LOCAL PROCUREMENT - GUIDANCE NOTE FOR DEVELOPERS This document is designed to guide developers through the principles outlined in the Local Procurement Charter for City Developers. Photography by Jamie Simonds
INTRODUCTION At the City of London Corporation, we are aware of the enormous impact that local procurement has in stimulating the economies of our neighbouring boroughs and creating associated job opportunities. As the bulk of all future jobs growth is expected to be through Small and Medium Sized Enterprises (SMEs) 1 rather than through larger firms, the development of a vibrant SME economy must be the basis of any sustainable form of regeneration in the City and the rest of London. For this reason, the City of London Corporation hosts its own Local Procurement Project to encourage and facilitate local purchasing both internally and by City firms and those developing within the City boundary. The purpose of this Guidance Note is to set out the actions required to secure local procurement and to maximise the opportunities available to local businesses, defined as small and medium sized firms 1 based in the boroughs of the City of London, Tower Hamlets, Hackney, Islington, Camden, Lambeth, Southwark and Westminster. This Guidance Note should be read in conjunction with the City of London Corporation s Local Purchasing Toolkit 2 and the Local Procurement Charter for City Developers 3, which outline the rationale for, and benefits of, local procurement. Within this Guidance Note you will find practical advice as to how you can translate the Charter principles into your procurement decisions, alongside a summary of the City of London Corporation s own initiatives and the further steps it intends to take to encourage local procurement. Further guidance can be accessed by contacting the City Procurement Project which provides free advice and guidance to City based businesses and City developers. By doing so, your company can be signposted to local supplier databases, given 1:1 advice and provided with written guidance. To access free support in procuring locally please: email: city.procurement@cityoflondon.gov.uk or call: 0207 332 1563 1 - <250 employees and <50million Euros turnover ( 42,137,864.80 at time of writing) and/or an annual balance sheet total not exceeding 43million Euros ( 36,353,173.26 at time of writing). In general, most SMEs are autonomous since they are either completely independent or have one or more minority partnerships (each less than 25%) with other enterprises. If that holding rises to no more than 50%, the relationship is deemed to be between partner enterprises. Above that ceiling, the enterprises are linked. Depending on the category in which your supplier fits, they may have to include data from one or more other enterprises when calculating whether they can be defined as an SME. Further clarification can be found at http://ec.europa.eu/enterprise/policies/ sme/facts-figures-analysis/smedefinition/index_en.htm 2 To be found at http://www.cityoflondon.gov.uk/business/ supporting-local-communities/pages/sustainableprocurement-for-city-firms.aspx 3 To be found at http://www.cityoflondon.gov.uk/services/ environment-and-planning/pages/ default.aspx
WHAT IS LOCAL PROCUREMENT? Local procurement is where services, supplies or equipment are purchased from locally based suppliers. In 2010, the City of London Corporation spent 24% of its procurement spend in the City, Camden, Hackney, Islington, Lambeth, Westminster, Southwark and Tower Hamlets. As well as being our neighbours, these boroughs are specifically targeted as they contain some of the most deprived neighbourhoods in the country and are priority areas of regeneration for us. Procuring from local suppliers is an important part of maintaining a healthy local economy. However, local procurement will rarely cover 100 per cent of suppliers. In the beginning, it is best to concentrate on specific sectors within the supply chain e.g. site facilities and labour, facilities management, design work and property advice. Where relevant, local purchasing decisions should ideally fit in with other procurement agendas, including Value for Money, Sustainable Procurement, Green Procurement, Ethical Procurement, Supplier Diversity and Fair-trade, amongst others. The City Procurement Project can offer free advice and guidance on all aspects of Local Procurement, so if you have any questions please ask city.procurement@cityoflondon.gov.uk. Page 1
WHY IS LOCAL PROCUREMENT IMPORTANT TO THE CITY OF LONDON CORPORATION? By procuring locally itself and supporting others to follow suit, the City of London Corporation is working towards the objective set out in The City Together Strategy: The Heart of a World Class City 2008-2014. to maximise local employment opportunities for local people (who live in the City / City fringe 4 ) and opportunities for local businesses to access contracts for goods and services. The City Together Strategy has been prepared by The City Together 5, a non-executive partnership which brings the key public, private and voluntary sector providers in the City along with representatives from the City s resident, business, worker and faith communities. The Strategy is a shared focus for the future, helping to co-ordinate partners activities, making sure everyone is working towards the same objectives, and meeting the needs and aspirations of the City s different communities. As noted in the City of London Corporation s Corporate Plan 6, its main strategic planning document, in December 2009 the Audit Commission announced the results of its annual assessment for the City of London Corporation. The City of London Corporation is delighted to have received a Green Flag for Supporting Small Businesses and Local Communities Across Borough Boundaries. The City of London Corporation is keen to continue its valuable community work and sees local procurement as a critical element. Photography by Jamie Simonds 4 Tower Hamlets, Hackney, Islington, Camden, Lambeth, Southwark and Westminster 5 Further information can be found at http://www.cityoflondon.gov.uk/about-the-city/working-with-and-for-others/pages/ local-strategic-partnership.aspx 6 Further information can be found at http://www.cityoflondon.gov.uk/about-the-city/how-we-work/corporate-governanceand-performance/pages/corporate-plans.aspx Page 2
