Commentary - June 2010

Put Local Businesses First

Bidding Preferences Make Sense for Nevada

by Lyle E. Brennan

    Did you know that Nevada firms are not given any preference over out-of-state companies on bids to provide goods and services to local government?  Existing law does provide a 5 percent preference in bidding on public works and highway construction projects, but that doesn’t help local companies that might want to supply products or provide professional services.  Nearly 40 states give bidder’s preferences to local firms in order to keep jobs in their state and to strengthen small businesses hit hard in the current economy.  It’s time Nevada took some steps in this direction as well.

    In fact, the 2009 Legislature introduced AB 147, which would have required local governments to grant a 5 percent preference to local bidders when assigning contracts for goods or services costing $50,000 or more.  The bill was supported by the Las Vegas Chamber of Commerce, the Nevada Association of Counties, the Nevada League of Cities and Municipalities, and many other organizations.  After passing both houses, the bill was vetoed by the governor.  Because lawmakers were unable to override his veto, it never became law.

    Governor Gibbons claimed the bill would have cost the state more money, but that’s only one issue in a complex situation.  All other things being equal, if a local company and an out-of-state company submit bids that are very close in price, it makes sense to grant the contract to the homegrown firm.  Nevada businesses that win contracts provide jobs for Nevada workers, whose salaries circulate throughout their communities, producing a multiplier effect that helps us all.  With Nevada’s unemployment rate at nearly 14 percent, keeping jobs in the state is more important than ever.  Higher employment also means lower demands for social services like Medicaid, which are paid for by tax dollars.

    Local companies’ profits stay in Nevada instead of being shipped out of state, and these dollars circulate through the economy as well.  In addition, local businesses are more likely to buy from local suppliers, helping those businesses and the whole economy stay healthy.  In fact, one recent Arizona study concluded that money paid to an independent local supplier recirculated three times as much in the local economy as money paid to a national firm.

    Businesses with roots in the community are also more likely to support local charities and provide much-needed pro bono work.  Simply put, the fiscal impact of the bidding preference is offset by the benefits of keeping jobs and dollars in Nevada.

    During the legislative hearings for AB 147, Assemblywoman Ellen Spiegel reported that a Nevada company and a Colorado company were the two lowest bidders to produce a book about Nevada tourism for the film industry.  The Colorado firm bid $130 less than the Nevada company, so it was awarded the contract, worth tens of thousands of dollars.  There have been instances in which two firms bid exactly the same amount of money for a project – one a Nevada company and the other from out of state – and the outcome was decided by cutting cards, supposedly to make it a fair decision.    

    In December 2009, the Secretary of State’s office bypassed seven Nevada firms to award a $866,000 contract to a Minnesota company to help collect census data in Nevada.  And in March 2010 the Secretary of State’s office announced that 20 companies awarded lucrative state contracts weren’t even registered to do business in Nevada.  

    Economic development agencies throughout the state are always looking for ways to encourage companies to come to Nevada, bringing in jobs and boosting the economy.  What about businesses that are already here?  We need to do whatever we can to support them, and establishing a bidder’s preference seems like a logical first step.

Lyle E. Brennan Publisher
COMMENTS? email: lyle@nbj.com