Every solicitation your agency posts is an opportunity not only for your agency to acquire goods or services at a competitive price, but also for businesses in your community to win work, grow their operations, hire staff, and reinvest in the local economy.
There’s a direct connection between public procurement and local economic development, and it often goes largely unappreciated. The vendors your agency contracts with are also employers, and the contracts you award are revenue for local businesses. Making sure your vendor pool is accessible to local suppliers has economic consequences for more than just your agency.
If you’re only thinking about your vendor market as a sourcing mechanism, without considering its impact on your local economy, you’re missing an opportunity to build a broader, more competitive market. The key to turning that view around is to bring those local businesses in, rather than waiting for them to find you.
What Procurement Spend Means Locally
Public agencies are one of the largest sources of contract revenue available to local businesses. State, local, and education agencies (the SLED market) spend an estimated $1.5 trillion to $2 trillion annually on procurement nationwide. This means cities, counties, school districts, utilities, and other special districts like yours are putting out billions in contracts for construction, professional services, maintenance, technology, and commodities.
A large amount of that spend is available to local vendors, who employ local residents, pay local taxes, and reinvest their dollars locally in the community. And when local vendors win a competitive bid opportunity, the economic impact compounds as that winning local vendor hires local subcontractors, purchases materials from local suppliers, and pays wages that again circulate locally.
In short, the procurement dollar does more than buy a service. It supports a local business ecosystem.
Now imagine that same spend goes to out-of-area vendors because local potential bidders either didn’t know an opportunity was available, couldn’t navigate the registration process, or faced requirements that eliminated them before they could compete. Now, the economic impact leaves the community, no longer benefitting your residents and your economy.
An easily accessible, clear and communicative procurement process determines whether your purchasing dollars stay in your local area or leave the region altogether.
Barriers to Local Participation
Smaller, locally-owned businesses usually have the least administrative capacity and therefore tend to be the vendors most likely to be filtered out of a competitive process. If your vendor registration requires significant time or effort, those small businesses are at a disadvantage if they don’t have dedicated staff with time to manage compliance. Short solicitation windows put vendors who can’t mobilize quickly at a disadvantage because they’re balancing multiple active projects at once, and insurance and bonding requirements set above the necessary level filter out smaller contractors who can’t absorb the cost of over-specified coverage.
While these barriers aren’t necessarily intentional, they do still narrow the field of competitors to those with the resources to clear them – that is, larger, less local firms.
The good news is that removing these barriers won’t lower the quality of your vendor pool. It will actually broaden it by bringing in qualified businesses that were previously filtered out by process limitations rather than capability.
Small and Diverse Business Participation
For many public agencies, small and diverse business participation goes isn’t just an economic development goal but also a policy requirement. Certified business programs covering minority-owned, women-owned, small and disadvantaged, and veteran-owned businesses exist at every level of government (although constantly fluctuating), and many agencies have participation goals or requirements tied to these programs.
Meeting those goals starts with your vendor pool. If your certified vendors are sparse in categories with participation goals, no amount of contract language will give you’re the responses you need. The solution is the same as for any thin category: proactive outreach, user-friendly registration, and inclusive solicitation practices that don’t filter out the vendors you’re trying to attract.
A few specific practices that will improve small and diverse business participation:
Unbundle large contracts where feasible
A single large contract that requires bonding and insurance appropriate for the full contract value may be inaccessible to smaller businesses, even if they’re fully capable of performing the work. Breaking a large contract into smaller components can open the solicitation to a broader range of vendors and often produces better pricing overall.
Set requirements proportionate to the contract
Review insurance, bonding, and financial documentation requirements against the real risk and value of each contract. Requirements that exceed what the work demands filter out smaller businesses and add compliance costs without adding value. Proportionate requirements directly improve small business participation.
Make certification tracking part of vendor management
If you track certified business status for your suppliers, that information should be current and accessible. Vendors whose certifications have lapsed may still show as certified in your vendor list, and those who’ve recently updated certified may not be flagged correctly. Accurate certification data makes reporting more accurate.
