Economic development
Economic development

Economic development

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What is it?

For many industries contracting has become a global affair, governments are rightly keen to gain economic advantages from a global economy but need to ensure that contracting can also be used as a driver to create jobs and innovation within their own region. This use case describes the use of procurement analytics and datasets to drive economic development forwards across particular industries or geographical regions within an economy.

Why do it?

By encouraging economic development public procurement can be used to increase skills and create jobs, particularly in areas of financial deprivation or within an industry that has the potential to create significant growth. Properly implemented, a good economic development policy can result in more diverse economies and greater growth. In some cases it can in turn reduce poverty and inequality, increase integration within an economy, and increase tax revenue.

Benefits

Analysing public procurement’s impact on an economy can have a range of positive effects for suppliers and entrepreneurs who believe that they can support government with their products or services.

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Research shows that spending with smaller companies provides greater returns for tax authorities and new jobs can reduce govt costs.
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Most innovation happens in smaller companies, engaging with them can deliver significant advances for governments.
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It is possible to create a virtuous cycle that helps small companies grow into large companies just from government business.

How open contracting data helps

Data on local firms, supplier’s commitments to apprenticeship schemes or commitments to using local subcontractors can all be used to monitor and measure the efforts associated with economic growth. By simply measuring the number of contracts won by local firms is a good way to start measuring the impact that purchasing can have.

Options for implementation

Economic development is a rich area for analysis, with governments often being able to draw on their own economic data from tax records and public company registers. We outline some simple steps that can be taken to analyse the impact of procurement in economic development.

Option 1: Measure contracts awarded

Buyers can measure the value and number of contracts awarded to suppliers based according to location, size or industry. Simply recording this and looking to see if the number of awards increases is the simplest way to start measuring economic development impacts.

Option 2: Measure commitments to local job creation by suppliers

The more and better data that exists around supplier and contracting and spend, the more buyers can analyse not only how much money is going to their local regions but also compare public spend with other important economic development metrics such as deprivation indexes, location of minority owned businesses.

Option 3: Look for local firms used by other parts of government

Buyers can search for local firms who have performed similar contracts based on category, specification, and value. A register of contracts with clean and complete OCDS data will enable this.

Option 4: Measure contracts to high growth industries

Buyers can identify categories of interest and measure the growth based on contracting spend compared to previous years. This can extend to key industries of interest subordinate to larger industries, for instance those further down the supply chain.

Getting started (1)

What can you do in your organisation?

No code
Low code
Code
Option 1: Measure contracts awarded
Track and monitor contracts awarded on simple spreadsheets and common analytics tools (e.g. Excel). Use Silver Eye to turn this data into OCDS.
Create dashboards that allow analysis of buyers, suppliers, categories. Create flags on contracts registers or portals for key economic indicators: e.g. minority owned businesses or SMEs
Link contracts award data to other metrics, such as spend data, quality metrics from regulator data (for healthcare or education settings)
Option 2: Measure commitments to local job creation by suppliers
As part of the spreadsheets for contracts, add supplier addresses. Where this is not available, mandate these from suppliers as part of tendering and contracting.
Extend the dashboards to show outflow of money and assignment of contracts to local businesses, based on ZIP codes or other address data provided.
Create regional dashboards that use machine learning geolocation to show where contract monies are being spent (thereby relying less on data entry). Break down spend by region down to ZIP code, creating heat maps that show where investment and monies are going and overlapping these heat maps with other measures such as deprivation indexes, location of minority owned businesses.
Option 3: Look for local firms used by other parts of government
Securely share spreadsheets through inter-departmental or inter-authority open data agreements
Identify local suppliers through contracts databases
Create a ‘recommendation list’ (e.g. have you considered X?) for buyers when choosing supplier lists
Option 4: Measure contracts to high growth industries
For top spend contracts, manually read through specifications to identify sectors As part of contract publishing, assign a pre-defined category.
Set up a contract opportunities website. Extend the data format in contract opportunities website to include category?
Apply an auto-classification label to tenders and contracts and compare with data from national statistics around growth sectors.

Goals for implementers

Better data on the way that contracts are marshalled to deliver economic growth can meet multiple goals. In the first instance, governments need to be able to report on their work:

→ That a policy has been implemented

→ That a policy has been effective at creating growth

→ Where a policy has been more or less successful

As well as public statements on policy implementations the data can be used to generate a viable feedback loop that provides detailed information on the effectiveness of a policy, including where a policy has been able to gain the most traction. Analysis should be able to give teams the following insights:

→ To know which geographic areas achieve better outcomes

→ To know which industries or categories achieve better outcomes

→ To know which types of buyer achieve better outcomes

With robust data in place, it will be possible to work with the most successful teams to find out what they are doing to achieve success and what other buyers should avoid if they want to have a positive impact.

What are your measurement options?

There are a wide range of analysis options in this area, we have already considered the issue of job creation but the scope of socio-economic analysis is very broad and does not have to be limited to job creation. Seeking to direct funding to different areas of your economy can be measured in multiple different ways. Below we outline some of the areas that you can consider:

  1. Measure contracting commitments that have been made using different features:
    1. Supplier’s region (e.g. number of contracts awarded to suppliers in City X)
    2. Economic profile of supplier’s region (e.g. value of contracts awarded to locations with a poor socio economic profile)
    3. Distance between buyer and supplier (e.g. test number of contracts awarded to local suppliers),
    4. Supplier size (e.g. contract awarded to small business),
    5. Supplier’s charity status,
    6. Supplier’s social enterprise status
  2. Record when buyers make reference to socio-economic factors in their tender notices
    1. Count the volume of tenders that score for socio-economic factors.
    2. Count the value of tenders that score for socio-economic factors.
    3. Record impacts related to these tenders when published.
    4. Record which buyers publish these tenders.
    5. Record which suppliers win these tenders.
    6. Record whether tenders encouraging engagement by a given type of organisation (e.g. small businesses) returns increased numbers of bids from these organisations.
  3. Evaluate all activities by category
    1. Establish whether different categories are likely to deliver better socio-economic outcomes.
    2. Determine whether policy take up varies by category.
    3. Explore suppliers by category and encourage those that can deliver better outcomes to bid for work.
  4. Look at the root causes of better socio-economic outcomes
    1. Where a buyer has successfully delivered a positive outcome, it makes sense to determine what conditions made this possible.
    2. Record the key features of successful contracts, reference technologies, metrics and outcomes

Through insights gained from the data, buyers can use this to direct more spending in public procurement to deliver greater productivity and growth. If published openly, suppliers can use the data to make positive changes to their own organisations and to deliver improved bids for future contracts.