Social procurement: A study on supplier diversity and workforce development benefits

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1.0 Introduction

1.1 The Office of the Procurement Ombudsman

The Office of the Procurement Ombudsman (OPO) is a neutral and independent organization of the Government of Canada that works collaboratively with federal departments and Canadian businesses (suppliers) to promote fairness, openness and transparency in federal procurement. OPO delivers on this mandate by connecting stakeholders, investigating complaints, resolving problems, making recommendations and sharing best practices.

OPO employeesFootnote 1:

  • Review the practices of federal departments for acquiring goods and services to assess their fairness, openness and transparency, and make appropriate recommendations
  • Review complaints respecting the award of a contract for the acquisition of goods (below $26,400) or services (below $105,700), where the criteria of the Canadian Free Trade Agreement would otherwise apply
  • Review complaints respecting the administration of a contract for the acquisition of goods or services by a department, regardless of dollar value
  • Ensure that an alternative dispute resolution process is provided, if the parties to the contract agree to participate

In 2018, OPO launched a knowledge deepening and sharing (KDS) initiative to better understand key issues in federal procurement. Through the publication of KDS studies, OPO intends to share knowledge and provide meaningful guidance for federal procurement stakeholders.

1.2 Purpose of the Study

The purpose of this study was to provide an overview of key success factors for organizations seeking to adopt social procurement practices, specifically with regard to increasing supplier diversity and integrating workforce development benefitsFootnote i into their procurement processes. As social procurement encompasses a wide range of objectives and strategies, OPO is committed to continue research on this topic and will publish another study in the future.

1.3 Scope of Work

This study explored the current landscape of social procurement through a cross jurisdictional review of practices at different levels of government within Canada and internationally.

The study focused on social procurement practices that involve supplier diversity (for example, diversifying the supply chain to target underrepresented groups such as women, Indigenous, racialized minorities, persons with disabilities, lesbian, gay, bisexual and transgender (LGBTQ2+) and other minority groups), and workforce development benefits (for example, including requirements for skills development and training for underrepresented groups into procurement contracts).Footnote ii

1.4. Audience

This study may be of interest to procurement stakeholders (suppliers and buyers) at federal, provincial, territorial and municipal government levels, as well as organizations who are interested in increasing the diversity of their supply chain and further promoting the use of workforce development benefits.

1.5 Development Methodology

Literature Review

A review of the regulatory and policy frameworks governing social procurement at different levels of government within Canada and internationally was undertaken to gain an understanding of the various approaches toward social procurement across jurisdictions, as well as a review of collections of studies and publications from non-profit and other organizations with in-depth knowledge on social procurement.

Interviews

Interviews were held with municipal, provincial and federal procurement officials, as well as with suppliers, non-profit organizations and supplier councils who have experience with social procurement in varying capacities.

1.6 Enquiries

Enquiries should be directed to:

Office of the Procurement Ombudsman
410 Laurier Ave. W., Suite 400
Ottawa, Ontario  K1R 1B7
Canada

Telephone:
1-866-734-5169
Fax:
613-947-6211
Toll-free for hearing-impaired:
1-800-926-9105
Email:
ombudsman@opo-boa.gc.ca

1.7 Acknowledgements

OPO would like to thank the participating federal, provincial and municipal organizations, supplier councils, non-profit organizations, and suppliers for their input in developing this study.

2. Social procurement at a glance

2.1. Defining key terms

Social procurement can be defined in various ways, however generally speaking, it is a growing international practice that refers to using procurement as a means for achieving strategic social, economic, and workforce development objectives.Footnote 2, Footnote 3 The concept of social procurement is relatively new to Canada and has been used in relation to a variety of different strategies.Footnote 4 As noted above, this study will focus on two specific approaches to social procurement: supplier diversity (diverse suppliers) and workforce development benefits.

Supplier diversity

This approach to social procurement can be defined as a business strategy and a concerted effort to ensure the creation of a diverse supplier base and supply chain in any organization’s procurement of goods and services.Footnote 5 Essentially, supplier diversity aims to create equitable access to opportunity for “diverse suppliers”. It is important to note that supplier diversity initiatives are not a promise that suppliers will secure business from an organizationFootnote 6, nor does it mean a separate playing field with separate rules or a compromise on the quality, cost, or service requirements that are expected of every service delivery.Footnote 6

Diverse supplier

There are many possible ways to define what a diverse supplier is, and the definition may differ according to your particular case. Public Services and Procurement Canada (PSPC) defines a diverse supplier as “a business owned or led by Canadians from underrepresented groups, such as women, Indigenous Peoples, persons with disabilities and visible minorities. Each business is usually defined as being owned, operated and controlled by 51% of a given group.

The Conference Board of Canada defines a diverse supplier in a similar sense, and states that “is a business that is at least 51 per cent owned, operated, and controlled by either women, members of an indigenous community (for example, First nations, Inuit, or Metis people), members of a visible minority group or members of the lesbian, gay, bisexual and transgender (LGBTQ2+) community”.Footnote 7

Workforce development benefits

Workforce development benefits are components of the procurement process.Footnote 8 They may be included as bid evaluation criteria or specific clauses within a contract whereby the supplier prepares workers (often from groups that are under-represented in the workforce or face challenges entering the workforce) with needed skills, emphasizing the value of workplace learning and addressing the hiring demands of employers.Footnote 9, Footnote 10

2.2. Current federal government focus

The current legislative and regulatory requirements for the Government of Canada on social procurement are somewhat fragmented.Footnote 11 While some detailed federal policies do exist, such as the Procurement Strategy for Aboriginal Business (PSAB)Footnote iii, others seem to provide only general guidance.

