Addressing Barriers to Social Procurement Implementation in the Construction and Transportation Industries: An Ecosystem Perspective

Abstract

Although social procurement is viewed as an important part of social value creation, barriers to its implementation have resulted in a failure to realise the full societal benefits it was designed to achieve. As a key area of activity for government procurement projects, the construction and transportation industries have a big role to play in contributing positively to societal outcomes. While prior studies have identified barriers from specific cohorts, no prior study has approached this from the perspective of the key stakeholders throughout the social procurement ecosystem within the construction and transport industries. To address this gap in social procurement research, interviews and a focus group totalling 42 participants were undertaken. Participants ranged from those implementing policy (government representatives), tendering for contracts (tier one companies) and providing specialised social procurement services (social enterprises), along with key intermediary support bodies. Results indicate that barriers exist throughout the entire social procurement ecosystem and highlight the need to develop an enhanced social procurement ecosystem capable of maximising the societal benefit that arises from social procurement. These findings provide a set of strategies for the key stakeholders in the ecosystem to consider adopting to improve social procurement outcomes.

1. Introduction

Social procurement extends the idea of ‘traditional’ procurement by requiring that the supply chain delivers social benefit outcomes in addition to the goods and services being purchased [1,2]. Many governments practice social procurement (e.g., the United Kingdom [UK], Canada, South Africa, and the European Union [EU]). In Australia, the Victorian State Government announced its view that social procurement outcomes will accrue to all Victorians when the social and sustainable outcomes in the social procurement framework are achieved [3].

Definitions of social procurement focus on the intention of the buyer–supplier relationship to bring about additional value that would not be delivered by traditional procurement relationships. Organisations use their buying power to generate social value beyond the value of the goods, services, or construction being procured [3]. Governments can unleash significant untapped social value potential from their existing procurement spending by requiring construction firms to give back to the communities in which they build [4]. Specifically, governments use their position as volume buyers to influence their social procurement policies [5]. Prior studies confirm that the construction industry plays a vital role in the adoption of social procurement practices [6,7]. This potential is evidenced by research commissioned on social procurement in the West of Melbourne region. As per Figure 1 below, the report indicates that every AUD 100 million spent on construction with local businesses creates AUD 237 million of economic impact and 580 local jobs [8] while social procurement has the potential to contribute over 450 jobs for people in target cohorts [9].

The motivation for this study is to address the paucity of empirical research examining social procurement issues throughout the whole supply chain [5] where poor social procurement implementation in construction could be due to constraints in their systems, structures and competencies [10]. The importance of more extensive research into social procurement barriers [4] had led some to opine that the literature on the barriers of promoting social procurement throughout supply chains had received little attention [11].

The focus on the whole supply chain refers to the business ecosystem which is a network of organisations—including suppliers, distributors, government agencies—involved in the delivery of a specific product or service [12]. Since each organisation affects the other, understanding their interactions within the ecosystem is important for its effectiveness. In the present research, the social procurement ecosystem refers to those who implement social procurement policy (government representatives), and those tendering for contracts (tier one contractors) (a tier one contractor is capable of delivering mega-projects over AUD 1 billion and has the ability to self-perform most of the required work on a project with its own employees), along with those providing specialised social procurement services (social enterprises) (the term social enterprises is used in this paper to denote both certified social enterprises and small and medium enterprises (SMEs) involved in the social procurement space) and key intermediary support bodies. The adoption of the ecosystem approach also responds to recent calls to include the perspective of policymakers in future social procurement research [13].

Prior studies assert that, unless the capacity of those within the social procurement ecosystem to deliver social value is considered, there is a danger that governments will fail to achieve their increasingly ambitious goals [14,15]. Problems with capacity have been linked to, among other things, barriers that key social procurement stakeholders face when trying to activate the social value that, theoretically, can arise from social procurement policies. It is no surprise therefore that, considered as a whole, social procurement projects have failed to realise the full societal benefits they were designed to achieve. Prior studies have identified barriers applicable to specific cohorts, but this paper seeks to contribute to the literature by answering the call to better understand the existing gamut of capacity and capability issues that are limiting the potential of social procurement [16].

The aim of this paper is to investigate perceived barriers to effectively implementing social procurement within construction and transportation infrastructure projects viewed from the perspective of key stakeholders in the social procurement ecosystem. Key stakeholders comprise: (i) social enterprises, (ii) tier one contractors, (iii) government representatives and (iv) key intermediary support bodies. The approach taken here, of including the perspectives of key stakeholders drawn from across the social procurement ecosystem, can be distinguished from the vast majority of published social procurement studies, which typically concentrate on one cohort. To achieve the main aim of this paper, the following research question is addressed:

RQ1: What do key stakeholders perceive to be the main barriers to the effective implementation of social procurement in the construction and transport industries?

By investigating this question, applying new institutional theory, support networks and organisational capability, this paper contributes to the emerging body of social procurement research by responding to the need for more construction and transportation research in this field. Answering this question is important as it provides a more comprehensive social procurement perspective, while also offering a more nuanced understanding of the challenges involved for each of the key stakeholders in the construction and transportation industries. This more nuanced understanding of areas benefitting from social procurement could assist governments to better utilise their policy implementation to achieve greater social value creation. To achieve this, interviews and a focus group comprising 42 participants were undertaken. Participants were obtained from the aforementioned four key stakeholder groupings who have responsibilities for implementing policy (government representatives), tendering for contracts (tier one contractors), providing specialised social procurement services (social enterprises) and providing support (key intermediary bodies).

The remainder of this paper is structured as follows. Section 2 provides an overview of the key literature on social procurement barriers. Section 3 outlines the research method adopted by this paper. Section 4 provides the results and discussion from the study while Section 5 draws links to the social procurement ecosystem. Section 6 concludes with some strategic recommendations arising from the research.

