Making Spend Matter Toolkit - Preston basic and advanced spend analysis case studies

The following case studies provide practical examples of how Preston carried out the following two processes to understand, explore and adapt the Making Spend Matter Good Practice into their city:

Core transfer (basic spend analysis)
Optional transfer (advanced spend analysis, developing a strategic approach to public procurement, SME engagement and using social and environmental criteria)

Basic spend analysis case study

At the outset of the transfer activities, Preston set out three key purposes for activities associated with basic spend analysis at the local level.

First, they wanted to use the URBACT Local [stakeholder] Group (ULG) process to build capacity amongst the anchor institutions involved (UCLan, Preston's College, Lancashire Constabulary, Community Gateway Association, Preston City Council) to undertake the spend analysis themselves, and to take ownership of the process and the findings. This is because previously the analysis had not been undertaken directly by them but rather by CLES. Therefore, the process was that CLES provided training to PCC in the use of the tool, who in turn provided training to ULG members, thereby transferring the skills to them. Alongside this, a collective term of reference was developed to set out the methodology and scope of the collective spend analysis to be undertaken.

Second, they wanted to further explore the quality of the data held by anchor institutions and the barriers associated with the anchors undertaking the analysis themselves, in order to improve the spend analysis process

Third, and related to interpretation of spend analysis and wider aspects of being more strategic in procurement, they wanted to use spend analysis to build a stronger evidence based for organisational and place-based objectives for Preston and Lancashire.

Taking part in the ULG has enhanced our understanding relating to the why and how we could improve our procurement practices - in particular, around trying to improve on and further embed social value in procurement. The ULG has helped identify the challenges that are being faced collectively and how we can come up with solutions that work for us as a group and as a place. At UCLan we had undertaken Social Value in the past, the work of the ULG has impacted on our development of Social Value leading us to do more; building a process around Social Value, creating a less ad hoc approach, maximising the benefits to UCLan and using the continual loop feeding back to further embed any learnings into our future work.

Brett Dixon, URBACT Local Group member, UCLan, Diary Entry

The spend analysis findings

Preston, like their partners undertook spend analysis in relation to geography, sectors and SMEs. They also included a very relevant local factor, which is around exploring levels of procurement spend with businesses and other organisations in areas of deprivation. The spend analysis was undertaken across five anchor institutions (see above), with the findings for each institution collated to provide the following collective findings:

The percentage of spend with Preston based suppliers had remained broadly stable when looking at the trend of spend over the seven years. There had also been an increase of spend within Lancashire over the same period. Spend within two new areas of geography had also been explored for the first time - the Functional Economic area of Central Lancashire (comprising the three neighbouring authorities of Preston, Chorley and South Ribble) and the North West (comprising Lancashire, Cumbria, Cheshire, Greater Manchester and Liverpool)
Approximately half of the spend of the anchor institutions in Preston was with suppliers based in the 20% most deprived wards nationally, as identified through the Index of Multiple Deprivation;
A third of spend was with SMEs, with SMEs forming just under two thirds of the supplier base of the anchor institutions;
The two sectors with the highest levels of spend were works (construction) and ICT.

This was work undertaken with the anchor institutions. There was added value in this process because the spend analysis methodology and tool was presented to all the ULG members and not just the anchor institutions involved. As a result, other ULG members built on this learning to shape their own approach to undertake spend analysis in their institutions.

Interpreting the findings

Preston adopted a very data and evidence-based approach to interpreting their spend analysis findings. Given this was the third time that anchor institutions have undertaken the analysis, this enabled a deeper assessment of change and trends to be explored. A number of findings were identified.

First, that in comparison to previous rounds of analysis, there was an increase in spend in Lancashire - this suggests that previous work around supplier engagement, breaking contracts into smaller lots, and embedding social value have had an impact.
Second, the findings suggest the influence that works (construction) spend has across the five anchor institutions, with there being significant spend with this sector in the financial year analysed.
Third, the findings highlight the growing strength, diversity and resilience of the Lancashire business base and economy - organisations based in the Lancashire region are now more skilled and capable when it comes to procurement and have the required capacity to bid for opportunities.
Fourth, there remains a key proportion of procurement spend which is outside the North West Region, reflecting the specialist nature of some of the good, services and works which the anchor institutions procure.

Re-using the transfer

Preston will continue to look to become more strategic in its approach to procurement and will seek to continue to engage with other local authorities and organisations in Lancashire as part of this journey.

Preston City Council, in particular, will look to further embed social value into procurement, with spend analysis findings being just one indicator or outcome associated with the development of a Social Value Procurement Framework.

Advanced spend analysis (SME engagement) case study

Preston is a medium-sized city located in the county of Lancashire, North West England, and has a population of 141,800. It is part of a larger Functional Urban Area (FUA) which is often referred to as Central Lancashire covering the local authority areas of Preston, Chorley and South Ribble, and which has a combined population of 365,000 people.

