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Cross sector spin-outs can help councils buy for good

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I could almost hear the sigh of relief from social enterprises when the much-amended Public Services (Social Value) Act was passed in February. But for local authority commissioners, the journey is just beginning. With pressure from all sides to reduce costs and improve service quality, this bill poses yet another procurement challenge.

It’s that age old problem. Should local authorities use national supply markets to benefit from low prices or should they buy from local suppliers to support local businesses and create jobs?

Birmingham City Council has already begun to tackle this issue by adopting a procurement policy for jobs and skills. But as we watched the bill make its way through parliament, we looked at how we could develop this policy further - once and for all solving the dilemma of sustainable outcomes versus efficiency.

Our objectives were many. We wanted to continue securing the best terms from suppliers. We also wanted to promote local economic regeneration - not just supporting businesses but supporting the people behind those businesses. We were also keen to use purchasing to cut carbon emissions.

But the wish list didn’t end there. As the country’s largest local authority we wanted to use our buying power to help our neighbours. The goal was to encourage public bodies that would otherwise see Birmingham City Council as a threat to take advantage of the low prices we could negotiate.

It was agreed that the only way to achieve such wide-ranging aims was through a public service spin out rooted in the social economy. A social enterprise could operate independently from the council, using business methods to achieve savings and social outcomes.

In early 2011 myself and Neil Hopkins, head of strategy and performance at the council began to work up this idea. Neil will be describing this process in more detail at procurement event PfH Live on 13 June. He and I realised that to get the buy-in of organisations across the public and third sectors we needed other bodies on board.

Months later five founding members launched ‘Buy For Good’ (BFG). They included Accord and Optima, the two biggest housing associations in the West Midlands; Birmingham Chamber of Commerce, representing local SMEs; the Initiative for Social Entrepreneurs and Birmingham City Council.

This cross-sector mix of board directors allowed us to speak with authority to organisations from the private, public and third sectors. Twelve months on and eight bodies now purchase through BFG. They include emergency services, social enterprises and several local authorities. Next year we want schools, health trusts and universities to benefit from our agreements.

These frameworks have been specially developed to achieve that delicate balance I spoke of earlier. Free from the red tape of local government procurement, we were able to design locality based contracts that channel money into local supply markets. Agreements including coach hire and the installation of electric vehicle charging posts have harnessed the £12m spent through BFG last year, using it to provide employment and training at four SME suppliers in the region.

Minimising environmental impact is also integral to each framework. We have four live agreements and another four currently being developed. Carbon reduction is at the heart of each one. From document sharing and retrieval to building demolition, each contract aims to reduce the environmental impact associated with providing goods and services.

So far Birmingham City Council has saved 35% on the micro-generation framework alone and it also earns a regular income on the procurement resource it provided when BFG was first set up. Other BFG members report that they have made significant back office savings by tapping into this OJEU compliant procurement resource. They are also taking advantage of framework prices far below those available on the open market.

This self-funded back office model for delivering shared services is not costly and it wasn’t difficult to set up. I would encourage local authorities around the country to consider a similar system. But a cross-sector approach is key. BFG wouldn’t have worked had it not been set up by a mix of local government, social enterprise and business organisations. It shows just how effective partnerships between the public, private and social economies can be.

Find out more about Buy For Good at procurement event PfH Live from 12-14 June http://www.procurementforhousing.co.uk/pfhlive

Jack Glonek, assistant director economic development, Birmingham City Council

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