2. Literature Review

2.1. Social Procurement in Construction and Transportation Industries

As sustainability management increasingly makes its mark on the business landscape, social procurement, with its focus on attaining benefits beyond value for money, is being increasingly adopted by governments. There has been strong uptake in the UK, Canada, South Africa, the EU, as well as Australia. This has been supported by socially conscious private sector organisations keen to attain their corporate social responsibility objectives [2]. By changing their procurement policies, governments are recognising the role social procurement plays in contributing to sustainability outcomes and social value creation [17].

In 2018, the Victorian Government’s Department of Treasury and Finance introduced a Social Procurement Framework (SPF). The SPF applies to all Victorian Government departments and agencies when they procure goods, services and construction at certain threshold conditions. The Victorian Government set up the SPF to add value to government purchases by: (i) creating jobs and skills-based training opportunities for local priority jobseekers; (ii) increasing business opportunities for social enterprises; and (iii) delivering social, economic and environmental benefits. The SPF includes procurement objectives for social impact and environmentally sustainable outcomes. It also targets outcomes for selected priority groups such as: Indigenous Victorians, Victorians with disability, disengaged youth, long-term unemployed people, migrants, refugees and asylum seekers, single parents and workers in transition [18].

The construction and transport industry is one of the main beneficiaries of government purchases via road, rail and infrastructure programs. These programs can act as a major catalyst to achieve social, economic and environmental benefits. Although the construction and transport industries offer enormous opportunities to implement social procurement, issues such as cross-sector collaboration with social enterprises [10] and notions of what an ‘ideal’ construction worker looks like [19] can be problematic. This is exacerbated by the fact that noncompliance under the SPF can lead to construction and transport infrastructure organisations being potentially struck off tender lists with government agencies. Thus, understanding the barriers that can hinder construction and transport industry participants from meeting their targets is increasingly important. The following subsection provides a brief overview of the main barriers to social procurement implementation in the construction and transport industries that have been identified in the literature.

2.2. Main Barriers to Social Procurement Implementation in Construction and Transportation

A review of the literature on social procurement in construction and transportation revealed six main barriers within these industries. The first main barrier concerned a lack of understanding and awareness of social procurement. An Indonesian study of owners of construction businesses mentions this barrier [1]. This finding reinforced an earlier study that interviewed eight tier one contractor senior managers and demonstrated that social procurement in construction is delivered mainly by existing industry incumbents who do not understand social procurement requirements [16]. This absence of people who understand social procurement hinders the monitoring of their implementation in practice as those with a lack of understanding demonstrate a tendency to view it as yet another compliance burden. The problem also manifests in inadequate training and a lack of platforms to exchange information and knowledge. This barrier was also identified in other construction social procurement studies [5,20,21,22].

A second main barrier is the perceived limited capacity of existing construction supply chain partners to deliver on social procurement clause requirements—particularly as many only work on projects for short periods of time [23]. Capacity issues can manifest via a lack of skilled labour [21,24]. Awareness of this barrier was reinforced by a study which examined social enterprise leaders in UK construction and found that there was a lack of supply of credible organisations capable of undertaking meaningful construction work [4]. Capacity gaps have also been identified in other social procurement studies [13,24,25,26].

A third main barrier is a lack of meaningful collaboration which has also been cited by social procurement experts and professionals as obstructing the integration of social enterprise organisations into supply chains [20]. This can occur via a lack of motivation and unco-operative attitudes [20,21]. For instance, there seems to be a perceived lack of trust in the ability of social enterprises to deliver work to the same standards as existing subcontractors [16]. This high level of suspicion leads to low social procurement engagement and resistance to change which adversely impacts the effective implementation of social procurement [14].

The fourth main barrier to social procurement implementation within the construction and transportation sector is the highly regulated nature of the industry and the difficulties which social service providers encounter in securing the necessary licences and certifications to even prequalify to tender on construction projects [4]. Other examples include a lack of technical guidelines regarding its implementation and systemised practices [25,26]. A recent study which undertook five focus group case studies disclosed that stakeholders perceived the way policies are being implemented to be unjust and appearing to be counter to effective risk management, leading to social procurement being viewed as more of a risk than an opportunity [24]. A lack of government support has been cited by other studies [5,21,27].

A fifth main barrier was the costs and administration effort associated with the implementation of social procurement. The pressure to pursue the lowest price has led to hesitancy to become involved in social procurement on a large scale [16,24]. A study of Indonesian construction practitioners showed that a number of specialised social procurement service providers were routinely more expensive to work with than nonproviders, resulting in those practitioners feeling hampered by the administrative burden associated with social procurement [26]. This was also identified in a study on sustainable procurement for public sector universities in Pakistan [28].

Finally, a sixth main barrier, organisational orientation, can act as an impediment to the effective implementation of social procurement. Specifically, the level of perceived pressure from competing construction and transportation industries impacts the extent of adoption of social procurement [4,16]. For instance, a study of construction industry professionals in Nigeria demonstrated that the attitudes of close competitors to social procurement and the need to retain a competitive advantage can act as barriers, or enablers, to social procurement [5]. Other studies cite similar effects [14,26,29].

Other barriers have been identified in the social procurement literature such as organisations lacking a long-term perspective, greater capital cost of research and development, and resistance to change [21,24,27]. Although not main barriers, they comprise internal limitations among construction and transport organisations in the implementation of social procurement.

The studies reviewed above identified barriers from specific cohorts (e.g., tier one contractors, owners of construction businesses, social enterprise leaders, construction practitioners, construction industry professionals, etc.). By adopting an ecosystem perspective, this paper extends the literature and addresses the call for an integrated analysis of the main social procurement barriers in the construction and transport industries [5,11]. To achieve this, an analysis involving key stakeholder groups throughout the social procurement ecosystem is undertaken, focusing specifically on the context of construction and transportation infrastructure projects.

3. Research Method

To build upon the main barriers identified in the previous section, key stakeholders in the construction and transport infrastructure social procurement ecosystem were contacted. A qualitative analysis approach was employed to obtain an in-depth understanding of the perceived barriers to implementing social procurement in the construction and transport industries. The qualitative lens allowed for a more nuanced explanation of the research topic [30]. Following ethics approval, the qualitative data was collected through in-depth interviews and a focus group conducted online.

