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Progressing procurement practice through spend analysis

Anchor institutions using spend analysis to improve procurement practice and benefit the local economy
Preston / United Kingdom
Size of city: 
140 800 inhabitants

Contact

Tamar Reay
Economic Regeneration Officer
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Summary

In 2013, Preston City Council (UK) and six other anchor institutions embarked on a project to identify how their wealth could be understood and harnessed more effectively for the benefit of the local economy. An element of wealth that anchors institutions can influence their procurement spending. Central to the work in Preston has been the analysis of these institutions’ procurement (1 billion euros), to understand where that spending goes geographically and on which types of business type, and what happens to it once it reaches suppliers. The anchor institutions then used the evidence gathered to inform how they undertake procurement. Some institutions have revisited the spending analysis: evidence suggests their spending has increased in the local economy and with small to medium-size enterprises. The work demonstrates the importance of using evidence to shape policy change and the role of procurement in addressing challenges.

The solutions offered by the good practice

The good practice offered by the Preston City Council and the six other anchor institutions is a methodology and means of changing behaviour around procurement so that it generates more local economic, social and environmental benefits. The methodology consists of three parts. First, it enables cities and institutions to understand where their procurement spending goes. So, the methodology measures the extent to which the annual 1 billion euros of procurement spending of the anchor institutions is with: businesses based in Preston and Lancashire, SMEs and social enterprises, and with businesses in particular industrial sectors. Second, it enables cities and institutions to understand the extent to which their procurement spending leaks out of their local economies to other parts of their country and across Europe, and subsequently the sectors of that leakage and the potential for that spending to be influenced. Third, it enables cities and institutions to identify the extent to which their suppliers are creating jobs or apprenticeships and find out about their practices around social sector engagement or environmental management. Effectively this activity develops an evidence base through which cities can understand the existing contribution their anchor institutions make to a local economy and assists in developing policies and practices through procurement which can enhance those contributions and further harness the potential or wealth of anchor institutions.

Building on the sustainable and integrated approach

The good practice fits with URBACT principles because it is about harnessing the wealth of anchor institutions through procurement spending which can help to create wealth in the local economy, thereby reducing poverty and social exclusion through increased employment opportunities, the creation of new businesses and supply chains, skills development, and dealing with environmental issues, for example, by reducing carbon footprint, waste etc. It is also based on an integrated and participatory approach whereby the anchor institutions (public and social sector) work together to ensure that their procurement spending is used to bring additional economic, social and environmental benefits to their local economies. The recent inclusion of stakeholders from business networks
ensures that the voice of the private sector, and also supply chains, are involved in the process. Whilst the good practice initially focused specifically on the Preston local authority area, it has now been broadened to encompass the wider functional urban area (of Preston and South Ribble) and also the wider Lancashire region, ensuring that the horizontal, vertical and territorial integration aspects have been taken into account.

Based on a participatory approach

The work around anchor institutions and spending analysis in Preston commenced in 2013 and continues in 2017.
Over the last four years a range of stakeholders has been involved and the whole project is framed by a cooperative desire across the institutions to use their wealth to create greater benefits for the local economy.
Stakeholders have been involved throughout the work.
1) The chief executives and political leaders (where appropriate) were visited to secure their buy-in to the principles of harnessing the wealth of institutions.
2) Procurement officers in each of the institutions were engaged to share data around their procurement spend and their suppliers to enable the analysis to take place.
3) The chief executives, politicians and procurement officers were brought together to share the findings of the supply chain analysis and to develop a collective statement of intent as to how they were going to change practices around procurement in light of the analysis.
4) The procurement officers have continued to meet through a procurement practitioners group and now an URBACT local group (as part of the Procurement Network) to discuss how they are changing practice around procurement.
5) The supply chain of some of the anchors has been engaged to identify the wider impact they are bringing through the delivery of goods and services. Engagement has been sustained over the course of the last four years with the stakeholders described above.

What difference has it made?

The 2017 publication from CLES details nine key achievements from the work in Preston over the last four years.
1) It has positioned Preston as a progressive place for local economic development and addressing poverty.
2) It has led to a much more effective relationship within and between institutions in Preston.
3) It has enabled a range of baseline data to be collected about the existing impact of anchor institutions and the wider business base in Preston.
4) It has secured the buy-in of senior stakeholders and enabled the development of a collective statement of intent.
5) Through the analysis of leakage, it has enabled a much greater understanding of Preston’s business base and those which could potentially deliver goods and services.
6) It has changed behaviour around procurement in each of the institutions and enabled enhanced impact. For example, the proportion of spending of Preston City Council with Preston-based businesses through procurement has increased from 14% to 28%.
7) It has recognised that this is a long-term approach to addressing key challenges.
8) It recognises the importance of scale when implementing wealth-building initiatives.
9) It has had an impact on addressing wider issues including low pay and deprivation. The core impact has been in the behaviour of anchor institutions and the realisation that spending analysis and procurement can be utilised as a lever or way in which challenges facing cities can be addressed.

Why should other European cities use it?

All cities across Europe have anchor institutions located within them. This will include municipalities, hospitals, housing organisations, police, large businesses and others. In turn, all of these organisations will have processes for purchasing goods and services through procurement. Despite this, few cities and institutions will have a means or methodology for understanding where this money goes geographically and in business type terms and what happens to it once it reaches the supply chain. Indeed, few municipalities actively know how much they spend in totality through procurement, let alone the impact it has on their local economies and residents. The good practice from Preston is, therefore, a way in which cities and municipalities can gather evidence about their procurement spending, draw together a range of stakeholders through a participatory approach, change behaviour and practice around procurement, and contribute towards demonstrating how they contribute to economic and social challenges. As bespoke funding for economic development and regeneration activities decreases, cities are going to have to find new ways of addressing challenges – harnessing existing wealth and the potential of procurement is one such way.