Why Local First Hurts Virginia (UPDATED 1/31/12)
By Jason Kenney | Thursday, January 26th, 2012 | PolicyLocal First Virginia is a fairly new issue advocacy group formed in the wake of a Richmond contract being awarded to a Denver firm last August. Their focus is to convince local governments and the state to give preferential treatment to Virginia based businesses. On its face this is an honorable notion: the state and local governments should invest in our communities and help create jobs locally by investing in home grown firms. But the problem with protectionism is that it doesn’t take into account any number of factors that play into the process. It’s not just a matter of dollars but ability and overall bang for buck in investment. Local for the sake of local isn’t necessarily fiscally sound.
And an impact study to Senate Bill 79 backs this up. SB79 would grant local companies a second look, allowing them to price match an out of state bid if their initial bid fell within 5% or $10,000 of the lower offer. An impact study hits the downside nail right on its head:
Establishment of procurement procedures allowing state agencies and institutions to match prices from an out-of-state bidder would create an in-state preference. In-state preferences could limit competition and result in the increased costs of goods and services. In addition, preference procurements can increase administrative processing time and delay procurement awards, resulting in increased resource costs for all public bodies falling under the Virginia Public Procurement Act.
What incentive would there be for an out of state company to make a bid on any work in the Commonwealth if they know that their bid is going to get viewed and responded to by in-state agencies? How is offering protectionism making Virginia “open for business”?
And how does this help the taxpayers by allowing for a competitive bidding process that allows companies to offer best bang for buck offers to fulfill Virginia’s needs?
Nevermind the Constitutional questions this creates…
Dollars should not determine an award. Overall quality of past work, proposed work, and cost of investment for return should be the factors that matter most. But we limit Virginia’s ability to get the best of the best nationally when we offer competitive advantages locally.
1/31/12 UPDATE: – SB79 was “passed by indefinitely” by a unanimous vote in the Senate committee on General Laws and Technology on Monday the 30th, shelving the bill for this legislative session.
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About the author
Jason Kenney has blogged at J’s Notes since 2001, is the director of RedStormPAC providing online fundraising for Republican candidates in Virginia, and co-founder of K6 Consulting. He is a graduate from Virginia Commonwealth University and resides in Richmond, Virginia.
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6 Responses to "Why Local First Hurts Virginia (UPDATED 1/31/12)"
Protectionism raises prices to consumers, and ultimately hurts taxpayers. Free enterprise and free markets ultimately lower costs and increases innovation.
I would prefer to think that Virginian firms are second to none and can more than adequately compete in the free market. Those who advocate otherwise are saying something very nasty (and wrong) about Virginia businesses…
…and I’ll mention that this is — yet again — one more unfunded mandate on localities.
*sigh*
Something is wrong in the procurement process when a vendor in Colorado can out-bid a local company. When you take into consideration the added costs of managing a contract from long distance, esp. if you are required to open a local office, then the local company has a built-in advantage. Add to that the intangibles of having local knowledge, community connections, and workforce access, and the playing field is already slanted towards the local companies. There is no reason to give any further preferential treatment to local companies. Having said that, there is nothing wrong with placing requirements in the solicitation that dictate that all work be performed locally, that reimbursable shipping costs for materials, etc, be limited to that of a specified geographical area, and so on.
Lots of issues with your article and argument, but very little time to respond.
SB 79 will give Virginia companies an opportunity to match the lowest bid of an out-of-state bidder when:
1. The project is $250,000 or less;
2. The VA company submits a fully qualified bid;
3. The VA company’s bid is within $10,000 or 5% of the lowest out of state bid;
4. The VA company must have paid unemployment or income taxes in VA
A two-year sunset clause allows the General Assembly to revisit the policy to ensure that there were no detrimental effects on competiveness in and out of Virginia.
The bill WILL NOT
1. Affect Virginia’s number one business rating
2. Force local and state governments to pay too much for Virginia good or services
or
3. Put us at a disadvantage in the marketplace; 37 states already have some type of preference for goods/services.
The last point is this. We love the free market. And we love increased competition.
Virginia’s procurement system isn’t a free market.
[...] Why local first hurts Virginia; Bearing Drift [...]
Dave,
The problem is this bill is a short term fix that benefits businesses over taxpayers.
There is a cost associate with this who’s burden will have to be picked up somewhere.
We’re talking about another unfunded mandate to local governments, a longer process across the board, and something that, yes, could threaten our #1 ranking for best place to do business in the nation.
Do 37 other states offer this anti-competitive system? Sure. But how many other states are ranked above Virginia in best to do business in? None. At all. (Except sometimes Texas.)
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