3.1. Data Collection

Purposive sampling was used to recruit interviewees [31]. To reflect the range of experiences of key stakeholders in the social procurement ecosystem, interview and focus group participants were selected from those exhibiting a range of expertise to capture the complexity that exists within the social procurement space. Specifically, a cross-representative selection of those with first-hand experience dealing with implementing policy (government representatives), tendering for contracts (tier one contractors) and those providing the specialised social procurement services (social enterprises and SMEs) were selected, along with representatives of key intermediary support bodies. As the State Government is the primary driving force behind social procurement in Victoria, tier one contractors had to have experience in large-scale construction and infrastructure projects. In keeping with the purposive sampling approach, communications with relevant people (e.g., procurement managers) were undertaken to identify the most knowledgeable person available to answer the interview questions. Key intermediary support bodies were identified primarily via established contacts from the research team. Their selection was based on their extensive experience with social procurement and acknowledged dealings with tier one contractors, social enterprises and state government. Government representatives were selected based on contact with the government department responsible for the social procurement policy. Finally, social enterprises had to have experience in the social procurement space; hence, they were either certified social enterprises or SMEs involved in social procurement. Their selection occurred via two main ways: (i) referrals from key intermediary bodies and (ii) responses to a call out via the internet for participants with social procurement experience within the construction and infrastructure industries. From there, a snowball strategy was employed.

Due to the COVID-19 pandemic, all interviews and the focus group dialogue were conducted via Zoom, following respondent consent. Emails were used to organise a day and time that reflected their preferred availability. Overall, in-depth interviews with 35 key stakeholders were conducted between March 2022 and October 2022. Interviews were stopped upon reaching data saturation [32]. Each interview lasted between 60 and 90 min and were audio recorded via Zoom. The focus group, conducted in May 2022, comprised service providers and consultants, along with major industry organisations with recent and current experience working on social procurement delivery to major projects in the western region of Melbourne (see Appendix A: Research Participants).

3.2. Qualitative Data Analysis

A total of 35 semi-structured interviews were conducted with key social procurement stakeholders. Broad individualisable questions were utilised along with spontaneous questions that followed up on unanticipated issues raised by respondents. In addition, a focus group of seven experienced industry representatives actively engaged in social procurement practice was formed. To ensure consistency and quality, two researchers conducted the interviews and focus group along with the transcriptions. Each transcript was then validated by a different member of the research team, which involved comparing the audio with the written transcript [33]. A content analysis of the transcripts was conducted for coding purposes which involved immersion and engagement with the interview data to identify themes [34]. The consistency and validity of the codes were checked through an intercoding technique [35], with the interview data analysed thematically. Figure 2 below presents the data analysis steps.

4. Qualitative Results

The thematic analysis identified a total of three main themes and 14 subthemes that comprise key barriers to social procurement implementation in the construction and transportation industries. These are presented in

Table 1. Key barriers to social procurement—a thematic presentation.

Area	Theme	Subthemes
Social Procurement Implementation in Construction and Transport	Supply Chain Process (Section 4.1)	Supply Chain Pressures (Section 4.1.1)
		Client Pressures (Section 4.1.2)
		Union Opposition (Section 4.1.3)
	Capacity and Capabilities of Social Enterprises (Section 4.2)	Capacity to Scale (Section 4.2.1)
		Non-Competitiveness of Social Enterprises (Section 4.2.2)
		Social Enterprise Capabilities (Section 4.2.3)
		Social Enterprise Resourcing (Section 4.2.4)
		Poor Cash Flows (Section 4.2.5)
	Support Networks (Section 4.3)	Lack of Support Networks (Section 4.3.1)
		Provision and Quality of Databases (Section 4.3.2)
		Certification and Accreditation Programs (Section 4.3.3)
		Social Procurement Education Support (Section 4.3.4)
		Supporting Priority Groups (Section 4.3.5)
		Tendering Process (Section 4.3.6)

below while their discussion occurs in the associated subsection in parentheses.

4.1. Supply Chain Process

The research participants identified the supply chain process as a barrier to social procurement implementation in the construction and transport industries. Within this theme, the notion of pressure was a major issue—with both supply chain pressure and pressure from clients identified as barriers. In addition, trade union opposition was also identified as impacting the supply chain process and ultimately impacting the effectiveness of social procurement implementation. The first subtheme is reviewed below.

4.1.1. Supply Chain Pressures

A number of participants throughout the ecosystem identified supply chain pressures as a barrier to the effective implementation of social procurement. One main reason was that a number of existing suppliers were not capable of meeting social procurement requirements. Thus, when it came time to procure goods and services to meet social procurement requirements, tier one contractors had to use suppliers they had not worked with previously. This was viewed as a higher risk proposition.

It’s very evident very early on that that risk is at the heart of most of these (supply chain) decisions, and that we’re now creating greater risk, because we’re asking them to use different suppliers that they’re not necessarily used to. [Hence], there’s probably a lot of suspicion around their (social enterprises and Indigenous businesses) ability to deliver… there was absolutely no desire to change supply chains, from what I could see. [P2]

Thus, reluctance from tier one contractors to change suppliers was quite evident from both the social enterprise and intermediary perspectives as evidenced in the following quotes:

You’ll sit in a room talking about social enterprise to subcontractors … and there’s a little bit more resistance because there’s: (a) why should I do this? (b) what’s it going to cost? (c) who are you? (d) is the quality going to be as good? [P3]

If you look at the major projects, it’s the same social benefits suppliers [enterprises] that generally get engaged on every project. And of course, that changes over time because some are emerging but there’s not a huge diversity of businesses being engaged. [P30]

As tier one contractors required suppliers that were proficient with social procurement, many were having trouble identifying suitable supply partners. The resultant search was seen as an inefficient use of time which increased overall costs. The lack of maturity in the social enterprises landscape has meant that demand has outstripped supply—a notion that was highlighted by all key stakeholder groups.

