Public procurement, Drivers of Development for the Local Economic Base in Manchester
Fonds mondial pour le développement des villes (FMDV)
In 2012, the UK central government spent around £260 billion in procuring goods and services, with local governments spending around £70 billion (€86 billion1). In a period of drastic budget reduction by local British governments (-28% in 20122), improving the management and effectiveness of public procurement is a key strategy in optimising public spending. In 2008, the city of Manchester commissioned the Centre for Local Economic Strategies (CLES, a nonprofit research centre) to carry out a study of the impact of public procurement contracted by the city (worth an average of £300 million, or €370 million annually) on the local economy, by analysing the share reinvested in the community by the subcontractors. The findings contributed to better understanding of the local economic base, closer ties between the city and local subcontractors, and better orientation of public investment in order to support the city’s economic and social strategy, in particular for youth employment.
To download : local_innovations_to_finance_cities_and_regions10.pdf (1.5 MiB)
Manchester, a dynamic city conscious of the importance of local public procurement
A city severely affected by deindustrialisation, Manchester started developing innovative revitalisation methods from the 1980s and became a ground breaker in urban regeneration. Despite a redevelopment of the downtown area and a renewed economic vitality, social inequalities continued, and with them the need to better distribute locally produced wealth. Following the first National Procurement Strategy for Local Governments launched in 2003 by the Local Government Association (LGA), Manchester reassessed its public procurement system and its impact on the local economy by setting up a Sustainable Procurement Policy. This system consists in having public procurement spending concentrate and take root within the city in order to stimulate the latter’s economic base. The study carried out by the Centre for Local Economic Strategies (CLES) and the LM3 tool developed by the New Economic Foundation (see box) provided valuable findings for this strategy.
From findings of the study…
CLES’s impact study made it possible to analyse the evolution of public procurement in Manchester in 2008, 2010 and 2012. As recommendations were made after the first study, the later studies were able to highlight the concrete effect of measures taken. In 2008-2009, for example, the city of Manchester spent £357 million in public procurement among 300 subcontractors, 51.5% of which were based in the city of Manchester, and in 2012-2013 this percentage grew to 69.3%3. There was thus a very clear reorientation towards economic players linked to the city, thanks to a series of measures developed by the city government. It was also possible to measure the economic reach of local public procurement on the city: in 2008-2009, it came to £273 million, including city spending and the wages paid by the subcontractors to their employees living in Manchester. The catalytic impact, i.e. that which is then reinvested in the local economy by the subcontractors and their employees, is more difficult to assess but has been estimated at £687 million4. The extent to which local public procurement has taken root nevertheless varies according to the economic sector. In 2012 for example, 89.2% of utilities providers were based in the Greater Manchester area, compared to 53.5% of suppliers of office supplies or municipal vehicles (wholesale and retail trade). There is in fact a limit to supply available within a local community, and (for now) some public procurement still has to be contracted with players located outside the community.
… to actions in the field
Some easy-to-implement policies were instituted following the study, with the main objective of changing the habits of local stakeholders, so as to optimise and multiply the impacts of local public procurement on the local community.
1. Identifying and giving priority to local subcontractors of the city and the Region Targeting local subcontracting first involves identifying subcontractors that are not from the local area, as well as their sectors of activity, so that they can be replaced by businesses from the local economic base. Furthermore, as Manchester’s public procurement has an impact on the Greater Manchester region, the city has undertaken to promote the North West Regional E-procurement Portal. This online portal, also called CHEST, enables businesses to register and local governments to post offers. Manchester hopes to use this tool to facilitate access to public procurement for businesses of the entire region.
2. Creating networks and groups of exchanges : The city has also created a network of its 300 main subcontractors, in order to better understand the difficulties surrounding access to public procurement (such as contracts that are too complex or inappropriate). The network is also used to communicate on issues regarding local redistribution of investments. It would seem that this intensive communication work has borne fruit, as the share reinvested by the subcontractors into the local economy rose from 25p per £1 paid by the city government in 2008-2009 to 47p in 2010-11. Furthermore, to improve public procurement effectiveness, the city council and CLES have set up a cross-departmental working group made up of administrative managers from the departments of Corporate Procurement, Economic Development, and Education and Adult Social Care. They meet quarterly to target the issues on which public procurement could take action.
3. Promoting jobs for youth in difficulty : One of the highlights of Manchester’s strategy is to use public procurement as a lever for job creation, especially in disadvantaged neighbourhoods. In 2010, CLES evaluated that 5225 inhabitants had their jobs directly from public procurement spent with local suppliers. To improve this figure, the city council favours contracts with companies that undertake to create local jobs, especially apprenticeships for underqualified youths. This refocusing on disadvantaged neighbourhoods has a visible effect: the proportion of public procurement contracted in the latter increased from 47.6% in 2008 to 59.7% in 2012. By exploiting the economic impact of their public procurement processes, the European local authorities demonstrate their ability to affect the real economy, purveyor of sustainable local employment. Thus they demonstrate they are directly agents of change and show their competence for organizing the local economic actors.
1 CLES (2012) Progression in Procurement: Manchester City Council
2 Local Government Association (June 2012) Local Government Procurement Pledge
3 CLES (2012) Progression in Procurement: Manchester City Council
4 Manchester City Council (2010) Economy, Employment and Skills Overview and Scrutiny Committee, Item 8
To go further
Matthew Jackson (2010) “The power of procurement- Towards progressive procurement: the policy and practice of Manchester City Council” Centre for Local Economic Strategies
Description of the LM3 diagnostic by CLES