Guide to Local Purchasing
WHY LOCAL PURCHASING MATTERS:
There are four widely-stated reasons for you to buy goods and services from local businesses. The first is in response to government regulations or investment agreements that require a minimum level of local content. The second is to deliver socio-economic benefits into your local community by creating business opportunities for people with an entrepreneurial spirit. Third is to create a shorter and more diverse supply chain and the last is to build local community support.
In emerging markets, local suppliers are typically micro, small and medium enterprises (MSMEs) and they often need help to bring them up to the required business management and operational, safety, environmental and technical standards. This is typically achieved using a combination of training, mentoring, and other support (usually externally sourced) and through internal efforts to identify opportunities.
There is no one-size-fits-all solution so it would be worth your while taking time early-on to clearly articulate the reasons your company is considering investing in this area.
WHAT TO DO:
HOW TO DO IT:
|Build trust in the procurement process
Remember: geography, owners’ place of residence and business registration location are commonly used criteria, often as a combination.
- Define the company drivers and short and long-term objective for local procurement in a way that everyone on the project can understand and that you can explain to the local community;
- Define the rules for procurement at all levels in a way that everyone on the project can understand and that you can explain to the local community;
- Define local using whatever criteria make sense for the site;
- Ensure all the players on site – Owner and contractors – consistently apply the rules;
- Pay on time – there is nothing worse than being late paying your local suppliers;
- Avoid creating barriers to participation (e-procurement and web-based registration are common problem areas);
- Don’t apply complex terms and conditions for low risk goods and services.
|Maximise the use of local businesses
- Create a centralized register of all potential opportunities to source locally;
- Demand that all low-risk contracts use local businesses and report performance as a KPI;
- Include bonus / penalties for local procurement performance in contract Terms & Conditions.
- Talk about your performance – on your website and in locally used forums. Radio, TV, social media and the tried and tested community noticeboard are all possibilities;
- Explain to your local staff how and why you do procurement the way you do. As with health, peer education is one of the best ways to get results;
- Prepare a frequently-asked-questions sheet for everyone to use. Keep it simple, focus on the top 10 and aim for a single page;
- Use the opportunity of site visits by senior managers to share procurement related information with staff and community alike. One-on-one meetings, small groups and larger gatherings can all work;
- Hold roadshows / town halls / open houses during site visits to periodically update potential suppliers of goods and services on business requirements and upcoming opportunities.
WHAT ELSE YOU CAN DO:
e-procurement: Web-based procurement systems offer a number of benefits. They enable transparency and fairness by providing all suppliers with access to the same bid information and evaluation system; they are a secure system through which to submit the bids and skills development can be an outcome of adoption of the technology. However, these systems may exclude small businesses from the tendering process, particularly those in remote locations with limited access to technology. Providing alternatives to access and submit tenders will ensure that these businesses are not disadvantaged. Alternatives might include:
- Making a paper-based Expression of Interest form and Tender documentation available for collection from the company office;
- Providing a consistent point of contact in the procurement team for each tender;
- Allowing for lodgement of tenders by email, post or hand delivery; and
- Providing local businesses with a longer notification period of upcoming opportunities to enable them to have more time to prepare.
The multiplier effect: For every direct job, supply or services contract created by the project, many more jobs and business opportunities are created as a result of increased economic activity in the area (hotels, restaurants, taxis, convenience stores for example). Establishing a business development centre, setting up a microcredit program, or serving as guarantors with local banks to help local entrepreneurs get access to cash are potential initiatives that help businesses and individuals benefit from the economic opportunities that arise from the project’s presence, extending the positive influence of the project on the local economy.
Partnering: Initiatives to build capabilities and business linkages often require collaboration, allowing risk to be shared, the ability to leverage expertise and accessing specialised skills and resources, all of which will improve the likelihood of being successful. However taking the partnership route is not an automatic guarantee. A clear scope, complementary skills, good communication and flexibility all play a part in delivering a good result.
Track performance: Getting started can be as easy as doing a few extra calculations using data you already collect:
- Value of local services and contracts;
- Number of local businesses in your database;
- Number of local companies with contracts by type and value;
- Number of local contracts as a % of total by type and value;