Procurement
by Gianmarco Katz
What’s the Problem?
Local governments across the country are responsible for $2 trillion in annual spending, accounting for 10 percent of the US GDP, yet government procurement processes have prioritized cost over quality and social impact. This has rewarded large corporate actors that cut corners, underpay workers, and forgo local suppliers or workers, perpetuating a race to the bottom and sucking money out of the local economy. Progressive procurement policies should encourage partnerships with high road businesses and reward practices that create value for the entire community. Further, such policies can be pursued without posing substantial expenses.
What are People Doing?
Procurement as Capacity-Building
Many municipalities are already using their procurement policies to promote high road development. Portland's Sustainable Procurement Policy establishes baselines for wages, safety, and sustainability in all procurement contracts. Meanwhile, Phoenix's Sustainable Purchasing Policy requires a full life cycle evaluation of materials’ economic and environmental impacts and mandates that suppliers use green products internally.
While local businesses often lack the experience and resources necessary to succeed in the “long, difficult, and expensive” contracting process — often needing help with capacity-building to become viable partners — this support is often an investment in community development. For example, Tacoma, Minneapolis, and Houston have all launched initiatives to help small local businesses take advantage of procurement opportunities. Tacoma’s Small Business Enterprise program provides a 5% discount for bids by prime contractors that use local small businesses as subcontractors, helping those contractors achieve low-bid status. The city partners with outside agencies to provide training, helping small businesses take advantage of the opportunities created by this policy. Minneapolis’ procurement policy offers preferences to prime contractors and Houston’s Build Up Houston program offers an intensive 7-month training program to prepare subcontractors in the construction sector.
Local governments should also target capacity-building for subcontractors and small businesses owned by members of historically disadvantaged communities. Boston's Executive Order Promoting Equity in Public Purchasing identifies procurement opportunities that have been historically inaccessible to women and minority-owned business enterprises (WMBEs) and creates outreach programs to share new opportunities with these firms. Additionally, the city recently expanded the resources available to city procurement officers to identify and work with WMBEs, and supported direct employment from the Building Pathways program for people of color and women. Boulder’s broadband expansion project used a pre-bid conference to reach out to WMBE contractors and subcontractors, which led to greater WMBE participation in the project. This toolkit from the Harvard Kennedy School of Government identifies strategies for using procurement to advance racial equity like streamlining certification processes, improving speed of payment, and targeted communications strategies to improve vendor diversity.
Procurement as Workforce Development
Crucially, procurement policies can develop the local workforce by prioritizing contractors that hire local workers, pay good wages and benefits, offer job training, and provide opportunities for career advancement. Project Labor Agreements (PLAs)— collective bargaining agreements between unions, government, and developers that establish the terms of employment for construction projects — can require hiring from local unions and establish project-specific compensation. In states where PLAs are banned, Community Benefit Agreements (CBAs) offer an alternative, ensuring projects receiving public funding fulfill local hiring commitments. For example, Milwaukee’s Deer District CBA guaranteed a wage floor tied to the cost of living and local hiring mandates (see ProGov21’s Job Quality roadmap for more on PLAs and CBAs).
Similarly, cities use procurement policies to enforce labor standards and increase residents’ access to high-quality employment. Cincinnati and Cleveland bar businesses with a history of wage theft and worker misclassification from bidding on public contracts, and New Brunswick, Princeton, and Seattle bar violators from obtaining business licenses outright. San Francisco's local hiring for construction policy mandates that city residents complete 30% of a project's total work hours and fulfill 50% of apprenticeship program hours on publicly funded projects. Los Angeles requires contractors on public projects to maintain higher labor standards and Denver requires city contractors to pay the "prevailing wage”.
Additionally, first-source hiring programs create employment opportunities for residents living within communities directly impacted by local development. Oakland’s Good Jobs Policy mandates that a certain percentage of jobs associated with the redevelopment of a decommissioned army base be reserved for workers from Oakland and that another portion be reserved for disadvantaged workers. Additionally, these programs can limit the use of temporary workers, and ban pre-screening for criminal records. This Bergen County ordinance ensures that workers are paid the highest of either 150 percent of the federal minimum wage, the county collective bargaining-agreed wage, or the rate provided under a preceding contract. New York’s Healthy Terminals Act ensures that airport workers receive health coverage and fair wages. Houston’s Pay or Play program requires contractors to either provide employee health insurance or contribute $1 per hour worked to a fund aimed at providing care services to uninsured individuals in the Houston area. This Center for American Progress report provides strategies for using procurement to improve labor standards and includes strategies for evaluating contractors.
Taking it to the Next Level
Procurement policies do best when paired with anchor institutions, large organizations tied to their surrounding communities, such as hospitals, universities, and airports. For example, local governments can encourage anchor institutions to implement their own high road procurement policies through both carrots and sticks. Cooperation can be incentivized through proactive grant-making, favorable zoning policies, political pressure, and legislative mandates. In St. Louis, the community-based entrepreneurial support organization WEPOWER works with anchor institutions to integrate WMBEs into their supplier and procurement networks. At the same time, collaborating with anchor institutions in this way can increase workforce training as well as jumpstart job creation and wealth building (see ProGov21’s Anchor Institutions roadmap for more).
High road procurement should also promote environmentally-conscious business practices. Orange County’s Environmentally Preferable Purchasing Policy establishes emission limits, recycling reimbursement programs, and encourages sustainable materials for all county procurement. Sonoma County’s sustainable purchasing policy defines procedures for identifying environmentally preferable products and materials. New York State’s Greening Report reviews actions taken by local governments to improve sustainability and highlights the NYPA and MTA’s investments in carbon-neutral vehicles. If local leaders are to ensure such development is equitable in all senses of the word, such measures will be crucial.
Allies, Advocates, and Advisors
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