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‘Anchor institutions’ using spending clout to boost local economy

Public sector institutions in Lancashire have been taking part in an innovative project over the last 18 months to stop their spending ‘leaking out’ of the local economy.

The Centre for Local Economic Strategies (CLES) has been working with Preston City Council, Lancashire County Council, Lancashire Constabulary and several other public sector organisations in the area, which it refers to as “anchor institutions”, to make their spending and procurement more local.

CLES analysis of the collective spend of the organisations taking part for the 2012-13 financial year found they spent a combined £750m a year on goods and services of which £458m “leaks” out of Lancashire.

Broken down further the analysis showed that only 5% of the £750m was spent on organisations in Preston, and 39% on organisations in Lancashire.

The report says: “Simply increasing spend in Preston by the anchor institutions from 5% to 10% per annum means an additional £37m directly being spent in the Preston economy. This has the potential to significantly outweigh the benefits that could be gleaned through other economic development initiatives which have longer timeframes (for example, the City Deal) and does not include consideration of wider spend upon employees, and the subsequent re-spend of that spend in local shops and upon wider services.”

CLES worked with the organisations to develop a statement of intent and series of objectives to help the anchor institutions focus more of their spending locally.

The vision the organisations agreed to is: “A long term collaborative commitment to community wealth building in Lancashire for influenceable spend.”

To meet the set objectives Preston City Council has re-done supply chain analysis for financial year 2013-14 to seek to understand change. It has also forensically interrogated every contract in order to identify ‘influenceable’ spend (spend where there is scope for local organisations to potentially deliver that service or provide that good).

Lancashire County Council has revisited its commissioning and procurement strategies to seek to get more benefit out of every procurement decision made by the authority.

For its part Lancashire Constabulary has applied the objectives of the statement of intent to emerging procurement decisions.

The work of Preston City Council has seen the amount spent with suppliers based in both Preston and Lancashire increase to 17% (from 14%) and 33.5% (from 29%) respectively. Despite this over £8m (nearly 50%) still leaks out.

The county council’s new strategies resulted in a recent contract around fresh produce being broken down to enable businesses just to bid for the lots associated with the produce they could provide, with distribution focused lots tendered separately. This benefited the Lancashire economy directly by around £2m.

Lancashire Constabulary has less freedom in its contracts then other institutions due to being tied into procurement frameworks. However it has been able to look at how it undertakes some of its (below European threshold) spending. It now requires quotes from local organisations on procurements between £10,000 and £50,000, and has recently recruited a Lancashire based organisation to deliver a printing contract for the next four years, with a value of over £600,000 over that period.

Matthew Jackson, one of the report’s authors and deputy chief executive of CLES, said: “Anchor institutions are a key component of local economies. CLES’ work with Preston City Council and five other anchor institutions has identified that changes in their behaviour around procurement and other processes can bring key benefits for local business, people and communities.

“Places are facing unprecedented challenges and anchor institutions should be part of the means of enabling change from within.”

The report adds that this is just the first stage of an ongoing journey to maximise the impact of local public sector spend. Other potential avenues include setting up worker-led cooperatives to provide the goods and services purchased by the council and other anchor institutions, an initiative which has proven successful in Cleveland, Ohio in the USA.

PSE has an interview with CLES chief executive Neil McInroy in our April/May 2015 edition.

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