What Works Centre for Local Economic Growth

Year of publication: 2018

This briefing considers the theory behind local procurement and available evaluation evidence for it as a tool for local growth. It finds there is no evaluation evidence covering whether local procurement strategies generate local economic growth, with no robust evaluations of local procurement schemes.

What limited evidence there is from the USA suggests that using procurement preferences to increase the flow of funding to targeted businesses may work in some cases, but the applicability of this to local procurement is unclear.

Given the lack of evidence, the briefing delves into what underpins local procurement policies, including empirical evidence, economic theory and legal considerations. Implications of local procurement are higher costs due to preferential treatment for local companies as opposed to lowest price, reduction of competition and further raising of procurement costs, difficulties defining ‘local’ given people commute across local authority boundaries and lack of scalability.

A suggested solution to some of the problems with local procurement is improving SME participation in procurement bids. The evidence base for such support policies is more advanced than local procurement. The Centre encourages UK piloting and testing of direct approaches to helping SMEs overcome procurement barriers, and asks interested authorities to get in touch.

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