If you look at the percentage of span that those projects need to direct to social enterprises, or Aboriginal owned businesses, I don’t feel at the moment, there’s enough of us to be able to meet that demand. So there’s a supply side constraint that needs to be fixed. [P12]

It’s a little bit more challenging to find (social procurement) businesses as opposed to non-social procurement businesses. So that’s probably one of the biggest barriers. There’s not a pool of businesses out there per se that you can just call on when you need them and the challenge is, obviously, every major project in Victoria is fighting over that pool of talent as well. [P33]

… sometimes it’s about supply and demand. So are there enough social enterprises or Aboriginal businesses in the region or the area or suburb that a particular project is working in, that makes it more accessible to buy from those companies or to employ people? [P36]

Supply chain pressures have been identified in prior studies as a barrier to social procurement implementation in construction and transportation [4,23]. To mitigate this known barrier, a potential area for action is to diversify the supply chain by looking beyond merely risk and price as the two differentiating factors. This requires a broader perspective of what value creation and social value is—the key outcomes of social procurement. Furthermore, there is an opportunity for government to invest in the supply base to help make social procurement sustainable. This would assist in meeting the government’s own social procurement targets and ultimately reap returns in terms of the economic benefits and employment.

4.1.2. Client Pressures

Some social enterprises spoke about the pressures clients placed on them regarding job performance due to differing priorities between the tender team and implementation team as well as the pressure to adequately meet their mandated targets set by government.

The tender team is different to the implementation team. Big Issue. Promise the world in the tender, then the implementation team comes in and they go, I can’t do that. [P2]

Did they actually do that (achieve their target)? And how did they do that? Or were they … padding their outcomes, or were they using the same labour hire contracts that use the same …people and move them around to different job sites and double counted them all at once? [P4]

Moreover, other social enterprises opined that they were treated the same as traditional commercial operators even though what got them through the door in the first place was being a social enterprise supplier. This expectation meant that tier one contractors were not necessarily factoring social enterprise specific complexities when evaluating work progress/efficiency.

You’re working with people who have got significant mental health issues. So you know, absenteeism can be quite high, you’re working with people who have undergone significant trauma, which leads to mental health issues, anxiety, all sorts of stuff. So their productivity on certain days can be very low. You’re trying to compensate for I mean, basically, commercial enterprises are all about productivity and efficiency and so on. Whereas a lot of these people are not able to operate at that level because of all the trauma and family violence, and whatever else is going on in their lives. [P17]

Typically, the traditional position is that construction and infrastructure projects are delivered the way a client wants it [5]. As social procurement increasingly becomes a mandatory part of major project builds this mindset should shift, however as this theme demonstrates, the shift is yet to occur in a substantial practical manner.

4.1.3. Trade Union Opposition

Trade union opposition was also cited as a barrier to social procurement implementation in the construction and transport industries. The instances were specific to times where the social procurement contracted agreement was seen to be in conflict with trade union objectives.

I’ve had the union get involved and basically say that I can’t have my people on their sites. … they’re not interested in supporting me and helping me to be on. [P7]

They (social enterprises) find it hard to break in, or they run into issues with the union around their agreements. You know, it’s a difficult space in some ways. [P30]

This finding adds to the very limited body of knowledge about this barrier to social procurement implementation [24]. From a main theme perspective, the supply chain process is already experiencing difficulties in managing the transition to greater social procurement activities. Unless further government support is provided, such supply chain pressures will only be exacerbated by the influx of construction and transport infrastructure projects in the pipeline.

4.2. Capacity and Capabilities of Social Enterprises

A second main theme identified by research participants focused on the capacity and capabilities of social enterprises. Capacity gaps have also been identified in other social procurement studies [13,24,25,26]. Within this theme, the ability for social enterprises capacity to scale was seen as a major barrier to effective social procurement implementation, as were social enterprise’s capabilities, resourcing, noncompetitiveness and poor cash flows. The first subtheme is reviewed below.

4.2.1. Capacity to Scale

Finding a social enterprise that can work at the scale required to service the social procurement project was seen as a major implementation barrier. One reason put forward by social enterprises was due to their relative infancy in the social procurement area.

… Tier one organisations want to procure their services but social enterprises can’t deliver at that scale. … a match of scale of demand and supply currently does not exist. [P4]

The ability to scale is a definite barrier and is something that we’re grappling with at the moment. [P17]

It’s interesting when you look at the social enterprise space across Australia, and certainly in Victoria, it’s still relatively in its infancy… we’re not at scale yet. I think once we get to scale, that’s when you’ll start to see us (social enterprises) compete more effectively in the market, but we’re still learning by doing at the moment. [P12]

In fact, social enterprises and intermediaries identified the difficulty for social enterprises to access support to develop relevant skill sets to increase their capacity to scale.

Implementation is quite important and how we can scale that into the current business model. … We have got so much work right now but we don’t have the capacity of having the support (ongoing training and development) and employee workforce… so there is a gap there that we’re trying to fill and fix and grab and grow. [P16]

Business and government can play a huge role in capacity building for social enterprises … If it (building capacity) was built into policy to do pilot programmes with social enterprises to start small on a project and build that up over time … a business or government organisation really partnering with them through the life of a project, the impact that that could have on social enterprise, and then this scalable impact being able to be generated through employment outcomes and environmental outcomes or whatever the impact model is of the social enterprise. [P22]

The notion of government support to increase the capacity of social enterprises was recognised by government stakeholders who cited that the potential to assist with social benefit scaling is on the State Government agenda (e.g., government funding schemes).

Social enterprises to tap into grant money or funding for equipment that would help them scale up. … … the social benefit supply sector to scale up (is) definitely on our (state government) radar. How we grow the sector, how we grow each of those businesses I suppose is the challenge. [P36]

The overall sense was that even though there were a lot of high-performing social enterprises in the ecosystem, support was needed to build their capacity to better respond to opportunities [21,24]. Given that players in the construction and transport space have greater scale expectations due to the size of projects undertaken in these sectors, government support was seen as critical to support organisations to scale up to meet demand.