WHAT IS BEING ASKED OF THE CITY S DEVELOPERS? For the purposes of the Local Procurement Charter, City developers are defined as anyone commissioning or carrying our building work or repairs in the City, regardless of development size or level of procurement spend. During the construction of the development, City developers are asked to: identify opportunities for local small to medium sized businesses 1 to bid/tender for the provision of goods and services. In the beginning, you will be most successful if you concentrate on specific sectors within your supply chain. We can give you advice on which elements of your supply chain are more easily procured from the City fringes 4. Through its City Procurement Project the City of London Corporation can provide free local procurement guidance to City based businesses and City developers. We can signpost to local supplier databases, give 1:1 advice and provided written guidance via the City of London Corporation s Local Purchasing Toolkit and other resources. aim to achieve the procurement of goods and services, relating to the development, from small to medium sized businesses 1 based in the City and the surrounding boroughs 4 towards a target of 10% of the total procurement spend. We recognise that some packages e.g. design work, facilities management, property advice, site facilities and labour are easily procured from the city fringe boroughs, whilst others e.g. cladding, are not. Whilst the City of London Corporation is looking for 10% of the procurement spend to be spent with local suppliers, it recognises that this will not mean 10% of each of the packages, rather it means an average of 10% across the entire procurement spend. In 2010, the City of London Corporation spent 24% of procurement in the City and City fringes (Tower Hamlets, Hackney, Islington, Camden, Lambeth, Southwark and Westminster), therefore we know from experience that 10% is an achievable target. Southwark, Westminster, Camden and Islington Councils also ask their developers to procure locally, however their developers are asked to procure 10% from just their borough. Developers within the City of London can choose suppliers from up to 8 boroughs. Or, where the procurement of goods and services is contracted out: ensure the above 2 principles are met by inserting local procurement clauses in the tender documentation issued to contractors or subcontractors. Where the Developer is not responsible for procurement, the City of London Corporation suggests that local procurement is included as a clause in the main contractor s tender documentation. Examples of clauses that could be used in tender documentation are included in Annex 1 7. 7 - The clauses at Annex 1 are provided for illustrative purposes only and do not constitute the giving of legal advice by the City of London Corporation. Page 3
Local procurement and planning The City of London Corporation intends to further support the aims of our Local Procurement Charter through the use of 1) an informative note with planning permissions and 2) the inclusion of obligations within agreements made under section 106 of the Town and Country Planning Act 1990. 1. It is intended that the informative note will be applied to planning permissions for developments of 5 or more residential units, 500sqm gross of new floorspace or changes of use over 300sqm. 2. An obligation under section 106 of the Town and Country Planning Act 1990 will be applied to developments where appropriate 8, which will require developers to submit a strategy on local procurement ( Local Procurement Strategy ), to use reasonable endeavours to comply with that strategy and achieve the Charter Principles, and to comply with some simple monitoring procedures. The developer will be required to submit a Local Procurement Strategy to the City Planning Officer for approval prior to implementation of the planning permission for a development. A Local Procurement Strategy shall include details of: initiatives to identify local procurement opportunities relating to the construction of the development; initiatives to reach the 10% target for local procurement, from small to medium sized enterprises 1 in the City and City fringes 4 ; the timings and arrangements for the implementation of such initiatives; and suitable mechanisms for the monitoring of the effectiveness of such initiatives e.g. a local procurement tracker (Annex 2) can be used to capture this information. The developer will be required at the 6 month stage, or half way through the project (which ever is earliest), to report to the City of London Corporation s Economic Development Office on their performance against the 10% local procurement target (The Economic Development Office can provide a pro forma local procurement log to assist in the monitoring process). The developer should then provide a progress update to the Economic Development Office every six months until the development is occupied, with a final report submitted no later than one month after the development is occupied. For large scale developments, goods and services (relating to the development) will usually be procured by the main contractor. In these situations, it is envisaged that the compliance and monitoring requirements will be passed on by the developer to the main contractor. Examples of clauses that could be used in tender documentation are included in Annex 1 7. For any questions about what we ask of City Developers please: email: city.procurement@cityoflondon.gov.uk or call: 0207 332 1563 8 - The indicative size threshold for seeking planning obligations is set out in the City of London Corporation s Supplementary Planning Guidance on Planning Obligations. Page 4
