Local Preference in Procurement
When evaluating procurement specifications, bidders and proposers want to look for every advantage they can get. One frequent specification that they may be able to take advantage of is the Local Preference. The Local Preference is usually set forth in statutes or a local agency’s code, and/or in the agency’s solicitations. Generally, the Local Preference provides an advantage for bidders or proposers which maintain headquarters or a permanent place of business in agency’s local area. For example, a bidder may be able to qualify for a Local Preference in a county if it had a permanent place of business in that county.
Often, the Local Preference rules will require the bidder to maintain a local office for a specified time period before the solicitation was issued, in order to qualify for the Local Preference for that project. Further, bidders or proposers may be required to submit proof to that agency verifying the local address. This may include the lease or ownership paperwork for the location, or a business tax receipt.
Here’s how the Local Preference works. Suppose a county in Florida has a Local Preference ordinance which says bidders with a permanent place of business in the county will enjoy a 5% preference during the bid evaluation. The County issues a solicitation seeking the lowest responsive and responsible bid. The bids are submitted and evaluated, and the lowest bid is from the ABC Corporation for $100,000. ABC Corp. is located outside the County. The second lowest bidder, XYZ Corporation, submitted a bid for $104,000, but it has a permanent place of business in the County and qualifies for the Local Preference.
XYZ will actually get the recommended award, even though its bid is $4,000 higher than ABC’s. Since XYZ is a local business, a 5% discount will be applied to its bid during the evaluation process, reducing it to $98,800. That means for evaluation purposes, its $1,200 less than ABC’s bid. This does not mean, however, that the value of XYZ’s bid is actually reduced; this is only for the evaluation. If the County enters into a contract with XYZ, it will be for $104,000. Thus, local businesses should seek to take advantage of Local Preference ordinances or specifications whenever possible.