In How to Build an Economy for the 99%, Wendy Keats recommends five key strategies based on two important criteria: 1) they have been tried-and-proven, more than once, to help build more inclusive, sustainable economies; and 2) they can’t cost taxpayers one more cent than we pay now.

The following strategy demonstrates the HUGE difference that can be made by a very small shift in government spending and procurement policies to support small and local business development, and just how easy this is and still stay well within trade agreements. It is nothing more than government will.

For many years, Atlantic Canada has been in a significant trade deficit position, meaning that we import far more than we export - to the tune of $11 billion. When this happens, money “leaks”  out of the community, often to a foreign corporation. 

 A recent study by the Centre for Local Prosperity reported that “$4.50 out of every $10 spent in New Brunswick leaves the economy”. This is the highest leakage rate in Atlantic Canada, although PEI follows very closely at 44%, with Newfoundland-Labrador at 38%, and Nova Scotia at 35%. 

More than a dozen studies have shown that every dollar spent at local businesses creates 2-4 times more jobs than it does if it goes to an outside business.

As individuals, we can - and definitely should - support local businesses by purchasing from them. However there is another very significant way we could plug this leak: our public procurement system.  

Every year, governments in Canada procure approximately $200 billion in goods and services - $22 billion by federal agencies and another $180 billion at the provincial, regional, and municipal level. And while there are free trade and other conditions that must be adhered to, there is far more flexibility than most people realize under their Exemptions, Exceptions and Exclusions. (Check out Changing How We Think of Value in Atlantic Canada Procurement Strategies for more information on that.) 

In Preston, this one small change to the procurement practices of just a few anchor institutions sparked a cycle of job creation, increased municipal tax incomes, civic regeneration, and investment in more local businesses. In a few short years, they turned their entire economy around and in 2018, Preston was named the most improved city in the United Kingdom. 

“Preston has experienced a large reduction in its unemployment rate, down to 3.1% last year compared with 6.5% in 2014, while it has also seen improvements above the national average for health, transport, the work-life balance of its residents, and for the skills among both the youth and adult populations.” PriceWaterhouseCoopers, 2018

There are many examples of local procurement that demonstrate the tremendous potential for quickly turning an economy around but perhaps two of the best known are the Preston and Cleveland models.  Both these cities' economies had been devastated by the 2008 financial crisis, increasing global competition, and the outsourcing of manufacturing and the service industry to foreign countries. 

PRESTON, UK

In 2012, this small city of 140,000 was designated as one of the most destitute economies in the United Kingdom. In a last ditch effort to save their city, municipal and community leaders came together to develop a plan for economic recovery inspired by the Mondragon model. They approached a few of their anchor institutions and asked them to shift a small portion of their procurement spending to locally-owned worker co-ops.

Anchor institutions are things like hospitals, universities, schools, prisons, government offices, and other public or private organizations that are anchored in the community and most likely to stay there. These institutions have a stable, ongoing demand for products and services and annual budgets of many millions of dollars. 

In Preston, this one small change to the procurement practices of just a few anchor institutions sparked a cycle of job creation, increased municipal tax incomes, civic regeneration, and investment in more local businesses. In a few short years, they turned their entire economy around and in 2018, Preston was named the most improved city in the United Kingdom. 

“Preston has experienced a large reduction in its unemployment rate, down to 3.1% last year compared with 6.5% in 2014, while it has also seen improvements above the national average for health, transport, the work-life balance of its residents, and for the skills among both the youth and adult populations.” PriceWaterhouseCoopers, 2018

CLEVELAND, OHIO

There is another example closer to home of what procurement can do to help build an inclusive local economy. By the time the 2008 financial crisis hit, Cleveland was one of the poorest cities in the United States. Its population had declined by 50% and 30% of the community lived in poverty, with incomes of less than $18,000. 

As in Preston, a group of visionary community, municipal and business leaders with a shared interest in the Mondragon model came together to work on a strategy to save their economy. They too convinced several anchor institutions to shift a small percentage of their procurement spending to co-ops that were owned and operated by people from Cleveland’s poorest neighborhoods.

This resulted in the creation of hundreds of living-wage jobs through Evergreen Energy Solutions, Green City Growers and Evergreen Cooperative Laundry - all democratically owned and governed by the workers who also share in the co-ops’ profits, have comprehensive health care benefits, and even a home ownership plan. 

