Written by Lena Ferguson and Kim Zeuli
The revitalization of the United States’ older industrial cities – those cities in America with vibrant pasts in legacy economies that now face challenges with dwindling populations, job loss and poverty – is a key urban challenge. While there have been numerous studies that lay out bounce-back plans for older industrial cities, at ICIC we’re particularly interested in how both a city’s anchor institutions and its small business entrepreneurs can lead revitalization. Our 2014 Inner City 100 list, for example, showed that both traditional manufacturing and knowledge-based small businesses are both doing well in many older industrial cities.
Developing a local procurement strategy for a city’s anchor institutions is an excellent way to knit together revitalization efforts between anchor institutions and small businesses and the organizations that support them. Directing procurement dollars to local businesses builds vital relationships, spurs firm growth and creates local jobs. ICIC just released a new report, Creating an Anchored Local Economy in Newark: Recommendations for Implementing a Comprehensive Local Procurement Strategy, that highlights findings from a comprehensive study of procurement in Newark, NJ supported by the Prudential Foundation. The study analyzed the size and nature of local procurement opportunities in Newark, one of the United States’ older industrial cities.
Newark already is undergoing a major revitalization and has built momentum for a buy-local initiative through past studies and initiatives. It also has a large, strong network of anchor institutions. Newark has 19 major economic anchors that include universities, hospitals, large corporations, government and public services institutions, and arts and entertainment institutions. We received 2013 procurement data from six of these anchors and supplemented this data with feedback and guidance from our advisory group comprising 30 organizations, and interviews with 70 key individuals for organizations that directly and indirectly support Newark small businesses.
The six anchors that participated in our Newark study were: New Jersey Institute of Technology (NJIT); New Jersey Performing Arts Center (NJPAC); Panasonic Corporation of North America; Prudential Financial; Rutgers School of Biomedical and Health Sciences; and Rutgers University – Newark. Together, they purchase $27.2 million in goods and services in Newark. If they collectively increased their local procurement from two percent to ten percent, an additional $33 million would annually flow into Newark local businesses.
We identified 18 priority procurement opportunities representing large contracting opportunities that should be the focus of Newark’s procurement strategy implementation. In aggregate, these opportunities, which include consulting services, nonresidential building construction, computer system design and services, advertising and legal services, represent $321 million annually in potential revenue for local businesses. We also identified a number of smaller, quick-win opportunities and two long-term opportunities for small business capacity building in the future.
The majority of Newark’s 13,515 businesses are relatively small. 62 percent of them employ fewer than five employees and 70 percent report less than $1 million in annual revenues. These businesses will need assistance to grow so that they can contract with anchors. We identified 34 Newark organizations that support entrepreneurs and small businesses, and their increased coordination and investment in capacity building programs will be crucial to Newark’s procurement initiative.
While a few other cities have similar procurement initiatives, none are on the scale described in Creating an Anchored Local Economy in Newark. Newark’s initiative would focus on the entire city and engage all of Newark’s major economic anchors. It won’t be easy to implement. We offer eight recommendations in the report, but the first step will be identifying the right leadership to carry the initiative forward.
Newark has great potential to lead this type of effort in the United States. This sentiment was echoed at the Newark Small Business Summit on January 14th, presented by Newark’s new mayor Ras J. Baraka and sponsored by Prudential, in a panel about the report’s findings and its implications for small business owners. The panel was moderated by Alfred Edmond from Black Enterprise Magazine and featured ICIC, Shané Harris and Kimberly Ostrowski from the Prudential Foundation, Jill Johnson from IFEL, Marjorie Perry from MZM, and Arcelio Aponte from Rutgers-Newark. As Harris, who is Vice President of the Prudential Foundation, said during the panel, “Newark has a core group of like-minded leaders…We can create an anchor collaboration initiative that responds specifically to Newark and makes use of Newark’s many competitive advantages.”
Click here to read Creating an Anchored Local Economy in Newark: Recommendations for Implementing a Comprehensive Local Procurement Strategy.