Progressive procurement: the policy and practice of Manchester City Council
Manchester, United Kingdom
The city of Manchester focuses its spending power to lock wealth into the local economy.
Over the course of ten years, and through the global financial crisis, Manchester’s procurement policy has evolved to focus the city’s spending power locally and sustainably. Manchester City Council has been extremely proactive in developing sustainability principles in its procurement policy. It has also sought to ensure that its procurement spending reaps maximum local economic, social and environmental benefit for the city’s communities.
To achieve this objective, the city consolidated all its procurement into a single department, and then analysed its spend and the supply chain, reallocating it towards smaller businesses in the local community where possible and emphasising social value. In doing so, the city made $85 million in efficiency savings, created 1,500 jobs, and boosted the proportion of its procurement spend going to businesses in Manchester by over 20%.
This case study was adapted from an article on Apolitical, the global network for public servants, found here: https://apolitical.co/solution_article/manchester-focuses-spending-power-lock-wealth-local-community/
Background and objectives
In 2007, the city of Manchester made the decision to consolidate its public procurement into a single department in order to fortify the local economy. Prior to this, individual departments were each ordering products and services from their own suppliers.
In 2009, the Centre for Local Economic Strategies (CLES), a UK think tank, was commissioned to explore three core gaps in the current procurement policy of Manchester city:
- a quantitative understanding of the benefit of procurement spend to the local economy;
- an exploration of the extent to which suppliers to the city council adhere to sustainability principles in their own choices;
- and an understanding of how sustainable procurement policies and practices can be improved in the city.
The research sought to both develop an innovative methodology for understanding the benefits of procurement spending and engaging suppliers; and offer recommendations as to how Manchester could move towards more progressive procurement practices across the local authority.
Research data found that only 51.5% of the city’s spend was going to organisations in Manchester, and a quarter of that was being re-spent in the local economy by those suppliers.
The city’s approach to improve those figures was threefold:
- alter existing procurement processes,
- engage with suppliers
- enhance the impact of the city’s spend.
The city then decided to wield a substantial annual procurement budget of around $1.3 billion as a tool to boost the local economy and build wealth in the community. The city embedded social value into procurement, measuring their suppliers’ contributions with a range of indicators - such as number jobs created - and applying a 20% weighting around social value in their decision process for awarding contracts. This, coupled with engaging the supply chain to instigate the change, started a broad movement towards making procurement more local and sustainable, and Manchester more resilient.
For the city of Manchester, the next steps involve going beyond simply embedding social value in the tender process and actually taking it into contract management. This will require monitoring and data collection, but will ensure that social value is really being added.
Financing and resources
The lead agencies for the project are the Manchester City Council, Centre for Local Economic Strategies and Greater Manchester Combined Authority.
Results and impacts
By consolidating the city's procurement into a single department, over $85 million of efficiency savings have been made. Three significant changes have been made to where the procurement spend goes. The proportion going to businesses in Manchester has jumped from half to three quarters. The slice going to SMEs now sits at around 50% - well above the central government’s target of 33%. And leakage of money from the local economy further down the supply chain has also been stymied: the amount re-spent in Manchester by those suppliers has doubled.
Altogether, CLES estimates that the proportion of money re-spent by suppliers in the local economy has jumped from 25% to 43%.
The impact has been felt in other ways, too. As well as the usual considerations around cost and quality, the city now weighs social value at 20% in the decision process when considering who to award procurement contracts to.
As a result of the new social value procurement framework, almost 1,500 jobs have been created, in addition to hundreds of opportunities for both apprentices and the long-term unemployed, and thousands of hours spent in volunteering and community activities.
Barriers and challenges
Making these changes to the procurement process required support on all sides. You need political buy-in, you need your procurement team to be active strategically. And you need a supply chain that is willing to engage. It took a lot of communication to set up a supply network.
Lessons learned and transferability
Building relationships with local suppliers and looking at where money goes further down the supply chain was a key innovation. Boosting the city’s direct spend going to organisations in Manchester only achieves so much if those suppliers then immediately send that money out of the local economy. By talking to suppliers and making clear their intent to build local wealth, the council managed to change the behaviour in the supply chain.
The Centre for Local Economic Strategies have taken similar ideas to Preston and Birmingham in the UK. Other cities across the world are engaging in community wealth building too, including Cleveland and Chicago in the US.
Centre for local economic strategies: Towards progressive procurement, the policy and practice of Manchester city council; https://cles.org.uk/wp-content/uploads/2011/01/The-power-of-procurement.pdf
Apolitical: Manchester focuses its spending power to lock wealth into local economy: https://apolitical.co/solution_article/manchester-focuses-spending-power-lock-wealth-local-community/