4.2.2. Noncompetitiveness of Social Enterprises

The perceived main drivers of social enterprises’ noncompetitiveness are high costs and low quality. Here, social enterprises felt that there was a disconnect between the value of the social procurement policy and the reality of how much things cost.

… when we’re going in for tender, we lose all our tenders because we’re seen as more expensive. [P1]

… people automatically, not always, but they think that by engaging a social enterprise that the quality is not going to be as good. [P3]

We’re always balancing that commercial viability with our ability to deliver on our social purpose. So we’re always having to negotiate how we cost in price in commercial contracts. [P5]

I’m hearing a lot of excuses of quality or cost or time that I guess people are using as excuses. So I would say, that’s probably the primary barrier. [P10]

Tier one respondents seem to support this notion with price being an obvious factor when deciding upon the choice of supplier.

I wouldn’t have a job if it (chosen social enterprise) was significantly more expensive, I’d get in trouble for that. So I wouldn’t be able to implement it. If it was significantly more expensive I just would not be able to implement it. It just wouldn’t happen. [P26]

A key to overcome this is to push forward the entire value proposition that social enterprises offer into a final value calculation by offsetting some of the costs.

There is a cost associated with it (building social enterprise capacity). So, if government could help out with some of those costs, or making sure that when it is valued, that somehow it goes into your value calculation so then if your cost is slightly higher, then it’s offset. [P31]

This finding demonstrates the concern with the perceived lower quality of work performed by social enterprises. This goes beyond the very limited body of knowledge which had raised contrary insights about the nature and quality of the work undertaken [24].

4.2.3. Social Enterprise Capabilities

The perceived inability of social enterprises to develop and strengthen their capabilities is another social procurement implementation barrier which has been identified in the prior literature [4]. Intermediary bodies had been made aware of some uncertainty with social enterprise capabilities especially in the area of technical skills when working on construction sites.

I think the challenge (for social enterprises) is technical skills, particularly if you’re working on site, you know, what are your safety systems? What are your environmental systems? That’s what the big companies, that’s where their red flags will be. [P30]

Interestingly, some tier one contractors noted that, particularly in construction and transport, as there are a multitude of infrastructure projects, capabilities are the main restriction. This led to the following issue.

You really have to work with these (social) enterprises and your suppliers to either find matched capabilities at the outset, or create the jobs and work streams together through those relationships. [P32]

This issue could be somewhat mitigated with greater engagement and support to build capability such as coaching and mentoring.

You need to engage with social enterprises to then build their capability and capacity. It goes far beyond just that usual supply chain partner that you engage with. … from a capability perspective, you do need to help coach and mentor in those particular spaces, too. … (currently) there’s not many organisations that have the capability and capacity to do both large packages of work. … they’re probably the biggest bottlenecks. [P31]

From a State Government perspective, it was felt that a better understanding of social enterprise supplier capabilities in the west was needed in the precontract stage to find matched capabilities to ensure potential social procurement targets can be met. Hence, to better match capabilities, the State Government were looking at ways to develop buyer capability.

Our (government department) team in particular are looking at how we develop government buyer capability to implement the framework… (that’s) a piece that has to happen to bring the market on the journey. [P36]

Although prior studies have identified capabilities as a barrier to effective social procurement implementation [36], the inclusion of the government perspective and their acknowledgement that further work in the precontract stage is required adds to the existing body of literature.

4.2.4. Social Enterprise Resourcing

Social enterprises, by virtue of their size, typically have limited resources to effectively implement social procurement. Thus, greater resources need to be provided to ensure their commercial viability. This may include access to funding via philanthropy groups or government funding schemes.

We’re a non-profit, which has influence in the ways that we can access capital. Having access to that kind of capital through philanthropists for example, is really important for us. [P5]

I think a lot more grants to support social enterprises… for start-up social enterprises, they’re meaningful bundles of money that could actually go towards running costs, because it takes a good couple of years to really get traction and get a business going. [P13]

I think there’s a lot of social enterprises that employ people from socially disadvantaged backgrounds. And a big barrier there that I’ve heard people talk about is this lack of appropriate funding, so the equivalent of the NDIS (National Disability Insurance Scheme) for people from disadvantaged backgrounds … that’s a big barrier. [P17]

This was a barrier also identified by tier one contractors and intermediaries who felt that assistance via the development of a social procurement resource toolkit for social enterprises would enhance their limited social procurement related resources

They (social enterprises) do need to be given the right tools to be able to play in this space, and it is quite a significant change to those smaller tier contractors, because they don’t have the resources themselves. So that is a big barrier in the marketplace at the moment. … I think there needs to be more financial resources and more toolbox resources to support these kinds of long term outcomes. [P23]

The major one is resourcing … having a consistent workforce that can be engaged for long periods of time, and then providing a long term benefit to all these different contractors and government entities. [P25]

The notion of greater resources being made available via a social procurement resource toolkit adds to the very limited literature previously citing this as a means to overcome this barrier [27].

4.2.5. Poor Cash Flows

Access to cash flows, particularly for social enterprises, is vitally important to their ongoing operations. Thus, there was a call for the trading terms to be more favourable to social enterprises and to provide for prompt payment terms to enable them to obtain earlier access to funding to deliver on their social purpose.

Organisations who engage in social enterprise need to understand that trading terms are so important for cash flow for that enterprise that they need to address that whether it be from the government or from the actual tenderer. That is really important. I recently exited out of a contract because they wanted to pay me 45 days from end of the month. So how do I, as a social enterprise fund 75 days of cleaning. I’m not a bank. I’m not going to fund that. [P6]

I think the industry needs to do more to support new players, I think they need to pay better is a major thing. You know, access to cash flow, particularly for SMEs and social benefits suppliers is really fundamentally critical. … if you get paid 60 or 90 days, well, that’s not good for your business, clearly. [P30]

Although this barrier has been identified in a previous study [24], the call for more favourable trading terms and prompt payments can help mitigate this barrier to arrive at a more effective social procurement implementation.

