Robert Cervelli. Photo: robertcervelli.ca
A newly released study suggests that public institutions such as Mount Allison University and the Town of Sackville could generate greater wealth in Atlantic Canadian communities if they bought more of their goods and services locally.
“It’s money that stays in the economy and works in the economy,” says Robert Cervelli, executive director of the Nova Scotia-based Centre for Local Prosperity.
“It helps regenerate the economy by keeping that money circulating.”
The study, called Assessing the Potential for Local Procurement as an Economic Engine, says that every dollar a public institution spends buying goods and services from a locally owned business creates a multiplier effect of two to four times more jobs and other economic benefits than a dollar spent in a similar, non-locally owned business.
“Even a 10% shift [in procurement spending] can have a significant effect particularly when you look at the multiplier effect,” Cervelli says.
Colleges and universities
The study, financed by the Atlantic Canada Opportunities Agency, assessed procurement spending by two medium-sized, post-secondary educational institutions with average student enrolments of 6,486. (The educational institutions are not identified in the study.)
The post-secondary institutions, from two different provinces, each spent an average of $27.8 million in 2019-20 procuring goods and services with 59% of that money going outside their provinces and 22% outside Atlantic Canada.
The study says that a 10% shift to local procurement would generate an additional $2.8 million invested in their local economies and a total economic stimulus of $3.5 to $4.8 million when the multiplier effect is added.[efn_note]The study uses what it calls a “conservative range” of 1.25 to 1.70x when calculating the multiplier effect.[/efn_note]
Municipal spending
An analysis of procurement spending by two unidentified municipalities in different provinces with populations in the 17,000 to 23,000 range showed similar results.
Each spent an average of $18 million buying from their top suppliers with 25% of that money going out of their provinces and 21% outside Atlantic Canada.
The study says a 10% shift to local procurement would generate an additional $1.8 million in local economies with an overall economic benefit of $2.2 to $3.1 million when the multiplier effect is taken into account.
‘Procurement culture’
The study points out that in the past several decades, public institutions’ procurement policies have shifted to an emphasis on achieving cost savings through centralized buying from fewer and larger suppliers. International trade agreements have reinforced this trend to non-local procurement.
“There’s an impression by a number of procurement professionals that you really can’t legitimately purchase locally,” Cervelli says. “But when you take apart things, particularly the trade agreements, you’ll see that there’s a lot of flexibility in there.”
Cervelli adds, for example, that public institutions can add criteria in their tendering processes to include local economic benefits.
“It doesn’t matter where a supplier is located, they could be in the U.S. or anywhere else, as long as they can demonstrate providing some degree of local benefit, then they could be awarded the contract.”
Taxpayer value
Cervelli says that public institutions such as municipalities have been concerned about getting the best value for taxpayers when they buy goods and services.
“It tended to be defined just as the lowest cost, [so] you’re getting the most widgets, for example, at the lowest cost.”
But he adds that the concept of value is starting to be defined more broadly.
“Taxpayer value comes down to how well are you keeping wealth in the economy and building local wealth,” he says. “So, lowest cost does not always translate into best value.”
The study mentions the provincial government’s New Brunswick First Procurement Strategy as an example of public institutions working toward building local wealth.
“They realized that the more procurement that they can do within the province of New Brunswick, the better off it will be for the New Brunswick economy,” Cervelli says.
Earlier study
The Centre for Local Prosperity’s study on local procurement grew out of an earlier one that showed Atlantic Canada imported $11 billion more in goods and services in 2012 than it exported to other places.
That 2018 study said that money “leaks” out of communities when they buy imports and that if there were a 10% shift in spending to local goods and services, the four Atlantic provinces could gain 43,000 jobs, $2.6 billion in wages and $219 million in new tax revenue.
“So, then the question became, as a follow-up to that study, how do you start plugging the leaks?” Cervelli says.
“It became quickly obvious that the most gains can be had by working with the bigger spenders which are the public-sector institutions because they’re each spending tens or hundreds of millions of dollars every year and the question becomes where does that money go?” he adds.