Reach out to certified businesses directly
Especially in categories with high participation or high spend goals, don’t rely on passive registration to build your vendor pool. Identify businesses in your region through your state’s businesses directory, regional business development organizations, and the vendor networks of other area agencies and invite them to register with you.
Looking for More Qualified Bidders?
PlanetBids gives you access to thousands of prequalified vendors and suppliers from other agencies in your area and nationwide, so you can find the right vendors no matter the project. Search by category code, region, or certification, then send a request for them to register with you or a notification for a new solicitation. It’s all built directly into the PlanetBids system so you know they’re familiar with the process and can perform the work.
Boosting Your Image in the Local Business Community
Beyond the direct economic impact of contract awards, your agency’s procurement processes can tell the local business community whether government work is worth pursuing.
An agency with a well-maintained and accessible vendor portal, clear and fairly written solicitations, and a reputation for treating vendors professionally will attract more local businesses over time.
Vendors, especially local ones, talk to each other, and word about their experiences gets around. A small business that has a good experience, even if they don’t win, is more likely to bid again. A poor experience, on the other hand, will likely leave a bad taste in their mouth and could mean a hit to your agency’s reputation for procurements.
Ensure you’re building a process that local businesses want to engage with. Simple registration, relevant project notifications, clear and transparent communication, smooth bid submission, and professional evaluation experiences will all lead to happier and more responsive vendors. And every local business that engages consistently with your agency’s procurement is a potential competitor on the next solicitation, which means better pricing, better quality, and more defensible awards.
The Importance of Transparency in Local Operations
One of the most direct ways you can support local business participation is by being transparent about what you buy, how you buy it, and vendors need to do to compete.
A vendor portal that makes current and upcoming solicitations visible and accessible to registered vendors and to the general public gives local businesses insight into what your agency is buying and helps them understand how to register and participate, eliminating an information barrier that may keep them out of the market.
Posting award information publicly – which vendor won, at what price, the contract terms – gives the market feedback about whether competition is producing fair and cost-efficient outcomes. Vendors who lose a contract can see what it was awarded competitively and at a reasonable price, which may make them less likely to protest and more likely to invest in future solicitations. But vendors who cannot see any award information have no basis for assessing whether the award was fair or whether the process is worth their time in the future.
Publishing your solicitation calendar in advance, even informally, also gives local vendors time to prepare and plan. A small business that knows six months in advance that a relevant contract is coming up can plan capacity, pursue required certifications, and be ready to submit a competitive response when the solicitation opens. Without that visibility, those same businesses may find out too late to realistically respond.
Connecting Procurement and Economic Development Leadership
In most public agencies, procurement and economic development operate as separate functions, with procurement focused on sourcing outcomes like pricing, compliance, and performance, while economic development is focused on business attraction, retention, and growth.
But there is overlap between these two functions that can help both function better. Procurement owns the vendor pool, the solicitation history, and the contract awards, and economic development has relationships, knowledge of the regional business ecosystem, and goals for growth and retention. Sharing this information and coordinating strategy can benefit both agency functions.
Your procurement team should know which local businesses are registered and which are not, and your economic development team should know which in which categories your agency is struggling to get competitive bids. Together, those two pieces of information can point directly to local businesses that could be competing for your agency’s contracts. And a coordinated outreach that combines technical knowledge and business relationships is more effective than either function operating independently.
If your agency has an economic development office, a small business development program, or a relationship with a chamber of commerce, use those resources to help grow your vendor market.
Where to Start
If you haven’t though systematically yet about the local impact of your procurement spending, the practical starting point is easy. First, pull contract awards from the past 12 months and identify which were awarded to vendors with a local or regional address – or with a local or regional team – versus those headquartered outside your area. That’s a rough baseline for understanding how much of your procurement spend is currently staying local.
Then look at your vendor pool by category and find the ones where local vendors are underrepresented relative to the available market. If you know local vendors exist but they aren’t in your pool, targeted outreach to those area businesses will have the most impact on both participation rates and local economic outcomes.
Competitive vendors and local vendors shouldn’t be competing goals – they should overlap into a broad, diverse, locally engaged, and accessible vendor pool for any qualified business that wants to participate.
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