4.3. Support Networks

The third, and final, main theme identified by research participants as an impediment to social procurement implementation was support networks. The subthemes comprise a lack of support networks, provision and quality of databases, certification and accreditation programs, support for priority groups and the tendering process. The first subtheme is reviewed below.

4.3.1. Lack of Support Networks

A number of respondents pointed to a lack of an identifiable support network as impacting social procurement implementation.

I think the biggest challenge is connection, it is that network and knowing the right people having the right relationships. … it’s not an easy space to crack into. [P30]

It’s building those relationships, building those networks, working with subcontractors… main contractors (tier ones) don’t do a lot of the work themselves so they bring it all in (via subcontractors). [P11]

Many were unsure of what was provided by the number of ancillary support service providers in the market, citing a general lack of support.

There seems to be a lot of support for ancillary services, but I’m not entirely sure what they deliver… doesn’t actually provide any benefit or support for us. It’s been no connections, no anything. [P13]

For a social enterprise trying to get in, it’s about learning how to broker those relationships, learning where to go and how to navigate it, and how to write. [P10]

Another point of concern for social enterprises was the payments required to join certain support networks insofar as: (a) whether this acted as a source of exclusion for smaller organisations, and (b) whether it provided value for money.

The membership model, which I have always thought is fatally flawed, because it’s the big businesses who are the members of those. [P30]

I just want to make sure that if we’re going to utilise a service and pay … the services are not cheap so I’m going to make sure if I join a group that we’re actually making benefit from it. [P28]

I don’t think the intermediaries have been playing that well together… [we need to] develop a collective voice, because at the moment, you’re just getting segment voices and no consistency in the way that they communicate with government… it’s not a coherent conversation with government around social procurement, which I think is a real barrier. [P2]

Nonetheless, there was a sense that support networks that are linked throughout the ecosystem were a missing key element in the implementation of social procurement.

I think this ecosystem building is huge because all the ingredients are almost there. You have social suppliers, you can employ people, you have your tier ones who want to do this and provide that de-risking, by having that almost like an insurance to service provision or providing one of the service they need to provide. And it’s just quite not linking up. But I feel like, even with government leadership, perhaps the procurement approach was able to encourage suppliers to connect up with tier ones to connect up with philanthropists and intermediaries and things like that … (then) you could definitely come up with a solution that works and is able to meet everyone’s needs and de-risk this whole thing for everyone involved. [P19]

Thus, there is a feeling that the ecosystem, which has multiple elements, is not being brought together appropriately. That is, the connections are not always clear and the vehicles to enable them to collaborate are not necessarily evident. Prior studies [21,24] have identified how improved support mechanisms are required to better manage risks associated with social procurement implementation.

4.3.2. Provision and Quality of Databases

Participants identified both the provision and quality of a database as an existing barrier to the effective implementation of social procurement in the construction and transport industries. The identification of both concerns constitutes a contribution to the literature. Regarding provision, a number of social enterprises cited the need for an accessible database to: (a) encourage them to use reliable suppliers; and (b) identify relevant organisations they should be in contact with. This was echoed by intermediary support bodies who saw that such tools could help save them time when accessing potential appropriate suppliers.

Maybe establish a resource database. I’m sick and tired of trying to look on Google every time I need to find something. I’ve got to go through 4000 different webpages until I find what I want. So a good resource database that is set on a benchmark, I think would be a fantastic opportunity for everyone. [P18]

Even your Tier one contractors, if they win a project… they pretty much go through the Yellow Pages going, who’s an Indigenous business, who’s this who’s that. They’ve got no idea who they’re contacting, they waste a lot of time and that’s when short cuts are made. [P11]

The inadequate quality of existing databases was also cited as a barrier to effective implementation. In fact, those that had access to a social procurement database bemoaned the quality of it. Specifically, they felt they still needed to do much work to understand the businesses listed in the database. Hence, both intermediary bodies and tier one contractors cited the need for improved descriptions of their capabilities and purpose to better understand the nature of their business.

If you go and ask industry around how beneficial all of those (existing social procurement databases) are, the answer won’t be overly positive because you’ve still got to do all the work to understand the business. [P30]

The different regionalised social enterprises, who is around, what they do and what are their capabilities and where they’ve worked. So enabling tier ones to go, alright … these are the people within my region, within my local network, I can come in and they are able to get started straight away. [P25]

There’s (industry) platforms … they will list at a basic level what the capabilities of an enterprise are, but they won’t list its potential capabilities. [P29]

4.3.3. Certification and Accreditation Programs

To fulfil the social procurement criteria associated with major government infrastructure projects, tier one contractors are required to use certified social enterprises to meet their targets. Hence, social enterprises who do not meet the social procurement framework criteria for social enterprises, whether it be due to not being able to afford certification or not interested in attaining it, are excluded from the social procurement area of direct spend. Thus, those without accreditation tend only to be involved indirectly. Exclusionary criteria via the social procurement framework further water down the available supply base for social procurement. This constitutes a new barrier not previously identified in the existing social procurement literature.

There are a number of small to medium enterprises that do want to win government work, and they’re obviously doing amazing things in the community. But for whatever reason they can’t afford or don’t want to be certified or, we have even anecdotal feedback of businesses that don’t want to be classified. [P36]

It can be a frustration because you’ve got businesses that are doing absolutely fantastic things and they don’t get recognised because they’re not labelled as a social enterprise, where you’re potentially doing more impact than a social enterprise. [P11]

On the other hand, the process of certification helps mitigate reputational risk for social enterprises. It also allows tier ones to avoid undertaking verification or further due diligence.

When our clients are looking for a bonafide social enterprise, they want to see that (accreditation) tick, because it just mitigates their risk. They know then that you’ve been through an independent process. [P14]

Reputational risks if you’re dealing with a social enterprise that turns out to not be doing what they say they do, and I think that’s where some of the certifications are beneficial for that. [P32]

Some suggest a government review of the social enterprise certification process may be needed.