For instance, although the Treasury Board Contracting Policy (TBCP) states “[g]overnment contracting shall be conducted in a manner that will…support long-term industrial and regional development and other appropriate national objectives, including aboriginal economic development”Footnote 12, OPO noted in its November 2019 study on Low Dollar Value Contracting that a key challenge with the wider implementation of social procurement has been “the absence of a policy providing specific authority to incorporate such considerations into [departments’] procurement strategy”.Footnote 12 Similar high-level, non-detailed policy language is also included in the Policy on the Planning and Management of Investments which affirms that “all public servants must uphold the obligations of the Crown with respect to Indigenous Peoples and consider opportunities to advance stated socio-economic and environmental objectives in the management of government assets and acquired services”.

The Government of Canada has recognized the need for further guidance and action in this area and has identified it as a government-wide priority.Footnote 13 This was noted in the October 2017 mandate letter of then Minister of Public Services and Procurement, Carla Qualtrough, where a commitment was made to “[develop] initiatives to increase the diversity of bidders on government contracts, in particular businesses owned or led by Canadians from under-represented groups, such as women, Indigenous Peoples, persons with disabilities, and visible minorities, and take measures to increase the accessibility of the procurement system to such groups while working to increase the capacity of these groups to participate in the system.”Footnote 13 Also in October 2017, the House of Commons Standing Committee on Government Operations and Estimates undertook a study on how to improve access for small and medium enterprises (SMEs), women-owned and Indigenous businesses in federal procurement.Footnote 14 In the final report, released in June 2018, the Committee echoed the sentiment of “the need to make federal procurement more inclusive for SMEs, women-owned businesses and other socially disadvantaged groups”.Footnote 14 The report also called on the federal government to “[d]evelop policies and procedures that engage diverse suppliers.”Footnote 15

In October 2018, Public Services and Procurement Canada (PSPC) and the Treasury Board of Canada Secretariat (TBS) received approval to lead a 2-year experimentation cycle to “[assess] market capacities and industry readiness, [add] new procurement criteria to promote socio-economic objectives, and [evaluate] innovative procurement approaches that advance socio-economic objectives.” As of December 2019, there were 38 pilot projects across Canada to increase social procurement practices in the federal government, with many of these pilots aimed at increasing supplier diversity in the federal supply chain (for example catering services, temporary help services) and including workforce benefits for employees with barriers to employment.

At the time of writing this report, PSPC continues to monitor the implementation of these pilots, and is collecting data in order to form a comprehensive understanding of socio-economic procurement and present their findings on the progress achieved and lessons learned over the 2-year cycle in October 2020. Furthermore, in its 2020-2021 departmental plan, PSPC noted it will lead “increased outreach to industry, and expanding its partnerships with professional organizations that support under-represented communities […].Footnote 16 PSPC will also work with Employment and Social Development Canada, who will lead the creation of a new Canada Apprenticeship Service, upon which PSPC will develop options to encourage supplier participation and set targets for greater inclusion of women in trades in federal construction contracts.”Footnote 16

In addition to the efforts from PSPC, other federal departments have launched their own initiatives. Infrastructure Canada launched the Community Employment Benefits initiative under the Investing in Canada Infrastructure Program in 2018.Footnote 17 The responsibility for this initiative lays in the hands of the provinces and territories (P/T’s), and it encourages them to establish specific targets for employment and/or procurement opportunities for projects above a certain total cost.Footnote 17 P/T’s are encouraged to establish targets to integrate diverse groups such as apprentices, Indigenous peoples, women, persons with disabilities, veterans, youth, recent immigrants and small-sized, medium-sized and social enterprises in the construction of the project.Footnote 17 They should also report on progress achieved against the project targets on an annual basis to Infrastructure Canada over the course of the applicable project(s).Footnote 17 However, P/T’s can opt out of doing so if they deem it is not appropriate for the specific project.Footnote 17 Provinces and territories are also asked to develop a community employment benefits approach and to establish the program.Footnote 17

While it is evident that the Government of Canada has recognized the importance of incorporating social procurement considerations into its procurement practices and has made some initial progress, much more work remains in order to fully realize the government’s commitments in this area.

2.3. Social procurement—Notable examples

Below are examples of social procurement initiatives implemented at a national level. In jurisdictions where a national approach has been established, various initiatives have also been undertaken at the sub-national and municipal levels.

