How we can protect the social role of government: What is social procurement?

Exploring how to advance community change through social procurement, instead of profit-focused, public-private partnerships.

Written by Maureen Owens (she/her) and Molly McCracken (CCPA)

Social Procurement: ethical purchasing and sourcing 

In growing communities, the need for infrastructure is more important than ever. Typically, the way infrastructure in communities is organized is by the public model. The usual public model involves several contracts with the local private sector: architects, engineers, and construction firms. The government pays for it, and when construction is completed, it owns and operates the infrastructure – a highway, a school, or a hospital. 

Social procurement is a practice where businesses and organizations consider the social impacts of their purchases. The goal is to  buy goods and services from suppliers that contribute positively to their communities, community development, diversity, and other socially responsible goals. 

With Public-Private Partnerships (P3) Procurement models, one large private sector firm is contracted to build, finance, maintain, and operate the project. The government leases the infrastructure for public services, while the private company retains ownership. 

 Building Community, not profits: Let’s rethink partnerships  

The P3 model undermines the social role of government. It limits government autonomy and puts control of a public asset into the private sector. Inserting a profit factor into service delivery can shift spending from the community and small local contractors to business centres elsewhere in the country or even abroad. In contrast, social procurement works on the premise that taxpayer-funded contracts should also enhance social value in our communities. 

 Particularly with schools, P3 models can work against community access to school facilities by placing costs and other barriers to schools used by community groups like childcare, sports leagues, and other after-hours purposes. There is also overwhelming evidence of costly problems related to P3 models. In Canada's history with P3 schools, everywhere tried, it's been a disaster.

• Conservative governments in Alberta have twice abandoned the model – once because they were too expensive, the second time because of the restrictive controls private companies put on infrastructure - private owners charged a for-profit, fee-for-service basis when schools were made available. 
• In Saskatchewan, teachers weren't allowed to decorate classrooms or open windows, and the province was spending four times more on maintenance in new P3 schools than older schools owned by the province. 
• In Nova Scotia, former P3 schools were repurchased from the company because leasing costs were so high. During the contract's life, the province had to go to arbitration to settle issues over cafeteria revenue, after-hours fees, and insurance issues.  

Costing the government—and taxpayers—less now, but more later 

The rationale for endorsing P3 models is speed and cost. However, P3 projects do not take less time; they take longer to get started due to complex and expensive contract negotiations. P3s cost governments less now but more later, after the politicians are long gone. Proponents of P3s argue that bundling construction costs and spending more upfront can save money. The public process could also use this bundling approach.  

The most significant reason the current public model of building public infrastructure costs taxpayers less is that governments borrow at much lower interest rates as they own substantial assets and are low risk. Evidence from the UK finds P3 repayment typically exceeds the cost of publicly financed projects after 15 years and is 40% more expensive than publicly funded projects over the project's lifetime. The UK Auditor General found interest rates for P3s were two to five percent higher. For these reasons, the UK and much of the European Union have abandoned using P3s.  

P3 value-for-money assessment methodology is often held privately by consultants, away from public scrutiny so public interest groups cannot review past P3 projects to assess costs. Many high-profile corporate leaders sit on the Canada Council for Public-Private-Partnerships. They are a powerful group and will continue to push and "shapeshift" procurement processes across Canada in favour of the P3 model as it represents a massive opportunity for profit to the private sector at taxpayers' expense.  

Although some municipalities have not assumed an active social role in the past, their responsibilities go beyond “operations”. Recent findings indicate the government’s calls to action include propelling positive social change. Bundling the public procurement process with the social procurement model is good for infrastructure, taxpayers, the government, and the community. Finding suppliers with sustainability values who compensate staff fairly, invest in community efforts, and actively work to improve an industry are win-win. P3 models are a backward move that elevates the goal of economic gain over the value public good. 

Deepen your learning: 

Report | 10 Ways local government can propel positive social change 

Communities Ending Poverty  

Written in partnership with the CCPA