Study: Hospitals in New Orleans purchase few goods, services from local small businesses

Jaquetta White

N.O. agency says redirected spending could spur economy

Compared with public agencies and large companies, hospitals in New Orleans purchase few goods and services from local small businesses, according to a study released Monday.

That’s at least in part because local hospitals lack procurement programs that encourage small and locally owned businesses to compete for contracts, according to the study’s authors, DMM & Associates and the Democracy Collaborative.

The firms spent three months studying the procurement practices and supply chains at New Orleans health care facilities, including eight hospitals, as well as the capacity of small and local businesses to provide them with goods and services.

The analysis was commissioned by the New Orleans Business Alliance as part of ProsperityNOLA, a five-year plan for economic growth that the agency introduced in 2013. The plan lists bioinnovation and health services as one of five industries with the potential to catalyze growth in the local economy.

But the study found that many local health care institutions, which have procurement spending of more than $1.5 billion per year, do not have programs to facilitate and encourage doing business with local vendors and small suppliers, defined as having between $100,000 and $1 million in annual revenue.

And that means a lot of the money that locals spend on health care does not end up helping local businesses grow and add jobs.

“Most New Orleans hospitals do not yet have specific vendor inclusion goals, do not track data on local spending, do not have small-business liaison offices and do not advertise available contract opportunities to the public,” the study’s authors wrote.

Three of the hospitals — New Orleans East Hospital, Tulane Medical Center and the Veterans Affairs Medical Center — have a formal supply chain inclusion program for small businesses, the study found. However, just one of those, New Orleans East Hospital, focuses on local businesses.

The other hospitals — Children’s Medical Center, Touro Infirmary, Interim LSU Hospital, Ochsner Medical Center and Ochsner Baptist — do not have dedicated programs for local and small businesses.

The report also found that “despite perceptions,” many small and local businesses have the capacity to serve large hospitals. The study offered as evidence the contracts that small firms have with some of the city’s largest public agencies, such as the Sewerage & Water Board, and private corporations, like Entergy.

“Although small businesses face a unique set of challenges, such as lack of experience with the bidding process, barriers to capital access or uncertainty about how to navigate hospital purchasing, these can be addressed through simple effort on the part of buyers, like unbundling bids or improving payment terms,” the report says.

The report suggests that the New Orleans Business Alliance take the lead in bringing health care institutions, small and local businesses, and other stakeholders together by hosting vendor fairs and supporting the development of inclusive procurement programs, among other things.

It also recommends that hospitals begin tracking their local spending and benchmarking it against industry peers and that they post requests for proposals with the city’s Office of Supplier Diversity.