Local Economic Development Through Strategic Procurement: How NSW councils can turn everyday purchasing into long-term community impact
Introduction: Procurement as an Economic Lever
Every year, local governments across New South Wales spend billions of dollars on goods, services and infrastructure. Yet too often, that spending flows out of the region — missing the opportunity to strengthen local businesses, create jobs and build resilient communities.
Procurement isn’t just an administrative process; it’s one of the most powerful economic development tools available to councils. When used strategically, it can drive investment, encourage innovation, and multiply community value — all while remaining compliant with the Local Government Act 1993 (NSW) and Local Government (General) Regulation 2021.
The challenge? Turning that potential into practice, without compromising probity or value for money.
- The Shift from Transactional Buying to Local Value Creation
Historically, councils have focused on cost and compliance. The lowest-priced tender, delivered through a compliant process, was often considered the best outcome.
But a growing number of NSW councils are recognising that “value for money” means more than price — it includes social, economic and environmental outcomes that strengthen the local economy.
Strategic procurement reframes every purchase as an opportunity to:
- build local supplier capability and participation
- stimulate small and medium business growth
- support regional employment and apprenticeships
- encourage local innovation and sustainability
Not all projects and services can be delivered by local suppliers, whether because expertise or capability is lacking or market size generally, so it requires councils to measure what matters — and not just contract value, but community benefit.
- Embedding Local Economic Outcomes into Procurement Frameworks
To make local economic development a real procurement outcome, councils need to integrate it from the start. This includes:
- Policy and Strategy Alignment
Embedding local economic development objectives within the council’s procurement policy, Delivery Program and Community Strategic Plan ensures consistency across decision-making. - Defining “Local” and Setting Clear Targets
Councils must define what “local” means — by LGA, region, or supply chain tier — and set realistic, defensible participation targets. Again, you don’t want to settle for a “local” solution if the result will not benefit the council or the community – so each procurement and the relevant market needs to be considered before deciding the weigh to be given to “local” and what “local means. - Weighting and Evaluation Criteria
Including local economic contribution as part of tender evaluation (for example, a 10% weighting) encourages bidders to demonstrate community benefits transparently and competitively. - Supplier Development and Early Engagement
Councils can run supplier briefings, workshops and capability programs to prepare local businesses for upcoming tenders and partnership opportunities.
When applied consistently, these measures enable councils to procure locally without compromising probity.
- Balancing Compliance, Fairness and Local Preference
One of the biggest barriers to local economic procurement is fear of breaching probity or competitive neutrality rules.
The good news is that the NSW framework allows flexibility — as long as councils maintain fair, transparent, and evidence-based processes.
Councils can lawfully incorporate local outcomes by:
- using weighted criteria linked to measurable benefits;
- applying pre-qualified supplier panels that prioritise local or regional capability;
- demonstrating that local participation delivers better long-term value, not protectionism;
- documenting decision-making to withstand audit scrutiny.
Done properly, this approach supports both compliance and community confidence.
- Collaboration and Regional Scale
Some local markets are too small to deliver major projects independently. In these cases, regional collaboration becomes key.
Neighbouring councils can align procurement policies or form shared panels to:
- aggregate demand and achieve scale;
- create predictable, multi-year pipelines for local suppliers;
- build regional manufacturing, logistics and service capacity.
This is where shared services and joint procurement models under Part 3 Division 4 of the Act can deliver powerful local economic outcomes — by keeping more public dollars circulating within the region.
- Measuring the Impact
To make local economic development more than rhetoric, councils must measure outcomes such as:
- Percentage of spend with local or regional suppliers
- Local jobs or apprenticeships created
- Supplier diversity and SME participation
- Long-term value (e.g. reduced maintenance, local responsiveness)
Collecting and reporting this data closes the loop — demonstrating accountability to both the community and auditors.
Conclusion: Procurement as a Local Growth Strategy
When councils integrate local economic goals into procurement, every dollar spent becomes an investment in community resilience.
Strategic procurement allows councils to:
- build stronger local industries
- foster innovation and regional capability
- retain value within the community
- deliver on the broader vision of sustainable local development
For NSW councils, the future of local economic growth isn’t just about attracting investment — it’s about procurement with purpose.
How Muscat Tanzer Helps Councils Drive Local Economic Outcomes Through Procurement
Muscat Tanzer helps NSW councils use procurement as a lever for local economic development — lawfully, strategically and transparently.
Our firm supports councils to:
- Review and modernise procurement frameworks to include local and regional economic outcomes
- Design weighted evaluation criteria and supplier engagement programs that meet probity and legislative standards
- Draft and implement local preference policies consistent with the Local Government Act 1993 (NSW)
- Facilitate shared services and regional procurement arrangements to maximise scale and impact
- Provide training and governance support for councillors, executives and procurement staff
We help councils move beyond “buying well” — to buying for community growth.
Paul Muscat
Director
Muscat Tanzer
Lucy Edwards
Associate
Muscat Tanzer
