State Contract Preference Critique
Local vendor preference ordinances are controversial for chambers. On one hand, who doesn't want local companies to benefit from government contracting. On the other hand, a local preference clause in your city, county or state may cause retaliatory government contract provisions when your local companies bid on projects in other cities or states.
Also, it is not always easy to determine which companies are, in fact, local. Is the engineering firm headquartered in your city that employees 15 people any more "local" than the firm headquartered out of state that has employees 50?
The Detroit News took a different line of questioning. They published an editorial with a taxpayer-focused critique of state preference legislation pending in Michigan. Here is an excerpt:
"Michigan lawmakers have been busily working on packages of bills with titles like "Hire Michigan First" and "Buy Michigan First." Unfortunately, the well-meaning legislation involves trade-offs that don't necessarily benefit taxpayers and seem unlikely to have much of an impact on jobs...
Lawmakers say about $13.6 billion of the state's $16 billion in annual contracts go to Michigan businesses -- or about 85 percent. They want to improve that, so one part of the bill package gives Michigan businesses a 10 percent advantage over out-of-state businesses in competing for state contracts. In other words, an in-state firm could bid $1.07 million to print a batch of state park brochures and be considered a lower bidder than a company from another state or country that bid an even $1 million.
The whole purpose of competitive bidding is to restrain government expenses, which, in turn, holds down taxes. The ultimate cost to provide the above example's $700,000 home-field advantage would be borne by taxpayers. Don't they deserve a break?"
Their math is wrong, the scenario they laid out would cost taxpayers an additional $70k not $700k, but the premise holds up.
To read the full editorial, click HERE.