Philadelphia launches push to get hospitals and universities to buy local

Philadelphia's vast eds and meds community represents not only academic and research strength, but considerable buying heft. Across the same city, thousands of local companies are eager for some of that business but are shut out.

On Wednesday, the wrappings come off Philadelphia Anchors for Growth & Equity, or PAGE, a first-ever citywide initiative to change that by boosting local purchasing by some of the city's biggest employers.

"This is a unique collaboration between the city, a nonprofit, and all of our major eds and meds institutions. … They're all lined up to figure out how to use their purchasing power to create more jobs," said Jeff Hornstein, executive director of the Economy League of Greater Philadelphia, the nonprofit that founded and is leading the procurement initiative. "This is the first time in this city that anyone has built a citywide collaborative to do this stuff."

The initial aim is to localize $500 million in contracts at 13 city hospitals and universities for goods and services — such as office supplies, lab equipment, food, video production, and web design — and create as many as 5,000 living-wage, middle-skill jobs for Philadelphia residents in eight to 10 years.

"This is a robust sector that is critical to our economy," Hornstein said. "It's done a lot, but it can do more and here's the road map."

Harold Epps, Philadelphia's commerce director, said it is the responsibility not only of the city's corporations and institutions but also its private citizens to strengthen the economy.

"I think everybody needs to be committed … to making Philadelphia a better place to live, work, and play," Epps said. "We have a lot of power in where and how we spend our dollars."

Along with the Commerce Department, PAGE's participating anchors are Children's Hospital of Philadelphia, Thomas Jefferson University Hospitals, Drexel University, University of Pennsylvania, University of Pennsylvania Health System, Temple University, Temple University Health System, all of whom provided seed funding. Additional participants are Salus University, Community College of Philadelphia, Einstein Healthcare Network, La Salle University, St. Joseph's University, and University of the Sciences.

PAGE incubated for a few years in the Office of the City Controller, where Hornstein was director of financial and policy analysis before joining the Economy League earlier this year. He was the project manager for a 2014 Controller's Office report that found slightly more than half of the more than $5 billion in annual purchases for goods and services by Philadelphia's universities and hospitals was spent on local businesses, and that a 25 percent increase in that spending would mean 4,400 new jobs and create an additional $14 million in annual tax revenue for the city.

PAGE's public launch follows a February report by the Sustainable Business Network of Greater Philadelphia, "Local Procurement: An Evaluation of Barriers and Solutions from the Business Perspective," that identified several impediments to locally owned businesses accessing contracts with local government and major companies. They include purchasing processes that aren't well-publicized and are beyond the capacity of small businesses. By SBN estimates, Philadelphia has 93,000 small-business owners.

>> READ MORE: Here's how small businesses can get a bigger piece of the pie in Philly

In May 2017, city voters approved a ballot question that gives small businesses a better shot at nonprofessional services contracts with the city by allowing that work to be awarded based on "best value" rather than lowest price.

Other cities, including Baltimore, Chicago, Detroit, and Cleveland, have been working on inclusive procurement longer and more deliberately, said Mariya Khandros, who is director of shared services at the Economy League and is leading the PAGE project.

"We are pioneers in certain strategies to do this work, but we are following in the footsteps of several successful initiatives," said Khandros, who formerly worked with Hornstein at the Controller's Office, as economic policy analyst. "That to me gives some outside validation to this work."

Kurt Sommer, director of Baltimore Integration Partnership, will be the keynote speaker at the PAGE launch event, 5:30 to 7:30 p.m. Wednesday at Drexel's George D. Behrakis Grand Hall inside the Creese Student Center, 3210 Chestnut St. Tickets are available at www.economyleague.org.

He will share experiences of the eight-year-old initiative to support job opportunities for low-income, predominantly African American residents of Baltimore. That includes a program with anchor institutions that, ironically, "was highly influenced" by some local procurement work being done at Penn and Drexel, along with efforts in Detroit, Cleveland, Chicago, and New Orleans, Sommer said in a recent interview.

"The work is hard, without a doubt," Sommer said. "We're taking large institutions … that typically compete with each other. … And so we slowly through the years have built a table of trust … where there are common goals of supporting community needs in Baltimore … by recognizing there's more to gain by working together in certain areas."

Those include vendor fairs, workforce development, and small-business strategies, Sommer said.

"There's no silver bullet to the work, and you really have to take a thoughtful and deliberate approach in crafting strategy," Sommer said, advising Philadelphia to start small and have patience. "This work is as much of an art as a science. You're working to take things institutions do at ease, going against the grain and trying to carve out intentional approaches to support local economic needs."

In Philadelphia, PAGE work so far has enabled an exchange of purchasing and supplier data "so we … can analyze it and provide a citywide view into this world that tends to be fairly opaque," Khandros said. Analysis will continue throughout the process and will include surveying participating businesses and anchors on job creation.

"For larger projects … we will do economic impact studies to understand the full implications of the new contract," Khandros said.

Shaming is not an objective, she stressed: "The point of data collection is to find opportunities and connect."

Equally important is ensuring that local businesses are being included only in opportunities "they are equipped for," said Julie Ann Jones, Drexel's assistant vice president of procurement services since January.

The daughter of a small-business owner who "watched him suffer with all of the challenges that small businesses suffer with," Jones said a key objective of PAGE must be to not overwhelm a local business — not that local and diverse always mean small.

"They may not have the capacity yet," she said. "How do we prepare them? We don't do that by handing them a contract they can't handle. As best we can, I want to look at this holistically — how do we make successful businesses, successful economic impact?"

What also can't be sacrificed in the process are the anchors' bottom-line needs, Jones said. "I worry about Drexel's fiscal health and our departments who struggle with their budget dollars and want to do right by their budgets," she said.

At the PAGE reveal, Jones will be part of a panel on challenges and opportunities in buying from diverse and local businesses.

>> READ MORE: Pointing out the obstacles

So will Lin Thomas, president and chief executive of EMSCO Scientific Enterprises Inc. and Supra Office Solutions Inc. in West Philadelphia. Supra, an office-products provider, was founded by Thomas and partners Ken Carter, Derrick Suswell, and Ismail Shahid seven years ago. They bought the 38-year-old EMSCO, which sells lab and research supplies, in 2015.

"It's been a challenge when we're competing against a national sales organization with strong capital dollars and a very aggressive approach to seeking to obtain as much of the customer's wallet as they can," Thomas said. "It's been difficult to be much in the game when customers are looking to keep things with one vendor or one or two primary vendors for simplicity for billing and receivables and payables."

Misconceptions are also a problem, Carter said.

"One of the largest is smaller enterprises are not savvy enough to work with the larger institutions," he said.

Thomas said Supra has 12 employees and more than $8 million in annual revenue; EMSCO, 14 employees and more than $20 million.

Crediting God, PAGE, and "building capacity … to make ourselves considered capable and reliable" over the last year and a half, Thomas said EMSCO last month landed a "major dollar" contract with Penn, a longtime customer, in partnership with ThermoFisher Scientific that "we would not have had the capacity to handle independently." It will increase the company's annual sales to the university to between $17 million and $25 million, up from $500,000, he said.

"We want to say 'kudos' to the University of Pennsylvania for being one of the anchor institutions that stepped up to the plate and encouraged an alliance partnership," Thomas said.

Construction of a new $16 million headquarters/warehouse will start early next year on nine adjacent acres; so will more hiring, he said.