Keep spending local: it brings benefits

Public sector organisations like councils and colleges can do much to work with suppliers on their doorstep and stimulate local economies. In Lancashire work is underway to ‘repatriate’ spending.

Anchor institutions are crucial components of our towns and cities. Commonly including local authorities, further and higher education providers, and housing organisations, they are key employers and procurers, embedded in their communities and unlikely to leave. In a UK context, the potential of anchor institutions to contribute to wider local economic development has been untapped – until now.

Over the last 18 months, the Centre for Local Economic Strategies (CLES) has been working with Preston City Council to seek to harness the spending power of six anchor institutions based in the city: Preston City Council, Lancashire County Council, Preston’s College, Cardinal Newman College, Lancashire Constabulary and Community Gateway. The work emerged from a feeling that anchor institutions could be doing more through their spending power to address some of the local economic and social challenges facing Preston and the wider Lancashire area.

The work started through looking at the process of procurement and particularly the extent to which the six anchor institutions utilised local organisations to provide goods and services. Of a combined annual spend of some £750m, only 5% was with organisations based in the Preston boundary and just 39% with organisations based across Lancashire. This meant that more than £450m leaked out of the Lancashire economy.

There was significant scope to rethink the way the six institutions undertook procurement activities and potentially repatriate some of that spending. The starting point was to therefore ensure all anchor institutions were on board and, secondly, to develop a collective vision and means of enabling maximum benefit through procurement. The former was relatively simple, but the latter has been less straightforward.

We therefore targeted what has been termed ‘influenceable spend’. These are goods and services which are not tied up in long-term framework agreements and not specialist and therefore unlikely to be found in Lancashire. We’re talking about goods and services for which there are local organisations that could potentially act as suppliers in the future. The next step was to develop an understanding of local organisations, build up their capacity and raise their awareness of potential opportunities.

While repatriating spend was and is an important component, the primary purpose has been to shift the behaviour of the anchor institutions so that they think more progressively about their procurement processes and choices and the impact it has on the local economy.

Simply engaging with the project, listening to the practice of others, working collaboratively and utilising the anchor institution vision has seen a step change in practice.

Preston City Council has now identified around £3m of opportunities that are potentially ‘influenceable’. Lancashire County Council has revisited its commissioning and procurement strategies and has broken contracts into lots to enable smaller organisations to be supported to bid. Lancashire Constabulary now requires quotes from local organisations on procurement opportunities between £10k and £50k. And Community Gateway is continuously measuring the impact its procurement decisions bring for the local economy.

The impact of this work will be more measurable in the longer term. However, we can already see changes that are bringing benefits for the local economy in the form of jobs and business development. If the amount spent in Preston by the anchor institutions increased from 5% to 10% and was sustained over the next ten years, this would mean a further £370m being spent with organisations based in the city over that period.

Multiply that across the UK and it’s easy to see how influential anchor institutions could be in their local economies if they harnessed the full potential of their procurement spend.

The original article can be read on the Public Finance website here