Preston's primary sectors of employment are public administration, professional and financial services, manufacturing, logistics, construction and retail.

Preston has a sizeable local small and medium-sized business base - 5,425 active business enterprises in 2020, of which 4,750 are classed as micro (0-9 employees), 550 are classed as small (10-49 employees), and 95 are classed as medium (50-249 employees).

However, Preston also has a relatively low wage economy and a growing mismatch of skills between higher and lower level which needs to be resolved.

Public procurement is an important priority within Preston's Community Wealth Building Strategy 2.0. This Strategy has at its heart the concept of the creation of "social value" that is outcomes that improve the wellbeing of communities, the resilience of the local economy and the sustainability of the environment.

Why engage with SMEs

With almost 98% of Preston's businesses being micro or small, engaging with this business base is really important for the economy of the City both in terms of direct spend through the public procurement contracts, or indirect, through the supply chain, and / or employee spend.

Spend analysis results over the last seven years have shown that the number of SMEs based within the Preston district who win public procurement contracts from the City Council and the Anchor Institutions has remained broadly stable, however the number of those based within the wider Lancashire boundaries has increased.

The question is whether there is scope to further increase the number and type of different businesses participating engagement in public procurement opportunities both in terms of locality and / or sector (i.e. diversification of the market), or whether the business base is simply not supplying what the Anchor Institutions are buying. To understand this better, Preston needs to know more about what businesses are out there.

Barriers / challenges:

Preston has faced a number of barriers over the years when it comes to engaging with SMEs. These include:

How to raise awareness and visibility of opportunities, particularly smaller ones, so that SMEs know where and how to access them, and more importantly when to look for them, thereby increasing the diversity of potential suppliers - both numerically and by type;
How to reduce public procurement bureaucracy, particularly in relation to complex documentation or procedures;
How to engage more directly with SMEs within the existing constraints of public procurement processes (pre-market engagement);
How to improve buyers' understanding of SMEs in regard to the type of services and the level of skills and added value which smaller suppliers can deliver, which in turn will have a positive influence on how public tenders are designed and enable SME to better express their specialisms, added value and competitiveness during the tender process;
How to improve SME capacity to bid for tenders.

Actions taken / changes made

Preston has undertaken a number of actions in relation to better engaging with SMEs and raising awareness of procurement opportunities. These include:

Holding an SME engagement workshop with the local procurement practitioners' group (Making Spend Matter URBACT Local Group) to discuss barriers (described above) and possible solutions and how these could be implemented;
Reducing bureaucracy by simplifying tender documentation where possible;
Raising awareness amongst suppliers of public procurement opportunities, particularly those of lower value which may not be advertised on procurement portals, using the North and West Lancashire Chamber of Commerce and Federation of Small Businesses Newsletters;
Considering how gaps in the market can be filled, for example through other types of businesses such as co-operatives or social enterprises;
Undertaking a business survey to understand better the challenges facing SMEs - these confirmed that those challenges already identified above were correct;
Participating in / planning for Meet the Buyer events and other ways of engaging the market;
Exploring what type of economic, social and environmental considerations are currently included in public procurement opportunities, e.g. through the use of Social Value Procurement Frameworks, and how these can be used to support the SME base;
Providing training for SMEs on tender and bidding processes;
Exploring the feasibility of establishing a single business database of potential suppliers which is accessible to all Anchor Institutions.

What worked well

Activities which have proved successful include:

Supplier survey to better understand what types of businesses bid for procurements and who with, and where they look for these opportunities to be advertised;
Sharing of low value procurement opportunities by business support organisations to promote market diversification;
Training SMEs on tender and bidding process;
Sharing knowledge and experience amongst public buyers of the use of social and environmental considerations in tenders;
The publication of institutions' guides on "How to do business with us".

What didn't work so well

There are things which have been tried which have worked less well:

General supplier days and Meet the Buyers are a less efficient use of time for public buyers as well as potentially for suppliers;
A lack of feedback/evidence regarding supplier training / awareness raising has made it difficult to assess whether the training has made a difference;
Despite the simplification of documentation where possible, there have still been occasions where the simplified documentation is incomplete / not completed correctly, revealing an ongoing training need;
Data protection rules (GDPR), and the cost of building and maintaining a single business database has proved prohibitive.

Lessons learned

Through the actions they have taken Preston has learned the following:

There is no right or wrong way to engage with SMEs - what is key is communicating with them in the first place;
Change takes time - it is an ongoing process;
There is a continued mismatch between buyers and suppliers between what the buyers are buying and suppliers are selling which is proving difficult to resolve;
Business support organisations can play an important brokerage role, sharing procurement opportunities and supporting capacity building through training;
Engaging with different types of business, for example private, community, social enterprise, co-operative, is important but also understanding their different unique contexts and what they can bring to the table, in order to collaborate well through public procurement is key;
Collaboration between anchor institutions and taking a strategic approach is vital to a place-based approach, to avoid re-inventing the wheel due to working in silos.