Local government procurement costs and Community Wealth Building Initiatives in England

Abstract We examine whether procuring locally leads to higher costs. Our study is motivated by the Community Wealth Building Initiatives adopted by Preston City Council in England in which social value to the local economy is considered in the procurement process. We compare contracts awarded to local and non‐local suppliers, by Preston, a group of similar local authorities, and all lower tier local authorities in England. We find that local contracts are usually of lower cost. When examining all contracts supplied to local authorities in England, we find that contracts with local suppliers have lower total costs. In a linear model of award value per month, we find a small negative association between local contracts and procurement costs after controlling for the type of good/service being supplied, the local economic characteristics, and the characteristics of the supplier. Our results indicate that local procurement does not necessarily increase costs and might help support smaller local businesses.