ELEVATING OUR PROFESIONALISM 48 TH ANNUAL CONFERENCE MAY 17-20, 2015 ORLANDO, FLORIDA Understanding Local Preference The Pros and Cons Gregory K. Spearman, CPPO, FCCM Purchasing Director, City of Tampa
UNDERSTANDING LOCAL PREFERENCE Definitions OUTLINE Pros of a Local Preference Program Cons of a Local Preference Program Court Cases Against Local Preference Legal Issues Conflicting Preferences Defining the Term Local Preference Methods Argument Against Local Preference
UNDERSTANDING LOCAL PREFERENCE OUTLINE (CONT D) Tampa Diversity Management Initiative Geographic Area Small Local Business Enterprise Purchasing Statistics Exclusions/Exemptions Recommendations Conclusions City Council Action Contact Information
DEFINITIONS Local Preference a mandate by policy or ordinance which imposes legislative requirements in the public bidding process to award contracts to local vendors.
PROS OF A LOCAL PREFERENCE PROGRAM 1. May eliminate out of state bidders who do not have local area knowledge and subcontractor contracts. 2. Local vendors are given an additional opportunity to be awarded City contracts. 3. Dollars may be kept within the local community.
PROS OF A LOCAL PREFERENCE PROGRAM (CONT.) 4. It gives local vendors an advantage in the bid process. 5. It encourages local vendors to bid for work in the local community.
CONS OF A LOCAL PREFERENCE PROGRAM 1. Local vendors already receive local dollars. 2. A non local firm often has a positive impact on the local economy and can offer expanded job opportunities for workers in the local community. 3. It can actually discourage local economic development.
CONS OF A LOCAL PREFERENCE PROGRAM 4. It discourages competition and eventually reduces the pool of competing bidders. It costs money for companies to prepare bid packages. 5. Reduction of competition can eventually result in higher costs. 6. It encourages the enactment of exclusions and ordinances across neighboring communities which harms vendors locally.
CONS OF A LOCAL PREFERENCE PROGRAM 7. It is subject to legal challenge. 8. Local vendors already have inherent cost advantages in delivering products and services. A preference policy unfairly exaggerates that advantage.
CONS OF A LOCAL PREFERENCE PROGRAM 9. It would significantly increase the staffing workload to administer a bidding preference program. Must ensure compliance with local definition for winning bidder. Resolution of the winning bidder is more complex.
CONS OF A LOCAL PREFERENCE PROGRAM Expect more bid protests based on real or perceived legality concerns of the program. Expect more defaults as a result of overly optimistic pursuit of the local preference option by local vendors.
COURT CASES AGAINST LOCAL PREFERENCE Adolphus v. Baskin March 28, 1928 City of Clearwater Florida Supreme Court Construction of jail addition Commission stated : He (2 nd low bidder) is a local man, will use local contractors and local labor, and will patronize local supply houses. Court stated: substantial rights of the taxpayers materially affected
COURT CASES AGAINST LOCAL PREFERENCE Marriott v. Dade County April 15, 1980 3rd District Court of Appeal Bar operations @ airport RFP, with several criteria Other factors that will best serve the highest public interest Board awarded to second highest priced offer: Jerry s is a local firm. Court stated: Board abused its discretion
LEGAL ISSUES
LOCAL PREFERENCE MAY BE A VIOLATION OF ANTI- TRUST LAWS AND THE COMMERCE CLAUSE OF THE UNITED STATES CONSTITUTION Potential Conflict of Local Preference Laws with Other Preference Laws M/WBE goals Veterans preference Drug-free workplace Buy American Federal Davis-Bacon and DBE requirements Small and Local Business Enterprise Programs
CONFLICTING PREFERENCES Picking and Choosing which vendors to award bids is: Arbitrary and capricious Violates the integrity and spirit of bidding laws, and Results in inconsistent award processes
DEFINING THE TERM LOCAL
PROPOSED LOCAL DEFINITION Vendor has a valid occupational license issued by a municipal/county government within the defined geographic area. Vendor operating at a physical address located within the defined geographic area at the time the bid is submitted and in an area zoned for conduct of such business.
LOCAL PREFERENCE METHODS Many different methods of applying preference. The match method does not increase the cost of the bid. - If the bid of a local vendor is within 5% of the lowest responsive and responsible non-local bid, the local vendor is given one chance to match the low bid.
MATCH METHOD EXAMPLE Non-Local Bidder $250,000 - Low Bidder Local Bidder $260,000 - High Bidder Bid Difference $10,000 Local Bidder is within 5% ($12,500) of Non-Local Bidder. Local Bidder is given opportunity to match bid offered by Non-Local Bidder to win the bid. 5% Bid Preference Differential $12,500 Local Bidder is awarded the bid if Non-Local Bidder s bid is matched.
