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Public Procurement and Social Impact in New South Wales

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Associate Professor Chris F. Wright and I presented evidence at the “Inquiry into the Procurement Practices of Government Agencies in New South Wales and its Impact on the Social Development of the People of New South Wales”.

Public procurement represents a substantial portion of the economy and provides a unique opportunity to drive significant social and economic benefits. The power of public procurement can – and indeed should be – harnessed to promote decent work, local employment, and sustainable development.

Our submission makes several key recommendations aimed at enhancing the social and economic impact of government procurement:

➡ Establish Centralised Procurement Oversight: We propose the creation of a centralised authority dedicated to overseeing procurement across all government departments and agencies.

➡ Lower Threshold for Contract Disclosure: To enhance transparency and public trust, we recommend lowering the disclosure threshold for government contracts from $150,000 to $10,000, similar to the Commonwealth level.

➡ Prioritise Local Suppliers: We suggest the implementation of a local procurement policy which prioritizes local suppliers, fostering regional economic development.

➡ Social Procurement Clauses: Introducing social procurement clauses to help ensure that businesses providing secure, well-compensated jobs are eligible for government contracts.

➡ Supplier Debarment: To maintain high ethical standards, we recommend the introduction of a supplier debarment regime, to exclude suppliers found guilty of dishonest, unfair, or illegal conduct from government contracts.

Other Key Takeaways From the Hearing:

  • Current procurement oversight ineffective due to lack of expertise and transparency issues, enforcement of anti-slavery policies in supply chains inadequate due to lack of follow-up and operationalisation. Expertise and capability building needed for enforcing social dimensions of contracts.
  • Strengthening worker representation in procurement ensures fair labour practices. Worker representation mechanisms can improve employee satisfaction, retention, and productivity, with positive impacts on procurement outcomes.
  • Government procurement can play a crucial role in creating an effective skills ecosystem. In Switzerland, procurement policies that give preferential treatment to firms with training apprentices increase the number of firms offering training without compromising quality.
  • Unions can play a positive role, as evidenced by studies showing improved training quantity and quality in countries with strong union presence. Unions have positive impact on productivity, worker wellbeing, and social benefits.
  • Value for money in NSW procurement often interpreted as price alone, despite social and economic benefits being important factors.
  • New South Wales government should require contractors to demonstrate compliance with work health and safety regimes.

Submission: Procurement Practices of NSW Government Agencies

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The inquiry into the procurement practices of government agencies in New South Wales (NSW) focuses on examining how these practices impact the social development of its citizens. It seeks to assess the current state of procurement, including the value, policies, and adherence to the NSW Procurement Policy Framework. The effectiveness of existing procurement arrangements in ensuring value for money and compliance with regulations, particularly labour laws, is a key area of investigation. The inquiry also looks into the capacity of procurement officials to assess suppliers and ensure compliance throughout the procurement process. Opportunities for co-regulation and incentives to improve labour market governance and enforcement through procurement are considered to achieve both economic efficiency and social outcomes. Evaluation criteria for tenders, emphasizing local content, value for money, social and environmental considerations, innovation, and subcontracting arrangements, are scrutinized. The transparency and accountability of procurement practices, the government’s ability to prioritize local content, jobs, training opportunities, diversity, and inclusion, and support for local suppliers and small and medium enterprises  are also under review. Furthermore, the inquiry explores procurement best practices from other jurisdictions to encourage ethical conduct and promote social development, along with any other related matters. Through this comprehensive examination, the inquiry aims to identify ways in which procurement practices can be optimized to contribute positively to the social development of NSW residents.

My co-authored submission offers several recommendations to enhance the social impact of procurement practices:

  1. Establish Centralised Procurement Oversight: Create a central authority within the NSW government to ensure compliance with procurement guidelines and audit practices.
  2. Lower Threshold for Contract Disclosure: Reduce the disclosure threshold for government contracts to improve transparency and public trust.
  3. Prioritise Local Suppliers: Introduce policies that emphasize social returns on investment and support for local businesses.
  4. Social Procurement Clauses: Include social criteria in procurement decisions to promote job security, indigenous employment, compliance with health and safety laws, and worker representation.
  5. Supplier Debarment: Introduce mechanisms for managing suppliers based on their conduct, including watchlists and do-not-engage lists, to ensure ethical business practices.