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Local Purchasing Preferences
When making procurement decisions, many cities and states give preference to local businesses as a means to nurture small businesses and local economies. Some of these jurisdictions give a local preference only in the case of tie bids, but others give preference if a bid from a local business is within a certain percentage of the lowest non-local bid. Washington D.C., for example, by administrative practice gives a five percent preference to local firms. More than two dozen cities and a handful of states have such laws. Internationally, the Government of Western Australia has a Buy Local policy.
Giving preference to local suppliers, even if it means spending a little more, can actually benefit a city's finances. Dollars spent locally generate additional economic activity even beyond the value of the initial contract as the local supplier in turn sources goods and services locally. Each additional dollar that circulates locally boosts local economic activity, employment, and ultimately tax revenue.
A study in Arizona found that using local independent suppliers for state contracts results in three times the economic benefit of bids fulfilled through national chains.
In Britain, a county council found that vendors based within the county spent 76 percent of their county contracts locally (on wages paid to local employees and goods and services purchased from local businesses), while vendors based outside the county spent only 36 percent locally. The council, which has an annual procurement budget of £ 245 million, concluded that, if it shifted just 10 percent of its current spending with non-local suppliers to local suppliers, it would generate an additional £ 34 million (about $ 65 million) for the local economy. (This example and many other case studies can be found in the New Economic Foundation's excellent guide, Public Spending for Public Benefit: How the public sector can use its purchasing power to deliver local economic development.)
The Virginia Department of General Services has a nice table of state purchasing preferences in a document titled, Listing of States’ Absolute and Percentage Preferences.
RULES:
LOCAL
Local Purchasing Preferences - Albuquerque, New Mexico
The city provides a preference to local manufacturers, local businesses, resident manufacturers, and resident businesses. A local business is given up to a five percent credit in evaluating bids for goods and services.
Local Purchasing Preferences - Columbus, Ohio
Columbus gives a five percent preference if the government's purchase is under $10,000, and a one percent preference if the purchase is over $10,000. The buy local preference credit is limited to $10,000.
Local Purchasing Preferences - Ketchikan, Alaska
Unless contrary to federal or state law or regulation, a contract or purchase for supplies, materials, equipment or contractual services the amount of which is less than $200,000 shall be awarded to a local bidder where the bid by such local bidder does not exceed the lowest responsible non-local bid by more than 10% for $100,000 or less, and 7% of the non-local bidder between $100,000 to $200,000.
STATE
Local Purchasing Preferences - Alaska
The procurement officer shall award a contract based on solicited bids to the lowest responsive and responsible bidder after an Alaska bidder preference of five percent. "Alaska bidder" means a person who (1) holds a current Alaska business license; (2) submits a bid for goods, services, or construction under the name as appearing on the person's current Alaska business license; (3) has maintained a place of business within the state staffed by the bidder or an employee of the bidder for a period of six months immediately preceding the date of the bid; (4) is incorporated or qualified to do business under the laws of the state, is a sole proprietorship and the proprietor is a resident of the state, or is a partnership and all partners are residents of the state.
Local Purchasing Preferences - Montana
A public contract for construction, repair, or public works to the lowest responsible bidder without regard to residency. However, a resident bidder must be allowed a preference on a contract against the bid of any nonresident bidder from any state or country that enforces a preference for resident bidders. The preference given to resident bidders of this state must be equal to the preference given in the other state or country. For most cases the local bid cannot be higher than 3 percent of the non-local bid.
Local Purchasing Preferences - New Mexico
When bids are received only from nonresident businesses and resident businesses and the lowest responsible bid is from a nonresident business, the contract shall be awarded to the resident business whose bid is nearest to the bid price of the otherwise low nonresident business bidder if the bid price of the resident bidder is made lower than the bid price of the nonresident business when multiplied by a factor of .95. New Mexico also defines New York businesses as resident businesses.
Local Purchasing Preferences - West Virginia
Bids from an individual resident vendor who has resided in West Virginia continuously for four years from the bid date or from a corporation nonresident vendor which has an affiliate or subsidiary which employs a minimum of one hundred state residents and which has maintained its headquarters or principal place of business within West Virginia continuously for four years is given a two and one-half percent preference compared to non resident bids.
Local Purchasing Preferences - Wyoming
Every board, commission or other governing body of any state institution shall prefer products manufactured or grown in this state or sold by a resident of the state in all purchases for supplies, material, agricultural products, equipment, machinery and provisions to be used in the maintenance and upkeep of their respective institutions. A differential of not to exceed five percent (5%) may be allowed in cost on the Wyoming based products.
INTERNATIONAL
Local Purchasing Preferences - Western Australia
The Government of Western Australia's State Supply Commission Act of 1991 (see part 4) set up a State Supply Commission with the authority to draft and implement supply policies for the region. The Commission set about creating a Buying Wisely program. Two of the Buy Wisely policies are "Supporting Local Industry" and "Value for Money": the principle that when goods and services are purchased, public authorities achieve the best possible outcome for every dollar spent by assessing the costs and benefits to government and the community, rather than selecting the lowest purchase price.
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