AN ARGUMENT AGAINST LOCAL PREFERENCE (TAMPA MODEL)
STEPS IN THE PROCESS Determine relevant market area Analyze Procurement Data Gain Support of Administration for Purchasing s position Inform local business community Get Chamber of Commerce Involved
DIVERSITY MANAGEMENT SYSTEM DEVELOPMENT
DIVERSITY MANAGEMENT INITIATIVE (DMI) DATA COLLECTION PROCESSES What is DMI? The Diversity Management Initiative is a city-wide process to collect, track, and report comprehensive contract information on vendors engaged in business with the City.
DIVERSITY MANAGEMENT INITIATIVE (DMI) DATA COLLECTION PROCESSES What s the purpose of DMI? To facilitate regular evaluation in meeting Minority Business Development Program Objectives Measure City s effectiveness in meeting defined Women/Minority Business Enterprise (WMBE) and Small Local Business Enterprise (SLBE) program objectives Respond to data management recommendations from the 2006 Disparity Study
DMI PROJECT SCOPE Over 500 users city-wide. DMI affects all City departments and business practices. (Required for all procurement over $2,000) 11 existing systems are linked to DMI for effectiveness. Development of DMI capture data forms for new required data. Trained over 250 new users. (ongoing) Over 62 reports must developed to meet minimum requirements of the 2006 Disparity Study.
QuoteWire Awards (Informal < $25,000) Sheltered Market Awards (Projects < $300,000) Contract Goal Setting (Projects > $50,000) Procurement Need WMBE Bid Discount (5% Variance up to $20,000) Non-Restricted Market (Promote WMBE/SLBE Participation) RFP Rating Points WMBE/SLBE Inclusion (1 10 Points)
MBD DIVERSITY MANAGEMENT SYSTEM AUTOMATED COMPLIANCE AUDIT PROCESS
DETERMINATION OF GEOGRAPHIC AREA FOR TAMPA LOCAL PREFERENCE Small Local Business Enterprise (SLBE) Counties - Hillsborough - Manatee - Pasco - Pinellas - Polk
DEFINITION OF SMALL LOCAL BUSINESS ENTERPRISE (SLBE) Business located in 5 County Areas In Business for 3 Years Less than 25 employees Less than $2 Million average gross receipt over a 3 year period.
PURCHASING STATISTICS Procurement Dollars Awarded within Small Local Business Enterprise Area 76% within SLBE Market Area Five (5) Purchasing Categories Goods Professional Services Non-Professional Services Construction Construction Related Services 24% outside of SLBE Market Area
PURCHASING STATISTICS (CONT.) Percentage of Dollars for Construction Contracts Awarded within SLBE Area 82% for Construction Prime Contracts 86% for Construction Related Services Contracts
AREAS OF CONSIDERATION AND EXCLUSIONS/EXEMPTIONS Applies to Construction Projects Only* Exclusions/Exemptions Small Local Business Enterprise Program Single Source Purchases State and Federal Grants Funded Projects Cooperative Purchases * Note: 82% of Construction Prime Contracts and 86% of Construction Related Contracts Are Awarded Locally within the SLBE Counties.
AREAS OF CONSIDERATION AND EXCLUSIONS/EXEMPTIONS (CONT D) Emergency Purchases State Contract Purchases F.S. 287.055 Governing Competitive Consultant Negotiation Act Contract Awards for Professional Engineering Services Highly Specialized and Technical Services
ORDINANCE RECOMMENDATIONS If City Council chose to move forward with a bidding preference ordinance, the Administration recommends inclusion of the following principles: Regional approach - TBARTA Area + Polk County Applicable only to formal construction bids Cannot cost taxpayers more money No additional expense to the budget
CONCLUSIONS Local vendors are already receiving the vast majority of the City s business. There is currently not a problem. Non-Local vendors often have a greater impact on the local economy (jobs/dollars) than competing local businesses. Local vendors may lose business due to the enactment of exclusions and ordinances across the State which harms our local vendors.
CONCLUSIONS (CONT D) Local preference increases complexity of bidding process. Local preference will increase staff time/costs at a time when the numbers of staff are decreasing. Less competition will result in higher costs to taxpayers.
CONCLUSIONS (CONT D) It cost vendors money to prepare bid packages. Non- Local bidders will be reluctant to bid if a local vendor has a preference to win the bid.
RECOMMENDATIONS Continue to promote the benefits of doing business with local companies. Avoid placing additional restrictions on the procurement process that limits competition and increases costs. Continue to encourage all companies to do business with the City of Tampa.
CITY COUNCIL ACTION Voted against implementing Local Preference in Tampa. Stated that Local Preference created barriers between local units of government. Voted to write the Governor to draft legislation to oppose Local Preference on a statewide basis.
CONTACT INFORMATION Thank you! Gregory K. Spearman, CPPO, FCCM Purchasing Director, City of Tampa 813-274-8855 gregory.spearman@tampagov.net