The stories of the workers leave absolutely no doubt about the difference it makes when people have a true voice in the decisions that affect them and a personal stake in the success of a business.

Social Procurement

There is another aspect of public procurement that has been shown to make a significant impact in addressing poverty, inclusion, climate change, and many of the other social issues that cost taxpayers money and affect our quality of life. The blanket term is Social Procurement and there are various examples such as Community Benefit Agreements, Community-Driven Outcomes Purchasing, and others, however they all tend to go something like this.  Rather than using the standard criteria for awarding tenders, i.e. lowest price, there are additional points/bonuses for social or environmental cost-savings/improvements and a set of expected outcomes for the community. 

There are several examples of social procurement happening in Canada at the moment however they pale in comparison to what COULD be done and what IS being done in some countries around the world.

Take Scotland, who enshrined their commitment to environmental and socio-economic well-being into their National Performance Framework and 2014 Procurement Reform Act. 

This means that, by law, public sector buyers in Scotland must meet sustainable procurement duties. In other words, they MUST take into consideration how the public contracts being awarded will improve the social, environmental and economic well-being of the community, with a particular focus on reducing inequality.

Scotland also uses Community Benefit Agreements (CBAs) to ensure its social outcomes are met. They are legally-binding, enforceable contracts that require additional benefits for the local community in which the infrastructure or development project is taking place and commonly includes jobs, training, and apprenticeships for targeted populations as well as a requirement for community consultation and engagement.

Today, Scotland is one of the strongest economies in the world with the highest productivity and lowest unemployment rates in the United Kingdom. Median income has grown 21% and exports – valued at £32.4 billion in 2017 – are at a record high, up 44.7%.

Between 2015-2017, Scotland's Social Procurement strategy resulted in:

• 10 times the number of contracts issued with community benefit requirements

• 3 of 4 suppliers who were awarded contracts were locally-owned SMEs with many being worker co-ops and social enterprises

• 87% of suppliers paid the real Living Wage

In Canada, two provinces - Ontario and BC - have used Community Benefit Agreements to help local communities leverage public infrastructure contracts in order to create jobs, affordable housing, and other opportunities for people who don’t usually benefit from capital projects.

A Community Benefit Agreement in Vancouver to build the Olympic Village resulted in employment for 120 disadvantaged workers in construction jobs and $42 million in procurement for inner-city businesses.

Toronto’s new multi-billion dollar metro transit system includes Community Benefit Agreements that will provide training, jobs and apprenticeships for marginalized people and procurement opportunities for local small businesses, co-ops and social enterprises.

Manitoba has also shown some leadership in social procurement. In 2014, it doubled its social procurement budget, resulting in $7 million worth of contracts being awarded to six social enterprises, creating hundreds of jobs in everything from drywalling to carpentry, solar installation, and food production for some of Winnipeg’s most marginalized people. 

One example is BUILD Manitoba who recruits individuals with multiple barriers to employment and who tend to also be those most likely to be incarcerated, live on income assistance, or have their children put in foster care. BUILD teaches them labour and trade skills as well as other essentials like math, money management, nutrition, and parenting. Then give them a decent living-wage job in construction, energy retrofitting, or other industries connected to Manitoba Housing. 

There are also many innovative examples of how Indigenous people in Canada are taking back control over their communities and economies using Community-Driven Outcomes Contracts. One is Aki Energy, an Aboriginally-owned and operated company that created hundreds of well-paying jobs in remote First Nations communities by installing geothermal and solar energy in homes, replacing millions of dollars spent annually on diesel and other fossil fuels being piped into their communities.

 There are other examples of how local or social procurement strategies are being used in communities across Canada to create meaningful jobs, build local economies, address social and environmental issues, and save taxpayers money.

However they are just a drop in the bucket compared to what COULD be done by a simple change in the spending practices of municipal, provincial, regional and federal governments.

While it is true that various trade agreements place some restrictions on government procurement, there is plenty of opportunities under their Exemptions, Exceptions and Exclusions and nothing that stops government from requiring social and community benefits to be part of the contractual outcomes. Even a small shift of 10% in government procurement could create hundreds of thousands of jobs across Canada for people of all socio-economic backgrounds.

So this solution is really quite simple. Make local and social procurement a priority and condition where ever and whenever it is possible within the confines of trade agreements.