Procurement

Written by Walker Kahn, Griffin Beronio, Gianmarco Katz

What’s the Problem? 

All counties, cities, and towns spend money purchasing goods and services: in 2021, this spending reached more than $2 trillion and accounted for about 10 percent of the US GDP. Historically, government procurement processes have prioritized cost over all other factors, which rewards large corporate actors that cut corners, underpay workers, and forgo local suppliers or workers, thereby creating a race to the bottom and taking money out of the local economy.  

Local governments can establish policies to use procurement to encourage high road business practices and create value for the whole community. The Supreme Court has established that local governments spending locally raised revenue may establish procurement policies that prioritize more sustainable, worker-friendly, and publicly accountable partners. Establishing procurement policies that prioritize local businesses and local workers circulates money through the local economy, creating an economic multiplier that drives more growth than spending with companies and workers located outside the community. Further, responsible procurement policies do not necessitate substantial cost increases. 

There are hurdles to these kinds of high road procurement strategies. State legislatures captured by corporate interests have worked to limit local governments’ traditional autonomy around issues like procurement (see ProGov21's Home Rule Roadmap for more information). Project Labor Agreements (PLAs), which allow local governments to establish safety and compensation standards on municipal projects, have particularly become a target of state government preemption: of the 23 states that preempt PLAs, only two had these laws on the books before the year 2000, while 21 have been passed since 2010. 

What are People Doing? 

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. The City of 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. For other pragmatic guides, the ProGov21 library contains sustainable procurement toolkits for harnessing the power of procurement. 

Local businesses often lack the experience and resources necessary to succeed in the “long, difficult, and expensive” government contracting process. Small local businesses often need help developing capacity to become viable procurement partners — but investing in this help can be treated as an investment in community development. Tacoma, Minneapolis, and Houston, for example 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. Similarly, Minneapolis procurement policy offers preferences to prime contractors but requires specific commitments to small business subcontractors at the time that a bid is submitted. Houston’s Build Up Houston program offers an intensive 7-month training program to prepare subcontractors in the construction sector to become prime contractors, emphasizing capacity building and information related to insurance and bonding. 

Local governments can improve equity while building small business capacity by improving communication with small businesses and subcontractors 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. The Mayor of Boston recently expanded this effort through an executive order that creates resources to help city procurement officers identify and work with WMBEs and veteran-owned small businesses. 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 policies can develop the local workforce by prioritizing contractors that hire local workers, pay good wages and benefits, and provide skill development and job training services to their workforce. These policies are not only strongly associated with higher productivity, but have positive community spillovers: better-paid and better-trained workers attract employers and increase spending at local businesses. Some local governments require project labor agreements, which are collective bargaining agreements between construction unions and construction contractors that establish the terms and conditions of employment for construction projects: these traditionally require hiring from local union halls, but can also establish things like safety requirements or project-specific compensation.  

Similarly, first-source hiring programs create employment opportunities for residents living within communities most directly impacted by local development projects. Oakland’s Good Jobs Policy mandates that 50 percent of jobs associated with the redevelopment of a decommissioned army base be reserved for workers from Oakland, 25 percent of the jobs be reserved for disadvantaged workers, limits the use of temporary workers, and bans 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 and incorporating project labor agreements.  

High road procurement policies can also promote environmentally sustainable business practices. Orange County’s Environmentally Preferable Purchasing Policy establishes emission limits, and recycling reimbursement programs, and encourages the utilization of sustainable materials for all county procurement. Sonoma County’s sustainable purchasing policy defines procedures for identifying environmentally preferable products and materials. Procurement policies related to municipal buildings and transportation fleets are another way local officials can reduce emissions and promote sustainability. 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.  

Taking it to the Next Level 

Local governments should encourage anchor institutions to create their own high road procurement policies. Anchor institutions are large institutions or enterprises that are tied to their surrounding communities by place-based capital investments. Examples include hospitals, universities, and airports. Governments and community groups have both carrots and sticks to incentivize anchor institutions to adopt high road procurement policies: they can incentivize cooperation through proactive grant-making, favorable zoning policies or variances, political pressure and legislative mandates, pressure from coalitions of community organizations and labor groups, and IRS community benefits requirements. However, local governments and communities must establish strong working relationships with anchor institutions for these policies to be effective. In St. Louis, the community-based entrepreneurial support organization WEPOWER works with anchor institutions to integrate WMBEs into their supplier and procurement networks. See Leveraging Anchor Institutions for Local Job Creation and Wealth Building and other resources on the ProGov21 database for more innovative ideas for partnering with anchor institutions to drive high-quality employment, and check out the ProGov21 Anchor Institutions Roadmap for more on partnering with major local employers.  

Helpers, Allies, and Other Useful Organizations 

• Responsible Purchasing Network (RPN) is an international network of buyers dedicated to socially responsible and environmentally sustainable purchasing. 

• The Sustainable Purchasing Leadership Council links institutional purchasers with existing best-in-class guidance on sustainable purchasing. 

• The Institute for Local Self-Reliance has resources on building local community power, many of which highlight municipal procurement. 

• Femecomony offers a powerful toolkit for using government procurement to fight for gender equality.