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Why don’t universities spend more locally?

nick petfordcroppedGiven their purchasing power and local profile, are universities really fulfilling their economic potential?

My feeling is the higher education sector can do what the banks apparently can’t. Banks still aren’t lending money to small enterprises but universities – with their multimillion pound spend on goods and services – can help drive business directly to local small and medium-sized businesses (SMEs) and put cash in their pockets.

For higher education to play this role, institutions need to take a fresh look at the way they approach procurement. As a function it needs to become more strategic.

A recent report by the Centre for Local Economic Strategies and Federation of Small Businesses found 70% of local authorities record levels of local spend. Some 42% have set targets to improve local spend and 91% have initiatives in place to support SMEs in tendering.

The report goes on to describe how spending on small local firms delivers greater additional benefit to the local economy than that on large companies. Things are far from perfect and councils need to adapt procurement further, but there are clear signs that things are moving in the right direction.

If local authorities can track spend and actively target SMEs to maximise their impact locally, why not universities?

Universities need to become more aware of where they purchase goods and services. Most already sit on their local enterprise partnership board (Lep); perhaps they could explore purchasing more strategically via their Leps.

But to get to that point many will require a shift in culture to achieve a better appreciation of procurement’s potential. At the moment that understanding simply isn’t there and it’s still what I’d describe as a ‘Cinderella activity’. Think about where the procurement function sits within universities – it’s a small group of people who report to the finance director. It’s very difficult for them to have a voice, if indeed they want one.

So how do we elevate the status of procurement and help staff across institutions become far more aware of its potential to not only get better value for money but also enable universities to maximise their local economic impact? It has to come from higher up. I would like to see procurement being taken far more seriously by senior leadership in universities and at board level. Regional purchasing consortia can play a key role here by raising awareness of procurement’s potential, addressing training needs and by putting the tools in place to make it easier, for example, to target SMEs in contracts.

The financial pressures that the higher education sector is now experiencing as a result of budgetary cutbacks and austerity measures won’t go away anytime soon. All the more reason to look at procurement as a strategic process that allows universities to use their purchasing intelligence and drive a better deal that benefits both the institution and the local economy.

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