Anchor Procurement Initiative: A Cross-Sector Approach to Business Growth and Job Creation

The Anchor Procurement Initiative (API) is a partnership between the Economy League, the City of Philadelphia, and leading “Eds and Meds” anchor institutions that seeks to increase local purchasing by large institutional buyers in order to grow local businesses and create jobs. API was incubated in the City Controller’s Office from 2014 until 2017, where it grew from a policy idea to an initiative supported by Philadelphia’s leading hospitals and universities. In 2018, API was adopted by the Economy League of Greater Philadelphia as the organization's first project in the Shared Solutions portfolio.

Philadelphia suffers from the highest rate of poverty of any major U.S. city (26%), with a very high number of hard-to-employ residents (e.g. individuals with criminal records). Even more discouraging is the fact that 48% of Philadelphia households are living below 200% of the federal poverty level, struggling to provide basic subsistence for their families. As we mentioned in testimony to City Council, the core problem is that the local economy does not produce enough jobs, particularly for those without a college education. To bend the poverty curve downward by 1%, the economy must create at least 2,100 new, family-sustaining jobs.

At the same time, Philadelphia is blessed with one of the country’s most robust sectors of large, nonprofit "Eds and Meds" institutions.  In a 2014 report, the Office of the Philadelphia Controller estimated that the nonprofit anchor institutions spend $5.3 billion a year on goods and services in aggregate, mostly with vendors outside the City.  Further analysis suggested that over $500 million of that spend could be redirected to local suppliers, in sectors as varied as food, medical services, medical and surgical appliances, building services, and others.  This would result in over 5,000 direct and indirect jobs, translating into a 2% reduction in the poverty rate, if hiring for new jobs were done from vulnerable and hard-to-employ populations.

The Anchor Procurement Initiative connects capable local suppliers to opportunities within institutitonal supply chains

The Economy League's approach was developed by studying past local purchasing efforts in Philadelphia, surveying national best practices compiled by the Democracy Collaborative, and interviewing leaders of successful anchor engagement initiatives in Baltimore, Chicago, Cleveland and Detroit.

The Economy League will work closely with institutional buyers to define opportunities for localization

The institutional buyers currently participating in the Anchor Procurement Initiative (API) include Children’s Hospital of Philadelphia, Drexel University, Thomas Jefferson University and Health System, The University of Pennsylvania, Einstein Healthcare System, La Salle University, St. Joe’s University, Temple University, University of the Sciences, and University of Pennsylvania Health system. Procurement directors from each of these institutions participate in a quarterly meeting to shape API and identify opportunities for localization, such as food and medical laundry.  

The Economy League is using its institutional network to gain access to and build relationships with Supply Chain Integrators (SCIs), such as Aramark, Premier, and Staples. Relationships with major suppliers will provide another source of opportunities for local suppliers since up to 80% of anchor spend can be committed to large SCI contracts.

The Economy League will work with local partners to find suppliers with capacity, grow ones that are on the brink, and create or attract new companies to fill market gaps

In order to identify capable local suppliers, the Economy League has partnered with various small business development agencies, including The Enterprise Center, The Sustainable Business Network, PIDC, and Wharton Social Impact Initiative.  Suppliers who have demonstrated capacity will be connected to anchor opportunities.  Those that need to grow before reaching capacity will be connected to the Economy League’s partner organizations that provide capacity building, capital access, real estate access, and workforce development services. The Economy League’s workforce development partners will work with local businesses that won anchor contracts to staff any jobs created with individuals from low-income and/or hard-to-employ populations. As the Economy League's supplier network expands, it will be possible to identify market gaps, where no local suppliers exist, and encourage new business creation in those areas.

Case Study: Medical Laundry

An early market test of the API approach was the attraction of a medical laundry company to Philadelphia. Several hospitals mentioned that they were shipping nearly 20 million pounds of medical laundry to Maryland and New Jersey, because there are no medical laundry facilities in Philadelphia. One participant quipped that he needed a meteorologist on staff to ensure the laundry would reach patient beds on time. Building a local laundry would not only create jobs, but would also reduce cost and risks for the participating hospitals.

API staff began looking for a potential supplier to build a plant. A local entrepreneur considered, but eventually passed on the opportunity. Instead, a participating anchor persuaded a New-York based laundry company to consider opening a new plant in Philadelphia.  The laundry is currently in development and is scheduled to open in early 2019. Once the plant is completed, it will create between 100 and 200 jobs. ELGP is working with local workforce development agencies to ensure that the jobs are staffed by hard-to-employ individuals. The plant will also partner with minority subcontractors recommended by local business development organizations. 

In order to expand the reach of API, the Economy League is building a matchmaking platform to allow for a greater number of connections between anchors and local suppliers

Connecting local suppliers to large institutions requires a platform that can serve as a repository of information and enable matchmaking between suppliers and anchor opportunities. The platform will provide a way for anchors to upload opportunity information, so that local suppliers can search and apply for contract opportunities. It will also contain a diagnostic tool to help identify which suppliers have capacity to serve large anchor institutions and which should be referred to capacity-building programs. Additionally, collecting supplier and contract opportunity information in one place will allow the Economy League to easily identify market gaps.  The Economy League has worked closely with a peer initiative, Chicago Anchors for a Strong Economy (CASE), which has built such a tool and successfully used it to connect suppliers and anchors, creating 180 new jobs and localizing $52 million in contract revenue to date. ELGP will use lessons from CASE to build a matchmaking platform as API’s main deliverable in 2018.

Get involved!

If you are interested in participating in the Anchor Procurement Initiative, please contact Mariya Khandros at [email protected].