EDC study quantifies the impact of increased local procurement
Today, as part of a commitment to inclusive economic recovery, EDC released a study and set of recommendations for large employers to support small businesses by buying local. “Anchor Institutions: Leveraging Big Buyers for Small Business“ analyzes the spend of more than a dozen local anchors and demonstrates the impact of increased local procurement on quality job creation.
Anchor institutions are defined as universities, hospitals, local government agencies, the U.S. Navy and other large employers that are physically bound to the region.
In San Diego, anchors represent eight of the region’s 10 largest employers—providing more than 72,000 jobs. They purchase tens of billions of dollars in goods and services every year, and yet, local anchors send about one-quarter of all procurement spend outside the region.
The web-based study—procurelocal.inclusivesd.org—includes a summary of local spending, a cluster map of anchor institutions in the region, estimated economic impact from increased local spending, and a set of recommendations for growing quality jobs across San Diego through procurement.
The COVID-19 pandemic has disproportionately impacted people of color and spurred the closure of one-in-three small businesses across San Diego. Local small businesses employ nearly 60 percent of the total workforce, which is double the national average, and are responsible for nearly half of all job growth in the last five years. Despite their critical importance to the region’s economy, many small businesses report struggling to attract customers and generate new sales.
“Small business resiliency will be key in getting this recovery right. This report further demonstrates the importance of connecting our region’s small and diverse businesses to large, institutional buyers,” said Eduardo Velasquez, EDC Research Director. “This will mean more quality jobs for San Diegans, more thriving businesses and a stronger regional economy.”
- Collectively, 14 anchors surveyed spend more than $9.9 billion each year on a range of goods and services, and only about $247 million of this reported spend can be traced back to San Diego businesses. Further, only a small proportion of this spend is reaching small (14 percent) and minority-owned or diverse businesses (11 percent).
- Small shifts in procurement can mean big economic impact:
- If the 14 anchors surveyed increased local construction spending by just one percent, it would put around $32 million into local construction businesses, adding $466 million to the local economy and helping create nearly 4,500 jobs in the region.
- The same one percent increase in professional services (e.g. legal assistance) spending would pump nearly $12 million into local suppliers, resulting in an economic impact of nearly $56 million and support another 800 jobs.
- The majority of these new jobs would be in industries with a higher-than-average concentration of quality jobs (those that pay middle-income wages).
“As a large employer that works with many diverse suppliers to meet our mission of delivering clean, safe and reliable energy, SDG&E understands the value small businesses bring to the regional economy,” said Christy Ihrig, vice president of operations support, SDG&E, anchor event and study sponsor. “When they thrive, our region thrives. To support economic recovery from the pandemic, we are more committed than ever to grow our supplier diversity program and encourage other local employers to do the same.”
Beyond impacts to suppliers and the regional economy at large, anchor institutions that buy from local, small, diverse businesses also stand to benefit. Specifically, several local anchors note that setting goals for greater procurement from these suppliers has resulted in greater customer service, supply chain diversity and resiliency, and stronger brand equity in the communities they serve.
“‘Shop local’ is about more than individuals; it means big business and organizations choosing to support their neighbors by buying in their communities. The City of San Diego takes pride in its efforts to work with local companies, is seeking increased opportunities to buy local and implores other local organizations to follow suit. Together, this is how we ensure a more equitable and inclusive San Diego,” said Mayor Todd Gloria, City of San Diego, study sponsor.
A CALL TO ACTION
To maintain our regional competitiveness, we need to create 50,000 quality jobs in small businesses by 2030, as outlined in EDC’s inclusive growth strategy. To do that, it’s imperative we help San Diego’s small and diverse businesses recover and thrive.
San Diego needs its largest employers (and our largest buyers) to commit to redirecting their procurement to local, small, and diverse businesses. To do this we must:
- understand individual institutions’ existing efforts;
- identify spend areas with high potential for inclusive, local sourcing; and
- define and track metrics that ultimately drive bidding processes.
We invite large firms to join San Diego Regional EDC’s Anchor Collaborative and help us shape and achieve this goal—join us here.
The report was unveiled today at the first in a series of Town Hall events. Watch a recording of the event here. Thank you to the study sponsors: SDG&E, City of San Diego, Civic Community Ventures, and the University of San Diego School of Business.