The Gazette covers City Hall, now a flood-damaged icon on May's Island in the Cedar River

City Hall contemplating breaks on bids for local firms; what is local?

In City Hall on March 4, 2009 at 11:10 am

Should local businesses get a local-preference break in City Hall bids?

The City Council has been interested in that idea in recent months, no doubt, because of the huge, flood-recovery rebuilding effort that is in the offing for city buildings, facilities and infrastructure.

In a memo to the council Judy Lehman, the city’s purchasing manager, notes that some jurisdictions have established a “legally-binding preference” in the competition for public projects that gives a direct financial advantage to local companies.

Typically, Lehman reports that the advantage comes by subtracting a percentage off a local bidder’s bid price in a bidding competition that seeks to select the lowest responsible bid. Another approach is to restrict bidders to only those companies in the local area.

Providing a local-preference has pluses and minuses: According to Lehman:

The pluses: Local businesses will be supported and that support will be “repaid” by the local businesses’ commitment to the community. Local businesses contribute to the property-tax base and circulate their dollars locally.

The minuses: Competition for work could be reduced and costs for work could increase. Identifying how much money actually stays in the local community could be difficult. Picking local companies could alienate other jurisdictions.

Lehman says the council will need to decide what size of percentage break on bids it wants to have if it puts a local-preference policy in place. Also, the council will need to define what “local” means, she says. Is it at the city limits? What if corporate headquarters are outside of the city?

  1. I’m all for local bid preference, but there are a number of projects that don’t even have local bidders, because the work is beyond what any local contractors do, or want to do.

    Perhaps before hastily instituting another business-affecting local rule, the City should examine its RFPs and the history of bids on City projects and figure out why 90% of the bids aren’t “local”.

    After that, they should figure out a way to foster a business climate that would attract the kinds of companies that we need to do all of the work that is needed here in Cedar Rapids.

  2. Good! Keep out those low-life Marionites who want to come steal our jobs. Besides, what has Marion done for CR lately anyway? Well, besides patrolling 1/4 of the city, handling dispatch, and pumping water to help save our water system? And don’t get me started on those scumbags from Benton County!

  3. My first question is how much of the work is done by non-local contractors, and how much of it is done by local contractors under a non-local general contractor.

    I’m currently working on two projects where the general contractor is from Dubuque, but all of the construction work is being done by local contractors.

    The projects were bid on by several local general contractors, but the one from Dubuque had the lowest bid. Under this proposal, our client (the Linn-mar school district in this case) would have ended up paying more for the same work.

    There are other options as well. One thing that is commonly done is to include certain requirements written into the contract that encourage local companies to do the work. One common method is requiring the contractor to provide a multi-year warranty on any work. This forces non-local contractors to include a large contingency in their bid that local companies do not.

    While I think trying to keep the cities money in the area is important, I would caution against broadly applied rules and discounts on bids.

    If the local company doesn’t have the lowest bid, even with the financial benefit of not having to transport large numbers of people and equipment into the area, why should we pay an inefficient contractor?

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