Procurement: The Hidden Engine of Equity
Welcome to the first article in our blog series on procurement and equity. Throughout this series, we will explore the often overlooked yet profoundly influential role that procurement policies and practices play in shaping our communities and society. We'll delve into the intricacies of Request for Proposals (RFPs), procurement policies, and how these seemingly neutral processes can perpetuate or challenge inequity.
Procurement, the process by which organizations acquire goods and services, is a significant driver of economic activity. At the government level, procurement decisions determine the allocation of vast sums of public money, influencing market dynamics and shaping opportunities for businesses and communities.
In Canada, government procurement is a multi-billion dollar enterprise. According to the Government of Canada's Public Services and Procurement Canada (PSPC), the federal government spends approximately $20 billion annually on procurement. This substantial expenditure underscores the importance of equitable procurement practices in ensuring that public funds are used to benefit all segments of society equitably.
Zooming in on Ontario, the province's public procurement spending is equally significant. The Ontario Ministry of Government and Consumer Services reported that the provincial government spends over $10 billion annually on goods and services. This figure includes everything from infrastructure projects to healthcare supplies, highlighting the diverse impact of procurement decisions.
In Ottawa, the capital city, the municipal government also plays a critical role in procurement. With an annual budget of around $3.4 billion, the City of Ottawa allocates a substantial portion of its funds to procuring goods and services. This spending impacts local businesses, community organizations, and ultimately, the residents of Ottawa.
Zooming the Equity Lens in on Procurement
While procurement processes are designed to be fair and competitive, they often contain hidden biases that perpetuate inequity. For instance, traditional RFP processes often favor larger, established companies with the resources to navigate complex bid requirements, leaving smaller, minority-owned businesses at a disadvantage. Moreover, the criteria used to evaluate bids almost unintentionally excludes diverse suppliers who offer innovative and valuable perspectives. This is not a matter of opinion Canadian institutions like the Women’s Entrepreneurship Knowledge Hub (WEKH) have an extensive body of research illustrating the ways that racialized, Indigenous and disabled business owners are systematically set up to have less success, growth and opportunity than their white and able bodied counterparts.
According to a report by the Canadian Black Chamber of Commerce, Black-owned businesses face significant barriers, with 76% reporting challenges in accessing financing. Indigenous businesses also struggle, with the National Aboriginal Capital Corporations Association noting that many face higher costs and limited access to capital.
Statistics Canada reports that racialized Canadians earn, on average, 78 cents for every dollar earned by non-racialized Canadians. Similarly, Canadians with disabilities face a 28% employment rate gap compared to those without disabilities. These disparities highlight the systemic barriers that exist in the broader economic landscape.
So with these stark inequities, prioritizing certain business, even if that decision is seemingly innocuous - means sidelining marginalized entrepreneurs. A study by the Office of the Procurement Ombudsman (2019) revealed that the majority of government contracts are awarded to companies owned by non-racialized individuals. Specifically:
85% of government contracts were awarded to businesses owned by white Canadians.
8% of contracts went to businesses owned by visible minorities.
3% of contracts were awarded to Indigenous-owned businesses.
4% went to businesses owned by persons with disabilities.
These statistics underscore the significant underrepresentation of minority-owned and disabled-owned businesses in government procurement.
The Consequences of Ignoring Equity in Procurement
Failing to address equity in procurement can have profound consequences:
Economic Inefficiencies: When procurement processes exclude diverse suppliers, organizations miss out on innovative solutions and competitive pricing. This leads to higher costs and less effective service delivery.
Perpetuation of Inequality: Without intentional efforts to include marginalized groups, procurement practices reinforces existing economic disparities. This is evident in the lower average incomes and higher unemployment rates among racialized and disabled Canadians.
Reduced Social Cohesion: Inequitable procurement practices erode trust in public institutions and contribute to social fragmentation. When communities feel excluded from economic opportunities, it undermines social cohesion and stability.
Stunted Economic Growth: Equitable procurement practices can drive economic growth by supporting a broader range of businesses. Conversely, ignoring equity stunts the growth of underrepresented businesses, limiting their contributions to the economy.
Here’s what to expect
In this series, we will unpack these issues in greater detail, exploring:
How procurement policies can be designed to promote equity.
The role of RFPs in shaping supplier diversity.
Real-world examples of equitable procurement practices from various sectors.
Strategies for organizations to implement equitable procurement practices.
By shining a light on the nuances of procurement and its impact on equity, we hope to inspire change and encourage organizations to adopt practices that create a more inclusive and just society.
Stay tuned for our next article, where we will dive deeper into the specifics of procurement policies and their role in fostering or hindering equity. Feel free to reach out with any questions or suggestions as we embark on this journey to understand and improve procurement practices for a more equitable future.
References
Public Services and Procurement Canada. (2023). Annual Report. Retrieved from https://www.tpsgc-pwgsc.gc.ca.
Ontario Ministry of Government and Consumer Services. (2023). Procurement Spending Report. Retrieved from https://www.ontario.ca.
City of Ottawa. (2023). Annual Budget Report. Retrieved from https://ottawa.ca.
Canadian Black Chamber of Commerce. (2021). Barriers to Success for Black Entrepreneurs. Retrieved from https://blackchamber.ca.
National Aboriginal Capital Corporations Association. (2020). Financing Indigenous Entrepreneurs. Retrieved from https://nacca.ca.
Statistics Canada. (2021). Income and Labour Market Data. Retrieved from https://www.statcan.gc.ca.
Office of the Procurement Ombudsman. (2019). Study on Supplier Diversity. Retrieved from https://opo-boa.gc.ca.