United Kingdom

The United Kingdom’s (U.K.) Public Services (Social Value) Act came into effect on January 31, 2013.Footnote 18 It requires commissioners (contracting authorities) to consider how they can secure wider social, economic and environmental benefits at the pre-procurement stage for contracts above the EU (European Union) threshold.Footnote 19 To comply with the Act, the U.K. requires that commissioners “show that they have thought about these issues and have thought about whether they should consult on them.Footnote 20 They can show this by documenting the internal process that took place to come to a decision on these issues, or by evidencing that they have spoken to their local provider market, service users, or community about them”.Footnote 20

The U.K. notes that the Act is seen “as a tool to save money in the context of severe public procurement cost saving pressures, and a way to think about public services in a more coherent way that plays into the redesign of services starting to emerge as a result of these pressures”Footnote 21, which is why the U.K. initially opted to follow a non-prescriptive nature as a means for encouraging innovation to flowFootnote 22.

The legislation has received notable public support since its implementation in 2013, and has had a positive impact where it has been taken up.Footnote 22 However, a review of the legislation in 2015 noted that the U.K. recommends strengthening the requirement “by making it an explicit requirement in central government contracts to the private and third sectors, rather than just a consideration.”Footnote 23 It noted that take-up of the Act by central government departments has been more limited.Footnote 24 The lack of a specific definition for “social value” and the lack of clarity on how to incorporate it in the procurement process appear to be key issues.Footnote 25 The review also indicated that there is a need for more precise measurement tools to be able to actually quantify social outcomes, and the government has since committed to addressing these shortcomings.Footnote 25

As a result, the U.K. announced in June 2018 that it would be reforming the Act and extending its scope “to ensure that all government departments explicitly evaluate social value [and to] strengthen the government’s commitment to awarding contracts based on social value, rather than just value for money”.Footnote 25 At the time of the announcement, “the government [had] not yet confirmed when the extension of the social value act [would] come into force or if it [would] require new legislation”.Footnote 25 At the time of writing this report, no changes had been made to the legislation.

Despite the intent behind the legislation, the review certainly outlined that there is much more work to do in order for it to reach its full potential. There are gaps with regard to the collection of data, which makes it extremely difficult to measure the impact that the legislation has had on procurement in the United Kingdom.

Scotland

With regard to the widespread adoption and inclusion of workforce development/employment benefit provisions, Scotland has achieved considerable advancement in this area. Scotland was among the first countries to pilot the inclusion of community benefits in government contracts back in 2003.Footnote 26 It introduced the Community Benefits in Procurement program in five cities that focused on targeted training and employment outcomes.Footnote 26 Building on the success of the pilots, the Scottish government formally incorporated the use of Community Benefits (CB) clauses into its procurement policy in 2008.Footnote 26

The Procurement Reform (Scotland) Act 2014 requires all contracting authorities, as stipulated in section 25(1) of the Act, “to consider including community benefit requirements for all regulated procurements where the estimated value of the contract is equal to or greater than £4 million” (approximately 6.9M CAD).Footnote 27 The Scottish Government has noted that “[W]hile the threshold for considering community benefits is £4 million, this value will be subject to review and research has shown that community benefits can be achieved in procurements under the £4 million threshold, and thus contracting authorities are encouraged to include such previsions in smaller scale procurement as well”.Footnote 27 Scotland does recognize that “[C]ommunity benefit requirements may not always be appropriate, but should be used in instances where a risk and opportunity assessment identifies that they are the appropriate benefit to seek in a contract or framework”.Footnote 27 Additionally, where community benefits are included in a procurement, Scotland requires that the award notice include a statement of the benefits that are expected to be derived from these requirements.Footnote 28

In its most recent annual report on government procurement released in August 2019 by the Scottish Procurement and Property Directorate (reporting period April 2018 – March 2019), it noted that:

It had “considered community benefits in all [their] regulated contracts and during the reporting period awarded 13 contracts which specifically included community and social benefits. As a result, they currently have 40 live contracts valued around £1.5 billion within which community benefits are now embedded. During the reporting period, [their] contracts created 212 jobs and 41 apprenticeships, delivered 57 work placements for school pupils, college and university students, 52 work placements for priority groups and enabled almost 100 qualifications to be achieved through training.”Footnote 29

United States (U.S.)

With the creation of the Small Business Administration (SBA) in 1953, the United States (U.S) was among one of the first countries to implement an independent agency to "aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns.".Footnote 30 While the agency primarily assists small businesses in the form of loans, over the years, it has evolved to develop a number of different programs and to create an environment for maximum participation for small businesses, disadvantaged, and woman-owned businesses in federal government procurement.Footnote 31

As required by the Small Business Act, U.S. federal departments and agencies conduct a variety of procurements that are reserved for small business participation (either through small business set-aside and sole-source opportunities).Footnote 32 The Office of Government Contracting (a branch within the SBA) notes that such procurements “can be for small businesses in general or be specific to small businesses meeting additional eligibility requirements under the Service-Disabled Veteran-Owned Small Business Concern (SDVOSBC), Historically Underutilized Business Zone (HUBZone), 8(a) Business Development, and Women-Owned Small Businesses (WOSB) programs”.Footnote 33

The Office of Government Contracting works with federal departments and agencies on an individual basis to establish annual targets with regard to their procurement activities.Footnote 33 As noted by the SBA,  “the overall prime contracting small business goal [is currently] 23% of procurement spend towards small businesses—this includes the specific goals of 5% to Women-Owned Small Businesses (WOSB), 3% to Service-Disabled Veteran-Owned (SDVO) small businesses, 5% to small disadvantaged businesses, and 3% to HUBZone firms”.Footnote 33

