In 2012, a longtime local provider of fuel to Guilford County, Berico Fuels, lost a contract to continue to provide fuel to the County to a Virginia-based company. Berico had performed well and had a good relationship with the County. Further, Berico employed many persons in our community, paid considerable amounts in local taxes, and supported many community organizations. Notwithstanding these facts (as well as the fact that elected officials routinely tout the importance of “buying local” and supporting small and local businesses), the out-of-state company was given the contract because it underbid Berico by a mere $847 dollars (an amazingly infinitesimal percentage of the total contract amount)!
For decades, nonsensical results such as this have happened too regularly in Guilford County, Greensboro, and throughout the State of North Carolina. For the past several months, however, Councilperson Tammi Thurm and I have worked to develop a “local preference” policy to address the issue and promote job growth in Greensboro. The policy proposal, which can be found here, goes beyond merely resolving (i.e., saying) that our City and local government should support local business, it actually supports local business.
According to the Institute for Local Self-Reliance, “a growing body of research shows… that locally owned businesses create communities that are more prosperous, entrepreneurial, connected, and generally better off across a wide range of metrics.” In addition, “these studies find that local businesses recirculate a greater share of every dollar in the local economy, as they create locally owned supply chains and invest in their employees.” This recirculation creates a multiplier effect that increases the value of dollars initially spent.
The local preference policy proposal addresses some of the purported reasons why no such written policy has been adopted to date:
- The City Will Not Pay More.
As explained by a recent article in the Rhino Times, “The [proposed] policy is fairly simple: In contracts under $30,000, if the lowest responsible bidder is not from Guilford County and the second lowest bidder is within 10 percent of the low bid and is local, the local company will be offered the opportunity to match the price of the lowest bidder. If the local bidder turns down the offer to match the price, then the contract goes to the non-local low bidder. In the RFQs, which are scored on a point system, the local company would receive a 5 percent increase in points for being local.” That is to say, where the City contract at issue will be awarded by bid and based on price, a local bidder will be given the opportunity to “match” the lowest bid if (1) the lowest bid was offered by a non-local bidder and (2) the bids between them were very close. In any event, the City pays the lowest price available to it.
- No “Trade Wars.”
One concern that was expressed on the topic in the past was that if Greensboro were to adopt a local preference policy, other area cities would respond by adopting similar policies for the benefit of their local businesses, causing Greensboro-based businesses to lose out on contracts in those cities. However, any such concern with regard to the policy proposal is misplaced for two principal reasons.
First, the policy proposal defines local as “All bidders (1) within the corporate limits of the municipalities which comprise the Guilford County Economic Development Alliance (Greensboro, NC; High Point, NC; and Guilford County, NC).” Thus, all certified businesses in Guilford County will benefit from the policy. The policy will not be a source of division among Greensboro’s neighbors and local economic development partners, Guilford County and High Point.
Second, the proposed policy is measured. While the policy is significant in the sense that other municipalities have not formally provided any local preferences to their local businesses, the ultimate scope of the benefits under the proposed policy are modest. Principally, the opportunity for a local bidder to match the lowest bid from a non-local bidder only arises where nearly “all things are equal.”
- Doubly Helps Local Minority and Women Owned Businesses.
Another concern that has been raised is that a local preference policy would somehow harm local minority and women owned businesses (“MWBEs”). While the exact nature of the concern is unclear, it appears to be based on a fundamental misunderstanding of (1) any local preference policy’s relationship with the City’s long-existing MWBE policy and (2) the (non)compulsory nature of local preference policies.
A. Relationship with the City’s MWBE Policy.
The City has long had a MWBE policy “to ensure all businesses — including those owned by minorities and women — are afforded the maximum practicable opportunity to participate in the City’s purchasing and contracting processes.” See https://www.greensboro-nc.gov/business/minority-and-women-s-business-enterprise. Here, however, the proposed local preference policy plainly does not conflict with the City’s MWBE policy. Not only does the local preference policy not harm local MWBEs, it affirmatively helps them.
Businesses can be MWBE, local, and both MWBE and local. Under the City’s MWBE policy, a business may receive a benefit in the procurement process as a result of it being an MWBE. If the MWBE were also local, it would receive a separate and additional benefit under the proposed local preference policy.
B. (Non)Compulsory Nature of Local Preference Policies.
Local preference policies do not require or compel local businesses (MWBE or otherwise) to do anything they do not want to do. Under the proposed policy, a certified local business or bidder (MWBE or otherwise) which submits a bid very close to the lowest bid from a non-local bidder will be given the opportunity to “match” the lowest bid. The local business (MWBE or otherwise) can choose to take advantage of the opportunity, but is not required to do so. If matching the lowest bid is not helpful to the local business, the business can simply decline the opportunity to be awarded the contract from the City.
- It’s Legal.
In the past, it has been suggested or stated to a number of local officials that local preference policies are not allowed under North Carolina State law. Such a legal conclusion, however, is incorrect. While State law does have strict rules for procurement processes regarding certain types of local government contracts (e.g., construction contracts over $30,0000), there are no such State rules with regard to other local government contacts (e.g., for professional services). The policy proposal navigates sometimes confusing State procurement law. It fully complies with all of State law’s rules and requirements (as confirmed by Greensboro’s City Attorney).
On April 17, 2018, Greensboro City Council will vote on whether to adopt the local preference policy proposal. The proposal has received terrific support from the community (including organizations such as Triad Local First and Downtown Greensboro, Inc.). Hopefully, City Council will support the proposal (or a variation thereof) and “buy local.”— post written on April 12, 2018.