Local Business Preference Policies

For the Mobile Lions ClubNovember 6, 2012

bySemoon Chng

For Your Information “Daily Expenditures per Visitor: Do

We Really Know?” at Association for University Business and Economic Research, Honolulu (Hawaii), October 30, 2012.

“Compensation from BP Oil Spill: Is It Fair?” National Association of Forensic Economics, San Diego (CA), January 4, 2013.

What is a “local” business?

Business owned by local residents? What about a multi-state business

with a local branch? Key: (a) own local business license,

(b) pay local taxes, and (c) hire local residents.

Assumes that local and outside businesses are equally qualified!

Types of Local Preference

In the purchasing stage: Allow a higher bid price for locally produced goods or local suppliers;

In the selection stage in construction and public works: Allow extra points or higher bid prices for local contractors; and

In the hiring stage: Require employment of local residents.

First, Cities

Cities with Preference Policies:Reviewed in the study Albuquerque NM Baltimore MD Berkeley CA Chicago IL Columbus OH Dallas TX Detroit MI D of Columbia Fremont CA Grover Beach CA Houston TX Los Angeles CA Memphis TN

Milwaukee WI New York NY Oakland CA Palmetto FL Pearland TX Phoenix AZ Pismo Beach CA Redding FL Richmond CA San Francisco CA San Jose CA SeattleWA Sunnyvale CA.

City Policies

Usually, preference limited to businesses that have business licenses with the city and are located within their city limits;

Some like Albuquerque, Los Angeles, Memphis and San Jose, expand their location requirement to include the county in which the city is located; and

Some cities require the local business to have been in their jurisdiction for at least a year.

City Policies 1% to 5% preference with 5% being most

popular; Some cities set a maximum, while others

set a minimum, amount of contracts to which preference applies.

Many cities exclude public works and construction contracts from their preference policies.

Reciprocal requirement is not popular among cities unless required by state law.

Now, Counties

Counties with Preference Policies:Reviewed in the study Alameda CA Charlotte FL Collier FL Lee FL Los Angeles CA Manatee FL Miami-Dade FL Monroe FL Multnomah OR Sacramento CA Sarasota FL Suffolk NY

City v. County Policies

A greater number of counties have reciprocal arrangements with other counties.

The percentage preference given to local businesses by counties is higher at 5 to 10% than it is for cities with 1 to 5%.

States

Three good sources

Annual Survey by NASPOThe web-based purchasing

system of the State of Virginia the Procurement Office of the

State of OregonMostly deals with state

projects.

States with no preference laws

Mississippi Nebraska New

Hampshire New Jersey N. Carolina Oklahoma

Pennsylvania Rhode Island Tennessee Utah Vermont Washington Wisconsin

States with Reciprocal Laws Colorado Connecticut Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Louisiana

Maine Maryland Michigan Minnesota Mississippi Missouri Montana Nebraska New Jersey New York North Dakota

Ohio Oregon Pennsylvania South Dakota Tennessee Texas Utah Virginia Washington West Virginia

Wisconsin.  

States with reciprocal laws that cover not only state, but also cities and counties

Colorado Florida Idaho Iowa Kansas Mississippi Missouri

North Dakota Oregon South Dakota Texas 

States without reciprocal laws

Alabama (listed in publication), Alaska, Arizona, Arkansas, California, Delaware, District of Columbia, Kentucky, Massachusetts, Nevada, New Hampshire, New Mexico, North Carolina, Oklahoma, Rhode Island, South Carolina, Vermont, and Wyoming.

ALA CODE § 39-3-5 : PREFERENCE TO RESIDENT CONTRACTORS IN LETTING OF CERTAIN PUBLIC CONTRACTS

(a) In the letting of public contracts in which any state, county, or municipal funds are utilized, except those contracts funded in whole or in part with funds received from a federal agency, preference shall be given to resident contractors, and a nonresident bidder domiciled in a state having laws granting preference to local contractors shall be awarded Alabama public contracts only on the same basis as the nonresident bidder's state awards contracts to Alabama contractors bidding under similar circumstances; and resident contractors in Alabama, as defined in Section 39-2-12, be they corporate, individuals, or partnerships, are to be granted preference over nonresidents in awarding of contracts in the same manner and to the same extent as provided by the laws of the state of domicile of the nonresident.

(b) A summary of this law shall be made a part of the advertised specifications of all projects affected by this law.

Let me highlight …

ALA CODE § 39-3-5 Unless funded from a federal agency,

“preference shall be given to resident contractors,” and a nonresident bidder “shall be awarded Alabama public contracts only on the same basis as the nonresident bidder's state awards contracts to Alabama contractors”;

A summary “shall be made a part of the advertised specifications of all projects”

Clear? Practiced?

Recommendations I(all based on equal qualification) Visit and work on: ALA CODE § 39-3-5 Cities and counties (and state) may

consider reciprocal arrangements of the following nature:

If an outside business submits the lowest bid and its jurisdiction does not have local business preference policies, the contract should be awarded to the outside business.

Recommendations …

If an outside business submits the lowest bid and its jurisdiction has local business preference policies, the bid amount by the outside business should be increased by the same percentage preference given to local businesses by the jurisdiction in which the outside bidder is located.

Recommendations … If contracts for works or services

are awarded without competitive process, decision-makers of cities, counties, and all private entities should consider utilizing local businesses or businesses that hire local workers.

Use of local workers should be encouraged but not required.

At the very least, all local leaders –public and private-

Pass a resolution promising to do their best to work with local businesses and to “buy local” whenever possible…

Possibly, organize a task force to review practices, tax rates, and laws that tend to discourage “buy local” !!!

Thank you!