Social Enterprise: making it work – a case for social procurement
Mark Quinn, Charter Keck Cramer (2011)
Having looked at impact measurement for ‘local buy’ and Fairtrade social procurement, both of which have been heavily evaluated, we come to social procurement delivering employment to marginalised groups. A number of welfare and advocacy organisations have pointed to the value of increasing employability through social procurement but there is scant information available in that directly captures the benefit created by this form of social procurement. This paper by AMES stood alone as a qualitative and quantitative analysis of social procurement as a creator of employment for those marginalised in the labour market. It captures the added value created when the Magic Green Clean social enterprise was awarded the contract to deliver cleaning and grounds management services of the Kensington Redevelopment – a public/private housing estate in Melbourne.
The economic impacts
The cleaning contract value is based on the market rate of $350,000pa. The business employed an Intermediate Labor Market (ILM) model, whereby unemployed tenants were provided with a job for 12 – 18 months in a social enterprise after which they were supported into employment in the mainstream market. The research utilises a Cost-Benefit analysis to estimate the added value created through delivery by Magic Green Clean Vs a mainstream commercial provider, looking at total wages, total income taxation, retail expenditure and associated flow-through expenditure (due to the multiplier effect of the retail expenditure). Most of the gains are premised on the assumptions that employees of the social enterprise will transition out of the social enterprise and into mainstream employment to be replaced by unemployed tenants.
Over a period of 20 years the social enterprise will provide added value of:
• $10.4 million in wages.
• $10 million in taxes.
• $4.5 million in unemployment benefit savings.
• $13 million in retail and multiplier expenditure.
Over 20 years, $7 million in contract value creates $38 million in total value, for every $1 spent, $5.42 is returned.
The research suggested that the use of labour from the estate resulted in a more preventative approach to maintenance which in-turn is extending the useful life of finishes, fixtures and fittings. An increase in the useful life of 1-3 years based on a 15 year life could equate to $2.3m.
The research is valuable because it shines a light on the added value that can be created through social procurement designed to provide pathways to work. The multiplier effect generated through bringing the long-term unemployed into the labour market via social procurement is profound and it is useful to be able to arrive at a multiplier built on the well understood LM3 methodology. When extended out, this line of thinking identifies the important role that social procurement can play in bringing the long term unemployed and other difficult to engage groups back into the labour market.
The lack of comparable research is concerning, there is a need for more research in this field to capture the experiences of different social enterprises, other social benefit suppliers as well as private businesses responding to social clauses in contracts.