EQUAL OPPORTUNITIES All developers should demonstrate their commitment to equal opportunities and be determined to ensure that they oppose all forms of unfair and unlawful discrimination. All suppliers should be contracted on the basis of their ability to meet the requirements of the contract. CONTACT To find out more about the City of London Corporation s local procurement activities please visit: ww.cityoflondon.gov.uk/business email: city.procurement@cityoflondon.gov.uk Page 5 Page I 5
ANNEX 1 A. Actions & Responsibilities of Main Contractor 1. Prior to the implementation of the planning permission, the main contractor will provide the City Planning Officer with a Local Procurement Strategy, for his approval, which shall include details of: initiatives to identify local procurement opportunities relating to the construction of the development; initiatives to reach the 10% target for local procurement, from small to medium sized enterprises 1 in the City and City fringes 2 ; the timings and arrangements for the implementation of such initiatives; and suitable mechanisms for the monitoring of the effectiveness of such initiatives e.g. a local procurement tracker (Annex 2) can be used to capture this information. 2. The main contractor shall use reasonable endeavours to comply with the approved Local Procurement Strategy; 3. The main contractor will work with the City of London Corporation s Economic Development Office to: include local small to medium sized 1 companies on their tender lists wherever possible and to aim to achieve the procurement of construction contracts and goods and services from small to medium sized companies and organisations based in the City and City fringes 2 towards a target of 10% of the total procurement spend. 4. At the 6 month stage, or half way through the project (which ever is earliest), the main contractor shall report their performance against the 10% local procurement target (The City of London s Economic Development Office can provide a pro forma local procurement log to assist in the monitoring process). 5. The main contractor should then provide a progress update every six months until the development is occupied, with a final report submitted no later than one month after the development is occupied. 6. The main contractor should include a written statement in the tender documentation sent out to sub contractors informing them of their planning obligations as set out in section B below and ensure cooperation is agreed as a prerequisite to accepting sub contract tenders. 7. The main contractor will identify any actions that are required in order to overcome known barriers, to local small to medium sized businesses, to accessing their supply chain in respect of the construction phase. 8. The main contractor should provide an opportunity for the Economic Development Office to brief subcontractors on the requirements of the Local Procurement Charter. B. Actions and Responsibilities of Sub-Contractors 1. All sub-contractors appointed will be required to abide by the Local Procurement Strategy and the principles set out in the City of London Corporation s Local Procurement Charter; to aim to achieve the procurement of construction goods and services from small to medium sized 1 companies and organisations based in the City and City fringes 2 towards a target of 10% of the total procurement spend. (The City of London can signpost subcontractors to local supplier directories). 2. All subcontractors are required to provide regular monitoring information to the main contractor every six months during the construction phase, via e-mail, providing details of: All local small to medium sized 1 wholesalers and building materials suppliers which are asked to provide prices and where possible the value of any subsequent purchases of materials and other wholesaler supplies procured. All local small to medium sized 1 companies which are sent a tender enquiry or a tender invitation detailing the date and the works package concerned and the outcome of all sub-contracts tendered. 1-1 - <250 employees and <50million Euros turnover ( 42,137,864.80 at time of writing) and/or an annual balance sheet total not exceeding 43million Euros ( 36,353,173.26 at time of writing). 2 - Tower Hamlets, Hackney, Islington, Camden, Lambeth, Southwark and Westminster Page 6
ANNEX 2 Local Procurement Tracker Name of Buyer: Site: Date of record: Outcomes: Local Company Tender enquiry (Y/N) Tender invitation Tender result Value (if won) Purchase of Supplies Comments Page 7
This publication is available in large print, Braille, tape and computer on request from the City of London Corporation's Economic Development Office Economic Development Office (EDO) City of London Corporation Guildhall PO Box 270 London EC2P 2EJ Telephone: 020 7332 1563 Website: www.cityoflondon.gov.uk Published February 2011 Page 8