Local preference in government contracting – a trend to watch
by Mary Scott Nabers,
CEO of Strategic Partnerships, Inc.
Trends are interesting to watch and a rather large one is impacting how cities procure goods and services. Elected officials at the local levels of government, in an effort to stimulate the economy and ensure job growth, are adopting new procurement guidelines that grant generous local preferences.
The new rules are designed to help hometown businesses and boost local economic activity. Advocates of preferences say this is also a way to increase a city’s tax revenues. The trend is gaining steam throughout the country.
Numerous cities in California have adopted local preference ordinances. Santa Ana grants a 7 percent preference for local businesses on all bids less than $100,000. This includes purchases of equipment, labor, services, supplies and materials. Simply put, it means that to win a bid, outside contractors must submit pricing that is more than 7 percent lower than what is offered from a local company.
Los Angeles established an 8 percent preference on all bids and San Jose grants a 2.5 percent advantage to local companies. For contracts awarded using a point-based system, San Jose grants local companies a 5 percent advantage.
Indianapolis established a 5 percent preference for procurement awards less than $50,000 and 3 percent for procurements between $50,000 and $100,000. However, in order to qualify for the local preference, companies must have proper documentation, such as registration from the Indiana Secretary of State and/or the County Recorder.
Other cities with local preference programs include:
- Chicago, Illinois
- Atlanta, Georgia
- Baltimore, Maryland
- Philadelphia, Pennsylvania
- Miami, Florida
- San Diego, California
In Texas, the city of El Paso is developing a local preference program that will be an enhanced version of its current “Hire El Paso First” program. City officials want to strengthen the current program and incentivize more local participation.
City Council members in Merced, California, have been discussing local preferences, but recently postponed any action until a later date. However, the County of Merced has had a local preference ordinance since 2009.
This trend is one that large government contractors are watching very carefully. And, as government purchasing declines at the federal level and increases at the regional and local levels, the impact of local preferences will be even more significant. Whatever the end result, this is one more example of change resulting from the nation’s strained economy.