It would be really beneficial to us, and it sounds like to others, if the way in which social enterprises were accredited was to be looked at by the government, it seems that the government sort of hitched their wagon to [X] who are considered the kind of oracle on all things social enterprise. [P14]

4.3.4. Social Procurement Education Support

A lack of understanding of social procurement was seen as a major barrier to its implementation. Thus, support is needed to educate key stakeholders to improve their level of social procurement knowledge.

It’s educating those people, getting them to understand how to do this, getting them to understand how to do a social procurement, not just you know, you just write this and it’s all good. It’s not cookie cutter. [P2]

… educating the team in their workforce on what actually social procurement is (such as) aligning basic definitions, getting their heads around legislation, identifying internal stakeholders, you can champion social procurement and build a lot more engagement internally. [P29]

Not understanding the purpose of social procurement leads to misjudgements of the work undertaken by key social procurement parties.

If they (X organisation) actually understood what social enterprises were about, most social enterprises are not here because of the dollars, we’re not here because it’s a profitable business that’s going to make them millions of dollars… we’re here to support individuals who need our support. [P6]

Another barrier is a lack of knowledge amongst the government and corporates around this whole space and how to work with organisations like us (social enterprises). [P17]

With big transport infrastructure projects, where it’s led by government and the prerequisites are given by government, there needs to be more people on the ground that actually understand and can work with industries and with corporates. [P27]

This lack of understanding from tier one contractors leads to confusion regarding the sense of purpose for social enterprises in the social procurement space. This has led to a belief that some tier one contractors operate in a contextual vacuum without understanding the true purpose of social procurement which is to benefit society first, with profit being secondary to that. Although this barrier has been cited in previous studies, understanding what that gap is is very important in social procurement implementation.

4.3.5. Supporting Priority Groups

A key to the social procurement program is the creation of employment amongst priority groups that will maximise positive employment outcomes. Since a number of organisations have little experience in this area, the lack of support for priority groups, which has been identified in the prior literature as a barrier [10], continues to seemingly be excluded from part of the financial calculations.

People from socially disadvantaged backgrounds have so many barriers to employment, trauma, family violence, childcare, transport, language, and they are not easy to get into work without support. [P17]

… they’re (social enterprises) lacking resources and they don’t know how to support people who are have complex disadvantage, which means there needs to be extra support to support these people if they want long term outcomes. And that’s not factored into any of this, financially or otherwise. [P23]

To mitigate this, some respondents felt there is a need to design adequate employment models to support priority groups with complex problems.

One of the biggest barriers is definitely the challenge of the employment aspect of social procurement… to come up with employment models that actually support different cohorts is a very complex problem. [P19]

Government financial support was seen as necessary to subsidise the substantial investment required to train individuals from priority groups and to provide the suite of support services (i.e., beyond employment) required to reintegrate those individuals into society with designated pathways.

There are people within the priority groups who will never ever be able to be employed directly by a contractor… and they actually need to be employed by a social benefit supplier who has that wraparound support, that won’t be on site, that will be off site, but are in the supply chain. And a lot of employers don’t understand how to do that. … if they (the government) want the retention of those people from those priority groups, money needs to be spent on the support of those priority groups, because it is unfair for the employer, and it’s unfair for the person who’s been employed… (it’s) a big barrier and it’s a big gap in the market at the moment. [P23]

It does take a substantial investment by the company and the people to train them (individuals from priority groups) up, which is not just a month or two, we’re talking about six months to 12 months, even years depending on the job that they want to go into. So there’s substantial investment on both sides. [P25]

You’ve picked up a social benefit supplier who helped people get new employment (but) what happens to those people after?… I feel that there’s a gap there. If we want it to be sustainable, we need to actually care about the asylum seekers or the minority groups or the disabled people that we’re so called indirectly employing. Do they have enough social workers to help them reintegrate into society? Do they have enough funding? [P27]

4.3.6. Tendering Process

The social procurement tendering process under the social procurement framework was identified as a barrier by tier one contractors due to its cumbersome nature. This has also been identified in the prior literature [15,24]. Specifically, the number of forms to be completed and submitted was perceived as a time consuming obstacle constituting a major strain on existing resources.

The amount of documentation that we have to put together is unbelievable. Literally, we just submitted a tender for the state and there was over 22 different attachments, so 250 pages. … If these organisations (non-tier ones) aren’t resourced up to have contract managers or tender writers, all that kind of stuff, it’s going to make it very, very hard for them. [P25]

If you make something really regulatory it can become an administration burden. And then it takes the joy out of it. [P26]

A potential mitigating factor would be if a more streamlined approach to the tendering process could be adopted to make the engagement process simpler and more efficient for participants.

In addition to the results and discussion presented in this section, the following section draws links to the social procurement ecosystem to determine the implications associated with its effective implementation.

5. Discussion of the Ecosystem Implications for Social Procurement Implementation

The key stakeholders comprising the social procurement ecosystem are listed in

Table 2. Key priorities for effective social procurement implementation.

Theme	Subthemes	Social Enterprises	Tier One Contractors	Key Intermediaries	Government
Supply Chain Process	Supply chain pressures	X	X
	Client pressures	X	X
	Union opposition	X
Capacity and Capabilities of Social Enterprises	Capacity to scale	X		X	X
	Non-Competitiveness of Social Enterprises	X
	Social Enterprise Capabilities	X		X	X
	Social Enterprise Resourcing	X		X	X
	Poor Cash Flows	X	X
Support Networks	Lack of Support Networks	X		X
	Provision and Quality of Databases			X	X
	Certification and Accreditation Programs			X	X
	Social Procurement Education Support			X	X
	Supporting Priority Groups	X	X	X	X
	Tendering Process		X		X

below along with the subthemes that are key priorities for them to facilitate effective social procurement implementation.

