Over the course of ten years, and through the financial crisis, Manchester’s procurement policy has evolved to focus the city’s spending power locally and sustainably. 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%.
Results & Impact
By consolidating the city's procurement into a single department, over $85 million of efficiency savings were made. Three big 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. Aside from that, the new social value procurement framework has led to over 1,500 new jobs and hundreds of apprenticeships.
Manchester City Council, Centre for Local Economic Strategies, Greater Manchester Combined Authority
Prior to 2007, Manchester’s departments procured supplies and services on their own. The first thing the city did was to consolidate procurement into a single department, making substantial efficiency savings. Then it decided to use public procurement as a lever to lift local wealth, job creation, and sustainability. The city started by partnering with the Centre for Local Economic Strategies to analyse their spend: where it went, whom it went to, and what happened down the supply chain. Then 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.
General public, entrepreneurs
Cost & Value
$85 million of efficiency savings were made; the costs are not clear, but did not exceed that.
Running since 2007
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.
In 2007, Manchester made the decision to focus its public procurement in order to fortify the local economy. Ten years later, the city has made $85 million in efficiency savings, created 1,500 jobs, and boosted the proportion of its procurement spend going to businesses in Manchester by 20%.
It all started with the decision to consolidate the city’s procurement into a single department. Before that, individual departments were each ordering stationery from their own suppliers. By pulling procurement together and ordering for city government as a whole, the city made big savings on time and money.
It also offered the opportunity 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.
It found that 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.
In other words, lots of money that could be building Manchester’s wealth and making it more resilient was going elsewhere.
The city’s approach to improve those figures was threefold. They sought to alter their procurement processes, to engage with their suppliers, and to enhance the impact of their spend.
Making these changes required support on all sides. “You need political buy-in, which we have in Manchester. 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—it was a major, concerted effort,” said Paul Murphy, Deputy Head of Corporate Procurement for the Manchester City Council.
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.
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, almost 1,500 jobs have been created in Manchester, in addition to hundreds of opportunities for both apprentices and the long-term unemployed, and thousands of hours spent in volunteering and community activities.
“The financial crash gave us an opportunity to do this,” said Murphy. “We realised procurement was about more than just the direct spend, and when the downturn came it became even more important that every pound we spent got benefits for the people of Manchester.”
For 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.
CLES will remain involved in Manchester but is also taking the model elsewhere in the UK, for example to Preston and Birmingham. The model has turned heads overseas, too. “Word has got round,” said Murphy, “We even had a delegation from China, believe it or not, two or three years ago!”
(Picture credit: Flickr/blogsession.co.uk)