Promoting Social Considerations into Public

Procurement Procedures for Social Economy

Enterprises

Mapping the ecosystem in which social economy enterprises operate, including access to public

procurement contracts, in Sweden

Author: Gordon Hahn, Mathias Sylvan

January 2019

LEGAL NOTICE:

This document has been prepared for the European Commission, however it reflects the views only of

the authors, and the Commission cannot be held responsible for any use which may be made of the

information contained therein.

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Contents

1. List of Acronyms & Abbreviations ................................................................................... 1

2. The state of play of Public Procurement ......................................................................... 2

2.1 Public procurement structure at national, regional and local level ............................ 2

2.2 Competencies and responsibilities of the authorities involved in public procurement 2

2.3 Use of public procurement ....................................................................................... 2

2.4 Application of articles of the Directive ...................................................................... 3

2.5 Cross-border dimension of socially responsible public procurement ........................ 4

2.6 Guidance and training material on the new Directive ............................................... 4

3. The Social Economy ecosystem ..................................................................................... 5

3.1 Main definitions and concepts used: social economy, social enterprise ................... 5

3.2 Data and figures ...................................................................................................... 5

3.3 Legal framework and legal forms of social economy enterprises ............................. 6

3.4 National policies supporting social economy enterprises ......................................... 7

3.5 Support structures for social enterprises ................................................................. 7

4. Access to markets .......................................................................................................... 9

4.1 Fields of activities of social economy enterprises .................................................... 9

4.2 Fields of interest to social economy enterprises and not subject to public

procurement ...................................................................................................................... 9

5. Bibliography ..................................................................................................................10

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1. List of Acronyms & Abbreviations

EU European Union

SALAR Swedish Association of Local Authorities and Regions

WISE Work integration social enterprise

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2. The state of play of Public Procurement

2.1 Public procurement structure at national, regional and local level

The Public administration is organised on three levels: state, regions/county councils and

municipalities. The state is responsible for overall state functions like the police, the defence,

the transport system and the labour market. The central state authorities purchase their

respective contracts related to their specific needs. There is also a centralised purchasing

body purchasing contracts that are common for all state authorities: the Legal, Financial and

Administrative Service Agency (Kammarkollegiet).

The regions and the county councils are responsible for health services and, together with

the municipalities, public transportation.

The municipalities are responsible for a large part of the public service. Among the most

important tasks are preschool, school, social services and care for the elderly.

Local government has a long tradition in Sweden. The country's municipalities, county

councils and regions are responsible for providing a significant proportion of all public

services. They have a considerable degree of autonomy and have independent powers of

taxation. The right of local self-government and the right to levy taxes are enshrined in the

Swedish constitution.

The regions/county councils and the municipalities are to a large extent purchasing their own

contracts. There is one centralised purchasing body purchasing framework agreements for

all municipalities and regions/county councils: SKL Kommentus, owned by the Swedish

Association of Local Authorities and Regions (SALAR) and a number of local centralised

purchasing bodies.

2.2 Competencies and responsibilities of the authorities involved in public

procurement

See above.

2.3 Use of public procurement

Public procurement in Sweden covered by the obligations in the Act on Public Procurement

2016 had an estimated value of 683 billion Swedish crowns, one sixth of the GDP. The value

of the public procurement of the municipalities amounts to about half of the 683 billion.

In 2017, 76 per cent of all tenderers were small enterprises or micro enterprises while 4 per cent were large companies. Small and micro enterprises won 50 per cent of the total number of contracts. The number of tenders is relatively large compared to other Member States. According to figures from the Commission there was more than one tender in 66 per cent of the procedures and more than 10 tenders in 8 per cent of the procedures.

The share of the non-profit sector is relatively small. Their share in 2017 was 22 billion Swedish crowns which amounts to three per cent of the total value of public procurement. Only one per cent of all tenders in 2017 came from non-profit organisations.

There are special rules in chapter 19 of the Act on Public Procurement that apply to contracts under the thresholds. These rules are to some extent similar to the rules in the rest of the Act on Pubic Procurement that implement the directive. New rules for the procurement of welfare services will come into force the first of January 2019 (under the threshold 750 000 euros and reserved contracts for organisations that fulfil the criteria in Article 77). There is also a special law of freedom of choice (lagen (2008:962) om valfrihetssystem) comprising social

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services and health services. According to this law the user is free to choose the provider from a list of qualified actors (private and public actors).

2.4 Application of articles of the Directive

Contracting authorities often use the possibility of splitting of contracts in order to facilitate

SME participation in public tenderings. The law on freedom of choice allows SME as well as

SEE to participate in these systems of social services and health services. There are not

many examples of reserved contracts yet since this possibility has not existed in Sweden

before the first of January 2017. There is no special regime for social services in the Act on

Public Procurement. This will change, however, when new rules come into force the first of

January 2019.

