Social Procurement in the Hospital Sector Caroline Gordon, Landell Paul Rogers, eSourcing Group © 2013 This material is copyrighted and cannot be used without the express permission of Landell and eSourcing Group

PART A. BACKGROUND

•  What is social procurement?

•  What are the benefits?

•  What are the obstacles to social procurement?

•  How do you overcome these obstacles?

What will this Presentation Cover?

What will this Presentation Cover?

PART B. RESEARCH SNAPSHOT What is the extent of social procurement in the Victorian hospital sector?

What will this Presentation Cover?

PART C. SPECIALIST ADVICE

What support are Victorian hospitals seeking to help them implement social procurement? What is important when implementing socially responsible purchasing?

What is Social Procurement? The purpose of Social Procurement is

to achieve social outcomes through purchasing

Examples of Social Procurement

PURCHASE OF GOODS

Fair trade aims to assist producers in developing countries to:

•  improve their trading conditions;

•  improve the conditions of their workforce; and

•  promote sustainability

Purchase of “Fair Trade” Goods

The benefits of local sourcing include:

•  supply chains are generally shorter, leading to greater certainty and predictability of delivery times and lower delivery costs; and

•  local suppliers and local communities are supported

Local Sourcing of Goods

Examples of Social Procurement

STRATEGIC INITIATIVES

•  A social enterprise is a business that operates for a social and/or

environmental purpose.

•  Many social enterprises employ staff and/or trainees from groups which

historically have difficulty securing employment (e.g. long-term unemployed,

people with a disability)

Contract with Social Enterprises/Not For Profits (do good)

Improvements in the supply chain can have very positive social outcomes for

specific groups and communities (e.g. improving labour conditions for workers

in developing countries)

Supply Chain Improvements (avoid doing harm)

Social procurement requirements can be included in tenders/quotes which

prescribe social outcomes as part of the service delivery (e.g. the employment

of long-term unemployed as apprentices)

Selection Criteria/Contract Provisions (do good)

Why Bother?

1. The Paradigm Shift has Started

•  Governments and markets are increasingly embracing social procurement as a mechanism for generating social benefit.

•  In 2012, the UK Government enacted the Public Services (Social Value) Act 2012

Four Good Reasons

2. Purchasing Power

•  The hospital sector has significant purchasing power. Victoria’s public hospitals bought more than $1.6 billion of goods and services in 2010/11.

•  Hospitals are thus ideally placed to use their considerable market power to stimulate and influence markets to develop strategies and processes which support social outcomes

Four Good Reasons

3. Cost Neutrality

•  Social benefit objectives do not necessarily have to add costs to the procurement.

•  Minimal cost impacts can be secured by ensuring that social benefit objectives are appropriate to the size of the procurement and within the expertise of the providers.

Four Good Reasons

4. Benefits Provided by Social Procurement

•  Securing a hospital’s reputation and leadership; the creation of training and employment opportunities;

•  Encouragement of local economic development and growth;

•  Engagement of small-to-medium enterprises, social enterprises and minority businesses to provide them with the same opportunities as other businesses, including the ability to engage in procurement processes;

•  Promotion of fair and ethical trade, thereby ensuring that supply chains do not harm people or environments; and

•  Improvements in social inclusion

Four Good Reasons

There is a growing body of evidence about the value of social procurement and case studies that have been undertaken, many of these case studies have been undertaken by:

•  local councils, which have been at the forefront of social procurement initiatives; and

•  State Government departments in the areas of:

•  construction;

•  hospitality;

•  catering; and

•  purchasing from social enterprises

Social Procurement and the Hospital Sector

And the Hospital Sector…?

Research Snapshot

There is not a great deal of evidence about social procurement in the hospital sector, especially in Australia

So we decided to do our own research…

Research (Part 1): Online Survey

Landell and eSourcing Group developed an online survey to collect baseline

information targeting Procurement Managers and Sustainability Officers

The survey was sent:

•  to the hospital procurement managers of 25 hospitals / hospital networks via

email; and

•  by Health Purchasing Victoria (HPV) to a network of 20 hospital

sustainability officers

Research Method

Of the 45 hospital representatives which received the survey, 18 completed it,

representing a 40% response rate, which is excellent for a “cold” survey of this

kind, given that it received:

•  no government funding (although HPV provided strong support); and

•  no government promotion

Response

Yes 64.7%

No 23.5%

I don’t know 11.8%

Hospitals that undertake Social Procurement

When asked whether their hospital(s) incorporated social outcomes in any procurements, the majority of respondents said

YES!

Public 81.8%

Private: 9.1%

A mixture of public and private: 9.1%

Of the respondents whose hospitals undertake social procurement, the considerable majority were public Of the respondents whose hospitals undertake social procurement, 45.5% indicated that social outcomes were required for specific procurement categories

Specific Procurement Categories

Specific Procurement Categories

A number of specific procurement categories were identified by respondents (respondents could select more than one option)

Of the respondents whose hospitals undertake social procurement, only 9.1%

indicated that they provided practical guidance to staff about social

procurement.

