Blog | 02.24.20

The “Buy Local” Trend Is Starting to Catch On, Especially Among Governments

Sometimes, being in the right place at the right time is all it takes for something good to happen. That’s what many private sector businesses are learning as the public sector increasingly opts to do business with companies closer to home. 

As NIGP notes, there are several scenarios in which “local preference” will lead a state or local government agency to award the contract to a local company versus an out-of-area bidder:  

  • “Second Chance” bidding for local firms
  • Tie-bids - when the bid of a local bidder is the same amount of that of a non-local bid;
  • Percentage bids - when the local bidder’s bid falls within a certain percentage of that of the lowest bid by a non-local bidder;
  • Reciprocal bids - when the local bidder’s bid is reciprocal to that of a bid of non-local bidder; and
  • Absolute bids - where the bid is awarded to the local bidder even if it is not lowest bid.

Although, it is worth noting that each state, city and county manages has defined its “local preference” rating system a bit differently. For example, many use the percentage bid model:  

  • A Governing article explained that: “When an L.A.-based firm submits a bid for goods or services to the city, the bid is considered as if it were 8 percent cheaper (and that much more attractive) than those submitted by nonlocal competitors…” and that “…companies with headquarters in Chicago get a 2 percent advantage on bids they submit to the city. There is an additional 4 percent bonus if a majority of the employees actually live in Chicago. But that’s not all: Companies in particularly high-poverty and low-employment parts of the city can get another 6 percent shaved off their bids.”
  • The City of Austin leverages Texas Local Government Code Chapter 271, which “allows municipalities to consider bidder’s principal place of business in certain instances. For a Construction contract, “if local bidder is within 5% of non-local bidder and contract is less than $100,000 (§ 271.9051)” then local preference can be given. However, “the municipality must determine, in writing, that the local bidder offers best combination of contract price and additional economic development opportunities, including: Employment of local/city residents and increased tax revenue to the city.”
  • The District of Columbia has several Certified Business Enterprise (CBE) categories that give competitive advantages to businesses with local connections, including: Local Business Enterprise, Resident-owned Business, Longtime Resident Business, Local Business Enterprise with Principal Office in Enterprise Zone, and Local Manufacturing. The terms that guide their application of local preference application vary as “bids and proposals are either evaluated using a preference point system in the form of points (in the case of proposals) or percentage reduction in price.”

Others are looking to utilize the “Second Chance” model more often. Maine is one of them. Per the Press-Herald, a measure that went before a Legislative committee for consideration this month “is designed to support Maine companies by giving them the option to lower their bid prices when they are beaten by an out-of-state company on a construction or purchasing contract with state government.” 

At the end of the day, though, it is up to governments to decide if and how they want “to direct purchases to certain companies based on location” as NIGP explains.  

The good news is that more and more are deciding to do so, especially given its potential for local economic stimulation. The hope is that, by “buying local,” the community will reap the rewards of increased local business revenue – to include job creation and a greater volume of tax income that can be reinvested in local programs.  

Do You Know Your State and Local Governments’ “Local Preferences”?     

It is critical that you confirm how each state and local government agency applies local preference points or percentages before bidding on a contract because you’ll likely have to prove that you meet all “local business” criteria either during the vendor registration process or in the bid proposal itself. 

Some will accept self-validation, while others may require a third-party review and validation. For example, the City of San Antonio utilizes a Texas Statute amended by 82nd Legislative session to allow larger cities to grant contracting preferences to local businesses when price alone determines the winning bid. For San Antonio, a local business is defined as “a business headquartered” in the city in which it is submitting a bid or a business able to meet the following conditions: “having an established place of business for at least one year in the incorporated limits of the City and from which at least 20% of its full-time, part-time and contract employees are regularly based OR a minimum of 100 employees; and from which a substantial role in the business’ performance if a commercially useful function or a substantial part of its operations is conducted.” 

While this type of information is often available on each individual agency’s website, it really is best to pick up the phone and call a procurement official to confirm each agency’s local preference policies and validation requirements. Website information can become outdated at any moment in time. Plus, making calls gives you the opportunity to start building relationships with buyers. Who knows what other golden nuggets of information they’ll share with you about contracting opportunities, preferences and more.  

The Benefits of “Selling Local”  

Many businesses aim to do business with the federal government. It may even be your “holy grail.” Yet, focusing on state and local governments has two three perks:

  • Physical proximity to the customer aids with relationship building, allows for closer oversight of projects to keep customer satisfaction levels high and makes you more accessible for briefings, site visits, etc.
  • Being a local business also aids with awareness – of both local government bid opportunities and of your business by government procurement officials and their customers (aka the influencers and decision-makers).
  • Your relationships with other local businesses can be highly valuable when project requirements dictate that the prime contractor, subcontractor, supplier or manufacturer must be a local business. 

Just know that being “local” does not automatically equate to a win every time, even in jurisdictions where local preferences are exercised frequently. As NIGP points out, every public sector agency must “Adequately reconciling local preference policies with public procurement’s guiding principles of fostering full and open competition, best value, equity, and impartiality.” Plus, there could be scenarios where all bidders are local. 

In other wordsthe competition will still likely be fierce on every bid. Your pricing has to be just as aggressive as out-of-area bidders, you must still demonstrate the quality and value of your goods or services, you must have references and a solid past performance track record, and you must be able of delivering on time/on budget without issue. The government is not in a position to compromise. And every agency still has a responsibility to evaluate proposals and make an unbiased decision.  

Does This Mean That I Shouldn’t Bid on Contracts in Other States, Cities or Counties?

Absolutely not. In fact, many state and local agencies are begging for bids…from anyone! There may not be local companies able to supply the goods and services they need. So, we’re not suggesting that you should only bid on opportunities within your state or local community. We’re just recommending that you don’t overlook the government contracting opportunities that exist locally as you look to expand your reach nationwide. You never know, getting your foot in the door with a state or local agency may just be the boost you need to secure a contract in another state or region. (Remember, references and performance track records go a long way in government contracting. 

Visit The L.A.B. for resources to help you strengthen your public sector sales efforts and sign up for a Periscope S2G Premium that will help you quickly identify new bid opportunities at the state and local levels.