Can Design Deliver Positive Economic Outcomes?

Ian Nightingale , 11 May 2018

Broadening the procurement process to consider the value of good design brings economic benefits to the state, argues SA Industry Advocate Ian Nightingale.

Economic benefit should be central to all public-sector procurement, and while ‘value for money’ remains crucial to every procurement process, there must also be a broader measure of value when the success of public spending is gauged.

The consideration of factors such as employment, investment, and industry development is critical to achieving this outcome.

In this period of economic transformation, the South Australian government is committed to creating jobs and diversifying industry sectors. To support these aims, the South Australian Industry Participation Policy has been designed to deliver greater economic contribution to the state.

On occasion, cost and the allocation of risk are the primary drivers of procurement decisions. This can often create a race to the bottom, where important and wider definitions of value are not given the due consideration they deserve.

This view was supported in a CEDA report titled Australia’s economic future: an agenda for growth, where it noted: “Another form of public support for innovation can be delivered through procurement processes.  An overwhelming focus on value for money considerations, and concerns about risk minimisation in public sector procurement can stymie innovative solutions to public problems.”

There is also a direct relationship between design and innovation.

Encouraging good design provides a catalyst for suppliers to improve their products and provide innovative solutions, which in turn gives them cutting edge products or services that are marketable to the wider business community within South Australia, interstate and overseas.

In 2016, the South Australian government asked me to look at ways to capture even more economic benefit from projects.

The Industry Participation Policy had been very successful, but the true benefits of the policy didn’t come into play until the tender evaluation process was conducted.

We found that future procurement decisions were being influenced at the very early design phase of a project.

I worked with the design fraternity to provide recommendations on how government procurement could drive innovation and growth.

Together, we identified how procurement could support the economy and provide long-term social and community benefits. This resulted in making the current Industry Participation Policy even stronger by ensuring that in the   initial design phase, government agencies considered what value could be achieved in terms of social and economic outcomes. This delivers a true measure of public value.

We aimed to make smart procurement central to the development of public projects, from conception through to delivery, and ensure that maximum economic activity is generated here in South Australia to give local producers, entrepreneurs and businesses every opportunity to be successful.

I worked with the South Australian Government Architect, other state architects and design professionals to come up with recommendations that could be embedded in future procurement policies.

These could include the design of a building, landscaping, an office fit-out or procurement services and systems, with new requirements that design should incorporate social and economic outcomes. These factors must be at the forefront of decision-making.

During this process, it became evident that the discipline of design was deficient in communicating its economic benefit. In fact, the emphasis of design as a thought-process that underpins other professional activities was often overlooked.

Our review also identified that consideration needs to be given to how goods and services are developed for the market and, more importantly, how they are specified and used in a project.

The South Australian Industry Participation Policy now ensures that at the initial design phase, the South Australian government and its contractors consider what value can be achieved in terms of social and economic outcomes.

The policy now requires:

  • Design of technical specifications and project requirements should provide opportunities for suppliers who have employed or invested in South Australia to win contracts and sub-contracts.
  • For the Industry Participation Policy to have maximum impact, project design specifications should not be an obstacle to the South Australian supply of required goods or services.
  • Design specifications should use Australian standards, or standards regularly used in Australia, and be performance-oriented rather than product-specific, where possible.

A key function of the Industry Advocate Act 2017 is to advance the objectives of the Industry Participation Policy and build the capability and capacity of local businesses to meet government contracting requirements.

Identifying when design and specification is an impediment to meeting that objective is a key priority for the Industry Advocate.

In early 2018, the Office of the Industry Advocate launched the South Australian Product Register to support both the Participation Policy and this approach.

The register provides a central point for architects, quantity surveyors and builders working on South Australian government projects to access information on locally manufactured and supplied products. In the future, we aim to promote the South Australian Product Register to other users including local councils and the private sector.

The system provides a simple method for identifying products that are produced and supplied within South Australia, and measures jobs or labour hours at each critical point of the supply chain – manufacturing, assembly, supply or distribution, and installation.

Adding your organisation to the South Australian Product Register is free. The Register ensures the products of the registered business have maximum visibility to the South Australian government and lead contractors responsible for purchasing products for projects.

The SA Industry Advocate website has further information about the South Australian Product Register.

Ian Nightingale is the SA Industry Advocate. Ian’s role and that of his office is to be a catalyst for change with reform recommendations that benefit the South Australian economy and small business, including through new policies to deliver more value for the state from government tendering. Ian has years of experience in running small businesses in metropolitan and regional South Australia and has applied the insights gained from running his own businesses to influence policy outcomes within government.