the capacity of the industry to deliver on these increasingly complex and ambitious targets, there is a danger that they will fail to meet their laudable policy outcomes.

Recent research in Australia has thrown light on how subcontractors in the Australian construction industry (the ultimate employers of these people) perceive these new requirements and the results are fasctinating and important.

The research shows that emerging social procurement policies are imposing an onerous, complex and overlapping set of employment requirements on a construction supply chain which is neither experienced nor equipped to meet them.

Setting targets without an understanding of supply chain capacity to deliver on those targets is likely to be counter-productive and create a real danger that policy will run ahead of practice and that the ambitious targets being set will not be met.

The research shows that the challenges and types of support needed for each group varies significantly. The following table shows how each group targetted by social procurement policy was ranked by subcontractors across a range of barriers to employment.

The research finds that from a government perspective, targeted legislation with specific deliverables supported by policies which provide support and removes these barriers to employment could be a powerful way to encourage the employment of disadvantaged groups in the construction supply chain. However, the research also indicates that the industry must do its part and that initiatives to support disadvantaged people in the construction supply chain are critically important if these policies are to work.

One excellent example, which is internationally recognised as an exemplar of innovative social procurement in action is Multiplex Connectivity Centres. The Connectivity Centre currently operating on the Westmead Hospital Development , which has been developed and refined over many years and projects is the largest and most ambitious yet. It shows how construction clients, construction companies, subcontractors, governments, communities, not-for-profits and third sector organisations working collaboratively, can help to leave a lasting and meaningful legacy in the communities in which they build.

The unemployment rate in Australia remained steady at 5.1% in May 2019, which is the lowest in 6 years and close to what most economists would class as full employment.  However, for the growing ranks of underemployed (8.1% of the population) in Australia and for the many people in our community who suffer disadvantage, these figures must seem surreal. For example, for people living with a disability the unemployment rate is almost twice this rate at 9.4%. Our youth (people aged between 15 and 24 yrs) suffer unemployment rates of up to five times the national average (in Coffs Harbour NSW the youth unemployment stands at 23.3% while outback Queensland the rate is 25.7%). And if you are Aboriginal, then you can multiple these rates by three.

Due to its size and diversity of jobs offered, we in the construction industry can do more than most to address growing inequity and disadvantage in our communities. This is what ultimately distinguishes Australia as a prosperous, stable and healthy society.