Government is overlooking potential of SDO procurement, research finds

The Centre for Asian Philanthropy and Society (CAPS) has unveiled its latest Policy Brief, “Procurement for Good: Government Procurement from the Social Sector in Asia.” This report emphasizes the untapped potential of government procurement from social delivery organizations (SDOs) in Asia, highlighting the mutual benefits for both sectors.

CAPS recommends a policy framework to enhance social sector involvement in government procurement, addressing capacity constraints and complex processes.

Government procurement from SDOs can harness their expertise and networks to drive positive outcomes and social benefits. Despite this potential, only 32% of Asian SDOs engage in government procurement, with varying participation rates across economies. China leads with 73% participation, followed by Korea (58%) and Japan (49%), while the Philippines (8%), Sri Lanka (12%), and Cambodia (13%) have the lowest rates. On average, government procurement provides only 9% of an SDO’s income in Asia.

Capacity issues, including resource constraints that limit production and quality assurance, human resource constraints that impede access to information, and financial constraints that discourage SDOs from participating in government procurement, hinder broader participation. Onerous and complex procurement processes exacerbate these challenges.

Government procurement policies often favor social enterprises over nonprofits, viewing social enterprises as part of the startup ecosystem and a tool for youth employment, while nonprofits are seen as charitable organizations. Opening up procurement opportunities for nonprofits can help them secure more sustainable funding and reduce their reliance on charitable donations, philanthropy, and government grants and subsidies.

Nonprofits are primarily engaged as knowledge partners and service providers in traditional social welfare services such as eldercare, disability care, and childcare, while social enterprises serve as suppliers. The government offers limited opportunities to nonprofits, which tend to be in these specific areas.

Structural disparities between established SDOs and newer ones are embedded in the current social procurement policy design, favoring larger and older SDOs with existing government relationships. The absence of formal sectoral representation within the social sector and the heavy reliance on relationships further contribute to inequalities in accessing opportunities.

CAPS proposes a three-step policy reform framework to address sector-specific challenges, enhance the procurement ecosystem, and promote decentralized social procurement. By implementing these recommendations, governments can strengthen collaboration with frontline organizations, enhance social impact, and foster a more inclusive and sustainable procurement landscape in Asia.

Dr. Ruth Shapiro, Co-Founder and Chief Executive of CAPS, emphasizes the importance of tailored solutions and partnerships with SDOs to address diverse societal needs effectively. “We should be mindful of the need for customized solutions instead of a one-size-fits-all strategy. Partnering with SDOs can help to develop time, geography, and constituency solutions.”

The report draws insight from 23 individuals and 2,183 social delivery organizations (SDOs) in 17 Asian economies participating in the Doing Good Index 2024 Survey. By providing these insights into the policy landscape of government procurement from the social sector in Asia, CAPS aims to facilitate more effective partnerships between governments and SDOs, ultimately leading to greater social impact and community development across the region.