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A Times Editorial

Local preference is bad policy

Local vendor preference policies make good public relations and bad public policy. They can increase the cost of government services and shut the best companies out of the bidding process. But that hasn't kept Tampa Bay governments from latching onto the policies and politicians from promoting them. It is shortsighted pandering that could cost taxpayers more than it helps the local economy.

During this recession, the push for local preference policies grows out of an attractive, though simplistic, idea: Governments should give preference to local businesses when awarding contracts and making purchases, because that would keep money in the community and save local jobs.

The idea of this sort of homegrown economic stimulus is so appealing to elected officials that it is sprouting all over. The Tampa City Council has scheduled a workshop for November to discuss a local preference policy for the city. The Hillsborough County Commission may take it up soon. Pinellas County commissioners have their staff drafting a proposal, as does the Hernando County Commission. The idea has been broached by the St. Petersburg City Council and become a topic of debate in the city's mayoral race.

In each case, the professional staffs of those local governments have been warning against the policies. Elected officials should listen to them before they vote.

Local preference policies work one of several ways. Local companies are allowed to offer a bid that is higher than those of outside companies and still be considered the lowest bidder. Or they may be allowed to match an outside vendor's lower bid. Or local bidders may get bonus points of, say, 5 percent or 10 percent when bids are ranked, which gives them advantage over bidders that are not local.

There is plenty of research to indicate that local preference policies increase the cost of government. That means taxpayers must pay more for the same, or even inferior, services or products. With governments already struggling to pay their bills and the public calling for tax relief, that does not make sense.

A policy that favors local businesses also interferes with free-market competition, which normally would drive prices down. It invites abuse and an even cozier relationship between government and those who win its contracts. It can discourage outsiders from bidding, which gives local businesses the opportunity to ratchet up prices, and it can invite expensive lawsuits, bid challenges and messy disputes over political favoritism.

There is even a down side for local businesses. If all local governments in a region adopt local preference, businesses can find themselves confined to one city or county, unable to bid successfully for work in other locales.

Even the premise that a local preference policy can stimulate the local economy is doubtful. The impact on jobs is quite small compared with the communitywide impact of increasing the cost of government or decreasing the quality of services.

The modern bid system provides the best protection for taxpayers and the local economy, because it encourages competition and fairness, keeps prices down and is open to all businesses that can meet the bid specifications. It levels the playing field instead of tilting it. Properly managed, it is a system that should result in the best product for the best cost. And in this economy, that should be every government's goal.

Local preference is bad policy 08/01/09 [Last modified: Sunday, August 2, 2009 4:10am]
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