In June 2019, the SBA announced that the federal government “had exceeded its small business federal contracting goal for the sixth consecutive year, awarding 25.05 % in federal contract dollars to small businesses totaling $120.8 billion, an increase from the previous fiscal year of nearly $15 billion”.Footnote 34 It marked the first time more than $120 billion in prime contracts has been awarded to small businesses, however it failed to meet its target in two categories- having only achieved 4.75% to Women-Owned Small Businesses and 2.05% to HUBZone firms.Footnote 34

While the U.S. has seen some success in meeting its targets for contracting with small businesses and other diverse groups, a 2014 audit conducted by the U.S. Government Accountability Office (GAO) shed some light on potential loopholes within some of these programs.Footnote 35 It was noted in this report that that “about 40% of the certified Women Owned Small Businesses in its audit sample were ineligible for the program and also raised that the SBA cannot provide reasonable assurance that WOSB program requirements are being met and that the program is meeting its goals”.Footnote 36 In its report, the GAO recommended that the SBA “establish and implement procedures to monitor certifiers and improve annual eligibility examinations, including by analyzing examination results”.Footnote 37

3. Key success factors and challenges

This section will present a series of key factors that should be taken into consideration by organizations when: A) developing a social procurement program; B) implementing a social procurement program; and C) measuring the impact of a social procurement program.  

3.1 Developing a social procurement program

“Tone at the top”

Based on the experience of the stakeholders interviewed for the purposes of this study, having senior-level support on the importance of engaging in activities to promote supplier diversity and community benefits is a key success factor for initiating pilot projects, the development of the program and its eventual implementation. In its report on the state of practice on social procurement, the City of Vancouver noted the following powerful message:

Although clear processes can be put in place, without an enabling culture there will be continued difficulty in fulfilling the potential of social procurement. For many within organizations, social procurement represents another bureaucratic barrier to their work. It is seen as a burden instead of an opportunity. While reservation by people is unfortunate, it is not unexpected. There are a number of steps organizations can take to alleviate these concerns. […]Direct support from leadership will enable a ‘whole of organization’ approach, where social procurement practices are influenced by, and align with, multiple city goals.Footnote 38

A great example of senior-level support for social procurement stems from the City of Victoria’s Task Force on Social Enterprise and Social Procurement that is chaired by the Mayor of Victoria, and includes city councillors, First Nations representatives, as well as leaders in social enterprise, community and economic development, and businesses.Footnote 39 The creation of the task force was a recommendation of the Mayor’s Task Force on Economic Development and Prosperity.Footnote 40

Nonetheless, it must be acknowledged that competing priorities within an organization remain a challenge. While social procurement is generally seen as a good idea, it is often treated as secondary to cost savings and risk avoidance.Footnote 41 While there may be a commitment at the top with regard to the importance of these initiatives, it is often difficult to acquire the funds and resources required in order to develop such a program. The Canadian Centre for Diversity and Inclusion echoed this statement and further acknowledged that “internal resistance, such as not wanting to break out of current relationships with non-minority business suppliers, and cases where the buying is done by user groups rather than purchasing professionals” can limit its proliferation throughout an organization.Footnote 42 As a means of mitigating some of these potential roadblocks, some organizations such as the Royal Bank of Canada (RBC) have incorporated supplier diversity goals into the annual performance objectives of their procurement staff and have also included corporate performance objectives on supplier diversity.Footnote 43

Understanding your organizational needs

As noted by various stakeholders, it is crucial to have a thorough understanding of your organizational needs for procurement in order to achieve your desired outcomes in the development of your social procurement program. The City of Toronto noted that one of the first steps to implementing social procurement practices is to understand who is in your existing supply chain, and which diverse groups are not. Furthermore, one must also identify where there is a need within your organization for services that can be delivered by diverse suppliers. For example, the City of Toronto is home to numerous women-owned businesses that provide human resources services; however, the City of Toronto already has a well-established human resources unit and does not have significant need to outsource services. As a result, a social procurement strategy that targeted this group of diverse suppliers would miss the mark in terms of impact in the community as very few contracts would be awarded. Consequently it is not enough to simply understand what diverse groups exist in your community, you need to link these groups to the areas of need within your organization if you want to see a real impact from your procurement activity.

A phased approach for quick wins

When looking to develop a social procurement program, jurisdictions have experienced success when consideration is given to launching a flexible and agile phased approach, which allows ample opportunities to test, verify, and implement sound policy and effective practices. A shift towards social procurement practices requires an organizational culture change, and a phased approach has been shown to achieve the desired outcome.

A phased approach can consist of many different forms. If a complete policy overhaul is not currently in the cards for your organization, utilizing pilot projects (where opportunities exist) is a great way to demonstrate the value of supplier diversity and workforce development benefits. Often times, incorporating social procurement considerations into the associated procurement processes for large-scale public events may serve as an impetus for the eventual consideration and adoption of a formal approach.Footnote 44 As noted by Sandra Hamilton, a Public Sector Social Procurement Advisor.

