Local authorities can build community wealth and social value as well as improve resilience by procuring more from small local businesses, according to a report.
The report, by think tank the Centre for London, said Preston in Lancashire was awarded “most improved city in the UK” in 2018 after its council tripled the proportion of the procurement budget spent in the local area.
By using “progressive procurement” to redirect spending back into the local economy it achieved the fourth-highest gross value added growth of any city in the UK.
Earlier this year Preston City Council's procurement policies were found to have improved the mental health of the community by 11%.
The report said local authorities can use progressive procurement to invest in communities, improve social value, and source from more resilient suppliers.
Jon Tabbush, senior researcher at Centre for London, told Supply Management: “Making sure you’re procuring from firms within a certain area of the borough will create a multiplier effect in the local area. That money will stay within the borough, and the money will be paid to local employees and that will circulate through the local economy.
“Then there’s local procurement in the sense of procuring from companies with a proviso that, in return for going to them with the contract, they have to hire a certain number of local people. That could be as apprentices, training them, and that could be part of their general social value offer. The next step is choosing firms because you think they have local benefits in the procurement process. For example trying to get more of your contracts going to cooperatives, businesses owned by their employees, democratically owned and managed businesses.
“They more actively and effectively keep money in the local economy. They are generally more resilient than most other kinds of small or medium enterprises. They tend to survive longer. There’s good evidence that shows they have more resilient internal financial dealings and less turnover. Preferring more small and medium enterprises as part of your procurement process is based on the idea that they provide more value for the local economy.”
Tabbush explained Preston’s model of progressive procurement increased local wages and built community wealth substantially. The benefits of the city's sourcing model included a reduced need for social support and public spending. This created a “lifecycle improvement of the public sector”.
“Specifically for procurement professionals, I would say set priorities on social value pledges,” he added. “Organisations can bring suggestions for things they’re willing to provide, but ultimately those are advisory. The procurement team themselves sets what their priorities are, what are things they want to get done. Inform companies of these requirements, and feed them into the tender process. Set priorities centrally, and then be more strategic and intentional about procuring from suppliers.”
Tabbush concluded: “Procurement was the area by far we saw the most appetite for collaboration around London. Local and progressive procurement systems have massive scope for London-wide collaboration. We’re really optimistic about that, and I think our research has definitely borne that out.”
The report set out several recommendations for council policy and practice within procurement teams:
1. Publish social value priorities.
2. Score tenders on socially valuable outputs.
3. Engage with locals.
4. Collaborate with other boroughs.
5. Publish the results of strategic and social value procurement.
6. Provide training to staff on how to define appropriate social value pledges.