From Contracts to Communities: How Public Procurement Can Drive Economic Development

Public procurement is often treated as little more than an administrative task. Yet with trillions of dollars in annual public spending, procurement is one of the most powerful—and underutilized—tools for economic development. It must be reimagined as a lever for economic change, not reduced to administrative routine. By buying smarter and more intentionally, governments can create jobs, build wealth, and strengthen communities from the ground up.

This blog explores how governments can harness procurement to build stronger local economies. It outlines how public contracts can stimulate private sector growth, expand economic opportunity, drive innovation and sustainability, and strengthen long-term community resilience. It also provides practical policy recommendations to help agencies modernize procurement systems, support small businesses, and measure real economic impact—not just costs.

Introduction: The Hidden Lever

Public procurement is far more than a mechanism for purchasing goods and services. At the federal, state, and local levels, public procurement in the United States represents over $2 trillion annually—more than 10% of GDP. At that scale, procurement becomes one of the largest and most consistent sources of public investment in the economy.

Yet despite its scale, procurement remains largely disconnected from mainstream thinking about economic development. Policy discussions tend to focus on incentives, tax breaks, or workforce development programs—rarely on the transformative economic power of government contracts: who they go to, how they are structured, and what outcomes they deliver.

When wielded strategically and intentionally, public procurement can become a cornerstone of economic development. By aligning compliance requirements with mission-driven and impact-focused strategies, governments can transform procurement from a narrow obligation into a powerful tool for job creation, business growth, and local wealth building.

The Procurement Economy: Public Spending, Private Growth

Procurement has an immediate and tangible impact on the private sector. Government contracts fuel a wide range of industries—from infrastructure and IT to professional services, construction, and community-based initiatives. When contracts are awarded to local and small businesses, those dollars stay in the community, recirculating and generating broader economic activity.

According to the World Bank, public procurement accounts for 15% of global GDP and up to 50% of total government expenditures. In the United States, strategic procurement isn't just good governance—it’s a proven economic engine, driving higher employment, stronger small business ecosystems, and greater local tax revenues.

The economic impact of procurement depends not just on how much is spent, but on who receives the contracts. When large, national firms consistently win bids, profits and jobs often leave the community. By contrast, awarding contracts to local firms—especially small, minority-owned, or historically underrepresented businesses—keeps economic benefits circulating within underserved communities.

Local initiatives across the country have shown that intentional strategies to engage small and historically excluded vendors can expand job opportunities and boost participation in public markets—proving that smarter procurement delivers real, measurable results.

Procurement as Policy: Unlocking Broader Benefits

Expanding Economic Opportunity

Public procurement is a powerful lever for expanding economic opportunity. By breaking down large contracts into smaller, more accessible scopes of work, reducing bonding requirements, streamlining proposal processes, offering debriefs to unsuccessful bidders, and removing unnecessary insurance or licensing barriers, agencies open the door to businesses that have historically been shut out of public contracting.

Encouraging Innovation and Sustainability

Governments can also design procurement processes to advance innovation, sustainability, and other public priorities. Bids can be evaluated not only on cost, but also on broader value metrics—such as community employment, workforce development commitments, innovation capacity, and the use of environmentally responsible practices. Supporting innovative firms through procurement strengthens local industries, drives adaptation to future needs, and ensures that economic development strategies are not just reactive, but forward-looking. While smaller or local vendors may sometimes have higher initial costs, strategic procurement delivers broader economic returns—keeping dollars circulating locally, strengthening the tax base, and building long-term economic resilience.

Building Capacity and Long-Term Economic Resilience

Government contracts don't just provide income—they fuel business growth. When firms can rely on consistent, predictable work, they are more likely to hire, build infrastructure, innovate, and scale. This is how local economies strengthen themselves from within—building resilience, deepening community roots, and creating wealth that stays local for generations.

Policy Recommendations

To harness procurement as a driver of local economic growth and resilience, governments should:

• Align procurement with broader economic development goals: Use procurement intentionally—not just to meet compliance requirements, but to strengthen local economies, expand opportunity, and build lasting community wealth.

• Measure what matters: Track not just contract costs, but the real economic and social impacts of public spending—including local job creation, business growth, innovation, and resilience.

• Invest in small business outreach and capacity-building: Provide technical assistance, mentorship, training, and accessible bidding opportunities to ensure that small and historically underrepresented businesses can compete—and thrive.

• Modernize and streamline procurement systems: Remove outdated barriers that have become "business as usual"—such as unnecessary printed submissions, excessive insurance demands, or redundant paperwork—and make it easier for qualified small businesses to participate.

• Coordinate across agencies for broader impact: Align vendor pools, share outreach strategies, and bundle smaller contracts strategically to amplify procurement's reach and economic effects across regions and sectors.

• Monitor performance and enforce accountability: Awarding contracts to small businesses—especially as subcontractors—must translate into real scopes of work, meaningful participation, and timely payment. Agencies should require regular reporting, conduct random audits, and hold primes accountable for delivering on their commitments.

Conclusion: Buy Better, Build Better

Every public dollar spent is a choice—a choice about who gets opportunity, what gets built, and whose future is invested in. Procurement isn’t just a formality; it’s a resilient economic strategy. When used intentionally and backed by real accountability, procurement becomes one of the most powerful tools government has to strengthen communities, build lasting resilience, and drive generational wealth. It's time to buy better—so we can build stronger, more inclusive economies from the ground up.

About The Amalgamation

At The Amalgamation, we help communities unlock the full potential of public procurement. We work with small businesses navigating government contracting and support public agencies in designing procurement strategies that build local capacity, strengthen economic sustainability, and deliver long-term results.

When procurement works well, it’s not just about who gets the contract—it’s about what gets built, who benefits, and how we grow together. That’s the future we’re working toward.

Learn more at www.the-amalgamation.com.