Local Procurement Practices: Who’s Doing What, Why and How?
The procurement shift to include local benefits began in Garstang, England in 1999. Garstang was the 1st city to implement a Fair Trade Town policy. The rationale was that people would buy products that were identified as giving a better deal to producers in developing countries. This led to an expanded definition which recognized that farmers in and around Garstang also deserved a “fair price.”
A fair price challenges accepted beliefs that the market should set prices for goods and labour. The purpose of Fair Trade is to ensure a greater equity in international trade which leads to sustainable development. The latter contributes to securing the rights of marginalized producers and workers — regardless of locale.
Fair trade certified products enjoy a “premium” to ensure that environmental protection and human rights are respected and reflected in the cost of the produce under an auditable process to reduce poverty. Arguably the Fair Trade movement has led to revised trade rules.
We can make a brief comparison with NAFTA and the TPP (Trans-Pacific Partnership) international agreements. Shortly after NAFTA was implemented the Maquila Solidarity Network was formed to protect workers’ rights in Mexico. NAFTA was relatively silent on labour issues. The TPP has committed to addressing LGBT rights; abolish forced and child labour; prohibit human trafficking; prohibit debt bondage; and end discrimination in employment practices. Presumably if the TPP needs to address these issues, the issues are still a problem with our (11) pending trading partners. We can see that the shift to social procurement strategies has a long way to go.
Scotland’s Community Benefit Agreement (CBA) program was one of the first undertaken in the public sector. As part of its principles it looks at local suppliers to see if they can supply goods or services under all bidding processes. Many CBAs ensure land development whereby the developer must provide a negotiated benefit which includes local labour, living wage programs and affordable housing.
Since 2010 in one UK study, it was found that under CBAs involving 35 projects valued at $600M (CDN), 80% was reinvested locally through $180M in wages; $400M in local business, with 80% going to SMEs; and 15, 000+ hours in employment training. Public sector procurement practices have led to an economic advantage favouring local sourcing as a part of the strategy.
In BC, the Ministry of Social Development and Social Innovation (SDSI) includes social impact purchasing requirements aimed at creating employment for people receiving income and disability assistance. An example of one opportunity for security services was that the successful proponent will identify the number of targeted individuals to recruit and fill job vacancies.
This is an expansion of the SDSI purchasing guidelines which requires staff to consider social and financial values when considering the procurement of goods or services. Recent SDSI Invitation to Quotes included criteria for social enterprises, community benefits and job opportunities for individuals supported through income assistance or face employment barriers or who may be otherwise marginalized. The SDSI has made purchases from social enterprises such as Coco Café, HAVE Café, Potluck Café, and Skookum Food and Coffee.
Is there an ROI for local sourcing?
- The economic multiplier effect (EM) has shown in many business cases that there is a greater redistribution of wealth through buying local versus buying from a multinational corporation. The EM applied in a Vancouver study in 2013 that buying office supplies from a local company rather than a “Big Box” outlet contributed to greater local reinvestment. For every $1.00 spent locally there was $.45 reinvested versus $.15 for every $1.00 spent with a big box company.
- The Vancouver Island Construction Association 2013 report found that the procurement practice of bundling construction contracts favoured multinational corporations at the expense of local small medium contractors. Report authors, Stephen Bauld, a procurement professional with decades of construction experience and lawyer Glenn Ackerley, conclude that bundling of contracts should be the exception and not the rule.
- The 2014 Toronto Enterprise Fund Report found that hiring through social enterprises individuals which faced employment barriers created significant improvement in their health and financial sustainability. A return of $3.50 for every $1.00 spent with target employee groups.
Local sourcing is not intended to favour a business based on its address. Local sourcing is a procurement tools which contributes to local social and economic development. If procurement strategies are heavily weighted on out-of-pocket cost savings, the strategy has shown that it actually detracts from the net benefits to the community. In the extreme, where one public procurement department saves money on a line budget item which results in another public body having to provide social services — that is not value for money for taxpayers.
Move from talk to tactics
There are many pros and cons to local sourcing. Conventional thinking around procurement strategies should be revisited to ensure there is an equitable opportunity for small medium enterprises, social and enterprises and marginalized individuals to participate in the economy. Every community in Canada would benefit from this shift.
Procurement professionals do have a lot on their plate. Local sourcing should be a part of progressive procurement practices. Where can procurement find the resources? Forging relationships with social enterprises through social procurement intermediaries is a means of facilitating local sourcing. Social procurement intermediaries have the reach into the community. They understand which social enterprises or local businesses have the capacity and social consciousness. Social enterprises screen for alignment of values and mitigate risks. Start small and think big. The potential for good outweighs the procrastinations through fear of failure on this front.
Earlier this year the Town of Qualicum Beach made a statement by passing its Social Procurement Policy. They saw the trend, implemented the tactics, and are doing so without trepidation.