Inclusive Public Procurement: the New Frontier of Sustainable Development

The social, environmental and economic challenges of the last decades have encouraged a rapid reaction from public authorities and a stronger collaboration with the private sector in order to promote sustainability, progress and inclusion. In line with these evolving times, public procurement has also changed, paving the way for new possibilities at the digital, green and social frontiers.

In this context, Inclusive Public Procurement (IPP) is gaining popularity as a new approach for governments to provide public goods and services by engaging Small-Medium Enterprises (SMEs), in particular Inclusive Businesses (IBs). The latter feature impact-driven business models with a specific focus on disadvantaged populations. This new approach, therefore, better allows public authorities to tackle today’s challenges by meeting citizens’ needs with initiatives that maximise economic, social and environmental benefits in an equitable manner.

While within the European Union (EU) public procurement is regulated under the 2014 EU Directives, the rest of the world features a great variety of practices in light of the different institutional and legal settings of national administrative traditions. Nonetheless, stakeholders at the global level have collaborated to pave the way for IPP. This was the case of the Business Call to Action (BCtA), a United Nations Development Program (UNDP) initiative promoting IBs to help achieve the Sustainable Development Goals.

According to the BCtA, two factors make IBs a valuable resource in the quest for sustainable development. Firstly, these businesses are better able to reach underserved populations, especially in low- and middle-income countries. Secondly, they tend to be more agile, resilient and, hence, successful in their collaborations with public authorities when it comes to impact-driven initiatives. Therefore, during the 12th annual forum of the UNDP BCtA, held last September in Instanbul, this community launched a Playbook on Inclusive Public Procurement with seven strategies for a more diversified choice of suppliers while still upholding fundamental public procurement principles.

Notably, part of these strategies recommend incentives-based approaches for attracting IBs to public procurement. Among them, pro-inclusive measures with a special attention for small businesses, e.g., exclusive bidding procedures, are considered vital to mitigate social inequities. Not only, the Playbook mentions SMEs set-aside as a best practice to make procurement available only for specific groups or sectors of the economy. Breaking contracts down into lots, subcontracting and discounted bids for IBs can also help small businesses enter directly in contract with a public buyer.

Another set of recommendations attempts at leveraging the public sector’s purchasing power to support IBs liquidity and competitiveness. For instance, the Playbook mentions the need to improve transparency about contract opportunities, to accelerate payment procedures with advance or instant payments, and to reduce the cost and administrative burden in tender applications. Not only, a multi-stakeholder holistic approach to monitoring IPP initiatives is also required for the successful implementation of this new approach.

Overall, while several practices mentioned in the Playbook do not perfectly reconcile with the EU Public Procurement Directives, an underlying common intention is evident: in light of today’s challenges, there is a moral and social imperative to embrace IPP approaches and the systemic change that they can drive thanks to their ability to leave nobody behind.