Stevens Advocates a Buy San Diego Contract Policy

In a bid to help stimulate the sagging local economy, Councilman George Stevens has asked the city of San Diego to give preferential treatment to San Diego-based businesses that vie for city contracts.

Stevens wants city purchasing agents to “try San Diego first” by establishing a preference program that would knock a set percentage off bids made by local firms bidding on city contracts. Stevens has yet to state how much of a preference he believes should be offered to local firms that bid for municipal goods and services contracts.

Stevens’ proposal mirrors a “buy local” City Charter amendment proposed last week in Los Angeles by Councilman Zev Yaroslavsky. If approved by Los Angeles voters, the amendment would grant preference to Los Angeles-based firms and, in response to current trade friction between the United States and Japan, set minimum domestic content requirements.

While an increasing number of municipal governments nationwide are considering “buy local” programs to stimulate their economies, purchasing experts believe that preference plans, when they aren’t tossed out by the courts, usually end up costing taxpayers more money.

“It’s almost axiomatic that whenever you reduce competition you increase prices,” said Les Jackson, a spokesman for the National Institute of Government Purchasing, a Falls Church, Va.-based organization that represents more than 20,000 federal, state and local purchasing officials. “Our position has always been that we oppose all preference (programs) when it comes to spending public money.”

“Studies have shown that . . . local preference (programs) tend to drive up the price of a bid roughly in the same amount of the preference,” said Ralph Shackelford, the city’s purchasing director.

Stevens’ proposal is similar to a preference program that San Diego abandoned in 1965, after voters determined that the charter amendment’s drawbacks outweighed the benefits, Shackelford said.

Preference programs can generate “almost endless litigation” from irate business owners who sue to prove that they are qualified local bidders. Those court challenges are prompted by the fact that most buy-local ordinances are “pretty vague” when it comes to defining which businesses are local, Jackson said. Preference programs also prompt retaliatory preference programs in nearby government jurisdictions, Jackson said.

“It’s just a costly way to do business,” Jackson said. “Successful local businessmen almost never pay more for their commodities and services just because someone lives on their block or is in their church.”

Yet, each time the economy sags, politicians around the country respond with preference proposals, Jackson said.

Many states and a growing number of municipal governments historically have adopted preference programs that cover smaller contracts, Jackson said. The nation’s courts have let most of those limited programs stand, but “the courts have thrown (broad) ordinances out repeatedly,” Jackson said. “The courts invariably find that (when public money is concerned) competition is more important than a socioeconomic program.”

During the fiscal year ended June 30, 1991, the city paid $89.4 million to materials providers, $76.5 million to construction companies and at least $13.3 million to consultants, Shackelford said.

While the city of San Diego has two limited preference programs in place, neither “kicks in very often,” Shackelford said.

One program allows city purchasing agents to rebate San Diego’s 1% sales tax to local firms that submit a bid equal to an out-of-town bidder. And, if the bid submitted by a hometown business ties an out-of-town business when the 1% rebate is applied, “the tie-breaker is (based on) location,” Shackelford said.