Local Government Magazine

Is buying locally the answer for council procurement?

By Peter Silcock

The ‘buy local’ movement has seen a renaissance over the past year, but the jury is still out on whether councils are embracing the trend in their procurement practices.

For everyday Kiwis, the benefits of buying locally have been brought into focus by the global pandemic. Buying in your community makes it easy to ask questions and ensures products arrive quickly – a key consideration when global supply chains are disrupted.
It also comes with the feel-good factor and tangible benefit of supporting local businesses and ensuring they remain in the community for years to come. But are these benefits quite so clear for councils looking to contract out work on local roads, water networks and other infrastructure?
On the one hand, councils need to make sure they are getting the best possible value for ratepayer dollars. On the other hand, they want to ensure money and employment opportunities stay within the district, and adequate capacity is retained locally for future projects.
Spending ratepayer dollars wisely is critical with rates in many communities at an all-time high. But it’s this bigger picture – retention of capacity and social and economic benefits for the community – that is sometimes overlooked, and which should sway the debate in favour of procuring locally. Not to mention the fact that contractors living locally are sometimes less expensive and often have a better understanding of a region’s geography and any longstanding community concerns about a project or site.
The need to factor in socio-economic impacts during procurement decision making process is acknowledged in the Government Procurement Rules, as is the value of increasing employment and, specifically; “the size and skill level of the domestic construction sector workforce”, of which civil contractors are a part. Likewise, many councils have introduced policies encouraging procuring products and services from businesses within their territorial areas.
Opotiki District Council’s procurement policy states that it will, “encourage the use of local suppliers and local labour”, and Clutha District Council’s’ policy says it will, “give local suppliers a full and fair opportunity to compete” and “make it easy for suppliers (small to large) to do business with the council”.
Similar wording is included in the many other local government procurement policies, including those of urban councils like Wellington City Council which adopted a new procurement policy in February.
However, it’s not clear that policies such as these always translate into reality.
There are still instances where councils do not give due consideration to local businesses – sometimes because other conditions they have imposed for pre-qualification of a prospective supplier have stacked the cards against smaller more local operators.
I’m aware of one recent instance where a council locked a local contractor out of submitting a tender because one of their criteria was that prospective contractors had to have worked on a project valued at over $6 million.
The local contractor had previously worked on two $5 million jobs simultaneously, but because neither of those projects crossed the $6 million threshold, the contractor was barred from taking part in the tender process.
Most would agree that in a case like that, a bit more common sense is needed. Providing opportunities for smaller contractors is critical to allow for more competitive tenders and to foster capability building and innovation. It’s difficult for local suppliers to develop the skills they need to work on larger projects if they are locked out of the process entirely during pre-qualification.
Keep in mind that the big players, including multi-nationals, can still have a local presence. It isn’t where a contractor is headquartered that is important, but whether or not they have a strong presence in a community. This presence could be local offices, locally based managers, or a field workforce that lives within a regional boundary.
When it comes to assessing the socio-economic outcomes of using a specific contractor, it’s not so much the size of their business that matters, but how much their involvement will benefit the community a council serves through local employment and economic impact.
The value of procuring locally will be amplified in coming years. Major investments signaled in the water, transport, energy and residential building sectors will result in multiple projects being undertaken simultaneously across the country, placing even more pressure on industry capacity nationally.
There is a shortage of infrastructure workers and councils that procure locally and factor in the benefits of retaining capability in their regions will see significant benefits. Think lower project costs and more buy-in and care from people working on your projects.
Councils that want to encourage local procurement can do so in many ways, whether it is updating procurement policies and briefing staff on the process and benefits or reaching out to local suppliers and industry to get a feel for what is out there.
Civil Contractors NZ has local branches around the country that are more than happy to assist council staff to grow their understanding of the contractors and skill sets in their regions. There are immensely talented contractors all over the country and many of them are crying out for opportunities to contribute to the communities where their staff live and work.

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