Guidance

Of the respondents whose hospitals undertake social procurement, three good

examples of social procurement were provided:

Some Good Examples Found

“Employment of socially disadvantaged and (intellect)ally challenged

individuals work in (the hospital’s) gardens and grounds and

(perform) minor maintenance

Some Good Examples Found

“Our priority is to ensure that the service is safe to the patients (but) with

equal conditions, we prefer non-profit organisations.”

Some Good Examples Found

•  “(We) have affiliations with health service of health care

organisations, councils, special health organisations and they

are involved in socially responsible activities.

•  We also require that companies working for us share the same

value and commitment to the community”

Of the respondents whose hospitals undertake social procurement, only 9.1%

indicated that they provided practical guidance to staff about social

procurement.

Guidance

Obstacles to Social Procurement

Of the respondents whose hospitals

currently undertake social

procurement, the majority (45.5%)

indicated that they experienced no

obstacles

Yes 36.4%

No 45.5%

I don’t know 18.2%

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Obstacles to Social Procurement

Of those respondents who indicated that their hospitals did not undertake social procurement a higher percentage (75%) indicated that they foresaw obstacles in undertaking social procurement than those whose hospitals did implement social procurement (36.4%)

Yes: 75%

No: 25%

Of the respondents whose hospitals don’t currently undertake social

procurement, 33.3% plan to do so in the future.

Plans to Implement Social Procurement

•  Most sectors are at a very early stage of adopting social procurement

•  HOWEVER, it appears that the majority of hospitals (particular public hospitals)

already undertake a range of social procurement initiatives

•  This is a fantastic start and beyond the

expectation of the researchers before the

survey was undertaken

How do We Interpret these Results?

•  However, the primary focus of these social procurement projects appear to be in the

form “direct” social procurement, which relies on first-tier supplier responsibility

•  Examples provided by the survey respondents included:

•  contracts with social enterprises and not-for-profits;

•  employment of staff from disadvantaged groups;

•  local sourcing of goods and services; and

•  purchase of “Fair Trade” goods

Focus on Direct Social Procurement

Lesson Learned

There does not appear to be a great deal of social procurement being

undertaken upstream in the supply chain

Research Part 2: Interviews with Senior Managers

“Our focus is primarily upon

business as usual and lack of time

is a key issue for us”

“We changed the scope of the contract

so that the preparation of conference

rooms could be handled by a provider

who engaged our target stakeholders ”

Where can you start? Tips to becoming Social Procurement ready

•  Appoint a “champion” who is knowledgeable and enthusiastic about

social procurement to be your organisation’s social procurement “go-to”

person

•  Ensure that there is senior managerial support for social procurement

within the organisation before implementing any programs, as this will have

a critical effect on the success of the project.

Tip: Get Support

•  Develop a social procurement business case in which:

•  your hospital’s policies, processes and purchases are audited and

reviewed to:

•  determine how your hospital’s strategic objectives can achieve the

following through social procurement:

•  Quantify the tangible and intangible social procurement benefits

Tip: Plan the Target Outcomes

•  Consider “hot spotting” your spend portfolio using one or more of these mechanisms:

•  supply chain analysis;

•  risk analysis; and

•  category analysis

•  Is there a chance that you are buying products that may pose a reputational risk to your

hospital?

•  bedding, linen, work wear, some simple bandages, etc.

•  surgical instruments, trolleys, etc.

•  Consider researching the scale and nature of those risks and mitigate them

Tip: Don’t Drive a Desk!

•  Develop "supply-side" readiness by educating your suppliers about your hospital’s move

towards social outcomes through purchasing

•  Incorporate social procurement outcomes into your organisation’s regular reporting

requirements (e.g. annual reports).

•  Communicate the social procurement message internally and externally using the principles of

the “Social Procurement Communication Strategy”

•  Develop a database of social enterprises in your local area municipality (e.g. by utilising and

promoting Social Trader’s online tool: www.socialenterprisefinder.com.au)

•  For quotes and tenders, develop specifications, tender provisions and contractual clauses

including social procurement requirements (including appropriate weighting)

Tip: Engage your Suppliers

•  Develop a database of social enterprises in your local area municipality

(e.g. by utilising and promoting Social Trader’s online tool:

www.socialenterprisefinder.com.au)

•  For quotes and tenders, develop specifications, tender provisions and

contractual clauses including social procurement requirements (including

appropriate weighting)

Tip: Review Supply & Demand

Information on Social Procurement

When asked whether they would like to receive information on social procurement, a whopping 94.1% indicated that they would.

When asked what type of information they would like to receive, the majority of

respondents indicated a link to:

•  a Social Procurement Guide for Hospitals; (98.3%) and

•  a Social Procurement Toolkit (81.3%)

Information on Social Procurement for Hospitals

Landell and eSourcing have jointly developed a free Social Procurement

Guide for the Hospital Sector, which provides high-level guidance and

checklists for implementing social procurement projects which is available

online at: •  landell.com.au •  eSourcing.com

Social Procurement Guide

Landell will shortly be releasing a Social Procurement Toolkit in August

The Toolkit focuses on procurement for the Victorian public sector including hospitals.

Thanks Caroline Gordon, Landell P: 0412 149 424 E: caroline.gordon@landell.com.au

Paul Rogers, eSourcing Group P: 0438 550 221 E: progers@esourcinggroup.com