Who cares where the money goes?

How often do we think about public procurement? How much attention do we pay to how city authorities and other public bodies spend our money; the choices they make about contracts and services? Do we really care which companies empty our bins, mend the gutters on the town hall, run the hospital cafe?

I admit it’s not a subject which has engaged me very much, although the evidence from Preston City Council suggests that perhaps it should.

Preston have been pursuing a strategy of ‘making spend matter’ since 2012, trying to understand how much they spend on external services and contracts, where that money goes to, and what value it brings. Since 2015, they have been the lead partner of the Procure network, funded by URBACT to encourage 11 cities around the EU to work on this complex but important subject together. And the results can be fascinating.

In Preston’s case, the key to how they could maximise the impact was through working with a range of other public organisations, or ‘anchor institutions’ as they are known. These are bodies like hospitals, Police, housing providers and educational establishments; all of them with sizeable public budgets and an interest in making that money work better for the local community. When Preston started this work, in 2012, the combined budgets of those organisations totalled £750m, and only 39% of it was directly spent in the Lancashire area. In other words, some £280m was leaking out of the local economy each year, when it could be bringing value to local companies, people and places.

Preston’s strategy, and the one they explored in the Procure network, was straightforward: analyse what you spend and where, and use the techniques available to influence how and where that is spent. These tools could be legislative, or they could involve changing the criteria by which contracts are awarded, or might involve closer working with local SMEs and potential suppliers, better to understand their needs. In general, they found that a combination of supplier-side and buyer-side interventions were most effective. “It’s important to recognise that we don’t buy in silos” said Andy Ridehalgh, Preston’s Procurement Manager. “We need to see that what we buy, and where we buy it from, can give significant extra value to the local economy”.

Some of the examples are startling: Paul Eastham, the Procurement Officer with Lancashire Police, described how smarter procurement practices in the commissioning and construction of a new £21m police station had a huge effect on local spending patterns: 85% of that cost was spent within a 40 mile radius of the construction site. What is startling is how such change can be effected without any major shifts in legislation or statutory processes; Preston’s strategy was based largely on influencing people and institutions, and developing new commissioning and delivery models which are designed with local spend in mind. “Combining our purchasing was not the objective” Andy explained, “we were more interested in sharing strategy and bouncing ideas off each other.”

The Procure network has now come to a close. Preston will be spreading more of their learning through a new Transfer Network which started last month, with a new group of EU cities eager to learn from their experience and apply this knowledge in their own procurement practice.

There is no doubt that it’s learning worth sharing. Remember that 39% which was spent in the local economy? When Preston and its anchor institutions undertook an analysis of last year’s spend (2016-17), that figure had increased to 80% of their total spend being retained in the Lancashire area. That’s almost £200m of money which can directly benefit local businesses and communities. And when that translates into local jobs, better environmental standards, improved skills amongst the workforce, it’s a benefit worth having.