Social clauses (art. 71) are common in public procurement especially in order to create

employment.

Interviews have been made to map the opinions and experiences involving social

procurement. The informants are a mix of people from different kinds of stakeholders,

everyone in daily contact with social procurement under the new code. Everyone interviewed

has been involved one way or another in social procurement. Some of the informants have

been on the outside in consulting or advising. Some of them have been part of the work of

procuring.

Considered interviews:

Charlotta Frenander (Dep. sustainable development – National Agency For Public Procurement)

Kent Mähler (Legal Responsible Procurement – Inköp Gävleborg)

Ulrika Svallingson (Coordinator sustainability – City of Malmö)

Eva Ternegren (Coompanion Gothenburg/City Commissionaire)

Bosse Blideman (Chairman Skoopi)

Summary of findings

Experiences. All informants indicate that reserved contracts are the most common social procurement and at the same time the most complex. Some of the informants mention that a reserved contract is the most convenient for the municipals to use and simplifies the process. The informants also mention employment clauses are a successful way of using social aspects in public procurement.

Complexity. When talking about social procurement, all the informants mention complexity as a main obstacle. They mention that reserved contracts for example can become more of a special treatment which implies limitations and is therefore not as open or inviting as it is supposed to be. The complexity of the social procurement, whatever kind it may be, makes the procurement more difficult to implement in regular activities since the interest in it fluctuates.

Clarification. None of the informants think that a clarification is needed. However, some mention that it is important to disseminate procurement knowledge. Some of the informants mention the National Agency for Public Procurement as an important source of knowledge, information and guidance. On their website they inform and advise exactly what every actor should or could do regarding social procurement. One informant also states that clarifications can be highly restrictive rather than informative.

Social economy enterprises. The possibilities for social economy enterprises to access public procurement contracts are increasing. Although most of the informants

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are of the opinion, that there is a lack of knowledge regarding social economy enterprises which makes their ability to access public procurement more difficult. The lack of knowledge exists in municipals as well as in social economy enterprises. Another informant talks about the lack of knowledge amongst politicians, which makes the public procurement isolated from the discussion. As such, there are difficulties when they strive to be a contender in the public procurement. Interest and knowledge are required from all actors influenced by procurement.

Good examples. Good examples indicated by the informants are Gothenburg City and Region of Skåne, where several successful procurements have been made considering social aspects. Some of the informants emphasized that many stakeholders involved in public procurement had implemented social aspects in different ways.

Documents. As mentioned above there are a plethora of information and knowledge about the way Sweden acts and uses social aspects regarding public procurement on the National Agency for Public Procurements website. Every informant is of the opinion that the website fulfills the need of documents with guidelines.

Special provision. None of the informants mentioned any special provision for public social procurement. However, many of them describe a change in the way the procurement offices work, a different kind of state of mind where social aspects in public procurement are encouraged and are growing.

In conclusion, the keypersons we have interviewed have had a similar experience with social

procurement, not differing regardless of sector, and refers to the National Agency for Public

Procurement for information and guidelines regarding social procurement.

2.5 Cross-border dimension of socially responsible public procurement

No relevant experiences.

2.6 Guidance and training material on the new Directive

The National Agency for public procurement is offering a number of guides and other advisory services. There is guidance on labour clauses, sustainable requirements and criteria, socially responsible procurement and innovative procurement to give only a few examples.

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3. The Social Economy ecosystem

3.1 Main definitions and concepts used: social economy, social enterprise

Sweden has a long tradition of social engagement and third sector involvement, including

through the popular mass movement.

Concepts such as “social economy” and “social enterprise” are relatively new in Sweden and

are used alongside more traditional terminology such as cooperatives, not-for-profit

organizations and civil society organizations.

The term social enterprise was initially explored to be associated with work integration social

enterprises (WISEs) and/ or civil society organizations in Sweden. Recently the Swedish

Government adopted a new “strategy for social enterprises - a sustainable society through

social entrepreneurship and social innovation”. This strategy broadens the definition and

concept of social enterprise to include a wider perspective.

The strategy starts from the view that in order to continue building a sustainable and strong

society and to meet the many societal challenges, such as integration, health, education,

climate, the environment, easier ways to work or gender equality, all actors in Sweden need

to contribute with full commitment and innovation.

The strategy clarifies that social enterprises are comprised of a heterogeneous group of

actors and activities that often work in the border between public, private and civil society.

