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Council supply chains can help small business

The Centre for Local Economic Strategies (CLES) was delighted when the Federation of Small Businesses asked us to develop a survey as part of its innovative research study of small business and procurement. Effective and locally responsible procurement spend should lead to a range of benefits for small business and local economies.

It can:

• Create new jobs and sustain existing ones
• Contribute to tackling issues such as worklessness and deprivation
• Support the creation of new businesses
• Boost spending in local shops and on local services
• Support the development of local labour through apprenticeships

For procurement to be more effectively linked to economic development, local authorities should be looking to understand levels of spend with local organisations and small and medium enterprises (SMEs) and embed economic development considerations into the procurement cycle. Evidence is the starting point for a more progressive approach to public procurement.

It not only means that local authorities know where their spend is going but also supports a procurement process that reflects the economic challenges – worklessness, low skills and small business sustainability – in their locality.

To enable these local economic benefits to be realised, local authorities should think strategically about procurement and, importantly, should proactively influence how the supply chain re-spends the income it receives through the procurement process.

Strategically, procurement should be based on cross-departmental relationships, particularly between corporate procurement and economic development, to enable economic considerations to be fed more effectively into the procurement decision. Economic, social and environmental benefit should also be embedded in the sustainable procurement strategy.

Supplier networks, engagement with suppliers in areas of deprivation and gap analysis are methods of passing on economic priorities to suppliers so that they can enable neighbourhood economic change through procurement. These are a means of influencing the extent to which suppliers think about local communities and the unemployed in their recruitment policies, the extent to which they consider SMEs and local firms in their own supply chain and the strength of focus on the environmental costs of purchasing.

This approach to procurement based on place, economic development and influence is working in particular authorities. Indeed, as a result of cross-departmental working and supplier engagement, the re-spend back into the Manchester economy of Manchester City Council’s suppliers has increased from 25p to 42p in every pound. Suppliers are also increasingly working to support long-term unemployed people into employment opportunity through apprenticeships and job brokerage activities.

The response rate to this research signals a commitment from local government to understand procurement spend, support SMEs in accessing opportunities, and enhance local economies through procurement strategy.

There is, however, much to be done and the recommendations presented in this publication highlight a key opportunity for local government to become more effective ‘place stewards’ when it comes to procurement strategy and purchasing goods and services.

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Heather
Heather
11 years ago

While I’m sure most local authorities would want to support local businesses, including SMEs, there is an issue with EU procurement legislation which effectively blocks any, but the most creative, local procurement. Even if it doesn’t it is an easy way to continue along the business as usual, compliance route. There needs to be more guidance and flexibility from European and UK government to allow LAs, as community leaders and spenders, to procure more locally and support their own communities and businesses over large multi-nationals who have the resources to bid for contracts across the UK.

Matthew
Matthew
11 years ago

Hi Heather. I couldn’t agree more. Hopefully the Social Value Act will enable the flexibility to more effectively consider local economic, social and environmental issues in the procurement decision. The key is practice. It is something which is emerging in Manchester through a step change in procurement culture and a tailoring of procurement strategy to local economic development strategy. There is also something here about the role of the supply chain. Those multi-nationals should be influenced by councils to embed community benefit in their practices and actively consider their employment, supply chain, and environmental practices so that they are more locally reflective to the place in which they are delivering a service. There is a key role for the local authority around stewardship and influence here rather than just letting suppliers go off and deliver.

Richard Barwick
Richard Barwick
11 years ago

Hello Matthew and Heather
Your thoughts are so very valid. This is ‘true’ regeneration; and it can be summed up in two words: Shared Value.

Please have a look at: http://www.sharedvalue.org.uk

As usual, Michael Porter was ahead of the rest of us!

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