If you run a small business, chances are that anchor institutions surround you. It could be a hospital, a University or even a local government agency. Put simply, anchors are organizations tethered to the community they serve. Every year anchors spend large portions of their budget on operational expenses and, sadly, much of that money isn’t spent locally. So how does a community transfer millions in procurement dollars to local businesses? David Barna from Source Detroit has the answer. In last week's inspirational Local First webinar Barna explained how Source Detroit has shifted millions of procurement dollars to local businesses.
For the past few decades Detroit has seen a population exodus from the city to the suburbs. As people left, so did many of the businesses. Source Detroit wanted to change this. Focusing on midtown Detroit’s three biggest anchors (Wayne State University, the Detroit Medical Center, and the Henry Ford Health System) Source Detroit aimed to transfer some of the roughly $1.6 billion dollars spent every year by the three anchors on operational expenses to locally owned businesses. To date, more than $16.5 million dollars has been shifted to local businesses.
Now that we know that shifting procurement to local businesses is a successful strategy to create sustainable, resilient local economies, how does one go about replicating it? Barna offers a few tips. First, identify vendors. Look through anchor spending reports to see what businesses they currently use. This information isn’t always public so creating relationships with the Chief Procurement Officers at the anchor institutions is paramount. Then, create your own list of local vendors and see where there’s overlap. Keep in mind that some local businesses just aren’t capable of handling large anchor contracts. Although Barna admits it isn’t an exact science, if a local business has more then one million dollars in annual revenue it’s usually capable of handling an anchor contract.
Next, begin matchmaking! Find out what contracts are up for RFP (Request for Proposal) and connect businesses with the appropriate RFP’s. If you can, try to forecast when contracts are up for renewal. The bottom line is making sure local businesses have access to RFP. After all, if they don’t know a contract exists, how can they win it?