Local Business
Preference Policies
For the Mobile Lions Club
November 6, 2012
by
Semoon 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
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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
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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
Seattle
WA
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
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Alameda
Charlotte
Collier
Lee
Los Angeles
Manatee
Miami-Dade
Monroe
Multnomah
Sacramento
Sarasota FL
Suffolk
CA
FL
FL
FL
CA
FL
FL
FL
OR
CA
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 NASPO
 The web-based purchasing
system of the State of Virginia
 the Procurement Office of the
State of Oregon
 Mostly deals with state
projects.
States with no preference laws
 Mississippi
 Nebraska
 New
Hampshire
 New Jersey
 N. Carolina
 Oklahoma
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Pennsylvania
Rhode Island
Tennessee
Utah
Vermont
Washington
Wisconsin
States with Reciprocal Laws
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Colorado
Connecticut
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Louisiana
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Maine
Maryland
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
New Jersey
New York
North Dakota
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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
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(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!