Social entrepreneurship is by definition difficult to demarcate from other forms of

entrepreneurship. Generally speaking, social enterprises display a number of features that

may be indicative to clarify this group:

It is a business, irrespective of the form of association, where the business activity is a means of achieving one or more specific socially beneficial goals, such as reducing exclusion, improving the climate and the environment or contributing to a safer living environment.

The company's results are measured in relation to the fulfillment of the societal goals stated as its purpose.

The company's financial surplus is reinvested mainly in the business, alternatively invested in a new community beneficial project, instead of being primarily taken as a profit through returns to the owners.

Enterprises and associations fulfilling these criteria are throughout the strategy referred to as

social enterprises and important drivers of social innovations defined as initiatives that meet

social challenges with new ideas and solutions that improves services to citizens. This

initiative is framed by the Governments work with Agenda 2030 for a sustainable

development. The important aspects of participatory approach and inclusive governance,

which is in the core of social economy/social enterprise development in Europe, is though not

emphasized in the strategy.

3.2 Data and figures

According to the Social Business Initiative of 2011, definition of social enterprise can be

arranged along entrepreneurial, social, and governance dimensions. More specifically, social

enterprises have a primary objective to achieve social impact rather than generating profit for

owners and shareholders and uses surpluses mainly to achieve these social goals. Social

enterprises are, according to this initiative, furthermore managed in an accountable,

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transparent and innovative way by involving workers, customers and stakeholders affected

by its business activities.

Social enterprises in Sweden is a heterogenic group of ventures. Social enterprises with

influences from the cooperative movement and cooperative principles are based on general

characteristics as social aims, business activities as well as empowerment through

participatory governance.

Social enterprises influenced by normative business practices highlights social aims with

arguments of a win-win relationship to economic aims. They furthermore highlighted the

business aspects as a key to results and seldom relate to a participatory approach.

Recently, the religious community has gained market shares in welfare production in Sweden

(although compared to the EU are still very small), where the non-profit, religious care and

Christianity are the characteristics. They seldom refer to a participatory approach.

Sweden has a long tradition of popular movement, which also reflects the development of

Social enterprises in the non-profit sector. Those drawing on non-profit sector practices also

highlighted social aims and a participatory approach, while other non-profit influenced social

enterprises didn’t stress participatory aspects. Characteristics of these types of enterprises

are that they frame their task as service delivery and focus mainly on service.

The blurred boundaries of social enterprises in Sweden makes it difficult to account for

systematic characteristics of work force, serviced provision and working methods. This also

makes it impossible to determine the scale of social enterprises in Sweden. In 2016

Statistics Sweden reported (based on statistics from 2014) 92 000 registered economically

active social economy enterprises, employing 183 000 people (which is equivalent to 150

000 full time employees out of a total work force of 4,7 million).

There are approximately 7 500 cooperatives in Sweden, of which approximately 1 500 are

worker cooperatives within the welfare sector, employing approximately 15 000 people. Of

these enterprises, approximately 300 are WISE’s, employing approximately 3 500 people

and providing training for an additional 9 000 people. There are approximately 1 200 religious

communities in Sweden, of which approximately 100 are active within the welfare sector,

employing approximately 10 000 people. The scale of the non-profit voluntarily sector social

enterprises (such as for example Red-Cross economic activity within the welfare services)

are difficult to determine, but an assumption is that they provide similar to the cooperative

and religious sector, approximately 10 000 employments. The scale of social enterprises that

are conducting business in a more conventional way is impossible to determine, but they are

relatively few and are often clustered in impact hubs.

3.3 Legal framework and legal forms of social economy enterprises

There is no legal form that is specifically designed for use by social enterprises in Sweden.

Social enterprises use adaptations of the cooperative (economic association), non-profit

association, religious community, limited company, limited company with distribution

restriction and foundation forms to carry out their activities.

The Swedish Government among others does recognise integration social enterprises

(WISE). This recognition can be obtained by an organization that operates with the aim of

integrating people into society and working life and creating involvement by co-workers.

WISEs are required to reinvest profits into furthering their aims and be independent of public

authorities. However, these WISEs are governed by the same laws as any other enterprise

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of the corresponding legal form. There are no incentives attached to being recognized as a

WISE. There is no recognition of, or incentives for, social enterprises that carry out other

social purposes.

There is no structured public support for social enterprises, except for project financing

accordingly to the strategy mentioned above as well as directed project financing for regions

regarding WISE’s.

Some work is being conducted at the moment in order to certify WISE’s in Sweden.

