Public purchasing power leaves small businesses on the outside looking in
Governments laud social and sustainable procurement, but are they putting their money where their mouth is?
When COVID-19 arrived in North America and businesses everywhere braced for an unknown future, Claire Theaker-Brown’s thoughts turned to China and the relationships she had spent the last decade nurturing there.
Like many of Alberta’s entrepreneurs, the Unbelts founder was faced with sudden and crippling uncertainty: trade shows were cancelled, retailers shut their doors, borders closed, and supply chains fell apart. For Theaker-Brown, the survival plan wasn’t about turning inwards. Rather, she cast an eye outward, acknowledging her position as one of many actors in a complex entrepreneurial ecosystem.
Relationships are key for flourishing startups like Unbelts. Customers, suppliers, manufacturers, financiers, and even governments work with businesses to collectively fulfill needs. When one party doesn’t pull its weight, the rest suffer. For Unbelts, the Edmonton-based but Shanghai-bred accessories retailer, COVID-19 was an opportunity to show its commitment to the ecosystem it had helped build.
“It was about more than just Unbelts’ survival,” Theaker-Brown said. “It was also about the people that we buy from and the people that we sell to. It was taking a holistic view of our supply chain, seeing ourselves as part of that supply chain and figuring out what we needed to do to stay alive as a customer and also as a supplier.”
Within a month of COVID-19 reaching Canada, the enterprising Theaker-Brown had rerouted her energy and resources from selling the company's popular belts to making what would soon take the reins as the globe’s most ubiquitous accessory: face masks.
An ideal engagement
Adding a new product line-up to a business during a global pandemic may seem untimely, but Unbelts’ healthy relationships with its component suppliers made the pivot not only possible, but logical. As long as Theaker-Brown could do her part to flex her purchasing power, she knew her suppliers could stay working and Unbelts would have a better chance of surviving the pandemic.
The challenge then became finding buyers for the fresh commodity. When the provincial government reached out last summer asking if Unbelts could fulfill an order for one million masks to be used in Alberta schools, Theaker-Brown jumped at the opportunity.
It seemed like an ideal engagement. On one side, a local business was primed for a major contract and a much needed infusion of revenue. On the other, the provincial government would admirably lean on its local business community to fill a sudden and unexpected demand, with an opportunity to work alongside an entrepreneur who prides herself on running an ethical and equitable business.
When the Alberta government awarded its contract to a pair of companies — one American brand Old Navy, the other a UCP donor — Albertans were stunned.
The decision sparked controversy and Theaker-Brown was left wondering why the process hadn’t been more transparent. To her, it accentuated the chasm that exists between the provincial government and local enterprises who often fruitlessly vie for their business.
“I don't think anybody is asking the government sincerely to risk tax dollars on businesses who have not proven their stability, or longevity, or ability to fulfill large orders,” she said. “Where the government may be missing an opportunity is in equipping medium-sized businesses with a really solid track record of working with large scale customers with the resources they need to be able to put forth success. I think that everybody has something to gain from that.”
As Theaker-Brown explained, it goes beyond revenue. Startup businesses benefit from institutional relationships in a myriad of ways. Government purchase orders in particular are extremely powerful. They help forge stronger banking relationships, fueling trust between businesses and lenders.
Governments, too, have a lot to gain from being more intentional with their procurement practices.
For years, governments have generally operated with a straightforward imperative: when purchasing with tax dollars, get the most value possible. For the most part, this comes down to cost — how can governments get what they need while spending the fewest public dollars?
More recently, governments have started to acknowledge that purchasing power can extend beyond saving taxpayer dollars. Procurement frameworks are emerging in municipalities and provincial governments that extol the virtues of spending in such a way as to maximize not only the fiscal benefit, but the social and environmental benefits as well.
As Vancouver-based social procurement consultant David LePage put it, governments are starting to recognize that two of their primary purposes — to support economic growth and improve the social welfare of their communities — are indelibly intertwined.
