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Every business would like preferential treatment when competing for a government contract. The question is, how far will your business go to secure an advantage? Would you uproot your headquarters and move it to a different city, county, or even state? That is the length to which some small businesses may go to take advantage of the increasing number of "local preference" contract awards by state and local government agencies.
Just like many small businesses owned by women (WOSB), minorities (MOSB), or veterans (VOSB/SDVOSB) may receive preference points during bid evaluations or qualify for government contracts set aside exclusively for their type of business, there are many small businesses that are eligible for “local preference” advantages when competing for contracts with public sector entities. In short, local preference “is a decision by the government to direct purchases to certain companies based on location” as NIGP explains.
The benefits to government, though debated by some, most frequently center around local economic stimulation. The hope is that, by “buying local,” the community will reap the rewards of increased local business revenue – to include job creation and a greater volume of tax income that can be reinvested in local programs.
Beyond the traditional socioeconomic advantages you may gain as a WOSB, MOSB, VOSB, SDVOSB or just a traditional small business, you will gain valuable “local preference” status on nearly every bid you submit. Just know that the value is going to vary depending on the city, county, or state, as every jurisdiction has the right to define their own program parameters. As NIGP notes, there are several scenarios in which “local preference” will lead a state or local government agency to award the contract to a local company:
Don’t forget there are other benefits to being local as well: Proximity aids with relationship building, allows for closer oversight of projects to keep customer satisfaction levels high and makes you more accessible for briefings, site visits, etc. Being a local business also aids with awareness – of both local government bid opportunities and of your business by government procurement officials and their customers (aka the influencers and decision-makers).
First off, know that being “local” does not automatically equate to a win every time, even in jurisdictions where local preferences are exercised frequently. As NIGP points out, every public sector agency must “Adequately reconciling local preference policies with public procurement’s guiding principles of fostering full and open competition, best value, equity, and impartiality.”
Translation: Competition will still be fierce. Your pricing has to be just as aggressive as out-of-area bidders, you must still demonstrate the quality and value of your goods or services, you must have references and a solid past performance track record, and you must be able of delivering on time/on budget without issue. The government is not in a position to compromise. And every agency still has a responsibility to evaluate proposals and make an unbiased decision.
You also have to prove that you meet all “local business” criteria, which may involve either a self-validation or a third-party review and validation depending on each agency’s policy. For example, the City of San Antonio utilizes a Texas Statute amended by 82nd Legislative session to allow larger cities to grant contracting preferences to local businesses when price alone determines the winning bid. For San Antonio, a local business is defined as “a business headquartered” in the city in which it is submitting a bid or a business able to meet the following conditions: “having an established place of business for at least one year in the incorporated limits of the City and from which at least 20% of its full-time, part-time and contract employees are regularly based OR a minimum of 100 employees; and from which a substantial role in the business’ performance if a commercially useful function or a substantial part of its operations is conducted.”
Before you attempt to claim local preference for a bid, check out the individual agency’s website to confirm their program policies and validation requirements for both small businesses and local businesses. Alternatively, you could pick up the phone and call a procurement official, which also helps you establish direct contact and start to build a relationship with buyers.
Ultimately, there is no single government sales strategy that is going to work for every company, including a reliance on local preference programs. If you are primarily leveraging a business-to-government sales model and require an increased volume of public sector contracts to grow your business, then it may not hurt to explore markets that could prove more advantageous from a “local preference” perspective. Just don’t forget to weigh the other business benefits offered by your current city/state or new markets to which you may consider relocating. These include tax breaks and legislative support for businesses in certain categories, of certain sizes, or of certain disadvantages.
Also confirm that there are enough potential government contracting opportunities in that region to warrant a move. Conduct market research to understand the typical volume and length of contracts awarded in your line of business among all area agencies. You may find that even though there are several contracts, they are multi-year contracts that may not come up for re-solicitation for a while.
Finally, be sure to evaluate resource availability before you make a move. The last thing you want is to relocate, secure several new contracts via the local preference program, and then find yourself strained to fulfill obligations due to a lack of resources during your period of rapid growth.