Central Corridor Purchasing Study Demonstrates the Transformative Power of Anchor Institutions

October 7, 2015

By Lena Ferguson and Kim Zeuli, Initiative for a Competitive Inner City (ICIC)

 

Anchor institutions have always played significant economic roles in their communities. One way anchors drive economic growth is by purchasing goods and services from local businesses. However, most anchors largely procure goods and services from companies located in other areas—other cities, states or even countries. Shifting purchasing locally seems straightforward, but in reality, it is difficult to implement.  

Initiative for a Competitive Inner City (ICIC) recently partnered with the Central Corridor Anchor Partnership (CCAP), a working group of the Central Corridor Funders Collaborative, to help the anchors identify specific purchasing opportunities (by industry) that provide the best opportunities for success. This analysis allows the Partnership to refine their local purchasing goals and move from generic to specific local spending strategies.

ICIC collected and analyzed 2014 purchasing data from 10 CCAP anchors, including seven educational and three healthcare institutions: Augsburg College, Bethel University, Fairview Health Services, Regions Hospital/HealthPartners, Hennepin County Medical Center, Metropolitan State University, Minneapolis Community & Technical College, St. Paul College, the University of Minnesota, and the University of St. Thomas.

In aggregate, the 10 anchors spent $3 billion in 2014. For their addressable purchases (goods and services that could be reasonably supplied by a local vendor), the CCAP anchors already purchase a remarkably high percentage (57 percent) of their goods and services from businesses in CCAP’s three target geographies – the Central Corridor, the Minneapolis-Saint Paul MSA, and the state of Minnesota. Nearly 10 percent of addressable purchases are already made in the Central Corridor.

These statistics reflect the vibrant economy in Minneapolis-Saint Paul as well as a strong Minnesota pride and “buy local” culture. The Minneapolis-Saint Paul region is the primary hub for economic activity in Minnesota, so it is not too surprising that most of the addressable anchor purchasing happens within the MSA (46.5 percent). Clearly, the CCAP anchors have a lot to already be proud of in terms of local purchasing. ICIC’s analysis allows the anchors to quantify that impact.

That said, the ICIC study also found opportunities for the anchors to purchase more goods and services locally. Based on our analysis, CCAP has the potential to shift an additional $328.7 million of addressable purchases from businesses outside of Minnesota to businesses within the Central Corridor.

Our analysis also identified 36 purchasing industries that represent feasible opportunities for CCAP’s local purchasing strategy. These include six “quick win” industries, such as dry cleaning and laundry services and design services, where the anchors already buy a relatively high percentage of their goods and services from businesses within the Central Corridor. The remaining 30 industries, including nonresidential building construction and special food services, represent local purchasing opportunities where current spending is far below the potential maximum or there is very minimal current purchasing from businesses within the Central Corridor.

Armed with this new analysis and information, CCAP is working to refine their local purchasing strategy, recommitting to shift five percent of purchasing annually and prioritizing at least two industries for focus this year. CCAP is selecting the target industries, assessing vendor capacity, and determining opportunities to pursue joint contracting. “ICIC’s in-depth demand analysis provides an excellent opportunity for CCAP to increase the impact of our purchasing efforts,” says Ellen Watters, who manages and counsels CCAP.

Anchor purchasing strategies are often subject to declarations of support that are met with little action because the strategies are undefined and hard to implement. With this purposeful, data-driven approach, CCAP is a model for how to effectively execute on an anchor purchasing strategy and transform lofty ideas into action.

For more details, read a longer version of this blog on ICIC’s website.  Click here for the full ICIC report.