“Social procurement is almost as simple as saying, we owe it back to the taxpayer to create the best value we can for the taxpayer with their money,” LePage said. “Somehow over the years that argument led to them saying that the least we spend is the best. Actually, all of the economic and social outcomes of spending the least indicate it's not the best value.”
“Buying office supplies on Amazon is not going to support the locally-owned office supply company, which means now you've actually created a greater economic and social problem with your spend, as opposed to thinking about spending taxpayer money as a reinvestment in community.”
Shopping local often creates an economic multiplier effect, in which dollars spent locally continue to circulate locally, improving the finances of numerous businesses in the system. An initial public investment can compound into significant and far-reaching economic benefits. While governments endlessly strategize over how to diversify and electrify the economy, often portioning off huge marketing budgets to do so, the answer can often be found in their own spending habits.
Public institutions are starting to take notice, as evidenced by the proliferation of social procurement policies at all levels of government. But LePage pointed out that policies can only go so far — what really matters is the government’s willingness to overhaul its approach to building relationships.
“So much of purchasing is based on relationships, and you have to rebuild a whole new set of relationships,” LePage said. “So that's why it's not just the policy, it's really a culture shift. We always thought procurement was, the winner is the sharpest pencil. And now we're actually saying the winner is the biggest paintbrush.”
The affinity component
In late 2019, Edmonton city council voted to adopt a new policy for sustainable procurement which “align(s) the City of Edmonton’s procurement practices to build and maintain a healthy, prosperous and climate-resilient community.”
Unfortunately for Edmonton’s local suppliers, implementation of this new and ambitious policy was stalled when COVID-19 redirected the city’s priorities and stunted operations. As some workers moved to work from home and others were laid off, the demand for goods dwindled.
According to Roxanne Kits, branch manager of corporate procurement and supply services with the City of Edmonton, the city was well on its way to building the necessary relationships before COVID-19 put a wrinkle in its plans.
“I think the challenge that we faced before March of last year was that we were able to train a number of people on the new policy, and make sure that they were more aware of how they can use our social value criteria in their proposals to help the community,” Kits said. “We got part of the way there and then COVID hit. So we've been relying on different ways of virtually trying to get that message across. Of course, it's always better in person.”
Jason Suriano, founder and CEO of Edmonton-based TIQ Software, has been a presence in the city’s tech sector for nearly two decades. He has found the government procurement process, both at the municipal and provincial level, to be outdated and opaque.
One trip to the Alberta Purchasing Connection website, which governments across the province use to connect with vendors, illustrates his point. The platform has a Windows 98 vibe to it, and one can very easily get lost among the maze of links, PDF downloads, and rambling FAQs littered throughout.
“Most companies like us have pretty much abandoned it,” Suriano said. “And we also don’t know where to go other than that portal. Who do you talk to? Where do you go?”
On both sides of the transaction, governments and small businesses recognize that relationship-building is the crux of truly advancing social procurement. Most policies emerging today seem to understand what community impacts they should be aiming for, but they don’t go so far as to examine the long-standing procedures that are counterintuitive to their goals. Emerging businesses are too often left out in the cold while governments default to larger, more established competition.
“If you’re a tech startup and you have a novel technology platform or software … your first customer should be coming from someone local,” Suriano said. “It should be an innovation partnership that helps not only the government — whether it’s local, provincial, or federal — but it should also help the company scale and then hire people locally. That’s what would end up happening.”
Fortunately for Edmonton, entrepreneurs like Suriano and Theaker-Brown have built healthy enterprises, which have succeeded both at a local and international level. But the stakes are high — for every success story, there are examples of businesses who didn’t make it, who couldn’t find their footing because there was nobody there to make that large initial investment.
“I think what (governments) miss sometimes is the affinity component,” Suriano said. “The loyalty component that they lose out on. If I get my first customer from the province, that’s the story you want to tell forever.”
Suriano remembers his first big customer, public utility company ATCO.
“It doesn’t matter what happened or how it ended, I’m always going to have loyalty to the fact that they gave me that shot. But what happens is when you don’t get that shot from the province, I go ‘Well, if another province is going to give me a shot — or a state, because there’s always U.S. incentives — to grow and scale, why would I stay here’?”