The Vancouver 2010 Olympic Games were a catalyst for social procurement; the first Olympic Games to include social considerations in their sustainability strategy. For example, the floral supply contract required the provision of a community benefit. The successful proponent committed to train and employ marginalised women, many recently released from prison. The podiums were built by at-risk-youth learning carpentry skills; and contractors bidding on the construction of the athlete’s village were required to provide employment opportunities for low income residents from the neighbouring, downtown eastside.Footnote 45

This model of integrating social value into games construction and procurement has similarly been adopted by the 2014 Commonwealth Games in Glasgow, and the 2015 Pan Am Games in Toronto.Footnote 46

Another approach observed amongst our stakeholders was to pilot initiatives within a specific group/division before launching a widespread program. Prior to implementing its Social Procurement Policy in 2016, the City of Toronto piloted their proposed approach within several divisions at the City of Toronto.Footnote 47 Over an 18 month process from 2013-15, City of Toronto staff led 9 pilot projects to determine how best to: (a) make access to the City's supply chain more equitable (supply chain diversity); and (b) use City procurement projects to leverage employment and training opportunities for people experiencing economic disadvantage (workforce development).Footnote 48 By undertaking these pilots, the City was able to identify early lessons learned to better inform the development of its widespread Social Procurement Policy.

Similarly, when the Business Development Bank of Canada (BDC) launched its supplier diversity program in February 2019 (which encourages more than 60,000 clients and diverse supplies to register for procurement opportunities while educating staff who lead purchasing decisions about the value of supplier diversity), it opted to add an additional focus on accelerating growth for women entrepreneurs. In 2018, it committed to lending $1.4 billion to women-led (not just women-owned) businesses by 2021 and it also increased the size of its Women in Technology venture fund to $200M.Footnote 49

Certifying your diverse suppliers

The approach that an organization adopts for the certification of diverse suppliers is a fundamental component of the development phase. There are predominantly three approaches to certification that we observed in the context of this study: 1) third party certification; 2) self-attestation; and 3) developing an internal certification program. Some of the benefits and drawbacks of each approach are outlined in Figure 1 below.

The City of Toronto determined that proceeding with a third-party certification approach, wherein an independent association validates that a business is owned, managed, and controlled by a qualifying diverse group, would best meet the needs of their social procurement program.Footnote 50 Toronto works closely with five supplier certification associations/councils, and requires that diverse suppliers who wish to do business with the City of Toronto become certified via one of these organizations prior to being eligible to bid on city contracts. This approach has also been adopted by various organizations such as the Business Development Bank of Canada (BDC)Footnote 51, the Royal Bank of Canada (RBC)Footnote 52 and General Motors CanadaFootnote 53, who have also opted to target certified diverse suppliers.

On the other hand, the Atlantic Canada Catering Pilot led by the Public Services and Procurement Canada’s Office of Small and Medium Enterprises (OSME) opted for a self-attestation approach for its women-owned or led business suppliers applying to win government contracts. For the purposes of the pilot, interested women-owned or led businesses submitted a simple five-question survey to the contracting authority, who then validated whether or not they were eligible participants for the pilot project. Furthermore, with the implementation of the Government of Canada’s e-Procurement solution (CanadaBuys), suppliers will be able to self-attest via the portal, while also being able to voluntarily upload third-party certifications if they wish. A policy determination has not yet been made as to whether a formal federal approach to social procurement would require suppliers to attain third party certification.

The City of Chicago’s Department of Procurement Services (DPS) has developed an internal certification program, and manages the certifications of approximately 2,500 new and renewing firms that are minority, women-owned or disadvantaged businesses.Footnote 54 The City of Chicago offers six different types of certifications, and lists eligibility requirements similar to those of other certifying bodies, and accepts all applications via its online portal.Footnote 54 Once a supplier is certified, their information is added to the Chicago Certified Firms Directory which is publically accessible online.Footnote 54

Regardless of which approach is preferable for your organization, one must weigh the benefits and drawbacks of each method prior to finalizing your approach, as outlined in Figure 1 below.

Figure 1: Approaches for the certification of diverse suppliers
  Third-party certification Self-attestation Developing your own certification program
Benefits of the approach
  • Validation of the authenticity of diverse suppliers by external, reputable associations
  • Supplier associations have various training and networking opportunities for their certified suppliers and subscribing organizations, and can also assist in the collection and interpretation of important data
  • Certifications can be leveraged/transferred internationally for greater business opportunities
  • Simple for both the supplier and organization
  • Poses less barriers for suppliers (i.e. membership costs) and is inexpensive for the organization
  • Ability for the organization to maintain a degree of flexibility, and to implement rather quickly
  • Ability to design and control your own certification program, and have confidence in the integrity of the certification
  • No membership fees for organizations
  • Ownership of the data and open access to the list of suppliers
Drawbacks of the approach
  • Diverse suppliers must usually pay membership fees, which can be a barrier to entering the market
  • Subscribing organizations must pay membership fees
  • Lists of diverse suppliers cannot be freely shared
  • Higher risk of false information or fraud as organizations aren’t in an immediate position to validate the authenticity of diverse suppliers
  • Does not build a community amongst the supplier group
  • Data may be less reliable
  • Diverse suppliers may be required to pay certification fees, which can be a barrier to entering the market
  • Poses a considerable amount of work for the organization’s procurement team, including resource costs of designing and implementing the program
  • Suppliers may not be able to leverage the certification for other opportunities outside the organization

Outreach activities to attract and support diverse suppliers

Outreach is a continuous process that is important at all phases of a social procurement program; however, it is especially important in the development stage. A key challenge noted by many of our interviewees was that it can be difficult to find diverse suppliers. An organization’s outreach strategy for attracting diverse suppliers may need to be different and more hands-on than its traditional approach for all contracting opportunities. Ultimately, a social procurement program will not flourish if diverse suppliers aren’t aware of its existence, so it is important to put considerable effort toward spreading the message.