“So, that’s why we looked at localizing procurement in public institutions.”
After reading some of the reports cited in this article, it’s clear that our Town needs to seriously consider the implications reported. “Buying Local” has become the tone of advice given to our citizens, yet when it comes to our municipality’s spending habits, the word ‘local’ seems to mean ‘anywhere in Canada’. Hence we recently purchased a piece of ‘public art’ from Vancouver BC, for $28,000. How much more benefit could that money have generated for our municipality, or even for our province, if it had been spent locally?!
Sharon I completely agree with you and I wrote the exact same comment on said sculpture a few weeks back. We’ve contacted many local professional artists (there are only a few capable to create such a call for entry) and no one received an email or any communications from the town. Unfortunately the town doesn’t want to hear what we have to say as my letters to them go unanswered (this too has been documented). So much for the tax payers worth in this town when we go ignored.
“We’ve contacted many local artists (there are only a few capable to create such a call for entry” Who are these “we’ve” and who did you contact and how did you become the person who can make judgements as to who is capable of anything creative…
People shop where they want to shop… that’s called free market capitalism…. if you don’t like capitalism I would suggest that your shopping choices are your own and no one should allow themselves to be socially engineered about their shopping choices… also, remember this: if you think capitalism is bad you really won’t like the alternative folks. Thanks for this article Bruce… I’ve had my eyes on Cervilli’s crew for a while.. and the people who are promoting it – most change agents and local ‘community organizers’ — the people I tend to track and disregard… like I’ve mentioned before… letting others form your opinions is not a good idea. Shop where you want to shop; stop trying to micromanage others’ choices. Live and let live. Online shopping has soared during the pandemic … no signs of that changing and if you have a small business it might be the only reason you have survived thru this awful shut down and lockdown of our freedoms. Think.
This report is not about where people shop as individuals but rather where our governments and public institutions spend their money. As a taxpayer, I want to know that my government is supporting local businesses and keeping money circulating in our economy rather than shipping 42% of it outside of the region. It not only makes common sense, it makes economical, social, and environmental sense.
Last night’s Town Council meeting gives us yet another very clear example of our Town managers doing the exact opposite of what this report talks about. The company which town staff has recommended hiring to do our summer flower beds was said to be located “just outside Moncton”, but a little checking online shows they are actually located in a little place called Osborn Corner, which is ‘just outside’ Dawson Settlement, which in turn is “just outside” Hillsborough, which is in Albert County.
It’s said that every dollar invested in your own community will touch / benefit at least SEVEN other people in some way. That’s the ‘trickle-down’ effect. Sending that money (over $32,000 for a 2-year term) ‘out of town’, plus ‘out of county’, means all the side benefits from those dollars would be completely lost to our town, and will instead benefit some other municipality.
It’s hard to imagine there is no way for this to be done ‘in-house’, as staff has suggested is the case. The fact that no local company chose to submit a bid on this project does not mean that it could not be done by town employees, working alongside the numerous summer students they hire each year. With proper guidance and supervision, those students should be able to handle such a simple task of planting and weeding flower beds! Home gardeners do it all the time, without benefit of a ‘professional company’, and we have some really lovely yards and gardens around town each year, to prove the point.
Then, our Town has supposedly adopted a ‘climate change lens’ which is meant to influence all decisions and projects. From Osborn Settlement to Sackville and back again entails 2 hours of driving, each time they come to town to look after the flower beds. Not sure how that amount of fuel consumption and greenhouse gas emissions fits in with that ‘climate change lens’.
Finally, in this ‘time of Covid’, NB citizens are advised to remain within our own locality, and not to travel around to other areas, with the goal being to prevent any unnecessary virus spread. So, our town will have a work crew coming from another county, working on Sackville’s flower beds, which are largely located along downtown sidewalks where local citizens regularly pass by. Is this responsible Covid pandemic behaviour?