Recently, an extended work has been done in the area of procurement in order to facilitate

participation of social enterprises and social economy in public procurements. In the

"Roadmap for public procurement" non-profit organizations - social enterprises, cooperatives,

societies, foundations, nonprofit organizations - are recognised contributors to diversity, the

quality of welfare services and adaptation to the needs of users and the desired goals.

3.4 National policies supporting social economy enterprises

Social enterprises in Sweden rely on the same fiscal framework as other ventures. They

register with tax authorities and are taxed for potential profit on the same terms as other

ventures.

There is no real social investment market in Sweden. With the exception of a couple of banks

(Ekobanken and JAK banken), social enterprises are treated the same as mainstream

enterprises. There are no specialist intermediaries or financial products catering to the

specific business models and/ or needs of social enterprises. Coompanion, cooperative

development agencies, which are present in all Sweden’s counties, including 120 advisors

give cost-free advise for cooperative start-ups, and have embraced social enterprises also

with different legal forms.

Recently, a few initiatives from the private sector have arisen to finance social enterprises in

the wider perspective, such as Norrsken Foundation (Klarna) and social impact bonds

(Leksell venture). These kinds of initiatives are though relatively small and few.

3.5 Support structures for social enterprises

There are several different networks and mutual support mechanisms.

1. Coompanion – an association of business advisors with focus on development of

cooperatives have been and is strongly associated with the development of social

enterprises.

2. Interestorganisations such as Skoopi, Forum, Famna, Ideell Arena and SE forum

3. Employer organizations KFO, Arbetsgivaralliansen and IDEA

4. SOFISAM – a web portal developed as a part of prior policy initiatives but still in use.

Includes a list of work integration social enterprises based to a large extent on self

identification and a certain official assessment. The list is updated sporadically

(Sofisam 2018).

5. Mötesplats social innovation – an initiative to promote, create venues for meetings

(eg. hosting Social Innovation Summit), and disseminate knowledge of social

innovations (Mötesplats för social innovation 2018).

Since 2001, Sweden has had a legislative ordinance (2001: 1194) on state grants for

cooperative development e.g., which has been updated several times (2005, 2009). The

regulation contains regulations on state grants to cooperative development centres and aims

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to secure the cooperative development centres’ activities throughout the country. The

regulation has been followed by financial support to cooperative development centres (CDA)

and differs yearly supporting Coompanion to 1/3rd of their activities. The cooperative

organised organisation Coompanion, present in 25 regions are today the main organisation

that supports the start-up and development of social economy enterprises, as well as social

enterprises. Coompanion has approximately 120 employees and 1200 members, all from

municipalities to cooperatives.

Additionally, recently, different private actors have shown interest in social enterprise

development. One such example is Klarna, one of Europe's largest banks which offers

payment solutions to 60 million consumers and 100,000 stores in 14 countries and supported

the start-up of Norrsken with approximately 80 million euros. Norrsken House is a 2400+ sqm

creative cluster in Stockholm for over 300 social entrepreneurs solving some of the biggest

issues of our time.

The social enterprises also have their own interest-organisations such as for example

SKOOPI (Work integrated social enterprises) and FAMNA (non-profit welfare enterprises).

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4. Access to markets

4.1 Fields of activities of social economy enterprises

Social economy enterprises have activities in a variety of sectors. Most organisations

operate in Housing, social and societal development (29 per cent), followed by Recreation

and culture (25 per cent) and education which includes popular education associations (20

per cent).

Out of these reported economic active non-profit organizations, 26 000 people were

employed in health and social security (ICNPO coding). To give some reference, this figure

can be compared to 111 000 employees working in the social care and health care (SNI 87-

88) employed by private for-profit enterprises in 2015 which is a 300 per cent increase since

the year 2000. These enterprises do not however fulfil the criteria of the EU definition for

social enterprises – even though there are indications that some of the small- or medium

sized enterprises might do so based on limited case studies (Sundin 2009; Gawell, Sundin

and Tillmar 2016).

Additionally, work integration social enterprises are active in all sorts of areas.

4.2 Fields of interest to social economy enterprises and not subject to public

procurement

IoP (social public partnership) is at the moment experimented in Sweden in order to secure a

legal base for social innovation partnership between the public and social economy. This is

still under development, but may be seen as a contract between the public sector and a

social economy enterprise in areas that are not subject for procurement.

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5. Bibliography

Year Topic and source info

2018 Statistics on public procurement 2018

The National Agency for Public Procurement, Report 2018:2;

Swedish Competition Authority, Report 2018: 9

2018 National statistics (SCB)

2016 Government bill : New Regulations on Procurement, 2015/16 :195

2016 Recent evolutions of the Social Economy in the European Union

2014 A map of social enterprises and their eco-systems in Europe