With respect to the first theme explored in this paper (supply chain process), as demand for social procurement within state sponsored major construction and transport infrastructure projects continues to outstrip supply, such supply side constraints mean there is a need for government representatives to give further consideration to the ability of the construction and transport industries to facilitate the goals of social procurement. As demonstrated via the thematic analysis, supply side pressures are a major concern for subcontractors (social procurement provider services) and this has led some to game the system by rotating the same priority group individuals across several projects to meet targets. Such gaming also serves as a warning to procurement managers (tier one contractors) to adhere to the monitoring and compliance aspect of social procurement.

The issues with the supply side seem to be a product of the immature nature of the social procurement ecosystem. Greater levels of maturity will bring new levels of complexity. A move towards greater maturity may result in an ecosystem where temporary labour-hire solutions are less frequent, and the focus becomes building long-term employment outcomes for priority groups. These issues can be contextualised in the light of new institutional theory which suggests that informal institutions (existing norms and practices that influence patterns of behaviour) can help advance, or in this case undermine, formal institutions (social procurement regulations, laws and policies). Existing attitudes maintained by informal institutions can manifest in behavioural practices such as the resistance to hiring from priority groups, and not factoring in complexity when evaluating their work progress. The supply chain process outlined above also links to the next main thematic barrier to effectively implementing social procurement in construction and transport, which is ways of building capacity within the sector.

The main findings from the second theme focus mostly on the specialised social procurement services area of the ecosystem regarding its capacity and capabilities. Issues such as capacity to scale, improving competitiveness regarding price and quality, enhancing technical skill capabilities and having to overcome limited resources were dominant discussion points in the consideration of barriers. Organisational capability theory provides an avenue for potentially mitigating these deficiencies. An organisation has the ability to respond to internal and external change and utilise organisational resources for the purpose of achieving a particular end result [37]. Given the size and scope of the problem, such capability development would initially focus on the service providers themselves and the intermediary support bodies. Intermediation capability development on both the supply and demand sides of procurement relationships can help mitigate some of the capacity and capability barriers.

Another ecosystem stakeholder group (government representatives) views the growth of the specialised social procurement services area as one of their biggest challenges [38]. This takes on increased significance when one considers the massive size of projects undertaken in the construction and transport industries. Thus, provision of government organisational resources in the form of grant money or funding to improve capacity and capabilities is a key to reducing this barrier.

For the third theme, the main findings suggest that a lack of support networks has been instrumental in impeding social procurement implementation. Viewed in the light of network theory (e.g., [39]), the implications for the social procurement ecosystem lie in the enhancement of certain key mechanisms. Specifically, key mechanisms such as resource and information channels (e.g., assistance with tendering process, advice seeking, education support), affiliations (e.g., shared memberships, certification programs, database provision) and formal contractual relationships (e.g., strategic alliances, buyer–supplier contracts) can mitigate the associated barriers.

From an ecosystem perspective, intermediary support bodies and government have a major role to play. Currently, the right mechanisms are not in place to enable place-based solutions to play a big role. Place-based solutions could spark new processes for enhancing the ecosystem of social procurement. An enhanced ecosystem approach could support a work integration social enterprise that not only has solid links into industry, but equally importantly, links into communities and employment services. This could potentially include important services such as pre-employment support and brokerage funding.

Furthermore, there is scope for intermediary support bodies and government to improve the quality of both specialised social procurement providers and tier one access to online databases to facilitate an easier transition to social procurement. In addition, intermediary bodies can act as mentors to those stakeholders who seek advice and guidance in embedding social procurement in their operations and building internal organisational capability. This would lead to communities of practice [40].

6. Conclusions

The aim of this paper was to consult with key stakeholders in the social procurement ecosystem to identify the main barriers preventing effective social procurement implementation in the construction and transport industries. The adoption of the ecosystem approach responds to recent calls to include the perspective of policymakers in future social procurement research [13]. Of the 14 subthemes identified, provision and quality of an extensive social procurement database as well as certification and accreditation programs constituted newly identified barriers. In addition, four subthemes: trade union opposition, noncompetitiveness of social enterprises, social enterprise resourcing and poor cash flows added to the limited literature that have identified these as barriers [24,27].

This paper makes the following contributions. First, the findings highlight discrepancies between policy and practice. For instance, it was acknowledged by government representatives that a better understanding of social enterprise supplier capabilities in the precontract stage was required to ensure social procurement targets can be met. In addition, greater support was needed for priority groups such as designing more adequate employment models to address long-term employment considerations. Thus, this paper helps bridge the gap between policy and practice by providing practical perspectives on policy implementation issues.

Second, this paper contributes to social procurement research by highlighting the importance of local conditions. For instance, the barriers: provision and quality of database, and certification and accreditation programs provide an empirical example of what is important to practically implement from a situated practice perspective to achieve improved social procurement implementation.

The findings also lead to the following strategy recommendations for the effective implementation of social procurement in the construction and transport industries. To increase capacity to scale, the authors recommend: (i) embedding capacity building into policy via pilot programmes that partner with selected social benefit suppliers; and (ii) existing key intermediary bodies to develop a social procurement resource toolkit for social benefit suppliers to enhance their limited social procurement related resources.

To enhance social enterprise capabilities, a strategic recommendation is to improve the ability of tier one contractors to identify matched capabilities to better meet social procurement targets. To rectify the lack of support networks, a potential strategy is to strengthen the brokerage role. For instance, the introduction of government approved brokers who will be accountable for: (i) brokering social benefit suppliers at scale and quality to meet the needs of tier one contractors; and (ii) building and fostering partnerships.

For certification and accreditation programs, it is recommended that a review from Government, in collaboration with key intermediary bodies, of what constitutes a certified social enterprise certification should occur. Certification and accreditation programs currently overlook a number of SMEs that are already delivering social impact outcomes. Regarding social procurement databases, the Victorian State Government should consider the provision of a free high-quality database accessible to all stakeholders to help achieve social procurement targets.

Given the importance of contextual settings, future comparative research should evaluate other countries’ social procurement ecosystems which could differ in breadth and maturity from Victoria’s. In addition, future research should apply the learnings from this study to other sectors beyond the construction and transport industries, which will exhibit characteristics that necessitate different approaches to social procurement implementation.