State-by-State Review of Local Preference Bids

Why is this Important?
The intent of local preference laws is to give local businesses a competitive advantage for winning awards for local government work.  However, many companies and governments perceive local preference laws to be anti-competitive.  Thus, while local preference laws may benefit specific local companies, these laws also may drive up the costs of goods and services to all taxpayers, which get reflected in the form of higher taxes.  For this reason, local preference laws are not widely utilized across the state and country.

How are we doing?
Public work projects and purchase of goods and services:  Both Nassau and Suffolk have equivalent language stating that the county may award the bid to a bidder “other than the lowest bidder” who “maintains a place of business in or sells supplies, materials or equipment manufactured in the county…or an adjoining municipality and submits a sealed bid not exceeding ten percent more than the other lowest bidder… .”  These statutes refer specifically to public works projects and purchases of goods and services.  In a telephone survey of the 36 most populous counties in New York State (out of a total of 62 counties), only three were found to contain local preference statutes: Nassau and Suffolk counties each have a defined upper limit of 10% for a vendor to receive a preference, and Erie County has an upper limit of 5% and can only invoke the statute for projects larger than $100,000. 

A series of additional phone calls made to other comparable suburban counties – Fairfax, VA, Fairfield, CT, Santa Clara, CA, Bergen, NJ – indicates that none of these regions use local bidder preference laws.  Further, a review of state laws using the Lexis-Nexis database found that 43 states do not provide for local preference for state-awarded contracts (New York State is included in this group).  Seven states allow local contractors to have preference if they fall within certain guidelines.  The rationale for the types of local bidder preferences and the specific preference thresholds vary widely across these states.  Percentages vary from 1% to 15% with the most common threshold being in the range of 5%. 

Professional services:  Large contracts are also awarded for professional services which are subject to competitive requirements set forth by each local government.  In general, the rules for soliciting proposals and making awards for professional services allow local governments to take into account factors other than price in awarding contracts.  Thus, for professional service contracts, localities are allowed to develop their own solicitation and award criteria, which often incorporate either an implicit or explicit local preference.  Typically this gives local professional service contractors, including architects and engineers, a competitive advantage over outside companies.  Since pricing is typically only one of the criteria considered in a professional services contract award process, a specific local preference price advantage threshold is not required, nor does it appear to be commonly described in law.  Hence, it is not possible to measure the impact of local vendor preferences on these types of services.