Social purchases supported by the budget: “When people are employed, they pay taxes”

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The announcement of $26 million for “incremental purchases” is a (small) sign of a major shift in how the government spends $51 billion of taxpayers’ money each year. Nikki Mandow interviews the man who arguably started New Zealand’s social procurement revolution

Former Christchurch infrastructure reconstruction boss Sean Barnes was working for social enterprise organization Ākina when his Road to Damascus moment happened.

It was November 24, 2016 (Barnes still remembers the date) and the environmental engineer was attending a seminar given by an Australian, Mark Daniels, founding pioneer of Social traders.

Daniels told the story of a cluster of public housing blocks in Melbourne filled with migrants and refugees.

“The unemployment rates were ridiculous,” Barnes Daniels recalled telling the audience. “You know, maybe three quarters of the people who lived there didn’t have a job. And at the same time all the people who worked on the lathes came from outside. The people who mowed the lawns came in, mowed the lawns and left. The cleaners came in, cleaned and left. Even with the people who did the security on the towers. It was crazy.”

Daniels inquired and discovered that the service contracts for the towers were about to be renewed. He bid to the local government, offering to award the contract for all the work to a group of people living in the buildings.

The new company won the tender, and not only did the service provide jobs for unemployed people in the towers, but many of them took advantage of the experience to move on and find other jobs.

“And the government is starting to say ‘Well, that’s a good thing’ and that’s sparked a lot of things happening in Australia,” Barnes said.

The state of Victoria is now one of the world’s leading promoters of what has come to be known as social procurement – government and business using their purchasing power to award contracts to companies – often SME – with a social or environmental vocation. These are companies that probably wouldn’t see the traditional way of buying – on experience and price.

“It’s a fundamental shift, and it can be deeply terrifying for a lot of people, especially when you’re in a risk-averse environment, in a bureaucratic environment.” Sean Barnes, Akina

Barnes says to this day he knows very little about procurement, let alone social procurement. He certainly hadn’t heard of it in New Zealand.

“I remember it vividly as one of those times when I was like, ‘This is what I think I can do here. As if there was a role for me here.

Sean Barnes has spent half a decade persuading government procurement departments to use their spending power to make a difference. Photo: Supplied

Barnes went back to his boss in Ākina and said “We should do this” and his boss said “Yes, we should” and Barnes created himself a new position of social purchasing manager.

It also created for itself the Herculean task of trying to persuade members of procurement teams in government departments and large corporations that procurement was not just about buying things and trying to save money for the Ministry of Finance.

Maybe it could make a difference in the world.

“It’s a fundamental change, and it can be deeply terrifying for a lot of people, especially when you’re in a risk-averse environment, in a bureaucratic environment.

“All the time you run into people saying, ‘Oh, we can’t really do this – it’s too hard.'”

$26 million for progressive procurement

How much has changed in five years. The 2022 budget includes an allocation of $26 million over two years for “incremental purchases” – $14.5 million this year and $11.5 million next – allocated under the Maori Development Budget.

Announcement of the initiative this week, Ministers Stuart Nash (Economic and Regional Development) and Willie Jackson (Maori Development) said the money was to help ‘diversify government spending on goods and services and increase Maori business engagement in markets public”.

The government spends around $51 billion buying things every year – from tarmac for the roads to toilet paper for the beehive.

Its target is that 5% of each government agency’s annual procurement expenditure goes to Maori businesses. But companies and agencies need help preparing, says Jackson.

“Achieving better economic outcomes by helping small and medium-sized businesses be tender-ready is a game-changer in this regard. This creates positive regional results in other areas such as employment and training.

It is not just Maori businesses that stand to benefit from the government’s new procurement priorities, although it is here that the government’s thinking is most developed. Below procurement rules “broader outcomes” “each agency should consider and incorporate, where appropriate, broader outcomes when procuring goods, services or works”.

“The broader outcomes are the secondary benefits generated by the procurement activity. These may be environmental, social, economic or cultural benefits,” the rules say.

However, as new head of public procurement Laurence Pidcock told Newsroom in an interview earlier this year (see “The Man Trying to Spend Your $51 Billion Better”), the broader performance criteria in rules are both oddly narrow and rather vague.

It has been difficult to ensure that those responsible for the ministerial purse strings take into account the government’s broader results objectives, said Pidcock. Social sourcing requires a massive shift in culture and mindset – and is much harder to do than standard sourcing.

Some people just “get it”

So far, Barnes says, moves toward results-based procurement have been driven primarily by individual procurement managers who simply “get it.”

The first was Matt Parsons of the NZ Post – see Newsroom’s Two Hundred Podcast on the subject here.

NZ Post’s Matt Parsons with Caroline de Castro (left) and Nicole Oxenbridge of social enterprise Fresh Desk. Photo: Nikki Mandow

Then there was a team at Auckland Council. Meanwhile, the first true government department to boardInland Revenue did so in large part because Juliet Glass, then head of trade and supply, and her team were committed to thinking government-wide, not department-wide.

“I remember a workshop at Inland Revenue and someone said ‘For us it’s about employment. Because when people are employed, they pay taxes. So if we can help people get jobs, the cynical person would say, we get more taxes.

“We’re also saving money for people who pay for people who don’t have a job.”

For social or environmental procurement to work – whether it’s a cleaning company that pays living wages, or a construction company that uses green materials or employs ex-convicts – every part of the government must think collectively.

“If you’re nearsighted and just trying to save pennies or dollars on a contract, you’re going to miss the opportunity,” Barnes says.

The three early adopter organizations – NZ Post, Auckland Council and IRD – all teamed up with Barnes and Ākina to push through the changes.

Hard graft

It hasn’t been easy, says Barnes. In fact, he describes it as “five years of hard work”, although he feels that these days “overall it’s an easier message to get across”.

“It comes and goes – even within individual organizations it comes and goes because you’re talking about human beings and change.

“So someone could bang their head against a door for three months and all of a sudden the door opens and things start to snowball.”

“There are people who aren’t just sitting there saying ‘Ooh, I love saving money for this entity’. They want something more. Sean Barnes, Akina

Newest in New Zealand Procurement Excellence Award (who knew there was such a thing?) Sean Barnes won Professional Sourcing Specialist of the Year, as well as the Supreme Award. And this is someone who, just a few years ago, didn’t even know a professional sourcing specialist existed.

In the award video, Barnes spoke of “continuing challenges”, “against the tide” and that there was “a lot of work to do”. Still, “social procurement is starting to have a real impact,” he said.

“There are people in every organization who aren’t just sitting there saying, ‘Ooh, I love saving money for this entity,'” he told Newsroom. “They want something more.”

Meanwhile, more and more young people are actively choosing procurement as a career path, he says, whereas in the past many people simply jumped into the field.

“And they don’t want to sit behind a desk and just turn the handle on some contracts. They want to see what the government is doing about climate or social issues. Because the government has a huge influence on how purchases are made.

“If the government doesn’t do it, no one else will follow.”

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