For example, in the OSME Atlantic catering pilot mentioned above, officials noted that considerable outreach was required for the success of the pilot. The group soon realized that they needed to find new ways to bring opportunities to the attention of the women-owned or led businesses because this group (along with other diverse supplier groups that infrequently bid on federal solicitations) does not actively check Government of Canada tenders on Buyandsell.gc.ca. In an effort to overcome these barriers, OSME Atlantic conducted client engagement sessions, engaged with provincial (Atlantic Provinces) and municipal stakeholders, and even called various catering companies to raise awareness and inform potential suppliers about the opportunity to participate in the catering pilot.

Traditional outreach activities, such as organizing networking opportunities for diverse suppliers to interact with procurement officials, or reverse trade shows, are also productive ways to attract diverse suppliers. The Province of British Columbia has recently formed a dedicated outreach team within its Procurement Services Branch to further engage with all stakeholders on the Province’s Social Impact Procurement Guidelines. However, if the establishment of a dedicated team for outreach activities is not feasible, leveraging opportunities to partner with other organizations or supplier councils is another fruitful option. There are various supplier councils in Canada, such as the Women Business Enterprises (WBE) Canada, the Canadian Aboriginal and Minority Supplier Council (CAMSC), the Canadian Gay and Lesbian Chamber of Commerce (CGLCC), the Canadian Council for Aboriginal Business (CCAB) and the Inclusive Workplace Supply Council of Canada (IWSCC). For example, WBE Canada offers orientation sessions for newly certified suppliers to learn what it means to be certified as a WBE, how to leverage your certification and to learn about tools available to them. In speaking with one WBE certified supplier, she noted that the additional benefits that stemmed from the certification (such as training) have helped her access more business opportunities.

3.2. Implementing a social procurement program

Training, tools and clear guidelines

Similar to conducting outreach activities, learning and training is a continuous and ongoing process. In order to support the supplier community and your organization on the journey into social procurement, our stakeholders noted that it is very important to ensure that fulsome information resources are available to them.

For many diverse suppliers, it may be their first experience submitting a bid with your organization. Therefore, it is important to have such resources in place in order to assist them in navigating the potentially complicated procurement process. For instance, OSME offers monthly seminars (either in person or online via WebEx) that provide suppliers with key information on how to sell to the Government of Canada, including topics such as understanding the contracting process, searching for business opportunities on buyandsell.gc.ca, and navigating the security clearance process.Footnote 55 The U.S. Small Business Administration also offers a variety of online courses to help suppliers start/run their business and navigate the procurement process, but also offers courses specifically targeted to certain diverse groups. In addition to outreach activities, these training opportunities can also assist organizations in clarifying some of the misconceptions about their procurement process to suppliers. For example, as noted by the BDC, there is a common misconception that large companies only have big purchases however, this is simply not the case: most of BDC’s purchases are under $100K, with the majority of transactions under $25K and there are opportunities for all suppliers.

In the same regard, it is equally as important to ensure that there is training in place for your organization that is specific to the desired outcomes of your social procurement program. As a starting point, the Province of British Columbia has included approved language and examples of possible indicators for workforce development benefits directly into its Social Impact Purchasing Guidelines, and intends to develop specific training on this in the near future. The Government of Wales has also recognized the importance of implementing clear training and guidelines.Footnote 56 In order to support the implementation of its Community Benefits Policy, and in addition to the guidance that has been developed, the Welsh government has implemented online training for its public servants with modules on how to identify potential community benefits, plan community benefits objectives in procurements, and proceed with contract management of community benefits.Footnote 57

The need for training was a key lesson learned from the pilots conducted by the City of Toronto.Footnote 58 As noted by City Officials:

For City divisions, supply chain diversity and workforce development [was] new and it [was] not always clear how procurements should embed social procurement. There [was] also significant risk aversion among staff in adding unfamiliar requirements to procurement without clear processes or guidelines. As a result, the pilots could not always include social procurement requirements. The pilot process identified gaps in knowledge and support structures that limited what could be achieved.  City divisions needed better lists of diverse suppliers to understand how and where to diversity the supply chain.[…] Training of management and line staff in understanding social procurement along with equity and diversity training is important to implement and sustain the City's social procurement activities.Footnote 58

Demystify the perceived implementation barriers

A common misconception in the procurement community is that free trade agreements act as a barrier to the inclusion of social considerations into tender documents. However, as noted by Buy Social Canada, “social considerations can be applied […] to procurements not covered by trade agreements [for example, low dollar value (LDV) contracts can be directed to social enterprises], but in fact can also be used in procurements covered by trade agreements, as long as these considerations do not discriminate between Canadian and foreign suppliers”.Footnote 59

