The announcement of $26 million for ‘progressive procurement’ is a (small) sign of a major change in the way the Government spends $51 billion of taxpayers money each year. Nikki Mandow talks to the man who arguably started the social procurement revolution in New Zealand
Former Christchurch rebuild infrastructure engineer Sean Barnes was working for social enterprise organisation 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, pioneer founder of Social Traders.
Daniels told a story about a group of Melbourne social housing apartment blocks full of migrants and refugees.
“The unemployment rates were ridiculous,” Barnes remembers Daniels telling the audience. “You know, maybe three quarters of the people living there didn’t have a job. And at the same time all the people working on the towers were from outside. The people who mowed the lawns came in, mowed the lawns and left. The people who cleaned came in, cleaned and left. Same with the people who did security on the towers. It was crazy.”
Daniels made some inquiries, and found out the service contracts for the towers were coming up for renewal. He tendered to the local government, proposing to award the contract for all the jobs to a group of people living in the buildings.
The new enterprise won the bid, and not only did the service provide jobs for unemployed people in the towers, but many of them used the experience to move on and get other employment.
“And the government starts going ‘Well, that’s a good thing’ and it kicked off a whole lot of stuff happening in Australia,” Barnes says.
The state of Victoria is now one of the leading proponents in the world of what’s come to be known as social procurement - government and corporates using their purchasing power to award contracts to businesses - often SMEs - with a social or environmental purpose. These are companies which likely wouldn’t get a look in with the traditional way of buying - on experience and price.
“It’s a fundamental shift, and it can be deeply terrifying for lots of people, especially when you are in a risk-averse environment, in a bureaucratic environment." Sean Barnes, Ākina
Barnes says until that day he knew very little about procurement, let alone social procurement. Certainly he hadn’t heard of it happening in New Zealand.
“I can remember it very vividly as one of those moments where I was like ‘That’s what I think I can do here. Like there’s a role for me here.’”
Barnes went back to his boss at Ākina and said ‘We should be doing this’ and his boss said ‘Yes we should’ and Barnes created himself a new job as director of social procurement.
He also created for himself the Herculean task of trying to persuade people in the purchasing teams of government departments and big corporates that procurement wasn’t just about buying stuff and trying to save money for the finance department.
It could, maybe, make a difference in the world.
“It’s a fundamental shift, and it can be deeply terrifying for lots of people, especially when you are in a risk-averse environment, in a bureaucratic environment.
“All the time you are bumping into people who say ‘Oh, we can’t really do that - it’s too hard.’”
$26 million for progressive procurement
How much has changed in five years. Budget 2022 has a $26 million allocation over two years for ‘Progressive Procurement’ - $14.5 million this year and $11.5 million next - allocated through the Māori Development budget.
Announcing the initiative this week, Ministers Stuart Nash (Economic and Regional Development) and Willie Jackson (Māori Development) said the money was to help “diversify government spending on goods and services and increase Māori business engagement with government procurement”.
The Government spends about $51 billion buying stuff each year - from tarmac for the roads to toilet paper for the Beehive.
Its goal is to have five percent of every government agency’s annual procurement spend going to Māori businesses. But both the businesses and the agencies need help gearing up, Jackson says.
“Achieving better economic outcomes by helping small to medium businesses be tender ready is a game changer in that regard. This is creating positive regional outcomes in other areas such as employment and training.”
It’s not just Māori businesses that should benefit from the government’s changed priorities around procurement, although it’s here where the government’s thinking is most developed. Under “broader outcomes” procurement rules “each agency must consider, and incorporate where appropriate, broader outcomes when purchasing goods, services or works".
"Broader outcomes are the secondary benefits that are generated from the procurement activity. They can be environmental, social, economic or cultural benefits," the rules say.
However, as the new-ish head of government procurement Laurence Pidcock told Newsroom in an interview earlier this year (see “The man trying to spend your $51 billion better"), the broader outcomes criteria in the rules are both strangely narrow and rather vague.
It’s been hard to get the people in charge of departmental purse strings to take the government's broader outcomes goals into account, Pidcock said. Social procurement requires a massive shift in culture and mindset - and is much harder to do than bog-standard procurement.
True, Barnes says; still the Progressive Procurement announcement is "great", he says because it is an investment into the necessary support to help social procurement actually happen.
"While it is a focus on Māori business as a subset of social procurement/Broader Outcomes, the same enablers are required to make this and social procurement more broadly a reality. Government agencies need that support and guidance to implement the changes to how procurement is done.
Some people "just get it"
Until now, Barnes says, moves towards outcomes-led procurement have mostly been driven by individual procurement people who just “got it”.
The first was Matt Parsons at NZ Post - see Newsroom's Two Cents Worth podcast on the topic here.
Then there was a team at Auckland Council. Meanwhile, the first true government department to get on board, Inland Revenue, did so largely because the then head of commercial and procurement, Juliet Glass and her team were committed to thinking on a government-wide, not a department-wide scale.
“I remember a workshop at Inland Revenue and someone said ‘For us, it’s about employment. Because when people are employed, they pay tax. So if we can help drive people into employment, the cynical person would say, we get more tax.
“We also save money for the people who pay for the people who aren’t in employment.”
For social or environment-based procurement to work - whether it’s using a cleaning company that pays the living wage, or a construction firm which uses green materials or employs ex-prisoners - individual parts of government have to think collectively.
“If you are myopic, and you are just trying to save cents or dollars on a contract, then you’re going to miss the opportunity," Barnes says.
All three early adopter organisations - NZ Post, Auckland Council and IRD - all partnered with Barnes and Ākina to push through the changes.
Hard graft
It hasn't been easy, Barnes says. In fact, he describes it as "five years of hard graft", although he reckons these days "by and large it’s an easier message to get across".
“It ebbs and flows - even within individual organisations it ebbs and flows because you are talking about human beings and change.
“So someone could bang their head against a door for three months and suddenly the door opens and things start to snowball.”
“There are people who aren't just sitting there going ‘Ooh, I love saving money for this entity’. They want something more.” Sean Barnes, Ākina
At the most recent New Zealand Procurement Excellence Awards (who knew there was such a thing?) Sean Barnes won Professional Procurement Specialist of the year, as well as the supreme award. And that’s someone who just a few years ago didn’t even know there was such a thing as a professional procurement specialist.
In the award video, Barnes talked about “ongoing challenges”, “running against the tide”, and there being “a lot of work to do”. Still, “social procurement is starting to get some real traction”, he said.
“There are people in every organisation who are not just sitting there going ‘Ooh, I love saving money for this entity’,” he told Newsroom. “They want something more.”
Meanwhile, more young people are actively choosing procurement as a career path, he says, when in the past many people just drifted into the field.
“And they don’t want to sit behind a desk and just crank the handle on some contracts. They want to be looking at what the government’s doing about the climate or social issues. Because the government is a massive influence on how procurement is done.
“If the Government isn’t doing it, no one else is going to follow.”
