The Impact of Local Authority Procurement on Local Economies
| Author | Ignazio Cabras,Frank Peck |
| Published date | 01 July 2011 |
| Date | 01 July 2011 |
| DOI | 10.1177/0952076709356859 |
| Subject Matter | Articles |
ßThe Author(s), 2010.
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0952-0767
201107 26(3) 307–331 The Impact of Local Authority
Procurement on Local
Economies
The Case of Cumbria, North West England
Frank Peck and Ignazio Cabras
Centre for Regional Economic Development, University of Cumbria, UK
Abstract Public procurementhas a significant impact on economic development in regions
and localities. Previous research in the UK has focused on variations in
government spending across regions, the effects of competitive tendering
processes and EU State Aid rules on regional economies. Empirical studies of
procurement at the level of local authorities have received less attention.
Increasing pressure to be ‘efficient and effective’ in use of public resources can
contradict the need to support local communities, particularly through a period of
economic downturn. Until recently, there has been a paucity of relevant dataat a
local level to examine the impacts of procurement. This paper analyses the
combinedpatterns of spend of eight Local Authoritiesin the County of Cumbria in
North WestEngland. The characteristicsof the supply base are investigatedusing
a two-stage survey of businesses that secure local authority contracts. Results
show the characteristicsof suppliers and their level of dependency on local
authority contracts. Managers’ evaluation of the advantagesand disadvantages of
contracting with the public sector are also analysed. The findings suggest that
many small and medium enterprises (SMEs) in Cumbria relyupon local authority
contracts for business stability. The interviewsconfirm the vulnerability of SMEs
to the currenttrend towards more formal approachesto public procurement and the
use of a narrow definitionof ‘value for money’. The paper concludes by
considering the implications of the findingsfor the extent to which local
authoritieshave retained a capacity to act to supportlocal economic development.
Keywords Cumbria, local authorities, local economy, new public sector management,
public procurement, sustainable procurement, value for money
DOI: 10.1177/0952076709356859
Ignazio Cabras, Centre for Regional Economic Development, University of Cumbria, Paternoster Row,
Carlisle CA3 8TB, UK. [email: ignazio.cabras@cumbria.ac.uk] 307
The spatial patterns of public expenditure and government procurement have a
significant impact on contemporary economic and social development in locali-
ties and regions. In recognition of this, the use of government contracting to
achieve wider socioeconomic benefits for communities and regions has prece-
dents in many different contexts (McCrudden, 2004). These include government
procurement practices designed to link contracts to generate competitive markets
(Caldwell et al., 2005), to promote ‘green’ environmental policies as well as
achieve social objectives. Examples of this practice can be found in a wide variety
of contemporary contexts including the use of ‘social clauses’ in the award of
public contracts in many European countries, South Africa and the United States
(McCrudden, 2004).
In the UK, there has been particular attention given to variations in government
spending across regions and the effects of competitive tendering processes and EU
State Aid rules on regional economies (Bennett, 2006; Fothergill, 2006; Pinch
et al., 2006). There is also a wider debate concerning the use of public resources
in general to achieve balanced regional growth. As Mackay (2001, 2003) has
argued, spatial imbalance leads to high inflationary pressure on the national econ-
omy and therefore public spending above tax in some regions to rectify this has an
economic rationale. This call for a return to ‘Post-Keynesian’ approaches to man-
aging the economy now has a much sharper focus as governments consider the role
of local authorities in ameliorating the impacts of recession in their communities. It
remains the case, however, that procurement professionals are increasingly faced
with demands that are often contradictory. One of these contradictions concerns the
juxtaposition of ‘value for money’ and the efficiency of procurement processes
alongside the emerging requirement to support local employment and small and
medium enterprises (SMEs) in particular, as part of government’s approach to
‘sustainable communities’ (Caldwell et al., 2006; Erridge, 2007; Erridge and
Nordi, 1994; Loader, 2007; Morgan, 2008).
Increased complexity of decision making in the procurement process can be
viewed as one outcome of a well documented trend towards new public sector
management embodying attempts to make managers more accountable for
‘efficient and effective’ use of public resources (Glynn and Murphy, 1996;
Osborne, 2002; Skelcher et al., 2003). However, these changes may have
intended (and unintended) consequences for local and regional economies. This
paper examines these issues using recent research conducted on businesses
involved in providing goods and services to local authorities within the County
of Cumbria in North West England.
Public Procurement and Regional Economies in the UK
Public procurement in general accounts for a significant proportion of demand for
goods and services, in the European as well as in the UK economy. According to
Public Policy and Administration 26(3)
308
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