OPO noted in its November 2019 study on Low Dollar Value Contracting that LDV contracts actually represent the majority of the contracting activity undertaken by organizationsFootnote 60. Historical purchasing data indicates that about 90% of the hundreds of thousands of contracts issued annually had values less than $25,000.Footnote 61

Thus, where trade agreements are not applicable, they cannot pose a barrier and there could be greater consideration for the inclusion of social considerations into these purchasing activities. For instance, the Government of Canada could develop a policy stipulating that if a certain number of quotes are required, at least one of the potential suppliers should be a diverse-owned or Indigenous supplier.Footnote 62 This concept has already been established in other jurisdictions, and could be replicated in other organizations. Buy Social Canada also emphasizes that although trade agreements prohibit the restriction of competition to only local suppliers, there is nothing that prevents you from requiring community outcomes or workforce development benefits from all bidders as a part of the contract.Footnote 63

Interestingly, in the realm of federal procurement, mandatory tools such as standing offers (SO’s) and supply arrangements (SA’s) can been perceived as a barrier to social procurement because specific, strict rules must be followed in using these tools. Many of the current federal supplier diversity pilots have been for catering services, as this is an industry segment that is not covered by mandatory tools such as SO’s and SA’s. It was noted that many of the industry segments that include larger numbers of women-led or owned and diverse-owned businesses, are actually covered under the ProServices Supply Arrangement (which contains 13 streams covering 158 labour categories) and that there is also confusion over what categories within that SA are actually mandatory. What this means is the perceived mandatory nature of some of these government-wide procurement tools may prevent the federal community from further experimenting in social procurement-type pilots.

Greater attention to social considerations and increasing supplier diversity could be included at the pre-qualification stage for many of these streams and categories, as is the case already with environmental considerations.Footnote 64 As part of Canada's policy directing federal departments and agencies to take “the necessary steps to acquire products and services that have a lower impact on the environment than those traditionally acquired”, equal measures could also be included with regard to supplier diversity and the inclusion of workforce/employment benefits.Footnote 64

Collaborate and build partnerships with other groups or organizations

Social procurement is increasingly becoming more widespread, and many organizations are going through similar development and implementation challenges, thus leveraging your network and collaborating with other organizations that have adopted a focus on social procurement has been noted by our stakeholders as a great starting point.

The Coastal Communities Social Procurement Initiative (CCSPI) is a notable example of how collaborating with others can propel the proliferation of social procurement. CCSPI is a two-year pilot project that stemmed from the establishment of a working group consisting of elected officials, procurement staff and other representatives from 9 municipalities and local governments in the Vancouver Island and Coastal Regions, which seeks to transform how they procure goods and services to better benefit their communities. By developing a learning hub to share best practices and develop training materials, CCSPI has created a network of local governments that can each learn and navigate the challenges together, and has now reached a membership of 21 municipalities (and hoping to expand their membership beyond just municipal bodies in the near future as the demand has been continually increasing).

Within the public sector, there are also opportunities to form communities of practice on social procurement. For example, in British Columbia, there is the existence of a Procurement Community of Practice (PCoP) that acts as a “forum for all government and public sector staff engaged in procurement and/or contract management, to openly and respectfully share and exchange information, knowledge, expertise, advice and ideas relating to procurement and contracting processes”.Footnote 65 The Province notes that “members participate in the PCoP to contribute to and benefit from good procurement and contracting practices across the Province and the broader public sector, through problem solving, innovation, capacity development, the introduction of new strategies and initiatives, and other priorities”.Footnote 65

3.3. “Measuring the impact” of a social procurement program

Apply a robust but realistic data collection framework and monitor its implementation internally, conduct reviews, and report publically

A key factor that was raised by each of our stakeholders pertained to data collection. It appears that data collection is a known challenge and is a hurdle for most organizations at various phases of their programs.

In order to have solid information to support effective decision-making, it is imperative to implement a robust but realistic data collection framework at the onset of your program. One must identify realistic and measurable baselines, targets and outcomes and mandate the requirement of an annual reporting exercise for both the organization and its suppliers.Footnote 66 These outcomes should be quantifiable rather than vague goals that cannot be measured.Footnote 67 Additionally, annual public reporting requirements on progress toward the stated goals are beneficial to demonstrating the impact of your program, while it is also widely held that standardization of KPIs and evaluation methodologies is critical to ensure comparability.Footnote 66

In order to assist their organizations in establishing a data collection framework, some have adopted a “score-card” approach. The U.S. SBA utilizes the annual scorecard as an assessment tool to “(1) measure how well federal agencies reach their small business and socio-economic prime contracting and subcontracting goals, (2) provide accurate and transparent contracting data and (3) report agency specific progress”.Footnote 68

Some examples of potential indicators used by organizations include, but are not limited to, the following:

  • # or % of contracts awarded to diverse suppliers, and # or % for each category of diverse supplier groups
  • % of spend or transactions with SME’s
  • # or % of contracts with workforce development criteria
  • # of training sessions held, etc.

A noteworthy example stems from the City of Seattle, which has developed a data collection framework for its contracting activities with women and minority-owned businesses (WMBE). Every year, each City of Seattle department (28 applicable departments) establishes plans and standardized annual goals for WMBE inclusion in consulting and purchasing contracts.Footnote 69 The City’s Purchasing and Contracting Services department then compiles the information submitted by each department and develops city-wide goals that are publically reported on alongside the overall results (both city-wide and department level) from the previous year.Footnote 69

Furthermore, as the main gateway between the certified suppliers and the contracting organizations, the supplier certification councils can also play a key role in filling the data gap. As the perceived “middle ground between the diverse suppliers and the buyers, they are in the best position to collect the information that organizations are seeking. It is also good practice for supplier associations and organizations to work together to ensure that they are mutually meeting each other’s needs with regard to data collection. For example, the City of Toronto has recently developed a Commodity Gap List which they have shared with their supplier associations’ partners in order to encourage greater efforts for data collection in those particular areas (for example, targeting suppliers in industries such as forestry and parks).

Whether opting to direct a contract to a diverse supplier, inviting a number of diverse suppliers in solicitation processes, or including social considerations into point-rated evaluation criteria, as with any type of procurement it’s imperative that procurement files be properly documented and ensure a clear audit trail.Footnote 70 Monitoring various aspects of the program via ad-hoc audits such as internal policy/program compliance, performance objectives, verifying the status of diverse suppliers, etc. is important in order to maintain the integrity of the program.

Implement a feedback loop and communicate with your suppliers

While the application of a robust data collection framework will assist your organization in retrieving important quantitative data, having an open line of communication with your suppliers has been shown to help organizations be able to tell the story behind the data they are compiling. A notable practice by the City of Toronto is that they proactively contact their diverse suppliers if City officials realize that their certified suppliers have not been bidding or do not respond to multiple opportunities. The City seeks to understand the reasoning, in order to be able to note whether the diverse supplier is no longer interested in doing business with them, whether they don’t have the resources to bid on this contract, whether the solicitation is not in line with their business, etc. The continuous feedback loop between the City and its suppliers is a good practice to ensure the success of a program.

Reaching out to your diverse suppliers via surveys on a quarterly, semi-annual or annual basis has also been noted as another productive mechanism to keep abreast of the status of the program, especially if your supplier list is made publically available. In the OSME Atlantic Canada Catering Pilot, program officials noted that a unanticipated challenge that they faced with regard to measuring the impact of the Catering Pilot was that because the supplier list was made publically available, OSME was not able to track who was accessing the list (and for what purposes) and whether suppliers were able to win contracts outside of those available with the federal government in the Atlantic Region. In order to mitigate this issue, program officials developed a survey to be sent to some of the suppliers on the list to see whether or not they have received any government contracts as a result of having applied to this pilot.

4. Conclusion

The following factors should be taken in to consideration throughout the lifecycle of developing, implementing and measuring the impact of a social procurement program aimed at increasing supplier diversity and the use of workforce development benefits:

  1. Securing senior-level support on the importance of engaging in activities to promote supplier diversity and workforce development benefits is a key for an enabling a culture to fulfill the potential of the program.
  2. Understanding your organizational procurement needs as well as what sectors should be targeted for social procurement practices is an important first step. This further demonstrates the necessity of adopting a phased approach that is flexible and agile, which will allow ample opportunities to test, verify, and implement sound policy and effective practices.  
  3. Establishing the approach that your organization will take with regard to the certification of diverse suppliers is another important step. There are various approaches to certification such as third party certification, self-attestation (or a hybrid approach of the first two options) and developing an internal certification program that each have their respective benefits and drawbacks. Prior to adopting an approach, one must conduct a thorough assessment to determine the level of organizational comfort with the potential risks associated with each approach as well as appropriate mitigation measures for these potential risks. 
  4. Engaging in considerable and continuous outreach activities in order to attract diverse suppliers, to spread the word about your program and to promote the use of workforce/employment benefits is required. In order to attract diverse suppliers, traditional outreach activities may need to be adjusted and supplemented with additional hands-on tactics in order to ensure that the right groups are being informed. Outreach is also key in being able to network with other public and private sectors organizations that are in the midst of, or have successfully implemented, social procurement practices.
  5. Providing clear and comprehensive guidance material for all audiences is important as the specific needs for each group will differ significantly. For instance, suppliers may need guidance on how to navigate the procurement process, whereas program personnel may need guidance to understand how and where to diversify the supply chain, and procurement officers may need guidance about incorporating social procurement requirements into procurement processes. This guidance must be further supported by offering training opportunities and info-sessions for all audiences. In ensuring the availability of detailed guidance and training opportunities, this is a positive step in helping dispel some of the perceived barriers and myths that exist around social procurement practices.
  6. Implementing a robust data collection framework is critical in order to measure the impact of social procurement programs and speak to their results. However, such data and key performance indicators (KPI’s) must be realistic and measurable. To ensure accountability and transparency, this information should be compiled and be made publically available, at a time best suited for the organization. 
  7. Implementing a feedback loop to ensure that the program is achieving its desired outcomes is important in order to be in a position to “tell the story” behind the data being collected and how the program is impacting the greater community. Receiving this feedback will also allow for targeted improvements to the program (if required) and allow for the creation of a long-term vision for the program.
  8. Monitoring various aspects of the program via periodic audits such as policy compliance, performance objectives, verifying the status of your diverse suppliers, etc. is important in order to maintain the integrity of the program.
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